Thursday, August 11, 2011

Developers compete to open outlet centers in Chicago

"Every now and then I get the taste for something a little more up-market," said Witkin. "I'm not knocking J.C. Penney or Kohl's, because I've picked up some great things there, but it's nice to go to the smaller stores (at the outlet). I like to get the feel of a little more glamour."

Even though outlet malls are growing quickly, they are still a small part of the U.S. shopping landscape. There are 325 outlet malls in the U.S., compared with 1,500 traditional shopping malls nationwide, according to the ICSC. Outlet malls make up a meager 1 percent of the total square footage of shopping centers nationwide, the trade group said.

Meanwhile, some of the malls calling themselves outlets in reality are a hybrid of discount stores, regular-price stores and outlets. Earlier this year, Gurnee Mills, another Simon property in the far northern suburbs, announced an unusual deal to bring department store Macy's as anchor of a new full-price wing.

The full-price Macy's store, set to open in 2013, would have been unthinkable when Gurnee Mills debuted in 1991. But today, Macy's, like many retailers, relies more heavily on in-house and exclusive brands than the big-name vendors that once populated its shelves.

At the same time, popular brand names such as Coach and Banana Republic create products specifically for the outlet stores that differ from the merchandise in their full-price locations, eliminating some of the conflict inherent in locating outlets close to full-price malls.

As for the Chicago area's trio of planned outlet malls, all three projects had been on the drawing board before the recession put a halt to development. If they are resurrected, they would mark the first major new shopping centers in the region since the Arboretum of South Barrington and Block 37 in the Loop. (Both of those malls, while still operating, wound up in foreclosure.)

The Spring Creek Outlets of Chicago is planned to go into a farm field in New Lenox near the interchange of Interstate 355 and U.S. Highway 6. The 550,000-square-foot, $225 million outlet center is scheduled to begin construction in the second quarter of 2012 and open in 2013. The outlet is expected to anchor a million-square-foot mixed development across from a new hospital.

The companies behind the Spring Creek project are Chicago-based mall developer and property manager Urban Retail Properties LLC, Chicago-based commercial real estate investor Mansur & Co. and Center Creek Development of Lake Zurich.

Another, 400,000-square-foot outlet mall is on tap about 20 miles away from New Lenox in Country Club Hills at Interstates 80 and 57. Construction of Chicago Outlets at Country Club Hills is targeted to start next spring and open in 2013.

The project has five signed leases so far: Esprit, Timberland, Levi's, Le Creuset and Perfumania, according to Steve Craig, president and CEO of Newport Beach, Calif.-based Craig Realty Group, who along with Chicago-based Capri Capital Partners LLC of Chicago is developing the project.

A third area project is in the works for Rosemont — a two-level, 550,000-square-foot outlet mall called the Fashion Outlets of Chicago, across from the Muvico cinema complex. The developers are Coral Gables, Fla.-based outlet mall developer AWE Talisman LLC and Chicago-based Silver Rock Development Group LLC. Officials declined to comment on the project.

The plans come as traditional shopping mall development slows. Since 2009, there have been only four malls built in the U.S., according to the ICSC.

The average vacancy rate at U.S. regional malls in the second quarter reached 9.3 percent, a 10-year high, according to Reis Inc., as the specialty chains that once populated their corridors — from Ann Taylor to the Gap — are closing stores and seeking smaller footprints.

"People are flocking to these outlets," said Jeff Middlebrook, principal with Center Creek, one of the developers behind the Spring Creek Outlets. "They still want to wear the Polo guy or alligator on their shirt, but they don't feel special paying $80 at Macy's. They do feel special paying $25 at the outlet mall. Brand consciousness still exists, but it's all about pricing now."

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