With the economy in recovery, many of the storefronts that went vacant are slowly being filled with new tenants, new businesses and helping spur growth. The average vacancy rate at U.S. retail property in the second quarter fell to its lowest level in more than three years to 10.5%, down from 10.6% in the first quarter (REIS). Although vacancy is still above the levels seen before the downturn, retail sales are up 4.3% from last year, consumer confidence is up 7.1 pts and unemployment has decreased from the month prior in Chicago to 10.3% – although still above December 2012’s low of 9.7%.
There is still uncertainty in the sector. Landlords and business owners are faced with growing competition from internet retailers. But not all retailers can provide goods and services easily done online. Hospitality companies have expanded, meeting pent up consumer demand. Even retailers providing luxury goods and services are not only opening up, but finding a consistent customer base and expanding.
But demand for space is still niche. Large office space, flex spaces and retail located in areas further from dense neighborhoods may still have trouble finding stable tenants. With the current trend of people slowly moving back into the city, the demand has been centered around easily accessible neighborhoods.
Last year, Coyote Logistics moved from Lake Forest into Chicago’s Logan Square neighborhood. Google’s Motorola Mobility division is moving about 2,200 employees from Libertyville to the top four floors at the Merchandise Mart.
For all of Chicago, commercial and industrial real estate have seen a 16.4% increase in sales (MRED), with available inventory lowering by 11.8%.