CHICAGO | General Developments

[harryc]

Originally Posted by west-town-brad

Improving but a ways to go.... Still many large vacant lots, parking lots, large vacant retail building, etc. along Milwaukee Ave.

It may just be that with the new web-economy there will be less demand for retail. Even with increasing population - much directly downtown - Oak Park is working hard to retain retail.

[glowrock]

Originally Posted by west-town-brad

Improving but a ways to go.... Still many large vacant lots, parking lots, large vacant retail building, etc. along Milwaukee Ave.

Most definitely. Up and down Milwaukee exist large vacancies, at least on the retail side. Something tells me it's much more a function of landlords jacking up their rental prices rather than actual lack of perceived need for retail, especially given the high foot traffic that exists all up and down the street. The seemingly permanently-stalled Congress Theatre restoration doesn't help, either.

Aaron (Glowrock)

[ChiTownWonder]

Wow totally forgot that development started construction, its damn beautiful and damn dense! best single improvement to Milwaukee this decade IMO, The twin towers and Robey Hotel conversion a close second and third.

[mark0]

Originally Posted by glowrock

Most definitely. Up and down Milwaukee exist large vacancies, at least on the retail side. Something tells me it's much more a function of landlords jacking up their rental prices rather than actual lack of perceived need for retail, especially given the high foot traffic that exists all up and down the street. The seemingly permanently-stalled Congress Theatre restoration doesn't help, either.

Aaron (Glowrock)

Very much still lingering effects in commercial real estate from the great recession. Values were so artificially inflated in the early 2000's and then refinanced at low rates during the recession, the commercial bubble is still out there. These valuations demand high rents which each year fewer and fewer tenants can pay. If it goes unleased it's a tax write off. So landlords need a high paying tenant or nothing. Supply and demand works but the propping up of the CRE bubble is totally distorting things for now and empty storefronts are a physical manifestation of that distortion. Eventually price equilibrium will be reached, when? Who knows.

[LouisVanDerWright]

Guys it's a myth that landlords leave commercial vacant for the tax write off. In no situation are you going to save more money taking a write off than you'd make renting it out. Not by a long shot.

The reason you have big retail vacancies all over the city is that its really f-ing expensive to put a retail tenant into a space. Most retail build outs start at $50/SF and range to upwards of $200/SF. That's a lot of dough to put into a space that might only be useful for the one tenant you have. So unless there is some serious financial backing or a national class A retail tenant, most landlord's are going to keep their wallet closed until such a time as they can find someone that justifies the financial outlay.

This is compounded by the fact that the retail spaces in most older buildings simply are not suitable for most modern retail uses. The Congress Theater, a building which I know better than literally anyone else in the city, was originally 13,000 SF of retail spaces along the street divided into 17 different storefronts. There are columns and triple wythe brick firewalls everywhere in there which means turning that into two or three 4,000-7,000 SF spaces (the kind of space needed by a modern restaurant or bar) is difficult. As if that weren't enough the storefronts are all old and feature the "windowshopping" layout with a bunch of glass entryway nooks. You aren't allowed to touch that configuration because the building is landmarked so any retail user will basically have to work with a "sawtooth" perimiter along the street. This means no long straight sections of storefront to work with. This means no rows of booths facing the street, no modern merchandise displays, etc etc.

At the end of the day reusing a building like the Congress (or any other 100 year old hulk) is pretty much like building a new building from scratch, but you have to do it inside an ancient shell that comes with who knows what complications hidden in the walls. This is actually a big reason why older industrial buildings have become so popular, they were built for huge wide open spaces which fits right in the mould of modern commerce. These old storefronts come from an era in which the average person walked to a tailor, clothing store, general store, and whatever other services they required within a 2 block radius of their house. You had dozens of smaller buisinesses taking up 800-2000 SF spaces filling the role that a single Target can fill for an entire neighborhood today.

So next time you see vacant storefronts and start blaming the landlord for taking a tax write off, look a little closer. Consider how much work the property really needs. Consider how difficult it would be to retrofit the space to house your favorite bar or restaurant. Think about what it would take to cram a Revolution Brewery or Piece Pizza into that building. There's a reason why Bow Truss buildings or big old pseudo warehouse Revolution type buildings are so popular with retail users. They were actually designed for wide open modern spaces like we take for granted today.

[woodrow]

^^ That makes a lot of sense. Also, if we want retail on commercial strips, we gotta stop shopping online.

[OrdoSeclorum]

Originally Posted by LouisVanDerWright

Guys it's a myth that landlords leave commercial vacant for the tax write off. In no situation are you going to save more money taking a write off than you'd make renting it out. Not by a long shot.

