Site Selection Strategies: Business as Usual? - Mid-America Real

RetailReview A publication of Mid-America ® Re al Estate Group FAL L 2 0 1 3

Site Selection Strategies: Business as Usual?

In the past five years, the real estate market has been in recovery mode and it seems that things are almost back to where they were in 2008. But is everything the same? Have tenants changed their criteria for the number of stores they plan to open? Do they look at sites differently now than pre-2008? Below are some insights from Mid-America’s tenant experts as to how the recovery has influenced the retail trades.

According to Mid-America Broker (Mich.) Susan Acciaioli, “Co-tenancy clauses continue to be one of the biggest sticking points in negotiating a deal. For national retailers, obtaining a co-tenancy clause makes it easier to get deals approved. But landlords deem them a liability.” She says that, “Typically language can be negotiated to satisfy the retailer’s ‘worst case scenario,’ and at the same time provide the landlord with replacement tenant flexibility.”

“One fundamental that seems back in vogue is that successful retail development follows, not leads, residential population and growth,” says Jeff Kuchman, Mid-America Principal and Director of Tenant Brokerage. “Most retailers and projects that continue to struggle exist on the fringes, where stores jumped out in front of rooftops in an attempt to drive growth plans.”

Location Scrutiny

More Reserved Retailers With that in mind, the lessons of recent years are apparent in retailers’ decision making process as the market continues to gain momentum. One example is concern about possible turnover in a potential center.

In the still-changing economy, it’s more important than ever for brokers to be aware of potential pitfalls in helping clients with site selection. Mid-America Principal (Minn.) Mike Sims says, “Tenants who were active during the recession, albeit few, were fortunate that there was not much competition. Overall activity is improving now, but retailers are still very selective on locations. Retailers are scrutinizing each and every site and deal.” Mid-America Principal (Mich.) Tony Schmitt says that when retailers are looking for a site, they must ask themselves if there are new development options. “We’ve seen the

majority of existing A space leased, and there is opportunity for new construction,” he says. “Smaller retail tenants are dictating the location of these sites and will pay for a strong location, especially if it out positions their competitor. Larger developments are still on the horizon as they require a critical mass of retailers.”

Exit Strategy Although the market is steadily improving, it is still important to be aware of possible changes in the future. Mid-America Principal and Vice President Dan Tausk says, “Retailers need to be cognizant of an exit strategy on each individual site more than ever before. Kick out clauses have become a big issue for both tenants and landlords trying to protect themselves from mistakes while giving each side some flexibility to move on.”

The retail real estate market will inevitably continue to change, and site selection strategies will have to evolve to keep up with those changes. Having an experienced broker in your corner with the most comprehensive, current market knowledge may be one of the best strategies of all.

ICSC Chicago Deal Making October 2 – 3, 2013 Navy Pier

600 East Grand Avenue Chicago, IL 60611 Stop by and visit us at the Mid-America Real Estate Group at Booth #911 or at the ChainLinks Booth #711.

Illinois Office: One Parkview Plaza, 9th Floor Oakbrook Terrace, Illinois 60181 630.954.7300 Chicago Office: 435 N. Michigan Avenue, Ste 2009 Chicago, Illinois 60611 630.954.7327 Wisconsin Office: 648 N. Plankinton Avenue, Ste 264 Milwaukee, Wisconsin 53203 414.273.4600 Minnesota Office: 5353 Wayzata Boulevard, Ste 650 Minneapolis, Minnesota 55416 952.563.6600 Michigan Office: 6230 Orchard Lake Road, Ste 230 West Bloomfield, Michigan 48322 248.855.6800 www.midamericagrp.com

Illinois Activity MAAMCO Leasing Activity

2

Principal Richard Spinell reports the following new and renewal retail leases recently completed by Mid-America Asset Management (MAAMCO) leasing representatives:

Shopping Center Tenants Total Sq. Ftg.

Shopping Center Tenants Total Sq. Ftg.

180 N. Jefferson Chicago, IL

Nail 2NE1, Subway

2,643

Ogden Mall Naperville, IL

Lotus Terrace

1,800

1480 N. Orchard Road Aurora, IL

Illini Legal Services

1,120

Parker Square Minook, IL

Full Steam Staffing

1,240

Asbury Plaza Dubuque, IA

Bed, Bath & Beyond, Dress Barn, Maurices, Petco

47,202

Parkview Plaza Chicago, IL

Fred Loya

Aurora Marketplace Aurora, IL

DuPage Medical Group

4,200

Plaza del Prado McDonald’s, Zoup! Glenview, IL

7,500

Bloomingdale Square Bloomingdale, IL

Blooming Nails

2,656

Poplar Creek Crossing Hoffman Estates, IL

Dunkin Donuts, PJ’s Avon Beauty Center

3,628

Brewster Creek Square Bartlett, IL

Sherwin Williams

3,500

Prairie Ridge West Pleasant Prairie, IL

Cheddar’s

Broadway at Surf Chicago, IL

Bed, Bath & Beyond, Sprint, TJ Maxx

The Quarry Hodgkins, IL

Bedding Experts, Cost Cutters

Broadview Village Square Broadview, IL

Vintage Cleaners

Randall Road-College Green Elgin, IL

Planet Fitness

Burr Ridge Village Center Burr Ridge, IL

Red Mango

1,658

Rice Lake Square Pure Barre, Pinwheel Toys, Smile More Dental Wheaton, IL

California & Armitage Chicago, IL

Sally Beauty

1,475

River Forest Town Center River Forest, IL

LOFT, Tilly’s, Ulta

Carillon Court Romeoville, IL

Stella’s

2,718

Scharrington Square Schaumburg, IL

Sally Beauty Supply

Carillon Square Glenview, IL

Advocate Health Care, Athletico, Dickey’s BBQ Pit, Onomoli, Prime Devices Corp.

