Heartland Real Estate Business

FEB 2018

Heartland Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Midwest.

Issue link: https://heartlandrealestatebusiness.epubxp.com/i/935979

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Page 13 of 32

www.REBusinessOnline.com Heartland Real Estate Business • February 2018 • 13 M A R K E T H I G H L I G H T: C H I C A G O HOW TO FIND THE FORMULA FOR SUCCESS IN CHICAGO'S RETAIL MARKET Successful retail development, espe- cially in today's evolving retail envi- ronment, needs constant re-evaluation by developers as well as municipali- ties. In some cases, the old rules are being rewriĴen to allow for more creative uses of otherwise stagnant — and sometimes historic — properties. The city of Chicago's Industrial Corridor Modernization Initiative, designed to relax zoning in areas once reserved for manufacturing, is an ex- cellent example of a notable shift that will allow developers to execute new strategies for retail development, of- ten in combination with other uses. The recently adopted guidelines for the North Branch Industrial Corridor, the first of 26 such areas in Chicago to be evaluated, suggest the formula that will be needed to help realize the city's ambitious vision. Neighborhood workforce With employers increasingly fo- cused on aĴracting and retaining tal- ent in a tight labor market, they are seeking locations with a mix of retail amenities that their employees can take advantage of before, during or after the workday. Increasingly, this mix is found in neighborhoods out- side the downtown core that offer a relative value when it comes to office rents — another benefit for companies looking to make a move. In some cases, office and retail are located in the same mixed-use de- velopment, a model that's becoming more common. In 2015, our firm com- pleted NEWCITY, a 565,000-square- foot mixed-use complex in the heart of Lincoln Park and adjacent to the North Branch corridor. While this enclave of Chicago is best known as a retail district — the second largest in the city behind the Magnificent Mile — it's emerging as an employment hub as well. In fact, a site just a mile northwest of NEWCITY is one of the proposed sites for Ama- zon's HQ2, an announcement that, together with the zoning changes, has spurred significant interest from for- ward-looking office developers. The expected influx of office work- ers will not only support existing re- tail in this area, but also drive the need for additional options. Given this syn- ergistic relationship between the two sectors, it's no surprise that office de- velopers are starting to think more like retail developers, and retailers themselves, in terms of how they're planning and marketing projects. Af- ter all, they're catering largely to the same end user: millennials. Successful office development, like retail development, boils down to loca- tion. Amazon, Google and McDonald's are among the employers that have re- alized the value of a non-CBD address. Instead, they're following retailers and residential development to "hip" neigh- borhoods that resonate with this new generation of workers and shoppers. This has given them a competitive edge in aĴracting the millennial workforce by creating new urban experiences that combine neighborhood authenticity with downtown conveniences. Filling demand for housing The demand for housing naturally increases as high-paying tech jobs move to former manufacturing dis- tricts around Chicago. Forecasts for residential development in the North Branch Industrial Corridor indicate the possibility of 7,500 new units com- ing to the stretch between Kinzie and Fullerton streets. I predict the area will see upwards of 10,000 units coming on line in the next 10 years simply based on the number of large development sites, such as the former A. Finkl & Sons steel plant, Greyhound maintenance facility on Goose Island and a 30-acre parcel that includes the Chicago Tri- bune's Freedom Center printing plant in River West. As this enclave of Lincoln Park evolves to include a full spectrum of live-work-play options, retail of all forms stands to benefit. Those who live here will grab their morning cof- fee here, go out for lunch or dinner here and shop for daily needs here. This economic ripple effect is sure to bring additional concepts to the area, including those that thrive during eve- nings and weekends due to the built- in customer base. This will further position this stretch of Lincoln Park as one of Chicago's top retail districts. Perfecting the timing Timing is critical when it comes to real estate development. Since the new land-use guidelines were adopted last summer, several projects have been announced, including everything from an all-timber office building on Goose Island to a new stadium in the Lincoln Yards mixed-use district that would host concerts and sporting events. But developers, particularly those who are accustomed to navi- gating the sometimes-turbulent retail waters, will still have to reconcile the land-use opportunities with the needs of the retailers themselves. Because of how recently it was com- pleted, NEWCITY serves as a case study in retail and entertainment con- cepts that are not just surviving, but thriving in the current landscape — and in Lincoln Park in particular. In addition to a grocery component, the center offers services, merchandise and experiences that cannot be easily replicated online. Examples include a kitchen showroom where customers can meet face-to-face with design ex- perts, an off-price retailer that offers a rotating selection of discounted ap- parel and accessories and entertain- ment-focused concepts including a movie theater and bowling alley. Although the future of the North Branch corridor is still coming into fo- cus, one thing is clear: its successful re- development hinges on many factors, including the thoughtful combination of uses that complement each other as well as offerings in neighboring com- munities. And despite the headlines about the so-called retail apocalypse, it's also apparent that a vibrant mix of storefronts, restaurants and entertain- ment concepts will be crucial to "sell- ing" this location to both employers and the people who will fill their offices. Jeff Berta Senior Director of Real Estate Development, Structured Development Structured Development's NEWCITY is a 565,000-square-foot mixed-use property in Lincoln Park located adjacent to the North Branch Industrial Corridor. CHICAGO COMMERCIAL 940 WEST ADAMS STREET, SUITE 200 CHICAGO, IL 60607 312.676.1866 | WWW.SVNCHICAGO.COM SVN | CHICAGO COMMERCIAL IS A FULL-SERVICE COMMERCIAL REAL ESTATE ADVISORY FIRM LOCATED IN CHICAGO'S WEST LOOP WITH OVER 50 PROFESSIONALS CONCENTRATED IN BOTH SALES AND LEASING #1 SVN OFFICE NATIONWIDE | CELEBRATING 10 YEARS EXPERIENCE THE DIFFERENCE RETAIL OFFICE INDUSTRIAL MULTIFAMILY

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