StreetMac hoping to rejuvenate Chicago-area shopping mall

The carousel at Stratford Square Mall.

The carousel at Stratford Square Mall.

by Dan Rafter

Stratford Square Mall in the Chicago suburb of Bloomingdale is an unusual place. The mall is still busy. And most of its retail space is filled. But it still needs a little something extra to become a truly successful retail space.

Much of the problem lies with the tenant mix here. Simply put, many of the tenants aren’t exactly higher-end, and they don’t attract the wealthier shoppers that the mall’s owners would like. There’s a vapor lounge, for instance, that sells electronic cigarettes. There’s a toy store stocked exclusively, it seems, with odd-looking knock-off toys. You might find a toy that looks exactly like a Power Ranger, only the helmet, color and name are slightly off.

Still, the raw materials for a higher-end, bustling regional mall are here. Stratford Square does have solid anchors with Macy’s, Sears, Kohl’s and Carson’s. It has a 16-screen movie theater and plenty of activities for kids, including its own carousel.

And in the fall of this year, a Round One Bowling & Amusement center — a popular addition to many malls — will open here.

So it’s little surprise that Northbrook, Ill.-based StreetMac LLC and an affiliate of Five Mile Capital Partners on Sept. 15 officially announced plans to redevelop the 1.3-million-square-foot mall to give it a boost, and to hopefully attract bigger-name tenants.

During the redevelopment, StreetMac hopes to bring in two or more new junior-anchor tenants. The company also plans to add sit-down restaurants, outdoor cafes and a streetscape retail center to the mall’s huge, and visually unappealing, parking-lot area.

StreetMac will also revamp the mall’s exterior entrances and add new signage.

“Our goal is to return Stratford Square back to its regional prominence when it was built more than 30 years ago,” said StreetMac’s Maury Fisher, who was the former president of JMB Urban, which developed the mall in 1981.

Round One will open its 40,000-square-foot entertainment complex in October. This will provide an immediate boost to Stratford Square. The Round One facility includes bowling, billiards, gaming and karaoke.

The redevelopment will also bring fire pits, new seating and improved landscaping to the mall’s outdoor areas.

David Jackson, president and chief executive officer of StreetMac, said that there is no reason why Stratford Square can’t thrive. The Bloomingdale area, after all, features particularly strong demographics, the kind of shoppers who still like to spend afternoons at the local mall.

“We believe Stratford Square has extraordinary upside potential,” Jackson said.

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CBRE’s Kaiser: Expect St. Louis’ CRE rebound to continue

by Dan Rafter

Midwest Real Estate News recently spoke with Jeff Kaiser, managing director of the St. Louis office of CBRE, about the state of the commercial real estate market in St. Louis. His take? Things aren’t perfect in this key Midwest city, but real estate activity is definitely on the rise in all commercial sectors.

Jeff Kaiser

Jeff Kaiser

Midwest Real Estate News: Let’s start with the broad question: Are you seeing more activity in the St. Louis-area commercial real estate market?
Jeff Kaiser: We are seeing a huge uptick in activity in investment sales in the entire metropolitan area in all property types, office, industrial, retail and multi-family. Our investment sales activity is incredibly busy right now.

MREN: What is behind this increase in activity?
Kaiser: You can point to a couple of things: On the office, industrial and retail side, tenants are committing to longer leases. This is making these properties more desirable. That is certainly a big change. The other big change is the amount of international money that is coming into St. Louis. International investors are looking to put their money in our market. Not every international buyer can buy in Manhattan or San Francisco. The money is now coming to the secondary markets like St. Louis. Of course, multi-family remains one of the favored asset classes. There are multiple reasons why, many of them related to larger housing issues, but multi-family continues to be a strong performer in our market.

MREN: Industrial is always an important sector in the St. Louis market. How is this sector performing today?
Kaiser: Industrial is performing incredibly well. Vacancy rates are very low. This is causing developers to look at new speculative construction. We just saw a large industrial spec building open in our market at the Gateway Commerce Center near Edwardsville, Ill. That property, developed by TriStar, is in the Southern Illinois portion of our market. That property is the direct result of demand for industrial space in our market. The industrial market is a very good market for investors.

MREN: I know the office sector is a challenging one in many markets. How is it performing in your market?
Kaiser: When we look at office, we almost have to dissect it into two markets. You have the CBD, downtown market that operates almost independently of the suburban markets, which includes Clayton. Downtown continues to struggle when it comes to office. There are large blocks of vacancies in the downtown office market. And this might only get worse. We are anticipating that AT&T will vacate 1 million square feet in downtown in the near future. That will add additional vacancies to the market. The downtown operates under its own metrics.

