A drive down Randall Road between Crystal Lake and Algonquin yields a common site on both sides of the road.
Vacant retail spaces.
The southern part of McHenry County – much like the numerous shopping centers stretching down the thoroughfare to Batavia – is full of them, and it’s part of Linda Kost’s job to fill many of them.
She’s a senior broker and partner at Algonquin-based Realty Metrix. Her specialty is commercial real estate, and she’s been watching how the retail market has transformed over the past decade.
“The dynamics of retail real estate have changed dramatically,” Kost said of a market that peaked in 2007 and bottomed out in 2011. “It’s not terrible – just changing.”
Before the recession, a building boom heaped a surplus of retail spaces into markets where the economic collapse would later make it difficult to find businesses to fill those spaces. On top of that, Kost said, the internet happened.
Equipped with smart phones and Amazon Prime accounts, shoppers no longer felt tied to the big-box retail shops where they once did their shopping – stores such as Office Depot, OfficeMax and Best Buy.
“It’s really thwarting any sort of big-box development,” said Kost, who is part owner of an old Dominick’s property in Geneva.
Instead of filling the 71,000-square-feet of space with a single grocer, Kost’s team split the property in two: About 28,000 square feet of that space will be a Fresh Thyme Market and the balance will be a Burlington Coat Factory.
A similar move is happening at the old Dominick’s in Crystal Lake, where developers broke the property in two for different organizations to occupy.
Repurposing is another trend that shows how much the retail market has changed.
Kost pointed to a bank on Randall Road redeveloped into a McAllister’s Deli and a Med Express. Then there’s Dania Furniture Co. building in Algonquin, where a soccer club is considering moving into the long-vacant space.
Ask Jack Minero why a soccer club is a good choice for such a property, and he surely mention these two words: “Specialty” and “service.”
A real estate agent with Berkshire Hathaway, Minero is the man behind the Winding Creek Shopping Center, one block west of Randall Road on Algonquin Road. The center has
16 units, eight of which are leased. Of those eight rented units, five of them are specialty shops that offer services to customers.
“Insurance, beauty salon, physical therapy, martial arts and day care,” Minero said, describing some of the businesses that seem to stick in the suburbs.
Kost offers this advice to landlords and tenants hoping to make a splash in the retail scene: try to go toward service.
There’s another factor stifling the retail market: Rent isn’t cheap in McHenry County.
The average price for an redeveloped property is between $16 and $22 per square foot. Rent on brand-new spaces could push past $40 per square foot, Kost said. That’s on top of the additional rent tenants pay for common area fees, maintenance, taxes and insurance.
“A lot of these retailers are struggling,” Minero said, pointing to McHenry County’s “steep” property taxes. “It’s something that goes along with the economic climate we’re in.”