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How A Chicago Suburb Sparks New Development In A Volatile CRE Environment

Downtown Arlington Heights, Illinois

Despite rising construction costs, high interest rates and other commercial real estate challenges, Chicago and its suburbs are weathering the storm and even experiencing growth.

The Windy City shows strong CRE fundamentals, specifically in multifamily, industrial and mixed-use. In particular, the city’s industrial market has been a top player for the past several years and continues to see high demand for space

One local area that has been pushing new development is the Village of Arlington Heights, a suburb 25 miles from Downtown Chicago. The community credits its growth to a sound, forward-thinking economic plan.

“The Village of Arlington Heights has changed a great deal since I lived in the heart of our downtown back in 1960,” Village of Arlington Heights Mayor Tom Hayes said. “Sound, thoughtful and creative planning by many elected officials and staff over the years since has resulted in the vibrant community we have today.”  

Village of Arlington Heights Director of Planning and Community Development Charles Witherington-Perkins gave Bisnow a rundown of some of the significant projects the city currently has in the pipeline. 

Arlington Gateway Redevelopment 

The Arlington Gateway Redevelopment follows the implementation of the 2018 South Arlington Heights Road Corridor Plan. 

Witherington-Perkins said the goal is to enhance local aesthetics and address the greater economic development potential of the corridor. 

“Some of the key objectives include specific development standards for land parcels along the east side of the corridor, enhancing pedestrian walkability and exploring sustainable development in an aesthetically pleasing design,” he said. 

The project is in the first of four potential phases to redevelop approximately 16.4 acres of property at the southeast corner of Arlington Heights and Algonquin Roads. The first phase will tackle 3.7 acres, 301 luxury rental apartments and about 25K SF of ground-floor commercial space intended for a mix of restaurant and retail commercial tenants. It will bring $126M of investment capital into the community that will act as a catalyst for future redevelopment, Witherington-Perkins said. 

The building will be eight stories, and 10% of the units will be offered at affordable rates. Witherington-Perkins said the building’s prime location will allow it to serve as a gateway to the community from the Interstate 90 tollway and will help inspire more redevelopment activity toward Downtown Arlington Heights.

FourNorth Apartments

Another major development in the works is the FourNorth Apartments in the historic Hickory-Kensington area. 

Witherington-Perkins said the previously light industrial area, which is less than half a mile from Downtown Arlington Heights and the Metra commuter rail station, is a natural location for mixed-use and walkable redevelopment. 

This project gained approval to begin construction in 2020, but the volatile real estate market, rising interest rates and the onset of the coronavirus pandemic halted the building process, he said. 

To maintain project momentum, Witherington-Perkins said the village negotiated a redevelopment agreement with the developer to provide financial assistance for public improvements in the area, including construction of a new street. The village also acquired excess property from the developer to hold for future assembly and redevelopment.

The apartment complex is a part of Arlington Heights’ Hickory-Kensington plan to create a vibrant mixed-use neighborhood near its downtown. Witherington-Perkins said the goal is to provide new housing and commercial opportunities in a walkable, pedestrian-friendly environment with local shops and restaurants.

Downtown Arlington Heights 

Like most downtowns across the country, Downtown Arlington Heights was affected by the pandemic, and many restaurants were forced to pivot the way they do business, Witherington-Perkins said. 

However, this turned out to be a blessing in disguise, he said. Since many area restaurants are located within blocks of each other, the village was able to easily close down streets in this four-block area to allow for outdoor street dining, leading to the creation of the annual Arlington Alfresco event.

Arlington Alfresco is an open-air event from May to September that encourages people to take advantage of the town’s dining, shopping and entertainment experiences.

“Since the summer of 2020, it's only grown in popularity and has become a local staple,” Witherington-Perkins said. 

Along with Arlington 425, a potential development on the west side of downtown, and the Mylo Arlington Heights development approved in 2023, the project is expected to add more vibrancy and support for existing businesses in the downtown area, he said. 

Northwest Gateway Center 

The village has also been able to take advantage of the city’s flourishing industrial market. Village of Arlington Heights Business Development Manager Michael Mertes said the West O’Hare Commerce Center, a 240K SF industrial development on Algonquin Road, saw 100% occupancy shortly after it was completed in 2020. A new speculative industrial development, Northwest Gateway Center, was created to help continue this momentum. 

Northwest Gateway Center was approved in 2021 and completed in 2023 in response to growing demand in the region for manufacturing, warehouse and distribution, he said. The Class-A, 511K SF industrial site is located east of IL-53 and Dundee Road, just 12 miles from Chicago O’Hare International Airport, and provides virtually unimpeded access to interstates 90, 290 and 355.

Mertes said that because of continued demand in Chicago for spec industrial development and flex tenant space, Arlington Heights is seeing both high occupancy rates and further development. 

Northwest Gateway Center is already 60K SF occupied with its first tenant, a Red Bull warehouse and distribution facility. Future plans include a mix of regional and national companies, he said. 

Hayes looks forward to the evolution of the Village of Arlington Heights as it continues to build a sound ecosystem for its community to prosper. 

“The village is proud to be a community that is not just livable, but a truly great place to enjoy, work, build a business and raise a family,” Hayes said. While the village’s primary goal is to provide high-quality services that reach beyond expectations, we are also committed to creating an atmosphere that allows our residents and businesses to thrive.” 

This article was produced in collaboration between the Village of Arlington Heights and Studio B. Bisnow news staff was not involved in the production of this content.

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