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Now that retail landlords have lowered rental rate expectations, deals are moving, especially as investors pick up properties out of receivership. At those prices, the buyers can make lower rents work, says one retail expert.
Jim Schutter and Stu Morden at NY Hilton on Dec. 5, 2011
Newmark Knight Frank retail landlord brokerage head Jim Schutter (left) traveled to New York's big ICSC show last week, where we snapped him with NY counterpart Stu Morden. Jim tells us retail tenants nowadays can pay $15/SF, compared with $25 10 years ago.
Mid-America Mini
Ross Dress for Less, Algonuin, IL
Of course rents dropped at a faster pace in secondary submarkets than on North Michigan Ave. Jim tells us a small space on North Michigan might go for $400/SF and on State Street for $60 to $100/SF, and suburban power center space is renting for $10/SF. Two 25k-ish SF box retailers entered Chicago this year: discount apparrel shop Ross Dress for Less (that's the Algonquin store, above) and discount electronics seller HHGregg, both opening around a dozen locations. They're going for those suburban power centers and are good fits for former Circuit City and Office Depot stores. Borders' two-story locations are more difficult to repurpose, Jim says.
As for new development, he's working on a large outlet mall, but properties like that have to be Goldilocks-ian—just right—in their uniqueness and location. Plus pre-leasing has to hit 70% before development will start. (So no hot porridge stores in new malls.)