While retail markets along the East and West Coasts mirror the boom-and-bust cycle of the turbulent economy, states throughout the Midwest often find shelter from the endless, unpredictable storms.

Although retail development in the states of Ohio, Indiana, Illinois, Missouri, Kansas, Iowa, Nebraska, Michigan, Minnesota and Wisconsin certainly isn't isolated from national trends, the region isn't as susceptible to market extremes.

“Whereas other markets are more vulnerable, the Midwest, in general, is more resilient,” says Todd Caruso, managing director and retail client advisory director for retail services with CB Richard Ellis.

Therefore, while New York, Miami and San Francisco retail headlines read like a Mary Higgins Clark mystery, terms such as predictable, steady and manageable — commonly used to describe the Midwest's retail activity — can still be used with confidence.

Ohio

Although Ohio's unemployment rate continues to creep upward, at 4.2% it is still below the national average. Consequently, the state's retail hubs are far from recoiling. In fact, the state's retail labor force — upwards of 1 million people — is ramping up for the retail development currently underway. Like much of the Midwest, Ohio has witnessed a reduction in the number of big-box retailers setting up shop in 2001. Taking their place in popularity are lifestyle centers, which command much higher lease rates.

Columbus, Ohio-based Continental Retail Development's West Chester Village is just one example. Located between Cincinnati and Dayton, West Chester Village is a mixed-use project that will feature 350,000 sq. ft. of retail and entertainment, 400 upscale apartment homes and 300,000 sq. ft. of Class-A office space. In nearby Dayton, Steiner + Associates of Columbus, Ohio, is moving forward with Indian Creek Commons, a 900,000-sq.-ft. town center project scheduled to open in 2003. Designed by Baltimore-based Development Design Group, Indian Creek Commons will host specialty retail, restaurant, entertainment, hotel and office space intermixed with pedestrian-friendly streets and public plazas.

Other Ohio projects, while not mixed-use by definition, strive to create community-focused retail environments. Locally based developers Steiner + Associates and the Georgetown Co. are busy expanding Columbus' successful Easton Town Center, which opened for business in July 1999. Phase II of the project, which is scheduled to open this fall, will encompass more than 750,000 sq. ft. of retail space anchored by retail powerhouses Nordstrom and Lazarus.

The center's focal point is a public gathering area, complete with outdoor seating and a nostalgic fountain. An expansive outdoor play area is also planned. And Nationwide Realty Investors is developing a high-energy, $500-million Arena District in Columbus, to include more than 600,000 sq. ft. of mixed-use space. The Arena District's 95 acres will also feature the Nationwide Arena — home of the NHL Columbus Blue Jackets — an urban-scaled cinema and an indoor/outdoor performance center. Nationwide Realty Investors President Brian J. Ellis believes the combination of useful, inviting space is “the formula for meaningful 24/7 use that all developers are striving for today.”

Meanwhile, Cincinnati has taken Montgomery Ward and Home Quarters closings in stride and appears to be thriving due to the abundance of neighborhood centers and single-use small parcels. Finally, overall development activity has slowed in Cleveland, where “retailers are being more selective in choosing sites,” according to market research provided by Grubb & Ellis.

Indiana

To the west, Indiana's retail market is neither suffering nor celebrating. Colliers Turley Martin Tucker called 2000 a “slow” year in terms of retail investment but remains optimistic about the state's future. Despite a low state unemployment rate, 3.3%, Colliers Turley Martin Tucker believes ongoing concerns about the softening economy are so strong that even “lower costs have not motivated buyers.”

The big-box category is the exception, however. In and around Indianapolis, for example, home-improvement stores, discount chains and super centers are following the population migration to the suburbs. Consequently, retailers such as Lowe's, Menards, The Home Depot, Sam's Club, Costco, Wal-Mart, Target and Kohl's have proposed more than 4 million sq. ft. of construction during the next few years — more than four sq. ft. of retail space for every man, woman and child in the metro region. Other dominant transactions throughout the state appear in grocery-anchored shopping centers, also spurred by suburban growth.