MREN: What about the suburban office market?
Kaiser: The suburban office market, including Clayton, is performing much better. There are not many big blocks of space available for larger tenants. We are seeing a lot of tech companies take out space in our suburban markets. Tenants looking for office space in the suburbs are finding that they don’t have all that many options.

MREN: I know it’s difficult to predict, but do you think commercial real estate activity will continue to increase in the St. Louis market throughout the rest of this year and into 2015?
Kaiser: I’m on the board of the St. Louis regional chamber of commerce. We have seen a lot of entrepreneurs and start-up companies target the St. Louis market. That continues today. You look at the business incubators in this market, and you see a lot of enthusiasm and momentum. St. Louis is capitalizing on the strong intellectual base in the area. As these companies continue to evolve and grow, we think they will provide a great momentum swing for St. Louis. The future, from all the reports we have access to, looks to be very positive across all property types.

Posted in industrial real estate, Missouri commercial real estate, multi-family, office, retail, St. Louis real estate | Tagged , , , , , , | Leave a comment

Tech boom helping Detroit rebound after bankruptcy

 

by Dan Rafter

Real estate executives working in the Detroit market say that the city has steadily rebounded since its bankruptcy filing in 2013.

These execs say that investors are again putting money into the city. Young people are moving into apartment buildings in the heart of downtown. And construction cranes are returning.

John Latessa, senior managing director in the Southfield, Mich., office of CBRE, said that the city is even attracting interest from investors outside the United States, with investment dollars flowing into Detroit from China, Germany, Canada and other corners of the globe.

“You go through a bankruptcy, and that is harsh,” Latessa said. “But you are now at ground zero. Arguably there is nothing to do but go up. A lot of investors are realizing that there are good deals to be had in Detroit.”

You can point, too, to technology as one of the reasons for the improved commercial real estate activity in Detroit since the city declared bankruptcy.

Many Midwest markets are attracting their share of tech-based companies. But Detroit is one of the few Midwest cities listed as a top-34 high-tech market in the United States by JLL in its newly released 2014 High-Technology Office Outlook.

JLL ranked Detroit as the 31st best high-tech market in the country. Other Midwest cities on the list are Chicago, Minneapolis-St. Paul and Indianapolis.

JLL researchers chose the cities on the list based on such metrics as wage growth, intellectual capital and venture funding. Researchers also looked at the amenities that the cities offered.

How did Detroit make the list? The auto industry is a key driver behind technology growth. And the auto industry, which is still big in the Detroit market, is experimenting with new technology, everything from hybrid vehicles to self-driving cars.

At the same time, several high-tech companies have moved into the Detroit market, tech players such as Amazon, Microsoft, Google and Twitter.

The tech report is more good news for a city that, last year, didn’t have much. But as Latessa says, there is new momentum in Detroit. The post-bankruptcy city has one thing that Detroit had long lacked: hope.

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Multi-family developments selling green have an advantage — now and if the market shifts

7west.jpg

7West

by Dan Rafter

Think of all the multi-family buildings across the Midwest that are now advertising their green features as a main selling point. In the Twin Cities market of Minneapolis/St. Paul alone, the new multi-family development 222 Hennepin has attained LEED Silver certification, while 7West has notched LEED Gold certification.

The Dock Street Flats multi-family development in Minneapolis touts its eco-friendly design and high walkability factor, while the Third North Apartments here boasts of its e-car charging stations and high-efficiency heating, cooling and lighting systems.

There’s one thing, though, that all of these green multi-family buildings in the Twin Cities have in common: They all boast high-efficiency windows.

This doesn’t surprise Jay Sandgren, sales representative at the Edina, Minn., office of Andersen Windows. High-quality, energy-efficient windows are becoming a must-have in modern multi-family buildings, he says.

And those developers that don’t call for high-quality windows in their apartment buildings? They might find themselves trailing their competition.

“The apartments being built today are like condo-wannabes,” Sandgren said. “Some of the apartments being put up today are being built by the traditional companies that have built and operated apartments for the last 20 years. But some of the properties are also being put up by the same people and development teams who eight years ago were leading the pack with all the condos being built. They are putting in condo-level amenities in these apartments, including the windows.”

Of course, there’s no guarantee, Sandgren says, that these buildings will remain apartments forever.

“You can almost see that these buildings will turn into condos one day when the market shifts away from renting and to owning again,” Sandgren said.

222 Hennepin

222 Hennepin

Will that happen in the Twin Cities? How many of the new multi-family buildings here will be converted to condominiums if consumers once again decide that owning is a better option than renting?

No one knows the answer to this question. But the debate between renting and owning will continue. And those apartment buildings that already boast high-end amenities — including energy-efficient windows — are more likely to one day make the conversion to condos, if that’s what the market calls for.

