Top Retail Locations Are Opening Up To A Whole New Breed Of Tenants
Consumers are aching to get back out and spend in places that aren’t grocery stores or pharmacies, but things will look very different when they return to the local mall or retail district. The coronavirus pandemic took out thousands of outlets, so many shoppers will find out their once-favorite places don’t exist. That doesn’t mean they will find empty storefronts.
Other retail tenants see the empty spaces as opportunities and are starting to secure leases in top locations that, until the arrival of the pandemic, only hit the market on rare occasions. That’s especially true in Class-A suburban markets such as Orland Park, Oak Brook and Schaumburg, where some highway sites expose retailers to thousands of passing motorists each day and well-known brands can hang on to the same corners for decades.
“A lot of restaurants and retailers were barely keeping their heads above water, and when Covid came along, the water got a bit higher,” according to Brenton Schrader, a vice president of HSA Commercial Real Estate. “Now these brands have been on this land for 20 to 30 years and are being supplanted by new entrants to the market.”
Pier 1 is one of the many troubled stores supplying the next generation of retailers with opportunities, Schrader said. The home furnishings and décor retailer was endangered before the pandemic, facing bankruptcy and the closure of about half of its stores. But after Covid-19 started suffocating retail even further, the company decided to shut down completely, and that has opened more doors for retailers with suitable business plans, Schrader said.
Chicago-based HSA also has a big retail presence in southeast Wisconsin, where it developed The Mayfair Collection, a 69-acre mixed-use development in Wauwatosa, and Schrader said that Pier 1 until recently had a store at 17000 West Bluemound Road in Brookfield, Wisconsin. Its location was next to the highway, the outdoor shopping center’s most visible spot, and it was quickly snapped up by Top Fitness, a home fitness company riding the wave of business generated by the pandemic’s shutdown of traditional gyms.
Other bankruptcies are clearing the way for innovative uses of retail space, Edwards Realty Co. President Ramzi Hassan said. His Orland Park-based firm owns and operates a collection of shopping centers in the Chicago area, and it has recently signed leases with groups normally not associated with suburban malls.
New York & Co., a women’s fashion outlet, occupied about 5K SF at Edwards’ Burr Ridge Village Center, a 200K SF Class-A development in the village of Burr Ridge, until it declared bankruptcy last year. But with clothing stores getting hammered by online competition, Hassan said he was looking for something different.
He found it. Today the same store is under construction as Beechen & Dill Homes, a luxury homebuilder, transforms it into a showroom.
“Before the pandemic, we never would have thought of that, and Beechen & Dill told us they never would have chosen a location in a high-end shopping center,” Hassan said.
Typically, shopping center landlords would aim to sign deals mostly with retailers, including restaurants, which bring in enough foot traffic to help a mall’s other businesses. But as so many retailers now struggle to compete with Amazon, the type of business considered appropriate has changed, Hassan said.
Edwards Realty is close to finalizing a deal with a dermatologist to take over the space once occupied by Charming Charlie, a women’s accessory retailer, at its Orland Park Crossing development in suburban Orland Park, he said. Healthcare tenants don’t usually generate as much foot traffic as a popular clothing store, but most now have big advantages over traditional retailers.
“Retailers these days don’t have good credit, but medical providers do, and medical providers stay in business,” Hassan said.
Edwards Realty also decided to terminate the lease it had with Loft, a division of Ann Taylor, another struggling women’s apparel brand, and is in the process of replacing its 6K SF at the Orland Park center with a new restaurant concept created by a local resident, Hassan added.
“He is in love with the idea of owning a restaurant and is ready to make significant investments into the space and sign a long-term lease,” Hassan said. “He never thought this space would be available.”
Schrader said even the most sought-after locations won’t look the same. The southeast corner of Golf Road and Meacham Road in Schaumburg sits adjacent to Woodfield Mall, one of the Chicago region’s most popular malls, and until the pandemic forced its closure last year, it had a Bar Louie.
“Historically, it is very hard to find free-standing sites with that level of visibility and market presence,” he said. “A location like that comes around once every 10 to 20 years.”
The Schaumburg City Council approved in February a plan to replace it with a Charles Schwab branch office. Several council members said they wanted the site to remain a restaurant, the type of establishment that had been there for decades.
But the rules for these kinds of sites may have changed, Schrader said.
“We’re starting to see the market achieve an equilibrium, and although this may be a crude way to put it, it’s going to become more and more apparent who the winners and losers are.”