Schaumburg Plaza Schaumburg, IL

JD Kids Ice Cream

Church Street Plaza Evanston, IL

Pure Barre, Second Time Around

2,970

Shops at State Place Chicago, IL

European Wax Centers

1,778

Cicero Annex Chicago, IL

Sleepy’s

6,075

Southport Plaza Kenosha, WI

Pier 1 Imports

9,981

Clark-Wellington FedEx Chicago, IL

5,006

Surrey Ridge Arlington Heights, IL

Wasabi

1,750

Crossroads at Briargate South Elgin, IL

Molly’s Deli

1,546

Town Square Schaumburg, IL

Creative Touch Interiors, Lester Starr Jewelers

3,911

Dempster Plaza Niles, IL

Advocate Lutheran General

14,700

Village Crossing Niles, IL

Radio Shack, Subway

3,712

Dorchester Commons Chicago, IL

Red Snapper

Village Square of Bradley Bradley, IL

Hair Works

Evanston Plaza Evanston, IL

DaVita, Papa Romeo’s Pizza, US Army & Marines

Village Square of Northbrook Northbrook, IL

Verizon Wireless

The Fresh Market Center Glen Ellyn, IL

Firehouse Subs, Great Clips

Fullerton Plaza Chicago, IL

Chase, Party City

Garden Market Western Springs, IL

71,850 630

16,515

1,500 12,911 3,250

940

2 acres 5,050 20,924 6,560 20,515 1,245 900

800 2,464

Webster Place Chicago, IL

Barnes & Noble, Pet Stuff

15,800

Westmont Village Westmont, IL

Rusco Windows

1,808

George’s Hair Design, Yumz Frozen Yogurt

3,477

Willard’s Corner North Aurora, IL

Sears Appliance

5,000

Gateway Centre Chicago, IL

Dunkin Donuts, T-Mobile

4,204

Willow Creek Glenview, IL

Sleepy’s

6,507

Geneva Commons Geneva, IL

Aveda/Annabella Salon & Spa, The Children’s Place, Claddagh Irish Pub, Destination Maternity, Express, Forever 21, Massage Envy, New York & Co., Sleep Number, Soma Intimates

Windsor Pointe Kenosha, WI

Lavish Spa

1,395

Glenbrook Marketplace Glenview, IL

EcoGym

8,700

The Grove Buffalo Grove, IL

Pastabilities

1,600

High Point Square Romeoville, IL

Laredo’s Hospitality

1,750

Hoffman Village Hoffman Estates, IL

Goodwill

Kensington North Plainfield, IL

Verizon Wireless

2,763

LaGrange Crossing LaGrange, IL

Pure Barre

1,612

Main Street Commons St. Charles, IL

Embroid Me, World Market

Market Meadows Naperville, IL

Heartland Blood Center, SAS Comfort Shoes

4,865

Marshfield Plaza Chicago, IL

Skechers

7,497

McHenry Commons McHenry, IL

Family Video

4,200

Midway Square Chicago, IL

Hanway Insurance

1,102

Milwaukee & Concord Chicago, IL

Presence Healthcare, UPS Store

4,627

Mount Prospect Plaza Mt. Prospect, IL

Famous Footwear

5,838

Naperville Crossings Naperville, IL

C2 Education, Nothing Bundt Cake

4,342

North Lake Commons Lake Zurich, IL

The UPS Store

1,411

Oakland Place Dekalb, IL

Sears

9,290

54,522

20,630

19,675

The Mid-America Asset Management team can be reached at 630.954.7300.

MAAMCO News & Notables Michelle Panovich to Receive Lifetime Industry Leadership Award Mid-America is proud to announce that C. Michelle Panovich, MAAMCO Principal and Executive Vice President, will be honored with the Lifetime Industry Leadership Award at the 12th annual Real Estate Gala hosted by the Marshall Bennett Institute of Real Estate at Roosevelt University on November 7, 2013. Michelle has more than 30 years of experience in real estate construction, development and management. Among her many accomplishments, she has directed the redevelopment of The Streets of Woodfield in Schaumburg and Brickyard Mall in Chicago, and the retail revitalization of downtown LaGrange and Park Ridge. According to Jon DeVries of Roosevelt University, “Michelle’s leadership and contributions to the profession, community and our school have been significant.”

31,950

Report from Illinois Brokers MAREC Activity

Principal Jeff Kuchman reports the following transactions recently handled by Mid-America Real Estate Corporation (MAREC) brokers:

PROJECT Leasing Location Tenant

3

Tenant Representation Sq. Ftg.

Broker

Chicago:

Tenant Location Broker Aldi

Big Rapids, MI; Galesburg, IL

Mike Phillips, Andy Bulson

Peter Scannell

Associated Bank

Sturgeon Bay, WI

Peter Scannell

Matt Gould, Paul Bryant, Dan Tausk

Aspen Dental

Alton, IL; Glen Carbon, IL

Willie Hoag

Andrew Becker

Athletico

Greenfield, WI; Orland Park, IL; Oswego, IL

Peter Scannell

1,340

Paul Bryant, Dan Tausk, Andrew Becker

Buffalo Wild Wings

McHenry, IL

Brian Adams, Steve Frishman

Buffalo Wild Wings

9,462


Camper

Chicago, IL

Paul Bryant, Dan Tausk

2500 W. North Avenue

Dental Magic

1,900

Stephen Ansani, Paul Bryant, Dan Tausk

Chick-fil-A

Chicago Ridge, IL; Elmhurst, IL; Rockford, IL

Steve Frishman, Greg Bayer

3404 N. Southport

Jeni’s Splendid Ice Cream

1,600

Matt Gould

Chili’s

Bradley, IL

Steve Frishman, Brian Adams

5300 N. Broadway

Pizza Hut Sleepy’s

1,260 8,625

Peter Caruso, Andrew Becker

Chipotle Grill

Highland, IN; Norridge, IL

Steve Frishman

California & Armitage

Sally Beauty The UPS Store

1,475 1,475

Matt Gould, Stan Nitzberg

Elsie’s Place

Oaklawn, IL

Stephen Ansani

EP Clock Tower

East Peoria, IL

Andy Bulson, Mike Phillips

Webster & Lincoln

Mrs. Greens Natural Market

Express

Chicago, IL

Greg Bayer, Paul Bryant, Dan Tausk

Webster Place

Pet Stuff

1,200

Andrew Becker

Francesca’s Collections

Chicago, IL

Matt Gould

Wicker Park Commons

Vitamin Shoppe

3,200

Greg Bayer, Dan Tausk, Paul Bryant

G Spot Salon

Chicago, IL

Michael Wexler

44 S. Washington St. Hinsdale, IL

China Spring Restaurant

2,964

Peter Caruso, Paige Winkels

417 E. Route 173 Antioch, IL

Blackhawk Restaurant Group

1,393

Kevin McLoughlin

737 Chicago Avenue Evanston, IL

Pie and Coffee

2,608

Peter Caruso, Stan Nitzberg, Paige Winkels

LA Fitness Chicago, IL; Glenview, IL

Jeff Kuchman, Greg Bayer, Willie Hoag, Dan Tausk, Paul Bryant

1080 S. Roselle Rd. Schaumburg, IL

Title Max

2,400


Lowe’s (pad site disposition)