The reason you have big retail vacancies all over the city is that its really f-ing expensive to put a retail tenant into a space. Most retail build outs start at $50/SF and range to upwards of $200/SF. That's a lot of dough to put into a space that might only be useful for the one tenant you have. So unless there is some serious financial backing or a national class A retail tenant, most landlord's are going to keep their wallet closed until such a time as they can find someone that justifies the financial outlay.

This is compounded by the fact that the retail spaces in most older buildings simply are not suitable for most modern retail uses. The Congress Theater, a building which I know better than literally anyone else in the city, was originally 13,000 SF of retail spaces along the street divided into 17 different storefronts. There are columns and triple wythe brick firewalls everywhere in there which means turning that into two or three 4,000-7,000 SF spaces (the kind of space needed by a modern restaurant or bar) is difficult. As if that weren't enough the storefronts are all old and feature the "windowshopping" layout with a bunch of glass entryway nooks. You aren't allowed to touch that configuration because the building is landmarked so any retail user will basically have to work with a "sawtooth" perimiter along the street. This means no long straight sections of storefront to work with. This means no rows of booths facing the street, no modern merchandise displays, etc etc.

At the end of the day reusing a building like the Congress (or any other 100 year old hulk) is pretty much like building a new building from scratch, but you have to do it inside an ancient shell that comes with who knows what complications hidden in the walls. This is actually a big reason why older industrial buildings have become so popular, they were built for huge wide open spaces which fits right in the mould of modern commerce. These old storefronts come from an era in which the average person walked to a tailor, clothing store, general store, and whatever other services they required within a 2 block radius of their house. You had dozens of smaller buisinesses taking up 800-2000 SF spaces filling the role that a single Target can fill for an entire neighborhood today.

So next time you see vacant storefronts and start blaming the landlord for taking a tax write off, look a little closer. Consider how much work the property really needs. Consider how difficult it would be to retrofit the space to house your favorite bar or restaurant. Think about what it would take to cram a Revolution Brewery or Piece Pizza into that building. There's a reason why Bow Truss buildings or big old pseudo warehouse Revolution type buildings are so popular with retail users. They were actually designed for wide open modern spaces like we take for granted today.

Interesting insight. There's also the length of leases to consider. A store front landlord might not want to sign a 15 year lease with an outfit that might go belly-up in 9 months. Or he might want to leave a place vacant, rejecting the opportunity for a nail salon, for a year or two hoping that if he waits, he might land a great tenant who will be there for decades.

[LouisVanDerWright]

Originally Posted by woodrow

^^ That makes a lot of sense. Also, if we want retail on commercial strips, we gotta stop shopping online.

Yup, support your local businesses and watch them multiply.

I'm actually leasing out a 1,000 SF storefront I just finished right now. Cost me $24,000 just to replace the storefront glass and fix the brick on the front of the building. That's $24/SF just doing the facade... This shit ain't cheap, I'll be getting about $1200/mo for the unit. It will take almost two years of rent just to cover that one aspect of the rehab.

[Skyguy_7]

^And that's why builders go cheap on the facade with painted concrete, etc. Kudos to Louie for going the extra mile on the aesthetic

[mark0]

Originally Posted by OrdoSeclorum

Interesting insight. There's also the length of leases to consider. A store front landlord might not want to sign a 15 year lease with an outfit that might go belly-up in 9 months. Or he might want to leave a place vacant, rejecting the opportunity for a nail salon, for a year or two hoping that if he waits, he might land a great tenant who will be there for decades.

I get what your saying for older buildings. But look at all the new vanilla box ground level retail just sitting there, sometimes ten years or more. If you can make a profit selling condos or selling a leased up apartment building above the retail, why not take a write off n the ground floor? You can write off the lost rent value which is way higher than the carrying cost.

[Tom In Chicago]

https://www.chicagobusiness.com/news...ated-navy-pier

Marina slated for Navy Pier
Boaters will be able to drop anchor starting in 2021.

Originally Posted by CRAIN'S

A commercial real estate developer who loves boating is behind a permanent marina set to open next year at Navy Pier.

The roughly $9 million Navy Pier Marina is the passion project of Randy Podolsky, a commercial real estate veteran, avid boater since 1983 and 29-year member of the Coast Guard Auxiliary. He said it’s long been his dream to be able to temporarily park his boat to easily enjoy all the city has to offer.

. . .

[Steely Dan]

^ well, that's a no-brainer of an idea.

the northside of the pier has always seemed vastly underutilized to me.