Illinois

Analysts seem to agree that the best way to describe the retail market in Illinois, particularly Chicago, is steady — slower than usual perhaps, but steady. Space left behind by Montgomery Ward and Sears HomeLife stores has been absorbed, but tenant activity is on the decline. “I think we're getting ready to see our vacancies spike up,” says Caruso. However, Anne Brettingen, director of Chicago-based Cushman & Wakefield believes it's important to keep in mind that the market is still experiencing positive retail sales growth year-to-date. “Most industry projections forecast total annual retail sales growth of 2% to 3% for 2001,” she says. “It is when we compare these growth levels to the past couple years' double digit growth rates that we grow concerned, when in fact those growth rates were not realistically sustainable.”

In June, 3.8 million sq. ft. of new retail construction was underway in the metro Chicago region, including seven community/neighborhood centers, six freestanding centers, one specialty and one power center. More than 600,000 sq. ft. of redevelopment projects were also on the books at the end of the second quarter 2001. However, CB Richard Ellis market predictions estimate vacancy rates throughout the state (currently 9.5% in the Chicago area) to increase and lease rates to decrease by year's end.

Developers are responding to such predictions by focusing on retail environments that encompass more than a place to shop, work, eat or sleep. “It's about the experience of being in a place,” says John Clark, president of architecture firm DDG, which is designing several retail developments in the Midwest. “It's life as theater.”

In Northwest Chicago, DDG acts as project architect for Steiner + Associates' Plum Farms, an 85-acre town center project that will comprise nearly 1 million sq. ft. of upscale specialty retail, restaurants, entertainment, office, hotel and residential space when it opens in 2003. Across town, Continental Retail Development is developing Seven Bridges Town Center, a 170,000-sq.-ft. lifestyle center. Seven Bridges will feature specialty retail, restaurants and entertainment venues, and represents just one component at Seven Bridges; the site already accommodates an 18-hole golf course, ice arena, fitness center, 16-screen theater and a 6,000-sq.-ft. spa.

Additionally, in downtown Chicago the Nordstrom-anchored Shops at North Bridge, which was completed in 2000 with 900,000 sq. ft. of retail space, has “spurred retailers to expand southward on the Magnificent Mile,” says Brettingen. And a $15 million renovation of the landmark Water Tower Place began in the second quarter of 2001. Such renovations and developments have helped drive up rents on Michigan Avenue. “Ground floor rents on North Michigan Avenue now approach $300 per sq. ft.,” says Brettingen, “the highest recorded rent ever. Additionally, the vacancy rate along Michigan Avenue is currently below 1.5%.”

Missouri

In the Show Me State, St. Louis and Kansas City tend to be the areas of major action. St. Charles and Jefferson Counties in St. Louis continue to attract families with children, and efficient, freestanding neighborhood and community centers are being built to cater to those families. In 2000, the metro region saw seven centers totaling 2.8 million sq. ft. come into town, with occupancy rates hovering around the 90% mark.

New retailers to St. Louis include 24 Hour Fitness, Bassett Furniture, Red Robin, Linens ‘N’ Things, Best Buy, The Home Depot, Kmart, Lowe's and Target. In nearby St. Charles County, the DESCO Group is developing Wentzville Commons, anchored by a 116,000-sq.-ft. Home Depot. Wentzville Commons hopes to expand along with the city's population, expected to grow from its current 9,000 residents to 28,000 by 2010.

In Kansas City, another Steiner + Associates' project — Zona Rosa at Rush Creek — is underway. Billed as a premier shopping, dining and entertainment destination for Kansas City's booming Northland market, the 1 million-sq.-ft. town center project is scheduled to open in 2003. La Bella Vita at Briarcliff is another lifestyle center scheduled to open next summer in Kansas City. Its 205,000 sq. ft. of space will host upscale and one-of-a-kind retail shops, cafés and restaurants.