1315 W. North Avenue Melrose Park, IL

Olive Garden

1518 Market St. Des Plaines, IL

Elite Fitness & Training Tap House

218 W. Washington

Fifth Third Bank

980

556 W. Diversey

Aligned Modern Health

835 W. Wilson

property sale

.63 acre

1560 N. Damon

Stan’s Donuts

1832 N. Clybourn

2,400

20,000


Illinois & Beyond:

55,000 11,619 6,720

Icebreaker Chicago, IL

Greg Bayer, Stan Nitzberg, Paul Bryant, Dan Tausk

Jason’s Deli

Bloomington, IL; Normal, IL

Willie Hoag, Brian Adams

Jeni’s Splendid Ice Cream

Chicago, IL

Andrew Becker

Kate Spade

Chicago, IL

Greg Bayer, Stan Nitzberg

La Colombe Torrefaction

Chicago, IL

Michael Wexler

Galesburg, IL

Jeff Kuchman, Paige Winkels

Lowe’s (surplus asset disposition) Ionia, IL

Jeff Kuchman, Paige Winkels

Steve Frishman, Brian Adams

Maggiano’s

Steve Frishman

Andrew Becker, Peter Caruso

Massage Envy Algonquin, IL; Highland, IN; Plainfield, IL

Peter Scannell, Steve Frishman, Brian Adams

Nordstrom Rack Chicago, IL; Skokie, IL

Jeff Kuchman, Stan Nitzberg, Dean Welch

Vernon Hills, IL

2825 Rockingham Ripple & Frenell Auto Sales 14,860 Davenport, IA

Peter Caruso, Mike Phillips, Andy Bulson, Paige Winkels

7130 East State Street Rockford, IL

Chick-fil-A

Jeff Kuchman

Pier 1 Imports

Chicago, IL; Schererville, IN; Oak Brook, IL; Wheaton, IL

Andy Bulson, Mike Phillips

Harlem Irving Plaza Norridge, IL

Panera Bread

Steve Frishman

Ross Dress For Less Chicago, IL

Andy Bulson, Mike Phillips, Paul Bryant, Dan Tausk

Merrillville Plaza Hobart, IN

Affordable Dentures & Crowns 3,172 JoAnn Fabrics 26,157

Peter Caruso, Jeff Kuchman, Paige Winkels

Massage Envy Physicians Immediate Care Vitamin Shoppe

3,300 3,290 3,012

Steve Frishman

Algonquin, IL; Bannockburn, IL; Batavia, IL; Berwyn, IL; Bolingbrook, IL; Chicago, IL (9 locations); Crystal Lake, IL; Evergreen Park, IL; Frankfort, IL; Glenview, IL; LaGrange, IL; Lake Zurich, IL; Naperville, IL; Oak Brook, IL; Orland Park, IL; Vernon Hills, IL

Jeff Kuchman, Willie Hoag, Greg Bayer, Dan Tausk

NEC Indianapolis Blvd & Main St. Highland, IN

Sleepy’s

NEC Rand Rd. & Rte. 22 Lake Zurich, IL

Sleepy’s Vitamin Shoppe

4,200 3,000


Sportclips

Chicago, IL (2 locations); Elgin, IL; Peter Scannell, Stephen Ansani, Elk Grove Village, IL; LaGrange, IL; Orland Park, IL; Matt Gould, Dean Welch Rockford, IL; South Barrington, IL

.99 acre 4,000

NEC Weber & Airport Rds. TJ Maxx 22,500 Romeoville, IL

Peter Caruso, Steve Frishman, Kevin McLoughlin, Paige Winkels

NWC Northwest Highway & Rte. 31 Crystal Lake, IL

Peter Caruso, Brian Adams, Steve Frishman

Texas Roadhouse

6,872

NWC 159th & La Grange Orland Park, IL

Games Workshop

862

The Shops at Fox River McHenry, IL

Buffalo Wild Wings Torrid

SWC Grand Ave. & Hunt Club Heartland Dental Gurnee, IL


5,687 2,500

Kevin McLoughlin, Peter Caruso

3,000

Peter Caruso, Steve Frishman

XOCO Frontera Chicago, IL

Paul Bryant, Dan Tausk, Peter Scannell

For site and location criteria for these clients, please contact Mid-America Real Estate Corporation at 630.954.7300.

Illinois Market Highlights Urban Grocery Study Shows Gourmet Sector on the Rise in Chicago by Dan Tausk and Nancy Fetsch The Mid-America Urban Team has offered the Chicago retail market food for thought with its second biennial Urban Grocery Study, authored by principal and vice president Dan Tausk along with analyst Nancy Fetsch. The study, released in mid-September, notes a 60% increase in new square footage devoted to the gourmet sector since the 2011 study. Gourmet also saw a 41.94% increase in the number of new store openings. The near future is also being led by gourmet. Continued on page 8…

Wisconsin Activity

4

Project Leasing Report

Wisconsin Market Highlights

Principals Daniel J. Cohen and Daniel E. Rosenfeld report the following transactions recently handled by the Mid-America Real Estate-Wisconsin team:

The greater Milwaukee area has seen demand for small shop space, with junior anchor space extremely competitive in the last several quarters. For quality sites in high-demand trade areas, national retailers have been forced to “pay up” to make deals, something that was rarely seen in this market in the past.