For now, though, Sandgren is happy that so many multi-family developers are calling for higher-quality windows. Projects like 222 Hennepin and 7West in Minneapolis use the Andersen 100 Series windows. These are made with reclaimed sawdust and recycled glass. They are also energy-efficient and dampen outside noise.

They’re a good fit, then, for multi-family projects that advertise themselves as green.

Demand for such windows is so high today that Andersen plans to expand its manufacturing facilities in Bayport, Minn. Andersen announced earlier this year that will spend $18 million to expand its production facilities in Bayport. Andersen will purchase new equipment for the plant and renovate a large chunk of it. Much of the production here will focus on the Andersen 100 Series line of windows, which has become a favored choice among commercial developers.

Overall, Andersen today operates 15 plants across the country.

Sandgren says that he expects the demand for energy-efficient windows to only increase. A recent survey by the National Association of Home Builders found that 54 percent of the firms building new multi-family developments are shooting for green status in 15 percent of them.

“We don’t know when the demand for multi-family buildings will slow,” Sandgren said. “In some ways, it feels like a bit of a bubble right now. But the demand for these apartment units doesn’t seem to be letting up at all. I thought we’d see the end of it a year ago. But that hasn’t happened. This might be a real demographic shift in what people are looking for in all parts of the country.”

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StuartCo, Simon meet a need, bring luxury apartments to Twin Cities suburb

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by Dan Rafter

The multi-family market is hot in the Twin Cities, and not just in the hearts of Minneapolis or St. Paul. The close-in suburbs of the Twin Cities are attracting their own share of renters.

That’s why One Southdale Place Apartments, the newly opened luxury multi-family project by StuartCo and Simon makes so much sense. These apartments opened in early September in Edina, a Twin Cities suburb that is badly in need of luxury rental units.

How high is the demand for the type of apartments One Southdale Place offers? StuartCo and Simon say that one-third of the units in One Southdale Place were leased before the apartment project even opened.

And now that apartments are available? That demand is only rising.

“We are now touring people through the development non-stop,” said Lisa Moe, president and chief executive officer of StuartCo. “The demand has been a pleasant surprise.”

Moe points to the walkable nature of the project as one reason for its early success. One Southdale Place is located in a suburb of the Twin Cities. But it also has an urban feel. Residents here can walk to restaurants, stores and parks. They’re also located close to downtown Minneapolis.

At the same time, One Southdale offers less congestion and noise than residents would get if they moved to downtown St. Paul or Minneapolis.

“We are getting a lot of people who like downtown but don’t want to be too downtown,” Moe said. “They want more trees and grass. We think we’re providing them with the best of both worlds.”

One Southdale Place is made up of three buildings. The three-story Plaza building and five-story Crossings opened to residents in early September. The 10-story Tower building will open in early 2015.

The five-acre development at 6800 York Avenue South in Edina features 232 units in a mix of studio, one-, one-plus-den, two-, two-plus-den and three-bedroom floor plans. There are also top-floor penthouse units available for rent.

The units earn their high-end designation, with quartz countertops, stainless-steel appliances, broadloom carpet and nine-foot ceilings. Amenities at the development include an 11th-floor Skydeck, 1,500-square-foot fitness center, club room, private theater, landscaped backyard with outdoor pool, sundeck and putting green.

Moe says that such amenities are a necessity for new multi-family projects today.

“Renters are more sophisticated,” she said. “They expect a variety of amenities. It’s a big deal today for developments to have that solid amenity package.”

Moe says that several of the new tenants at One Southdale Place have told her that they especially appreciate the condo-like finishes inside their units. These high-end finishes, Moe says, has helped attract a wide range of renters to the project, everyone from empty-nesters to young professionals who either work downtown or in the booming medical industry throughout the Edina area.

 

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Stores empty? Maybe consumers are still living paycheck-to-paycheck

credit cardsby Dan Rafter

Wonder why so many shopping malls and retailers continue to struggle today? It might have something to do with the reduced buying power of consumers.

Too many consumers continue to live paycheck-to-paycheck. It makes it hard for them to spend big on home appliances, clothes or computers.

A new survey from the National Foundation for Credit Counseling illustrates just how much of a struggle finances have become for many consumers. According to the survey, one in five consumers would be unable to maintain their lifestyle if they couldn’t fund at least part of it with credit cards.

This means that these consumers could not pay their bills, buy their groceries or fill up their cards if they couldn’t rely on their credit cards to help them do it.

An additional 22 percent of survey respondents said that they’d have to make significant lifestyle changes if they had to live on an all-cash basis.

The National Foundation for Credit Counseling says that too many consumers rely too much on their credit cards. The foundation said that in 2013, the average consumer who sought counseling from a foundation member had five or six credit cards with a total unsecured debt equal to half of their annual household income.