Kansas

Over the border in Kansas, Sprint's new 3.1 million-sq.-ft. world headquarters continues to stimulate retail growth in the area, as does The Walk at High Pointe, a 1.25 million-sq.-ft. shopping and entertainment destination in Overland Park being developed by Copaken, White & Blitt. According to the developers, the area has a population in its lower 30s with an average disposable household income of approximately $103,000 — ideal demographics to which retailers hope to cater.

About 200 miles west, the state's largest city, Wichita, is experiencing fabulous growth, says Leisa Lowry, a broker with the city's J.P. Weigand & Sons real estate firm. Despite slow-going growth elsewhere, Lowry believes positive trends will continue. Current projects in the vicinity include the expansion of Simon Property Group's 26-year-old Towne East Square mall, a 200,000-sq.-ft. Wal-Mart Superstore for Slawson Co.'s NewMarket Square and a 100,000-sq.-ft. expansion of Wall, N.J.-based National Factory Outlet Stores' Newton Mall. A mixed-use entertainment center is also planned in Wichita's CBD.

Iowa/Nebraska

Iowa and Nebraska share many common characteristics, including a lower number of residents and lower unemployment rates than most of their neighboring states. Iowa's retail establishments number close to 15,000, with 278,900 retail employees and a statewide 2.8% unemployment rate.

Recent projects in Iowa include Muscatine Mall, developed by Chicago-based Landau & Heyman — a 304,000 sq.-ft. redevelopment project slated for completion this year, and Jordan Creek Town Center in West Des Moines, developed by Chicago-based General Growth Properties. Jordan Creek Town Center will be a superregional mall, which, upon completion in 2002, will encompass more than 2 million sq. ft.

Similarly, Nebraska's unemployment rate rarely exceeds 3%. According to the Bureau of Business Research at the University of Nebraska-Lincoln, retail sales have been increasing steadily in recent months and years. Through March of 2001, state sales totaled $4.2 billion, 1.1% higher than the same period for 2000. The Bureau estimates retail sales will continue to grow in 2001, projecting a 5.4% increase for the year.

Michigan

“Although many national retailers reported a disappointing sales slump in May, Michigan's retail industry appears to have fared slightly better,” says Larry Meyer, CEO of the Michigan Retailers Association (MRA). “Although the gains were small, May was the second consecutive month of overall improvement. We view that as a positive trend. We haven't necessarily turned the corner, but we appear to be making progress.”

Both the northern and southeastern regions of the state had more retailers posting year-to-year gains than declines in May, according to the Michigan Retail Index, a joint project of the MRA and the Federal Reserve Bank of Chicago. Statewide, electronics and computer retailers and jewelers reported positive numbers, while furniture and appliance retailers fared the worst.

While describing the Detroit market as “stable” — there has been a slight falloff in the number of national retailers entering and expanding in the area — forecasts by Grubb & Ellis claim retail activity in Grand Rapids is “humming along.” Areas around GGP's Rivertown Crossings Mall are being developed, and the fall opening of Chattanooga, Tenn.-based CBL's The Lakes Mall was deemed a success. Meanwhile, the renovation of Visser Development Inc.'s 32-year-old Eastbrook Mall is nearing completion.

Overall, Bruce Aikens, executive vice president of locally based Robert B. Aikens & Associates, sees Michigan's retail market as going neither uphill nor downhill. “It's holding its own, but for the most part it is flat,” he says. The company's 375,000-sq.-ft. The Village of Rochester Hills project will be Michigan's first lifestyle center, with a setting reminiscent of a traditional downtown. Storefronts will be individually designed using a variety of building materials, while 22% of the 30-acre site will be dedicated to green space. The project is scheduled to be complete by fall of next year, with tenants such as Abercrombie & Fitch, AnnTaylor, J. Crew, Casual Corner, Eddie Bauer, Talbots and Banana Republic. Parisian, a division of Saks Inc., has also agreed to open its second store in the state at The Village of Rochester Hills.

Minnesota

In the Twin Cities, retail real estate continues to bustle. “Mid-year vacancy rates of 5.5% were slightly higher than the 5.1% year-end 2000 rate,” according to reports by United Properties. Yet, demand for well-located, grocery-anchored community centers and neighborhood shopping centers “remains very strong.” Restaurant concepts also are popular in Minnesota suburbs and business districts. And two major moves can be seen by Bed Bath & Beyond and AutoZone, which are aggressively expanding their Twin Cities presence.