Project Leasing Property/Location

Retailer

Sq. FtG.

Bayshore Town Center Glendale, WI

Ulta Beauty

10,277

Brady Place Milwaukee, WI

GNC Subway

1,440 1,230

Ryan Holzhauer

Brooktown Plaza Brookfield, WI

Cycle Gear

3,432

Teresa Shemitis

Brownstones Shopping Center Brookfield, WI

Blaze Pizza

2,650

Andrew Prater

Concord Corporate Center 4 Mequon, WI

2nd Wind Exercise Equipment

4,410

Teresa Shemitis

Delavan Crossings Delavan, WI

rue 21

5,200

Andrew Prater, Teresa Shemitis

Former Circuit City Grand Chute, WI

Sears Outlet

45,572

Ryan Holzhauer, Dan Rosenfeld

Germantown Market Place Germantown, WI

Bellisima Spa

Heritage Village Mall Beaver Dam, WI

Staples

Horizon Plaza Appleton, WI

maurices

4,664

Dan Rosenfeld

Oak Creek Commons Oak Creek, WI

Express Cleaners Yen Hwa Chinese Restaurant

1,081 2,028

Andrew Prater

Pine Tree Plaza Janesville, WI

Dress Barn Eyemart Express

8,184 3,500

Teresa Shemitis, Andrew Prater

Ruby Isle Brookfield, WI

Kid Spa Salon & Parties Serenity Spa Salon & Boutique

1,813 3,220

Teresa Shemitis

The Shoppes at Fox River Waukesha, WI

Hobby Lobby

55,000

Ryan Holzhauer

Shoppes at Prairie Ridge Pleasant Prairie, WI

Affordable Dentures & Crowns

3,127

Teresa Shemitis

The Shops of Grand Avenue Milwaukee, WI

Jake’s Deli

Southport Plaza Kenosha, WI

Pier 1

1,159 .29 acre

771 9,981

Broker Teresa Shemitis, Dan Rosenfeld

Joe Kleiman Joe Kleiman, Dan Rosenfeld

Ryan Holzhauer, Teresa Shemitis Teresa Shemitis, Barb Kading

Tenant Representation Tenant Location Broker

Blaze Pizza Brookfield, WI ROJECT OVERVIEW - PHASEDan 1Cohen, Dan Klister Buffalo Wild Wings Manitowoc, WI; Racine, WI Adam Dreier Cherry Berry Yogurt Bar

Oshkosh, WI

Tony Colvin

Cycle Gear

Brookfield, WI

Tony Colvin

REGIONAL SHOPPING DESTINATION Grace & Shelly’s Cupcakes Whitefish Bay, WI Dan Cohen

th Staples Beaver which Dam, WI Mayfair Collection’s first phase, broke ground on April Dan 16Cohen , 2013, Jimmy John’s Delavan, WI; Glendale, WI Adam Dreier sists of adaptively repurposing functionally obsolete warehouse buildings Menchie’s45 Delavan, WI; Sheboygan, Adam through Dreier ng Highway into new, contemporary retailWI environments that, Outpost Natural Foods Cooperative Mequon, WI Dan Cohen que design, celebrate the property’s industrial heritage. With commitments 7-Eleven Milwaukee, WI Tony Colvin, Dan Cohen m strong national retailers, this 270,000 square foot initial phase will serve Starbucks Lake Delton, WI; Sussex, WI Tony Colvin he catalyst for future mixed-use development for the balance of the 69 es at the “Burleigh Triangle” and along the greater Burleigh corridor for years Land and Building Sales ome.

Property Location

Size Broker

Tenant Expansion: Active to Very Active Notable retailers pushing for new units throughout Wisconsin include Meijer, Buffalo Wild Wings, Starbucks, Panda Express, Planet Fitness, Ulta, Blaze Pizza, Discount Tire, Dollar General, Dunkin Donuts, and Heartland Dental.

Redevelopments: The Best Bet for Retailers With limited ground-up activity, retailers have turned to redevelopments of retail and non-retail sites for expansion opportunities. Notable projects in the Wisconsin market include: Mayfair Collection – One of Milwaukee’s most dynamic projects in over ten years has started to take center stage. Phase I of this multi-phase HSA Commercial development is currently under construction, and will include over 265,000 SF of retail space at Highway 45 and Burleigh Street. Space is scheduled for delivery in January of 2014 with an April grand opening planned. Key tenants include Nordstrom Rack, Saks Fifth Avenue Off 5th, Dick’s Sporting Goods, Old Navy, and Ulta. The Corners – This proposed project in Brookfield, Wisconsin will be anchored by a 140,000 SF Von Maur and will include an additional 243,000 SF of retail and restaurant shops. Hopkins, Minnesota-based CarVal Investors, LLC, an independent subsidiary of Cargill, Inc., and Chicago-based real estate investment company M & J Wilkow, Ltd., were recently named as equity partners in the development, along with Milwaukee-based hotel and theater operator Marcus Corp. The project is slated for a late 2015 opening. Drexel Town Square (Spotlighted in the Spring 2013 Retail Review) – Located in the south suburb of Oak Creek, this project is continuing to move forward with the TIF agreement approved in early August and Meijer secured as anchor. The project will include hospitality, medical and health club tenants. Site work is scheduled to start in September with delivery to tenants in spring of 2015.

Ground-up Development: Pabst Farms Expansion Walmart and Sam’s Club are being proposed for Pabst Farms Town Centre in Oconomowoc as an addition to the Market Place at Pabst Farms, currently anchored by Roundy’s Pick ‘n Save. Construction is projected to begin in 2014 on the 590,000 SF project, part of a 1,500 acre master-planned community.

