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Towns in McHenry County struggling to fill largest retail vacancies

Published: Sunday, March 9, 2014 5:50 a.m. CDT

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Doug Martin is eagerly awaiting that phone call from an interested developer ready and willing to fill a vacant big-box store along Route 31 in McHenry nearly two years after Sears Holding Corp. closed shop.

The deputy city administrator tasked with developing McHenry’s economy has a running list of real estate brokers and prospective retailers he contacts daily about the benefits McHenry can offer a large retailer and the desire officials have to fill vacant big boxes.

But Martin has found developers remain hesitant in a lethargic economy to fill those large commercial spaces that have left shopping centers in cities and suburbs without anchors.

“In any case, good or bad economy, it is a challenge,” Martin said. “The bigger the building is, the harder it is to fill.”

Size, ownership, the changing retail market and economy explain why big box retailers throughout McHenry County in recent years have closed their doors, local officials and real estate agents said.

Grappling with continued earning losses, Sears made the decision in early 2012 to close the Sears Grand Store in McHenry, along with nearly 120 similar stores across the country.

McHenry officials saw the Walmart along Route 31 close two years earlier. Walmart closed its McHenry location and opened a larger store in Johnsburg.

In Crystal Lake, the former Walmart tucked inside the Crystal Court shopping center on Route 14 has sat vacant for more than five years. Dominick’s decision last fall to close all of its Chicago-area locations leaves Jewel as the only big-box grocer in Crystal Lake along that route.

The competition between big-box retailers along the Route 14 corridor and other suburban commercial strips is why retailers don’t want to take on additional developments, said Jack Minero, a commercial broker for Prudential First in Crystal Lake.

An oversaturated market in the suburbs where grocers, supermarkets and restaurants stretch for blocks causes trepidation for retailers in an economy struggling to recover, he said.

“Consumers in this economy are price conscious, and it boils down to how many of the big box stores can penetrate McHenry County until its oversaturated,” Minero said. “I think they are really conscientious now in this economy of oversaturation.”

Consumers also have shifted to the Internet for their shopping needs, but that doesn’t mean the big-box store is an outdated concept in today’s market.

It may just need a makeover, said Tim Billimack, owner of Blue Chip Commercial Real Estate in Lakewood.

Big-box retailers lately have begun downsizing their brick-and-mortar needs.

“There is less need for big-box space in today’s market,” Billimack said. “What you are going to see is these available big boxes subdivided rather than have one large retailer anchor one large space.”

Whether its dividing a large building for multiple tenants or finding another big-box retailer, redevelopment has its unique challenges.

Crystal Lake has worked to revitalize the Crystal Court center since Walmart vacated it and J.C. Penny abandoned plans to locate there at the height of the economic recession in the late 2000s.

Officials hired architects in 2009 to craft redevelopment concepts that the city’s economic development staff use to pitch retailers across the country.

But based on existing tenant agreements, current owners at the center need to agree on how it is redeveloped before construction can start, said James Richter, the city’s assistant economic development director.

“Developers would love to come in and work with one piece of dirt and be done with it,” Richter said. “Fragmented ownership just adds another layer of challenges to it.”

In McHenry, Walmart placed limitations on what types of future buyers could occupy its store along Route 31 before the retailer left, Martin said. Multiple entities own the McHenry Commons shopping center that housed Sears, and they, too, have shared control on redevelopment decisions, he said.

But the ownership hurdles haven’t deterred city officials from finding new ways to entice retailers.

Officials are developing a new program between the taxing bodies in McHenry that would abate some portion of a business’ property taxes over a certain time if the business redeveloped a property or occupied a vacant site.

The proposed program still needs City Council approval, Martin said. It would add another business incentive city officials could use to fill vacant spaces.

“Economic development is something you need to actively work, in good times and bad,” Martin said. “Today, it’s more challenging than ever, but it just makes us more creative in finding new, innovative ways to entice businesses to locate here.”

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