A handful of regionals, including Edina's Southdale Center and Eden Prairie Center are finalizing repositioning efforts, while Brookdale Center continues its repositioning activity. CBL's nearby Burnsville Center — a 24-year-old, 1 million sq.-ft. superregional, also has announced a major renovation. And grocery superstores are invading the Twin Cities in a big way as Target, Costco and Sam's Club battle for market share.

More retail development is occurring along the southern side of Nicollet Mall in the Minneapolis CBD. According to real estate firm United Properties, a new two-story Target store is slated to open this fall. And analysts believe Dayton's/Marshall Fields commitment to stay in the area has strengthened the St. Paul region's retail future.

Wisconsin

Although big-box retailers are winding down expansion in Wisconsin, a few familiar forces are still active. Milwaukee's urban renewal in particular is impacting the state's retail development, causing retailers to vie to be near existing population centers. As a result, redevelopment of older centers in infill locations is on the rise and national chains such as The Home Depot, Walgreens, Wal-Mart and Jewel Osco are paying top dollar for older, well-located buildings. Milwaukee-based The Polacheck Co., for example, is currently redeveloping a 55-acre shopping center that will open in June 2002. Overall, construction starts have been slow throughout the state in 2001, with average vacancy rates lingering around 9.6%.

While regional malls redevelop and lifestyle centers pop up across the Plains, the slow effects of the lagging economy aren't over for the Midwestern states. “The fundamentals are still strong,” says Caruso, “but I think we'll still be feeling these effects through the first half of next year.”

Stephanie Flack is a Golden, Colo.-based writer.

Q&A: Rich Tucker of Chicago's Tucker Development Corp.

Despite a softening retail market, some segments in Chicago have shown continuing resilience. To get the scoop on the Windy City's hot retail trends, SCW caught up with Richard Tucker, president of Highland Park, Ill.-based Tucker Development Corp.

SCW: As the national economic slowdown has softened retail sales, which retail sectors remain strongest in the Chicago area, and who are the dominant players in each of those categories?

Tucker: Our business has been focused on grocery and discount department store anchored centers. These two categories have been dominated by Jewel Osco and Dominick's for the grocers and Wal-Mart and Target for the discount department stores. Meijer, a combination of both, has also opened quite a few locations. The other dominant category has been home improvement stores. Here, Home Depot and Menard's have been the leaders.

SCW: How has your company dealt with the retail slowdown?

Tucker: We've kept our focus on the sectors mentioned above (grocers, discount department stores and home improvement), and catered to tenants that are financially strong and have long-term strategies for growth. Also, we've targeted locations that, despite the slowdown, have pent-up demand for our tenants' goods and services. These include in-fill locations and outlying areas with high population growth.

SCW: Speaking of housing growth, another trend in Chicago during the past several years has been the explosion of new housing in urban areas that had previously not been residential, such as the South Loop and the area near the commuter train stations downtown. But retail development has tended to lag behind residential growth in these parts of the city. What are the reasons for that disparity, and do you expect retail development will soon catch up with residential?

Tucker: Typically, retail will lag behind residential. You need the rooftops for the retail sales. The city has had such an explosion, and the sites for large retail developments are difficult to come by, that this process will take longer than in the suburbs.

SCW: Your own company, Tucker Development Corp., acquires the land, develops the retail property and then leases the space to tenants. Do you expect to see more examples of big-box retailers wanting to own the property, rather than lease the space?

Tucker: Most, if not all, of the major national retailers are public companies and therefore have access to reasonably priced capital. There are few developers, Tucker Development Corp. being on the short list, that these retailers will work with on a lease basis versus a retailer/owner basis. A developer that has a track record for performing on time and on budget at least has a chance. We need to prove ourselves on every deal.