Commercial Real Estate is Mequon, continuing to identify and recruitDanfirst-class, 7512 W. Mequon Road WI 1.9 acres Cohen egory-leading retailers seeking presence theKleiman Mayfair Former Associated Bank that are Sturgeon Bay, WI a regional 3,290 sf / .8 acre in Joe l trade area. The following Brookfield, tenantsWI have signed leases theCohen Mayfair Chuck E. Cheese 19,800 sf for Dan w/MAREC ectionCrisp and will be opening in Milwaukee, Spring 2014: WI 5,300 sf Teresa Shemitis Glenwood Crossings

Nordstrom Goodwill Rack Creek Market (outlot) Saks Meadow Off 5th Ridge West Dick’sPrairie Sporting Goods The Shoppes at Nagawaukee – Ulta Beauty Phase II Old Navy The Shoppes at Nagawaukee – Carter’s Phase III Former Walmart

Kenosha, WI

87,504 sf

Dan Rosenfeld w/MAREC

Sheboygan, WI

20,035 sf

Dan Rosenfeld w/MAREC

Pewaukee, WI

1.77 acres

Dan Cohen, Joe Kleiman

Pleasant Prairie, WI

2.4 acres

Dan Rosenfeld

Delafield, WI

96,231 sf

Dan Cohen w/MAREC

Delafield, WI

9,600 sf

Dan Cohen w/MAREC

Berlin, WI

58,984 sf

Andrew Prater, Dan Rosenfeld

ase see theWalmart following page forMilwaukee, a copyWI of our merchandise plan.Andrew Prater, Dan Rosenfeld Former 140,002 sf The Mid-America Real Estate - Wisconsin team can be reached at 414.273.4600.

Mayfair Collection

Minnesota Activity

5

Activity

Minnesota Market Report

Principal Doug Sailor announces the following new and renewal retail leases recently completed by Mid-America Real Estate-Minnesota project brokers:

Former Brookdale Mall Redevelopment Continues On Strong Pace

Project Leasing Report

by Doug Sailor, Principal Leasing and Management

Property/Location

Retailer

Bloomington Shoppes Bloomington, MN

Papa Murphy’s, Smokeless Smoking, Total Renal Care, We Care Childhood Development Center

Brooklyn Park Auto Mall Brooklyn Park, MN

Brookdale Auto Sales, Trust Transmission & Auto Repair, Universal Car Service

7,060

Cedar Grove Business Center Eagan, MN

Eagan Resource Center

4,952

Cliffview Plaza Burnsville, MN

Cathy’s African Beading, Ignite Hookah

3,914

Commerce Hill Chuck E Cheese Woodbury, MN

Sq. FtG. 15,586

15,000

Coon Rapids Auto Mall PTL Detail Coon Rapids, MN

4,561

Corner House Shoppes Stillwater, MN

Family Cuts

1,232

County Fair Marketplace Hutchinson, MN

Liberty Tax

1,115

Crossroads Center Eden Prairie, MN

Safire Nutrition

1,195

Crystal Gallery Mall Crystal, MN

Allstate Insurance, Comfort Massage, Great Clips, Home Choice, Vision World 13,995

Dunkirk Square Maple Grove, MN

E Cigarettes of MG

1,240

Eagan Promenade Eagan, MN

Spire Federal Credit Union

2,343

Eagan Town Centre Eagan, MN

Sally Beauty, Sears

6,983

Foxridge Shoppes Eagan, MN

Almax Auto

1,800

Hudson Marketplace Hudson, WI

Toy Riffic

1,032

Knollwood Crossing Hopkins, MN

Yogurt Lab

1,200

Lakeland Village Lakeland, MN

Comfort Massage

1,586

Main Street Marketplace Blaine, MN

Little Caesars, Penn Cycle

6,437

Mapleridge Maplewood, MN

Ace Cash

1,211

Normandale Village Bloomington, MN

Bloomington Family Chiropractic

3,035

North Branch Marketplace North Branch, MN

Papa Murphy’s, Wireless Zone

2,740

Northstar Marketplace Ramsey, MN

Cellular Experts, Dollar Cents

4,694

The Promenade of Wayzata Wayzata, MN

Olives & Sprigs

1,450

Richfield Shoppes Richfield, MN

Dr. Berg Dental, El Tejaban Mexican, Hairtenders, Hot Comics, NCS Marketing Services, LLC, Perez Chiropractic, Richfield Flowers

Rosemount Market Square Rosemount, MN

Ten Tiny Toes Photography

Shingle Creek Crossing Brooklyn Center, MN

AT&T, Discount Tire (sale), Foot Locker, Qdoba, Schlotzsky’s

The Shoppes of Willmar Willmar, MN

Sally Beauty

1,627

Shops at Riverdale Commons Coon Rapids, MN

Cash-N-Pawn

2,480

Shingle Creek Crossing, the first and largest new development project to hit the Twin Cities since the recession, is on track for new fall openings. Phase I of the 840,000 square foot redevelopment of the former Brookdale Regional Mall was completed with the opening of Walmart on September 12, 2012. Mid-America Real Estate-Minnesota, LLC, represented Walmart in the transaction, and is now representing Fort Lauderdale, Fla.-based developer Gatlin Development in the leasing and sales of the rest of the project. After Walmart opened, Phase II commenced with the construction of outlot structures. These included three multi-tenant small shop buildings, a new LA Fitness, and Discount Tire and Panda Express pad sites. LA Fitness is scheduled to open in September 2013, with all other Phase II small shop and pad sites slated for delivery in September as well. Leasing of the small shop buildings is on pace to be 100% leased by the end of 2013. Phase III is scheduled to begin in late fall 2013. This phase will entail new construction of the junior box site in the last remaining area of the former regional mall building. The existing area will be razed and construction begun for T.J. Maxx, Michaels and two additional junior box tenants whose deals are currently in negotiation. Also infilling smaller tenant areas within the new junior box building will be a national full service salon group and a national beauty products group. Phase IV, consisting of pad sites to the north and east of Walmart, along with small and medium size tenant spaces, will commence in spring/ summer 2014. This phase will consist of more food users with a focus on fast casual, full service family and entertainment. Sears continues to own its real estate separately, with Kohl’s a long time tenant of the site as well. The activity at Shingle Creek Crossing has been overwhelmingly positive with juniors as well as small shop retailers.

