Big retailers shelving plans to add area stores
Slowing economy puts new store sites on ice across region
Target Corp., Home Depot Inc., Wal-Mart Stores Inc. and other big-box retailers — buffeted by sagging sales and the housing slump — are pulling the plug on new-store plans in and around Chicago.
The pullback is another sign of the darkening outlook for 2008, as retailers turn cautious on expansion.
"The economy is in the crapper. Housing is going down the chute," says Richard Kopczick, mayor of Morris, which had expected to gain more than $1 million in sales taxes from a planned shopping center that's lost its key big-box anchors. "Lowe's backed off, and then Kohl's said they wouldn't come without Lowe's, and the whole house of cards collapsed."
The retailers' retrenchment hurts because retail and housing have been the primary sources of growth in exurbs like Morris, and city neighborhoods counted on new stores as an economic shot in the arm.
Wal-Mart Stores Inc. had plans to add stores in six Chicago-area suburbs. All have either been cut entirely or put on hold.
Minneapolis-based Target is walking away from plans for new stores in Morris as well as Antioch, Arlington Heights and at 76th Street and Ashland Avenue in Chicago.
Wal-Mart, of Bentonville, Ark., had stores planned for North Aurora, St. Charles, Crystal Lake, Elgin, East Dundee and Bradley; all have been either axed or put on hold.
And after Christmas, Atlanta-based Home Depot will shut down a chunk of the real estate department at its regional office in Arlington Heights and has told brokers it's not interested in new store plans. Home Depot has cancelled projects in Minooka and at Interstate 57 and 119th Street in Chicago.
Target and Wal-Mart did not return calls. Home Depot would confirm only that it's laid off some Arlington Heights personnel.
"Consumers are struggling and retailers are clearly concerned," says Willard Ander Jr., a senior partner at retail consultancy McMillan Doolittle LLP in Chicago, who predicts Christmas sales will rise just 2% to 3% nationally — the worst Yuletide performance in five years. "The big chains are recognizing that building more stores next year won't help them, so they're pulling back."
REVISED ESTIMATE
David Bossy, chairman of Mid-America Real Estate Partners LLC in Oak Brook, predicted early this year that 2007 would see 12.7 million square feet of new retail development in metro Chicago. He now estimates the total will come in around 8 million or less, and he's reluctant to make a prediction about 2008.
In 2005, the area saw 5 million square feet of new retail space open. The total hit 6.2 million square feet in 2006, according to Mid-America data.
The newfound temperance leaves developers holding the bag. Mr. Bossy, for instance, has parcels of 50 to 100 acres in Minooka, Elburn and Sugar Grove slated for retail, but no tenants. All his new projects are on hold. "Retailers were taking more risks a year ago," Mr. Bossy says.
Inland Real Estate Corp. of Oak Brook is a partner on a 75-acre parcel on U.S. Route 12 in Lakemoor slated for a shopping center that still lacks anchors. Groundbreaking has been delayed until next year, and there is no guarantee the project will start even then.
"The retail mind-set has changed 180 degrees," says Mark Zalatoris, Inland's chief operating officer. "Merchants just don't want to take a risk on new locations."
John Melaniphy, a Chicago retail consultant, thinks conditions will worsen in 2008: "The housing problem is causing deeper trouble than anybody wants to admit. Overall, 2008 will be a lousy year."
chicagobusiness.com |