Midwest project listings
Project Name | City, State Developer | Headquarters Center | Project Type Current GLA* Completion Date* Anchors
Meridian Crossroads
Meridian, Idaho
Developers Diversified Realty
Cleveland
P | N 700,000 sq. ft. Open Wal-Mart SuperCenter Office Depot, ShopKo
The Shops at Kildeer
Chicago
Developers Diversified Realty
Cleveland
C | N 200,000 sq. ft. November 2001 Bed Bath & Beyond Circuit City, Old Navy
Pointe Plaza
Niles, Ill.
Tucker Development Co.
Highland Park, Ill.
C | N 335,000 sq. ft. Open Wal-Mart, Babies R Us Cub Foods, Office Depot
Yorkville Marketplace
Yorkville, Ill.
Tucker Development Co.
Highland Park, Ill.
C | N 225,000 sq. ft. Spring 2002 Jewel-Osco
Woodbridge Commons
Elgin, Ill.
The Zale Group
Chicago
P | E 450,000 sq. ft.
(+240,000 sq. ft.)
Open Meijer Menard's
Orchard Grove
Aurora, Ill.
The Jaffe Cos./Mid-America
Glencoe/Oakbrook Terrace, Ill.
P | N 400,000 sq. ft. TBA Home Depot, Meijer
TBA
Orland Park, Ill.
Terraco/Mid-America
Oakbrook Terrace, Ill.
N | N 23,820 sq. ft. TBA Walgreens
North Riverside Park Mall
North Riverside, Ill.
Urban Retail Properties Co.
Chicago
M | RN 1.2 million sq. ft. November 2001 JCPenney Carson Pirie Scott
Seven Bridges Town Center
Woodbridge, Ill.
Continental Retail Development
Columbus, Ohio
L | N 170,000 sq. ft. Open TBA
Plum Farms
Barrington, Ill.
Steiner + Associates
Columbus, Ohio
MU | N 1 million sq. ft. 2003 TBA
Jefferson Pointe
Fort Wayne, Ind.
RED Development
Kansas City, Mo.
L | N 562,000 sq. ft. August 2001 Von Maur Rave Motion Pictures
Merchant's Pointe
Carmel, Ind.
The Linder Co.
Indianapolis
C | E 358,193 sq. ft.
(+95,000 sq. ft.)
Spring 2002 Borders, Macaroni Grill
Westfield Commons
Westfield, Ind.
The Skinner & Broadbent Co.
Indianapolis
S | N 180,000 sq. ft. Open TBA
Indianapolis Pavilions
Indianapolis
Sandor Development Co.
Indianapolis
S | N 500,000 sq. ft. Open TBA
Muscatine Mall
Muscatine, Iowa
Landau & Heyman
Chicago
M | RD 304,000 sq. ft. TBA Menard's, Staples JCPenney
NewMarket Square
Wichita, Kan.
Slawson Cos.
Wichita, Kan.
MU | N 750,000 sq. ft. Open Old Navy, Shoe Carnival Wal-Mart SuperCenter
TBA
Kansas City, Kan.
RED Development
Kansas City, Mo.
P | N 600,000 sq. ft. Fall 2002 TBA
The Crossroads
Portage-Kalamazoo, Mich.
General Growth Properties
Chicago
M | RD/RN 890,000 sq. ft. Fall 2001 JCPenney, Mervyn's Sears
Novi Promenade
Novi, Mich.
Kaplan Co.
Detroit
P | N 375,000 sq. ft. Fall 2002 Target
Maple Hill Mall
Kalamazoo, Mich.
Insignia/ESG
New York
M | RD 642,000 sq. ft. May 2001 Target
Grandville Marketplace
Grandville, Mich.
JDN Realty Corp.
Atlanta
S | N 361,525 sq. ft. Winter 2002 TBA
Shops at Waldenwoods
Hartland Township, Mich.
Robert B. Aikens & Associates
Troy, Mich.
S | N 80,000 sq. ft. Fall 2001 TBA
The Lakes Mall
Muskegon, Mich.
CBL & Associates Properties