19,712 540

Shingle Creek Crossing

54,166

Shorewood Village Shopping Center KathrynMak Designs Shorewood, MN

2,283

Southcross Shoppes Savage, MN

First Resource Bank

3,843

Stadium Village Plaza Minneapolis, MN

Burger King, European Wax

3,828

Tamarack Village Woodbury, MN

The Joint, Totally Tan, The Woods

9,196

Tonka Village Shopping Center Tonka Bay, MN

Bellasaluti

1,400

University Car X St. Paul, MN

Eco Garage

Waterford Plaza Plymouth, MN

Big Frog

Westview Shopping Center Hastings, MN

Goodwill, Nu-Wave Hair

Woodbury Village Woodbury, MN

Massage Retreat & Spa

4,216 1,406 30,777 2,800

Principal Mike Sims announces the following transactions recently handled by Mid-America Real Estate-Minnesota Tenant Representation brokers:

Tenant Representation Tenant Location

Broker

Advance Auto Parts

Lakeville, MN

Johnny Reimann

AT&T

Maple Grove, MN; Woodbury, MN

Patrick Daly

Banana Republic Factory

Eagan, MN

Johnny Reimann, Stefanie Meyer

Brush!

St. Louis Park, MN

Patrick Daly

Cherry Berry

Hudson, WI; Minnetonka, MN; Oshkosh, WI

Patrick Daly

Family Dollar

International Falls, MN


Gap Outlet

Eagan, MN; St. Cloud, MN


Home Goods

Fargo, ND


Honey & Rye Bakehouse

St. Louis Park, MN

Stefanie Meyer

Marshalls

Bloomington, MN; Fargo, ND


OfficeMax

Maplewood, MN

Stefanie Meyer, Johnny Reimann

Potbelly Sandwich Shop

St. Paul, MN

Patrick Daly

Salon Concepts

Apple Valley, MN; Blaine, MN; Minneapolis, MN Eden Prairie, MN

Patrick Daly, Johnny Reimann, Stefanie Meyer, Patrick Daly

TJMaxx

St. Paul, MN


Walmart (land sales)

Andover, MN; Cottage Grove, MN; Mountain Iron, MN; Roseville, MN

Mike Sims, Patrick Daly

The Mid-America Real Estate – Minnesota team can be reached at 952.563.6600.

Michigan Activity

6

Michigan Market Highlights

Project Leasing Activity

Detroit Bankruptcy Impact

Principals Brad Rosenberg & Tony Schmitt report the following transactions recently handled by the Mid-America Real Estate-Michigan team:

It is unfortunate that the national media coverage of Detroit’s Chapter 9 bankruptcy hasn’t painted the entire picture. Most people are of the opinion that this bankruptcy is a positive step for the City of Detroit, a step forward to a point of financial stability and economic growth, and a chance for the city to “right-size” itself and move forward. The news unavoidably affected some short-term deal making, but that perception can and will be overcome. Now, those who doubted realize that Detroit, Metro-Detroit and the state of Michigan are growing and open for business more so than ever before.

Local Retail Activity Since June 2013, Meijer, K&G Fashion Superstore, Marshalls, Petco and Whole Foods have all opened their first stores in the City of Detroit. Gordmans entered the Michigan market with their first location in Norton Shores currently under construction, and is assessing other “out-state” markets. LA Fitness and Dick’s Sporting Goods continue to be active in the metro Detroit market. Jo-Ann Stores opened a new store in Grandville and relocated stores in Roseville and Battle Creek, and is currently assessing smaller Michigan markets for expansion. Ollie’s Bargain Outlets nears completion of their penetration into Michigan for the time being after opening Lansing, Flint, Saginaw and Ypsilanti in July and August. The former big boxes once occupied by Circuit City, Walmart, Kmart and Borders are continuing to be backfilled with national retailers absorbing the vacant space and in turn, driving up rents.

project leasing Property/Location

Retailer/Seller

SQ. FTG.

Broker

2262 Telegraph Road Bloomfield Grill 9,500 Bloomfield Twp, MI

Daniel Stern, Karen Mullane, Brad Rosenberg

2340 Silver Fox Run Holly, MI

Karen Mullane, Adam Goodman

American Fitness

8,800

4934 Marsh Road DigiLink Technology 4,000 Okemos, MI

Daniel Stern, Cynthia L. Kratchman, Christina Roberts

14712 Mack Avenue Footlocker 5,656 Detroit, MI

Adam Goodman, Gabe Schuchman

16360 26 Mile Road Henry Ford Health Systems 3,580 Macomb, MI

Gabe Schuchman, Karen Mullane, Daniel Stern

43711 Ford Road Canton, MI

Adam Goodman

Canton Sports

5,665

50679 Waterside Drive Party City 11,343 Chesterfield Twp, MI

Brad Rosenberg, Gabe Schuchman, Tony Schmitt, Adam Goodman, Karen Mullane, Christina Roberts

Beltline Plaza Max 10 6,700 Muskegon, MI

Gabe Schuchman, Brad Rosenberg, Karen Mullane, Daniel Stern

Fairplain Plaza Dunhams Athleisure 53,683 Benton Harbor, MI

Brad Rosenberg, Daniel Stern, Christina Roberts

Meridian Town Square Okemos, MI

2,800

Cynthia J. Kratchman, Daniel Stern

Telegraph Plaza Maurices 4,800 Monroe, MI

Gabe Schuchman, Karen Mullane, Brad Rosenberg, Christina Roberts

Village Knoll Bloomfield Twp, MI

1,975

Adam Goodman, Tony Schmitt

Wildwood Shopping Center Ollie’s Bargain Outlet 31,000 Westland, MI

Adam Goodman, Tony Schmitt, Susan Acciaioli, Jack Uhazie

SVS Vision

Pack and Ship Plus

Tenant Representation Tenant Location Broker

Development Activity

Achatz Burgers Macomb Township, MI

Christina Roberts, Brad Rosenberg, Susan Acciaioli

New construction is dictated somewhat by where retailers want to be. The most construction and development activity continues to be the purchase and redevelopment of small freestanding buildings or out parcels to accommodate the needs of retailers such as Vitamin Shoppe, Mattress Firm, Tim Horton’s, fast casual restaurants and cellular stores. Dine-in, sit down restaurants are also more active in the marketplace than they have been in the past and are looking for strong outlot opportunities to purchase or ground lease.

