Available retail anchor space in the Chicago area is at a record high, according to CBRE’s 2017 Retail Anchor Report.
Yet as more space is available, much of the new space hitting the market is quality Class A space, which has attracted users at a faster rate than past years, and, driven rental rates up as active and expanding retailers vie for prime space in the market.
Currently, the Chicago market has 10.8 million square feet of retail anchor space available, well above the pervious high of 10 million square feet in 2009. The total number of spaces available is at 218, up from 165 at this time last year.
The main reason for the increased availability has been the wave of bankruptcies and liquidations from retailers like Sports Authority and HH Gregg that have swept across the market, said Parrott.
“The surge of available space in the Chicago area can be attributed to the exit of some very large chains,” said Parrott. “Over the past year, we have seen dozens of big box anchor spaces become available en masse as retailers have left the market entirely.”
According to CBRE Research’s Q3 2016 Chicago retail report, the exit of Sports Authority alone added 1.3 million square feet of available space to the market.
However, many of the spaces available from the recent closings are well-located, Class A spaces in desirable markets. This has created unique effect in the market as retailers, reluctant to enter low quality spaces in the past, are now leasing these spaces at a much faster rate, and, essentially pushing up rents more than $1 per square foot from last year.
According to the report, the average market time for space leased over the past year dropped to 25 months compared to 39 months the previous year, while average rents went up to $12.05 PSF from $10.96.
“In past years, much of the new space on the market came from tenants closing underperforming stores, typically in B & C locations,” said CBRE’s Parrott. “That is not the case this year as liquidations have resulted in more Class A space coming on the market. This phenomenon creates the illusion that rents are increasing. The increase is really a reflection of the changing pool of available space which now includes many high-quality big box locations.”
Other findings from the report include:
- Furniture and fashion stores account for nearly 50 percent of new anchor space leasing.
- There was 3.8 MSF of new anchor space added to the market over the past year, up from 1.6 MSF the previous year
- Average asking rents are at $10.37 PSF.
The report tracks stores larger than 20,000 square feet in the 45 largest regional shopping areas in metropolitan Chicago.