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Retail real estate gets its rebound
Chicago’s retail market will get notably better this year because of improved job creation, real estate firm Marcus & Millichap said in its second-quarter outlook. It said overall retail vacancies for the region will slip to 12.2 percent from 12.7 percent at the end of 2012.
The biggest beneficiaries will be in-city plazas, Marcus said. It cited a rebound in salaries for traditionally higher-paying professional and business services jobs downtown, plus the more than 3,300 apartments being added to the market. “While the suburbs have lagged in the recovery cycle,” Marcus’ report said, “vacancies in well-located centers have started to capture the interest of expanding retails, particularly chains specializing in home-related goods.”
The demand for single-tenant properties with good-credit tenants is strong. As a result, cap rates, or a buyer’s expected return on the sales price, are relatively low. Marcus said cap rates on a corporate-owned McDonald’s start near 4 percent, while a Chase Bank property often trades at less than 5 percent and newer Walgreens range from 5.5 percent to 6 percent.