Aspen Dental Brighton, MI; Ft. Gratiot, MI

Gabe Schuchman, Tony Schmitt, Karen Mullane

AT&T

Troy, MI

Tony Schmitt, Gabe Schuchman

Dollar Tree

Benton Harbor, MI; Cedar Springs, MI; Kalamazoo, MI; Lowell, MI; Taylor, MI; Waterford, MI Jack Uhazie

Guitar Center

Allen Park, MI; Bellingham, WA

Jack Uhazie

Headquarters Haircuts for Men

Shelby Twp, MI

Brad Rosenberg, Christina Roberts

LA Fitness

Clinton Twp, MI; Grosse Pointe, MI

Tony Schmitt

Maurices

Cadillac, MI; Monroe, MI

Cynthia Kratchman

Ollie’s Bargain Outlet Flint, MI; Saginaw, MI; Westland, MI; Ypsilanti, MI Susan Acciaioli, Tony Schmitt, Jack Uhazie Party City Chesterfield Twp, MI

Adam Goodman, Brad Rosenberg, Tony Schmitt

Potbelly Sandwich Works

Bingham Farms, MI; Grandville, MI

Adam Goodman, Brad Rosenberg

Pro Martial Arts

Canton, MI

Adam Goodman, Tony Schmitt

Subway

Detroit, MI

Adam Goodman

The Mid-America Real Estate - Michigan team can be reached at 248.855.6800.

Home of the Detroit Tigers

Meijer in Detroit

Investment Group Sales Net Lease Market Reaches Peak by Tom Fritz With the 10 year treasury up 100+ basis points in the past four months, the Net Lease Investment market appears to have reached its peak. Cap rates have been extremely aggressive over the past year, with McDonald’s leading the market and reaching as low as 4.00% while banks were second in line selling as low as 5.00%. Investors have been able to borrow at 3.50%-4.00% to create positive leverage. Now that interest rates are moving towards 4.50%-5.00%, that same positive leverage is dependent upon cap rates increasing as well. If we were to draw a bell curve depicting the past three years and the next three years, it is our estimate that July 1st of this year would be right at the peak.

Changing Demand The net lease market has been so aggressive over the past three years due to a couple of reasons: (a) the artificially low cost of capital; and (b) the long term credit leases have become a safe haven for long term cash flow. Investment funds have been raising money faster than they could spend it, thus inflating demand. Now that interest rates are on the rise and the stock market is beginning to rebound, demand will likely start to change as well. Since 2009, investors slowly started buying net lease investment property again, now to a point where it became a frenzy towards the middle of 2013. If someone had $2 million in cash, they may have placed roughly 70% in secure net lease property and kept the rest in cash. The thought was that achieving a 4.00% return on a McDonald’s was better than 0.50% in a money market account. Today, an investor who has the same $2 million may choose to diversify a little more by placing 40% in real estate, keeping 20% in cash, but now placing 40% back into the stock market, which continues to show improvement. As we write this, the Dow Jones is up over 14% since the start of 2013. For the funds that have been raising millions of dollars on what seemed to be a daily basis, three things are likely to happen going forward: (a) their demand should decrease as investors move money to the stock market; (b) the cost of capital should increase, limiting their profit margins; and (c) their required rate of return to investors should increase in order to compete with alternative investments. This means the primary driver helping to keep cap rates low is likely going to start seeking a higher yield, thus pulling cap rates up with it.

Back to Basics Meanwhile, our leasing brokers are busier than ever doing a great job of creating new supply. This takes us back to the basic principles of Econ 101. Increasing inventory and decreasing demand means oversupply and price decreases. We have already started to see signs with McDonald’s and bank ground leases now receiving offers 25-50 basis points over where they were selling four months ago. Investment funds have increased cap rates on certain offers, while other REITs have recently issued bonds 50-100 basis points higher than bonds issued 6-12 months ago. This indicates investors and shareholders are demanding higher returns. Our advice to developers committing capital to projects 12 months out: underwrite at least 50 basis points higher than you would today. Our advice to current owners of net lease property: it’s still a good time to sell.

Walmart

7

Investment Group Activity Following are year-to-date sales transactions by the Mid-America Investment Sales Group: Property Location ANCHORS Colerain Towne Centre

Cincinnati, OH

Walmart Supercenter, Dick’s Sporting Goods

Sq. FtG. 409,960

Mount Prospect Plaza Mt. Prospect, IL

Marshalls, Ross, LA Fitness, Aldi, Walgreens, (Walmart – Shadow Anchor)

301,045

Danada Square East

Wheaton, IL

Dominick’s, Petco

202,036

Milwaukee Portfolio

Various locations, WI

Walmart

174,705

Van Dorn Plaza

Lincoln, NE

Sun Mart, Hobby Lobby

168,888

Clocktower Square

Des Moines, IA

TJ Maxx, Office Max

142,356

Warsaw Commons

Warsaw, IN

TJ Maxx, PetSmart, (Kohl’s - Shadow Anchor)

120,000

South Oaks Plaza

St. Louis, MO

Shop ‘n Save, Michaels, Walgreens

112,300

The Shoppes at Nagawaukee Delafield, WI

Marshalls, Sports Authority, (Kohl’s & Sentry Foods - Shadow Anchors)

105,921

Lincoln Crossing

Chicago Hts, IL

Food 4 Less

101,498

Glenwood Crossings

Kenosha, WI

Pick ‘n Save

87,504

Savage Towne Square

Savage, MN

Cub Foods

87,181

Meridian Towne Center Okemos, MI

Marshalls, Five Below, Ulta, (Target & Kroger - Shadow Anchors)

86,891

Evergreen Marketplace Evergreen Park, IL

Michaels, Ross, (Meijer & Menards – Shadow Anchors)

49,225

LA Fitness

Plainfield, IL

Single Tenant Net Lease

43,227

Whole Foods

Minnetonka, MN


33,225

PetSmart/Dollar Tree

Decatur, IL

PetSmart, Dollar Tree

30,087

Goodwill

Sheboygan, WI


20,035

Chuck E. Cheese

Brookfield, WI


19,800

Dollar General

Milwaukee, WI


19,800

Prairie Town Center

Oak Lawn, IL

ATI Physical Therapy, AT&T, Eva’s Bridal

17,659

Aldi

Elk River, MN


16,224

Walgreens

Antioch, IL


14,820

GSA

Davenport, IA


11,877

Quarry Outlot

Hodgkins, IL

GameStop, Payless ShoeSource, Verizon Wireless

9,650

Aaron’s

Hillsboro, OH


8,028

Savannah Crossing (Lot 7)

Aurora, IL

Chipotle, Great Clips, LA Tan

7,380

Advance Auto

Lake Geneva, WI


6,895

Advance Auto

New Richmond, WI


6,895

Fifth Third Bank

Matteson, IL


4,200

Chase Bank

Chicago, IL


4,020

TOTAL

The Mid-America Investment Sales Group can be reached at 630.954.7300.