[Chi-Sky21]

could easily be done, they should also fix up the wood water break just south of the pier have seen multiple ships sink on that one.

[woodrow]

Very happy this is happening.

I wonder how they got around the "terrorist" fear, which is what scuttled an earlier, similar plan. It called for a guest marina and the city/state/Feds(?) put the kibosh on the idea because of Jardine.

[ardecila]

I'm not sure what they could do to Jardine realistically from a boat 500 feet away. It's not an especially vulnerable building. But you can already sail up against the north, east, or west sides of Jardine already so it's not like the south side is any more at-risk.

This project seemingly came out of nowhere. Also, $9M seems ridiculously low. For that price, I'm expecting a bunch of janky plastic floating docks and not much more...

On the other hand, this could do wonders for the dining/drinking options at Navy Pier, at least in the summer months. Imagine if the playpen folks could tie up for 2 hours to grab a fancy dinner before returning to their maritime revelry... it's also pretty easy to call an Uber on that north access road so they could head to Streeterville or River North spots.

[west-town-brad]

Originally Posted by Steely Dan

^ well, that's a no-brainer of an idea.

the northside of the pier has always seemed vastly underutilized to me.

I think all of the docks/boat slips are underutilized:
https://news.wttw.com/2018/06/06/why...-monroe-harbor

[Tom In Chicago]

I think the park district is going to need to review their rate structure. . . for non-city of Chicago residence you pay a 25% premium on mooring at the harbors. . . that coupled with the demographic changes will certainly put pressure on them to re-evaluate the future of the harbors. . . I've always questioned a harbor at 31st Street and it's impact on the capacity of Burnham, but I'm really surprised at Monroe's capacity being relegated to the north harbor. . . it will be interesting to see how these transient slips work out. . . I have always thought that side of the pier should be dredged and built out for larger "cruise" ship type moorings. . . maybe someday. . .

. . .

[Baronvonellis]

Originally Posted by mark0

I get what your saying for older buildings. But look at all the new vanilla box ground level retail just sitting there, sometimes ten years or more. If you can make a profit selling condos or selling a leased up apartment building above the retail, why not take a write off n the ground floor? You can write off the lost rent value which is way higher than the carrying cost.

I think America is just way over retailed. We have giant Target stores in every neighborhood and giant suburban malls. We can't decide what we want, if we want small local retail we can't also have huge Targets, and malls all over as well.

In Europe, they use old small retail spaces just fine. But they don't have Targets, Wal-Marts, and malls all over the place, so they have to shop at small retail spaces on city streets.

[SDJackson]

Originally Posted by LouisVanDerWright

Guys it's a myth that landlords leave commercial vacant for the tax write off. In no situation are you going to save more money taking a write off than you'd make renting it out. Not by a long shot.

The reason you have big retail vacancies all over the city is that its really f-ing expensive to put a retail tenant into a space. Most retail build outs start at $50/SF and range to upwards of $200/SF. That's a lot of dough to put into a space that might only be useful for the one tenant you have. So unless there is some serious financial backing or a national class A retail tenant, most landlord's are going to keep their wallet closed until such a time as they can find someone that justifies the financial outlay.

I'm a retail landlord and this guy knows what he's talking about. Thank you for calling out this uninformed conclusion. I roll my eyes every time I see someone say that because of tax implications, it's beneficial for landlords to leave their spaces vacant. It absolutely is not. One year of vacancy eats up lots of $/sf of rent. I'm not refusing to do deals because I'm holding out for $2, $3, $5 more per foot in rent.

You give me a tenant with a viable business plan, willing to throw in some of their own money next to mine to building out their space, willing to put up some amount of security, and willing to pay a reasonable rent, even if it's less than I'd like to get .....and I'll sign that lease.

[marothisu]

Originally Posted by Baronvonellis

I think America is just way over retailed. We have giant Target stores in every neighborhood and giant suburban malls. We can't decide what we want, if we want small local retail we can't also have huge Targets, and malls all over as well.

In Europe, they use old small retail spaces just fine. But they don't have Targets, Wal-Marts, and malls all over the place, so they have to shop at small retail spaces on city streets.

They've had the same issue in China with retail. People just go online - even moreso over there - for retail. An entire mall near my wife's parents place on the outskirts of Shanghai was converted to all restaurants and bars (and a movie theater). Actually a pretty nice place - it was built not even that long ago but they had to make that decision. Went twice when I was there 2 years ago and it wasn't extremely busy but definitely enough people there to keep restaurants open. A lot of nice restaurants in there that were good sized. And also for the record, it was a Wanda property