The vacancy rate at Chicago-area strip malls was the highest last year since at least 1980, according to new data.
Vacancies at neighborhood shopping centers rose throughout the year, peaking at 11.5% in the fourth quarter, according to New York-based Reis Inc.
Chicago’s fourth-quarter vacancy rate also was much higher than Reis’ nationwide number, 10.6% — itself an 18-year high.
Possible reasons for Chicago’s rate being higher than the country’s are the steady decline of manufacturing jobs for Midwest cities such as Chicago and the fact that this market is one of the largest by square footage, meaning more competition for tenants, according to Reis economist Ryan Severino.
Mr. Severino expects strip mall vacancy here and nationwide to creep even higher in the next couple years. He cites two factors: Employment and consumer confidence will take a while to perk up, and a lot of store space has come online in the past couple years.
Chicago’s fourth-quarter rate was an increase from 11.2% in the third quarter, 10.9% in the second quarter and 10.7% in the first quarter, according to Reis. The rate was 10.1% at yearend 2008.
The previous high was 10.6% in 1990. Reis began tracking the data in 1980.
“Landlords are having to get more aggressive in deal structures,” says Doug Renner, vice-president of landlord representation at Chicago-based brokerage Baum Realty Group LLC.
Strip mall owners who can offer free rent and money for buildouts are more likely to be successful in this environment, Mr. Renner says.
In the Chicago market, effective strip mall rent fell 2% in 2009, better than the national decline of 3.7%. Asking rents here fell 1.2%, also better than the 2% national decrease, according to Reis.
Chicago’s vacancy rate last quarter put it in the middle of the 77 markets Reis tracks. The lowest vacancy was in San Francisco at 3.4%. Dayton, Ohio, had the highest vacancy at 16.3%.
Source: Todd J. Behme (2010). Local strip-mall vacancy highest in at least 29 years. Crain’s Published Jan 08, 2010 Viewed Jan 11, 2010, http://www.chicagorealestatedaily.com/cgi-bin/news.pl?id=36677
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