With all the fluctuations in the retail real estate market, one old bit of wisdom still holds true: a good location is best. We heard all about it from the panelists for Bisnow's 6th Annual Retail Real Estate series, 7am on Tuesday, Feb. 23, at The Century, 2828 N Clark.
Tucker Development CEO Richard Tucker made a huge splash when Tucker and Acadia Realty Trust paid $52M for a 10-building portfolio in white-hot Fulton Market. The Tucker-Acadia JV plans to create a mixed-use shopping, dining and office hub that will further establish the landmark district as one of Chicago’s retail centers. Richard says the location was too good an opportunity to pass. He sees activity taking place between Randolph and Fulton as integral to the area’s future and hopes to build a critical mass of 90k SF, split equally between retail and office. Richard likes that Fulton Market is in development mode, especially on the retail front.
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Terraco Real Estate Development CEO Scott Gendell sees a continuation of retail growth in the urban core, spurred by residential growth. In particular, there’s a rise in TOD retail developments, but Scott says there needs to be a comprehensive approach to programming retail in these areas. Terraco’s Logan Square Mega Mall redevelopment will have a grocery-health club combo, along with 25k SF of specialty shops, restaurants and smaller tenants. Logan Square is developing a reputation for specialty shops and nightlife, and Scott adds we may see more artisans and craft-oriented users in the market.
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First Western Properties’ president Paul Tsakiris says TI packages were generous during the recession. That balance has shifted and as the economy has recovered, Paul is encouraging landlords to get creative in courting tenants, such as staggering free rent in lieu of TIs. Paul also likes to see a mix of shops in his retail assets, based on how they complement each other. Examples: an MRI center next to medical offices or specialty fruit markets next to grocery stores.
Another thing we aren’t seeing as much of in the retail sector these days: ground leases. NGKF senior managing director Jim Schutter says he’s only seeing ground leases in high-profile urban or suburban deals and most suburban land transactions are sales for good corner parcels where the developer has an end user in place for at least part of the building. Jim also sees a trend towards smaller retail footprints trading off with a larger online presence as the good retailers have an online strategy to complement their brick-and-mortar business plans.
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Abbell Associates CEO Liz Holland says capital is following density, as big-box retailers aren’t developing as frequently these days. Investors are still hungry for core assets and they’re moving to secondary and tertiary markets as Chicago becomes more competitive. She’s also keeping an eye on Brookfield’s recent activity. The firm's interest in General Growth Properties comes with a hefty premium at $17/share, but Brookfield's bullishness on a portfolio of Class-B and Class-C assets is an intriguing opportunity. To learn more from these speakers and others, please attend Bisnow's 6th Annual Retail Real Estate series, 7am on Tuesday, Feb. 23, at The Century, 2828 N Clark. Register here.
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