This Week's Chicago Deal Sheet
The proliferation of fast-casual concepts, and the rapid growth of so-called “eatertainment” concepts that combine food and beverage service with live and virtual sports, among other trends, continue reshaping the restaurant industry and the real estate it occupies, according to a new report from CBRE.
The fast-casual format, which satisfies a growing demand for restaurants with higher quality than fast food but lower prices than full-service restaurants, dominated restaurant expansion in recent years, including in Chicago, CBRE found, and retail landlords should take note.
“In Chicago, we have several new developments in good trade areas that are very appealing to fast-casual users,” CBRE Senior Vice President Kim McGuire said. “In many cases, these users are willing to pay a premium to open in a new market for brand-building opportunities. Many interesting new concepts are taking a look at the Chicago area, but one of the challenges has been existing exclusivity rights that certain retail centers have in place. If landlords want to capture more of this market, they will have to revisit their exclusivity strategy and allow more of these concepts to enter the market, as the demand is there.”
“Eatertainment” outlets such as Topgolf, Dave & Buster’s and Punch Bowl Social already populate many suburban malls and freestanding locations, but several of these operators are testing smaller-footprint concepts to expand in urban markets like Chicago.
“I think we will continue to see these concepts evolve — whether it is updating classic games like darts and miniature golf or developing new content through virtual reality and high-end simulators that can always use the latest characters and stars,” CBRE Vice President Phil Golding said. “They are not lacking content and show no signs of growing stale, especially in cold-weather markets like Chicago, where indoor entertainment is always sought after in winter months.”
A 60-unit multifamily building at 929-935 North Main St. in Rockford, Illinois, sold to Becovic Management Group for about $2.8M. SVN Chicago Commercial’s Reid Bennett and Cody Doran were the sole brokers, and this was the second time in five years that the pair brokered a deal for this asset. Becovic has now acquired four properties in the market, totaling almost 300 units.
Gary, Indiana, sold $40M in tax-exempt bonds. According to Mayor Karen Freeman-Wilson, the tax-exempt transaction utilizes fixed-rate bonds to sell and lease back the city’s public safety building to the local nonprofit Gary Building Corp., in order to shore up funds for the city, improving its financial health and facilitating capital investment. The building, located at 555 Polk St., will be leased back to the city. Kevin Hoecker, head of Midwest public finance at Wells Fargo, was lead banker on the financing, and the bonds were purchased by Preston Hollow Capital.
An undisclosed limited liability company spent $5.8M to buy the Holiday Inn Express Watertown, a 79-room hotel at 101 Aviation Way in Watertown, Wisconsin. Marcus & Millichap’s Ebrahim Valliani, John Yurich, Allan Miller and Chris Gomes marketed the property on behalf of the seller, a private investor. Marcus & Millichap’s Jake Erickson and Jared Plamann represented the buyer with Todd Lindblom assisting as the broker of record.
Chicago Real Estate Resources’ Timothy Keenan represented Aqueel Ahmed in the $2.6M purchase of 39K SF of land at 1655 West Fullerton Ave. in Chicago. Eric Janssen, also with CRER, represented the seller. Ahmed plans to develop the land for commercial use in late 2020. Keenan also represented Ahmed in the $1.75M purchase of a property at 2300 West Fullerton Ave. earlier this year.
Chicago-based HSA Commercial Real Estate, along with its partner New York-based Clarion Partners, signed a 375K SF lease with DSC Logistics at the 758K SF Heartland Corporate Center warehouse development at 21530 Southwest Frontage Road in Shorewood, Illinois, near the Interstate 55 and I-80 interchange. Des Plaines, Illinois-based DSC Logistics already occupies 250K SF at the building, and within six months will expand into the rest of its space. Colliers’ David Bercu and Matthew Stauber represented the owners, while Colliers’ Lynn Reich and Suzanne Serino represented DSC Logistics.
Lee & Associates closed several industrial transactions in DuPage County. The company’s Michael Plumb and Jeffrey Janda represented tenant Buy Rite Wholesale Food & Paper Co. in its long-term lease on 101K SF at 80 Internationale Blvd. in west suburban Glendale Heights. CBRE’s Mike Sedjo, Jack Brennan and John Hamilton represented the owner, Prologis. Plumb and Janda also brokered a 39K SF lease at 1035 Hilltop Drive in Itasca. The Lee team represented the owner, Liberty Property. NAI Hiffman’s Pat Hart and Jeff Fisher represented the tenant, Whatever It Takes Transmission Parts Inc.
CONSTRUCTION AND DEVELOPMENT
Evergreen Real Estate Group completed in October the 48-unit Oso Apartments at 3435 West Montrose Ave. in Chicago’s Albany Park neighborhood, and just unveiled its new mural by local artist Miguel A. Del Real. Oso means bear in Spanish, and Del Real used that as inspiration. He also was inspired by the building’s facade, which Chicago-based Canopy Architecture + Design accented with bright yellow metal that resembles honeycombs, to create a mural of bees, flowers and honeycombs. Located at the southwest corner of Montrose Avenue and Bernard Street, on land that was formerly vacant, the new five-story building has 32 one-bedroom and 16 two-bedroom apartments.
THIS AND THAT
A recent study by RENTCafé shows the popularity of high-rise apartment buildings skyrocketing in the U.S., and Chicago is at the center of this trend. After going from a share of 24% in the 1990s to its current 41%, Chicago now ranks third among the cities with the highest share of high-rise apartment buildings in the country, trailing only Boston (55%) and New York (51%). Developers created 71 high-rise buildings in Chicago between 2010 and 2018, according to RENTCafé.
MB Real Estate just published its latest analysis of the central business district’s 30 top office properties, and found their collective vacancy rate rose from 8.7% to 11.6%, mostly due to the opening this quarter of the 2.5M SF Old Main Post Office, which joins the list for the first time. The firm’s researchers said the 1.5M SF in leasing activity at the post office in less than two years is a sign of the overall strength of the Chicago market, even though its tenants will relocate from other CBD buildings, and leave behind almost 1M SF of shadow space.