Chicago_2Q13_LRR.pdf

Chicago's retail market is expected to improve in 2013 due to healthy job creation and strong consumer spending. Investor demand for retail assets is rising, and cap rates are tightening. The development pipeline is dominated by build-to-suit projects and pre-leased shopping centers, which will drive new demand into existing shopping centers. In-city centers are expected to post the most improvement, with vacancies decreasing and rents increasing. The suburbs have lagged in the recovery cycle, but vacancies in well-located centers are starting to capture the interest of expanding retailers. Transaction velocity is expected to remain stable, with cap rates for high-credit deals holding near historically low levels. The forecast for 2013 includes a 1.4% increase in total employment, 647,000 square feet of new construction, a 50 basis point decrease in vacancy, and a 0.4% increase in asking rents.