Surburban Retail Roars Back
They said the ‘burbs were finished. But, like Rocky, they're in the ring as institutional capital expands its borders beyond hot CBD ‘hoods in a search for yield. We’ve gathered the experts to discuss what that capital is looking for at Bisnow’s State of the Suburbs on Oct. 2.
First Western Properties prez and managing broker Paul Tsakiris, one of our panelists (snapped during the World Cup with the kids), says it’s a natural progression for deals to flow from hot city areas like River North to primary suburbs (Oak Brook, Naperville, Glenview), then secondary and tertiary markets like Schaumburg, Mount Prospect, or Dolton. For retail deals, Paul says, there’s one unifying theme—the pioneering days are over. Retailers won’t go somewhere far flung and build, hoping that the rooftops will follow. They’re opting for streamlined footprints (integrated with their e-commerce platforms) in areas with proven demographics and density.
With the exception of rare projects like at Freedom Commons in Naperville (above, Paul is leasing), suburban retail development is unlikely to ramp up for another 24 months. That doesn’t mean tenants aren’t making moves, he says. Retailers like fast food chains and clothing stores are expanding across the ‘burbs via strategic repositioning. How can you snag Class-A properties with these fresh leases? Good luck, he says. The most active suburban investors are well-capitalized funds or REITs, and it’s hard to compete with their 2% to 3% cost of capital. Paul’s suggestion to local investors: You may be better off buying some of the many Class-C centers available in secondary markets like Carol Stream or Lockport, rather than chasing properties with ever-decreasing cap rates. To hear more, please join us for Bisnow’s State of the Suburbs on Oct. 2 at the Western Lombard Yorktown Center starting bright and early at 7am.