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Developers are racing to build the Chicago area's first mall since the recession, even as some of the biggest shopping centers from the last building boom emerge from foreclosure and many retailers remain skittish about expanding.
Hoping to cater to consumers pinched by falling home prices and meager pay raises, three rival teams are pushing proposals for outlet malls, a shift from the high-end strategy of troubled developments such as Block 37 in the Loop or the Arboretum of South Barrington in the northwest suburbs.
Chicago real estate investor Quintin Primo is reviving his plans for a 400,000-square-foot outlet mall in south suburban Country Club Hills, while Rosemont Mayor Brad Stephens is the guiding force behind developers' plans for a two-level , enclosed mall that would feature discount versions of ultra-upscale retailers such as Barneys New York, Prada and Gucci.
Meanwhile, an upstart team is angling to upset those high-powered rivals with a 530,000-square-foot project in southwest suburban New Lenox.
All three development teams say they're close to signing enough leases to land construction financing, a boon to suburbs eager to see tax revenue grow.
Yet commercial real estate industry sources say it's possible just one of the projects will be built. Even so, the first construction start of a major mall since 2007 would be a sign that the retail real estate market is slowly rebounding.
“These outlet malls speak directly to value-conscious consumers,” says Michael Jaffe, principal of Northbrook-based Jaffe Cos., which in 2008 developed the Arboretum. “But putting these things together is going to be extremely challenging.”
The 600,000-square-foot Arboretum was sold last month to settle a $90-million foreclosure case, while Block 37, which opened in 2009, was taken over by its lenders in March after a bitter court battle with Chicago-based developer Joseph Freed & Associates LLC.
Undeterred by those setbacks, a joint venture of Coral Gables, Fla.-based outlet mall developer AWE Talisman LLC and Chicago-based Silver Rock Development Group LLC says it expects to start construction in October on Fashion Outlets of Chicago in Rosemont, a town where hotel rooms far outnumber residents.
The $230-million project would be Mr. Stephens' largest undertaking since he took office four years ago, succeeding his late father, Donald Stephens.
“This is going to be big for us,” he says. “There's been people coming into Rosemont telling us they're going to do retail for a long time, but it just never came to be until now.”
The tiny village prepped the site of the proposed mall by paying half of the more than $14-million cost of building an off-ramp from Interstate 294 at Balmoral Avenue. Rosemont has agreed to sell the 14-acre site to developers for $1.
Arthur Weiner, CEO of AWE Talisman, dismisses any competition from the rival proposals.
“We are the center of the universe,” he says. “The days of the cornfield are over.”
The Country Club Hills project, first proposed more than three years ago, is backed by a couple of local heavyweights: Mr. Primo, chairman and CEO of investment firm Capri Capital Partners LLC, and Michael Reschke, chairman of developer Prime Group Inc.
Dubbed Chicagoland Outlets at Country Club Hills, the mall would be just off Interstate 80 and Cicero Avenue. The joint venture is negotiating leases on about 60,000 square feet and expects to start construction in 12 months, Capri President Gwendolyn Butler says.
“We continue to make progress,” she says.
About 20 miles away, in New Lenox, retail broker Barry Schain and developer Jeff Middlebrook are playing catch-up.
Late last year, they proposed Spring Creek Outlets of Chicago, which would be located just off Interstate 355 and U.S. Route 6, near the new Silver Cross Hospital, which opens next year.
Outlet malls have been a relative bright spot for retailers throughout the recession, prompting some local observers to say that a second center could be built even if the Rosemont project moves forward.
Mr. Middlebrook, of Lake Zurich-based Center Creek Development, agrees.
“There will only be one south project,” he says. “We're confident it will be us.”
For complete coverage of Chicago-area real estate, visit ChicagoRealEstateDaily.com
© 2011 by Crain Communications Inc.
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