Chattanooga, Tenn.
M | N 609,834 sq. ft. Open Sears JCPenney
Fenton Marketplace
Fenton, Mich.
Regency Centers
Jacksonville, Fla.
N | N 97,126 sq. ft. Open Farmer Jack
Eden Prairie Center
Eden Prairie, Minn.
General Growth Properties
Chicago
M | RN/E 900,000 sq. ft.
(+140,000 sq. ft.)
Open Von Maur, AMC Theaters Barnes & Noble
Riverdale Village
Coon Rapids, Minn.
Developers Diversified Realty
Cleveland
P | E 400,000 sq. ft.
(+440,000 sq. ft.)
2002 Sears, Costco, Kohl's JoAnn, Linens ‘N’ Things
Kirkwood Commons
Kirkwood, Mo.
The DESCO Group
St. Louis
S | N 525,000 sq. ft. Open Lowe's, Target, Wal-Mart, TJ Maxx
Zona Rosa
Kansas City, Mo.
Steiner + Associates
Columbus, Ohio
MU | N 1 million sq. ft. 2003 TBA
Ward Parkway Shopping Center
Kansas City, Mo.
Madison Marquette
Minnetonka, Minn.
M | RN/RD 758,746 sq. ft. Spring 2001 Dillard's Stein Mart
TBA
Columbia, Mo.
Sansone Group
St. Louis
P | N 300,000 sq. ft. Fall 2002 TBA
SummitWoods Crossing
Lee's Summit, Mo.
RED Development
Kansas City, Mo.
P/L | N 735,000 sq. ft. October 2001 SuperTarget, Kohl's Borders, Best Buy
Chesterfield Valley Crossing
Chesterfield, Mo.
THF Realty
St. Louis
P | N 275,000 sq. ft. December 2001 TBA
Olde Towne Plaza
St. Louis
Regency Centers
Jacksonville, Fla.
N | N 286,547 sq. ft. December 2001 Lowe's, Marshalls SteinMart, HomeGoods
South Town Center
St. Louis
Developers Diversified Realty
Cleveland
C | N 95,327 sq. ft. 2002 TBA
Sheffield Crossing Phase II
Sheffield, Ohio
Visconsi Cos. Ltd.
Cleveland
S | E 88,500 sq. ft.
(+150,000 sq. ft.)
Open Giant Eagle CVS
Indian Creek Commons
Dayton, Ohio
Steiner + Associates
Columbus, Ohio
MU | N 900,000 sq. ft. 2003 TBA
West Chester Village
West Chester, Ohio
Continental Retail Development
Columbus, Ohio
MU | N 350,000 sq. ft. August 2002 TBA
Grove City
Grove City, Ohio
Continental Retail Development
Columbus, Ohio
P | N 400,000 sq. ft. TBA Target
Wal-Mart SuperCenter
Newark, Ohio
DeBartolo Property Group
Tampa
C | N 204,170 sq. ft. March 2003 Wal-Mart SuperCenter
Polaris Fashion Place
Columbus, Ohio
Glimcher Realty Trust
Columbus, Ohio
M | N 1.4 million sq. ft. Open Saks Fifth Avenue, Sears Lord & Taylor, Kaufmann's
Lee Harvard Plaza
Cleveland
Forest City Enterprises
Cleveland
C | RD 200,000 sq. ft. Open Tops Supermarket Walgreens, Rentwise
Crossroads Centre
Rossford, Ohio
Ramco-Gershenson Property Trust
Southfield, Mich.
P | N 650,000 sq. ft. Summer 2001 Home Depot Target
Regency Milford Center
Milford, Ohio
Regency Centers
Jacksonville, Fla.
N | RD 108,870 sq. ft. Summer 2002 Kroger
Forest Fair
Cincinatti
Gator Investments
Miami
M | RD 1.45 million sq. ft. 2002 Bass Pro Shops, Kohl's Off 5th Saks Fifth Avenue
Southgate Marketplace
Milwaukee
JDN Realty Corp.
Atlanta
S | RD 120,000 sq. ft. Winter 2002 TBA
Greenway Station
Middleton, Wis.
RED Development
Kansas City, Mo.
L | N