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updated: 8/19/2019 11:40 AM

Suburban malls look to reinvent, reinvigorate themselves as retail slips away

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Just north of the Jane Addams Tollway on the south end of Huntley, broken concrete and tall grass are all that remain of the Huntley Outlet Center.

The 279,000-square-foot discount retail mall closed in 2017 following a 22-year run, a victim of changing retail trends and the emergence of online shopping. It left the village of Huntley with an enormous tract of land in need of redevelopment, which in turn would generate new tax dollars lost by the mall's demise.

But two years later, the lot remains empty as the village and the property's owners battle over what should be built on the land.

Huntley's predicament is just one of many different scenarios playing out across the suburbs as once thriving retail malls look to reinvent themselves or struggle to remain relevant.

Changing economy, migration

It's a situation that began with the Great Recession, and was compounded by the rise in e-commerce and retailers following Millennials as they settled in urban locations, according to Greg Kirsch, executive managing director and Midwest retail leader for commercial real estate firm Cushman & Wakefield in Chicago.

Kirsch said 2005 was "the high water mark" for suburban retail growth, as big box companies like Target and Best Buy continued to build in anticipation of a continued population growth outward from the city.

"Once the recession hit, there was a reset on the way retailers thought about expansion," he said. "The recession was the tipping point, and then e-commerce and (consumer) behavior patterns have only compounded the effects of the recession.

"Even though we've been in a 10-year recovery ... from a retailer's point of view, we really have not recovered."

The past several years have seen a population migration -- especially from Millennials -- back to city centers. As a result, Kirsch said, the national big box retailers have followed that migration, which has driven up commercial rents in urban areas. That has left a lot of vacant retail properties in the suburbs, but Kirsch said a number of the big box vacancies are being replaced by discount furniture, clothing and fitness centers, which are capitalizing on rental rates that have remained stagnant.

"There are very few grocery stores, very few Targets or Walmarts moving in," he said. "It's the Ross Dress for Less and Bob's Discount Furnitures that are taking its place."

Different directions

But regional shopping centers found themselves trying to find new ways to make themselves relevant again amid these changes.

In Huntley, Huntley Investment Partners LLC -- comprising Elgin's The Capital Companies LLC; Chicago-based The Prime Group, Inc., which built the center in 1994; and Craig Realty Group, a California-based development and management firm of upscale factory outlet centers -- acquired the struggling outlet mall in 2016 and closed it a year later. The mall was razed in 2018 and the group proposed erecting three speculative warehouse/distribution buildings ranging in size from 177,320 to 245,280 square feet on the property.

After endorsing conceptual plans for the project, Huntley trustees rejected final site plans last April, despite the village staff and plan commission recommending approval. Trustees said a business park would not generate many jobs or significant tax revenues, and would increase truck traffic. Officials also said they would prefer a hotel or restaurants on the site.

The company currently is suing the village.

"They breached their settlement agreement with us," said Mike Reschke, chairman and CEO of The Prime Group. "Their action to deny us our zoning request is unreasonable and unconscionable under state law."

Reschke said numerous changes were made to landscaping, berms, setbacks, size of parking spaces and screening upon village staff's request.

Village officials have declined to comment on the lawsuit "since it is a matter of litigation."

Mixed results

Results of other suburban mall redevelopments have varied.

In Waukegan, a casino is envisioned for the former Lakehurst Shopping Center site, which closed in 2001 and was demolished in 2004. It was the proposed site of a casino until the 10th and final state license was awarded to Des Plaines in 2008. With the latest round of gambling expansion, Waukegan could revive that dream.

St. Charles has seen little momentum on a concept plan presented two years ago for the largely vacant former Charlestowne Mall site north of Route 64. It called for the property's complete revitalization, including a residential development, a smaller mall building and the construction of free-standing commercial structures. Mall owners have yet to make a deal with developers.

Stratford Square Mall in Bloomingdale, which opened in 1981, launched a multimillion-dollar renovation project featuring interior and exterior improvements at the 1.3 million-square-foot center. Recently, the mall's lower level was redeveloped to include a roughly 9,500-square-foot brewery, which opened last fall. A new Italian restaurant called Strada Italia recently opened next to the brewery. Owners now are seeking up to $2 million from a new village tax increment financing district to help pay for the demolition of a shuttered former Macy's store and a portion of the mall to make room for a 243,000-square-foot Woodman's Food Market.

Like Stratford, Spring Hill Mall in West Dundee underwent a massive redevelopment, building an exterior plaza and a new mall wing with outward-facing retail. Woodfield Mall in Schaumburg, Oakbrook Center in Oak Brook, Hawthorn Mall in Vernon Hills and Randhurst Village in Mount Prospect also have undergone sizable facelifts and expansions.

Randhurst transformed from an indoor mall into a $200 million open-air "lifestyle" center with stores, restaurants and a movie theater.

Cushman & Wakefield's Kirsch said how the individual malls will fare depends mostly on the capital behind the owners and the vision they have to reinvent their centers.

"The larger portfolio owners are actively exploring the addition or creation of alternate uses," he said. "Lower or undercapitalized private individuals are having a much harder go and they're having a challenge putting together new developments."

'Walkable' environments

One bright spot in the suburban landscape is the emergence of several suburban downtowns, like Elmhurst, Arlington Heights and Libertyville, where a mix of residential, dining and entertainment have created "walkable" experiences that are desirable among Millennial residents.

The trick for suburban shopping centers will be to reinvent themselves into a destination and experience that is walkable, Kirsch said.

"Typically, those shopping centers were where people went to buy stuff," he said. "What they really need to be is a place where people office, where people live and where people are entertained."

Back in Huntley, The Prime Group's Reschke believes rezoning the outlet mall site for industrial purposes would make it consistent with neighboring businesses -- a Weber Grill warehouse facility to the east and a General RV dealership to the west, Reschke said.

"After three years, we have concluded (it) is the highest and best use of the property," said Reschke adding, "it was impossible" to reinvigorate the property as an outlet center.

"There is no demand for any retailers to be located there"

Daily Herald Business Ledger Editor Richard Klicki contributed to this report.