Mount Prospect Plaza

2,423,332

8

On the Corner by Dan Cohen, Director of Tenant Representation and Principal, Mid-America Real Estate – Wisconsin, L.L.C.

Back by Popular Demand Tell me if you’ve heard this before: “The market is coming back,” or “We’re cautiously optimistic that things are better,” or “I think you’ll see a slight improvement next year.” Well, I’m here to tell you that none of those are true anymore. The market is definitely back. Significant retailer demand is driving occupancy rates higher, rental rates higher, valuations higher, and dare I say, there’s potential for new ground up development. Okay, so not all this can happen over the next six months before our spring 2014 Retail Review is published, but it’s a start. Changes in both retailer demand and the consumer were evident in the recent improvement of retail sales and consumer confidence numbers. This is the starting point for what those of us in the retail real estate trade needed to see before becoming believers that the end of the recession is near.

Six Years Later When you think about it, it’s logical. The consumer and our retail economy have been down and in a recession since the 3rd quarter of 2007. Economists may try to define the recession as beginning in a different place and time, but for the retailers, this was the first obvious quarter of changing sales and consumer spending expectations. So we have been in this retail quagmire for six years longer than any period in our American post-World War II economy.

The past six years have caused the consumer to become healthy by spending less, controlling the household budget, and retaining equity in their homes. It also required them to budget the family paycheck in a more reasonable fashion, and to be less reliant on debt. Thus, the consumer is ready to go again, albeit at a controlled, measured pace. They will be more critical and conscientious on where and how they spend their hard-earned dollars (tell me if you’ve heard that one before).

Getting It Right Our retailer friends have also gotten their houses in order. There’s nothing like a shy customer to force retailers to control inventory levels, shed excess square footage, pare down general overhead expenses, and focus on operational margins. By spending the last six years becoming more efficient, retailers are ready to grow again. Thus, DEMAND is back. Retailers and restaurateurs are now confident that they have the right merchandising mix and the right operating efficiencies to draw the customers’ money out of their wallets. In short, they’re feeling good again about their ability to meet the customer’s expectations, have the customer shop with them again, and leave the bad times behind. So with our demand side “fixed,” things are looking up. If we could only get our supply side in order, which should be no later than 2017, we’d really be back in business. So, whether you’re looking for space, acquiring space, or leasing space, contact your friendly real estate firm (that’s us, by the way) and get back in the game. We look forward to seeing you soon.

downsizing slightly, cautious about expanding, which reflects the same trend in non-grocery retailers, in general. Meanwhile, the number of full-service grocery stores continues the decline noted in the 2011 study: this year netting 8 less stores than in 2011 (including the closing of 2 Jewel and 2 Dominick’s), and losing 5% of the overall square footage.

Increase in Size, Not Numbers …Continued from page 3

Gourmet Expanding “Of the 21 stores proposed for 2013, 15 are gourmet, 3 are full-service and 3 are discount,” says Tausk. Adding to gourmet’s momentum was a major change in store size for that category. “Some in the gourmet sector are expanding their merchandise to include more staples and choices offering one-stop shopping, and reversing the recent trend to split grocery dollars heavily between discount, warehouse, specialty and gourmet stores.” Leading the way in expanding store size and offerings is Mariano’s, whose average store is now 70,000 square feet, compared to a 50,000 square foot average grocery store size in the study area. Between 2011 and 2013, Mariano’s opened 5 stores, and proposes an additional 9 for the rest of 2013 and beyond. Whole Foods was also active with 2 new stores proposed in 2013. Much of the gourmet activity is concentrated in the higher income Central City (Zone 1; refer to map). http://www.midamericagrp.com/downloads/ Grocery_Study_2013.pdf

Although the total number of grocers in the 2013 study increased by one, the square footage of operating grocery space increased by 443,218 square feet, with proposed new grocery totaling more than 1.05 million square feet – about 180,000 more square footage than in 2011. The figures show an overall increase in store size by nearly 17,000 square feet.

Independents Losing Ground Across all grocery categories, about 400,000 square feet of grocer development proposed in 2011 was delayed or killed by 2013. Tausk says that 11 of the 17 stores that closed in Chicago and the close suburbs between 2011 and 2013 were in the Near South/ SW submarket (8 closings) and the South/Southeast sub-markets (3 closings) – markets with boundaries that are already underserved with regards to square footage of operating grocery stores per person or household. Overall, the dramatically underserved submarkets of the West City and S/SE City still rank at the bottom of penetration statistics with 1.56 square feet/person and 1.29 square feet/person respectively, while the city’s average is now 3.47 square feet/person

Discount, Full-Service Shrinking

“Of course, our study does not take into account the positive impact from recent city initiatives on food deserts, such as the addition of food trucks, drugstore food, city farms and farmer’s markets in these areas,” Tausk says. “But the food deserts are obviously still severely underserved by traditional stores.”

There’s a dramatic shift in the opposite direction for the discount category, which lost 4.08% of its store count between 2011 and 2013. Just two years prior, discount was experiencing a 24.05% increase in stores count.

“In our 2011 study, we thought we were seeing some hopeful signs with stores proposed for development there, but these fell through due to the economy and a lack of any new construction getting out of the ground everywhere.”

“Discount declined significantly because of an increase in store closings among both independent and chain grocers,” says Mr. Tausk. Discount grocers are also

To read the full Urban Grocery Study, go to www.midamericagrp.com/press/9.16.13.html

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