“It is a warning sign if a person is not able to manage his or her daily lifestyle without the use of credit cards,” said Gail Cunningham, spokesperson for the foundation. “This is a dangerous habit that could lead to serious financial distress.”

And when too many people can’t get by without the crutch of their credit cards? You can bet that plenty of retailers will be struggling to gain customers.

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Scott Savacool: The power of networking can help CRE pros navigate a challenging industry

Scott Savacool

Scott Savacool

by Dan Rafter

Scott Savacool is in for some busy times. Not only will he continue to close deals as senior associate with St. Louis-based Sansone Group/CORFAC International, but once January 1 rolls around, he will also serve as president of CORFAC International for one year.

But for Savacool, who spoke to Midwest Real Estate News from Marriott’s Hotel Chicago Downtown in Chicago’s River North area during the CORFAC fall conference, the extra work is a small price to pay for the benefits he and his fellow CRE pros receive from working with a network that is filled with companies led by experienced and talented real estate brokers.

“When you attend conferences like this, or when you meet with people in the network, you can leverage a lot of the experience of like-minded professionals who’ve encountered the same situations you are working through,” Savacool said while taking a break from the conference. “We have some of the most successful brokers around the country in this network. We have companies in 40 of the top 50 MSAs around the country. That’s a great footprint. And there is a lot of expertise you can tap into by being part of this network.”

Closing commercial real estate deals is no easy task. It helps, though, when brokers can turn to other CRE pros who’ve faced the same challenges.

And that’s the prime benefit of working in a network like CORFAC International. Say you’re struggling to help a client sell office property that’s a bit outdated in a market filled with more modern space. You can call a network broker who has solved the same problem in another market. That broker might have the key tip that can help give your client a marketing advantage.

Working in a network with veteran brokers also helps when you need to refer a client to another CRE professional in a market across the country. As Savacool says, when he refers a client to, say, a CORFAC broker in Pittsburgh, he knows that the broker is going to give his client top service.

Some of the attendees at the CORFAC International fall conference in Chicago included Kevin Riley, Mason Capitani and Kurt Walsh in front, Scott Savacool in back, Steven Tick, Gary Grochowski, John Homsher, Jason Capitani, Jim Klements, Joe Kramer, Jack Allen, Steve Zacher and Tim Ryan.

Some of the attendees at the CORFAC International fall conference in Chicago included Kevin Riley, Mason Capitani and Kurt Walsh in front, Scott Savacool in back, Steven Tick, Gary Grochowski, John Homsher, Jason Capitani, Jim Klements, Joe Kramer, Jack Allen, Steve Zacher and Tim Ryan.

That’s important: Brokers can easily lose a client if they refer that client to a CRE professional who botches the job.

“There’s a comfort level with referrals,” Savacool said. “You know when you send a client to a broker in this network that your client isn’t going to get paired up with a rookie broker who’s still learning. That’s the last thing you want your client to have to go through. With this network, when I refer clients I know that my client is going to receive the benefit of working with an experienced professional. They are not going to get connected to someone who doesn’t know the business.”

Midwest consistency

Being connected to the CORFAC network is an important tool for Savacool. He works in a market, St. Louis, that is seeing a steady increase in commercial real estate activity, especially in strong submarkets such as the city of Clayton.

But St. Louis, like all markets, has its share of challenges, too. The office market in the city’s CBD, for instance, is still a sluggish one.

Savacool knows that when he has a challenging question or faces an unusual problem, he can bounce ideas off his fellow CORFAC brokers.

Like the other brokers at CORFAC’s fall conference, Savacool expects business in his market to continue to improve throughout the rest of the year and into 2015. He says that he’s glad to work in the Midwest, where his market doesn’t experience the big swings of those on the coasts.

“We do have our own ups and downs, but we don’t have the major peaks and valleys that other markets have,” Savacool said. “We have blips from time to time. But barring any unforeseen catastrophes, we generally have a stable market. That might sound boring, but that stability is a real benefit to working in a Midwest market like ours.”

What could slow the real estate recovery being seen today in most Midwest markets? Savacool points to the “global unknown.” No one knows, after all, what hits the global economy might take in the future. Those hits could impact commercial real estate throughout the United States.

The good news? Savacool says that he and his fellow CORFAC members will be prepared for anything that the global economy will throw at them.

“The companies in this network are very nimble,” Savacool said. “They can adjust and adapt quickly to changes. It’s great to be around so many people who are focused on doing business the right way. They are constantly focusing on best practices. And they’re not shy about sharing their strategies with the other brokers in the network. That’s a real help in today’s market.”

Posted in Chicago Commercial Real Estate, Illinois, Illinois real estate, Missouri commercial real estate, office, St. Louis real estate | Tagged , , , , , | Leave a comment