A major part of being a good real estate professional is knowing your market.  And in the case of commercial real estate, it's all about knowing the current state of each market segment.  I'll start with a brief overview of the property types I deal in and a snapshot of their current conditions, then get into the meat of this months topic.



By far the best market segment nationwide is multifamily housing, and specifically in college towns like C-U, student housing.  Rents are climbing as more families and individuals are moving out of underwater single family homes and into apartments.  Combine that with an ever increasing enrollment at the U of I and the results are clear: multifamily housing is a solid investment.  Solid investment a/k/a lower risk also means more demand from investors for MF property and thus higher prices and lower returns.  Own an apartment building and willing to sell?  Priced appropriately with proper exposure and you shouldn't have too much trouble selling.



The retail market had been stuck in third place but has seen some dramatic improvements in the past two quarters, enough to jump into second place.  You may recall reading my article in June titled "The Reality of Vacant Retail Buildings" which focused on the plethora of retail vacancies (especially of the mid to big box variety) in this area.  I can even be quoted as saying that "it will take significant time to fill the current inventory of vacant buildings..."  To my surprise, this segment has rebounded faster than I would have thought.  The retail market is by no means stable, some retailers are still struggling, and its yet to be seen if new stores will survive; but here's hoping for the best.  More details on that below.



In third place is the industrial/warehousing market; things are relatively stable here.  Not a whole lot of users looking for space, very little new construction, and a vacancy rate at or below 10% (pretty average for our market).  The only scary thing in this segment is the stagnation.  Companies who utilize warehousing for distribution/storage and manufacturers appear to be sitting on the fence waiting for...something.  In my opinion these type of companies tend to be on the conservative side, so perhaps they are waiting for the state and federal government to show signs of stability before adding a new production line or expanding.  There is great potential for expanding the employment base in this area, so I hope whatever they are waiting on happens soon.



In dead last (by far) is the office market.  This segment was hit the hardest by the recession due to corporate cutbacks and layoffs.  Companies with multiple offices in central Illinois cities have been closing up and consolidating into a single location in one city.  Larger companies that once required 10,000 sq ft or more of office space have cut employment and downsized.  Many others have approached their landlords to renegotiate their leases and many small offices have closed their public offices in favor of working from home.  Technology certainly enables us to do that nowadays.  The News-Gazette quoted me in the article "Office Space Demand Shows Uptick" back in April that the office vacancy rate was around 20%.  Despite that article's positive spin, I would say that there has been little change since then.  In the market to lease or buy office space?  You are in the driver's seat with prices falling and landlords offering very attractive incentives for long term leases.



Now that you get the whole picture of the commercial real estate market in this area, let me focus in on the "hot" retail market.  The rapid improvement is likely the result of a combination of pent up demand, a stabilizing economy, and sellers/landlords finally understanding the reality of their property's value.  If you follow the local news media none of these new retailers or developments will be news to you; but here is a summary of what new retailers to expect:



Aldi just completed work on their new larger (nearly 18,000 sq ft) discount grocery store at the corner of North Prospect and Interstate Drive.  It will be a dramatic improvement over their old store on Mattis Ave with an opening scheduled for today; the negative is the closing of the old store = another new vacancy.



Meatheads, with six restaurants currently in operation in Illinois, will open its seventh store within the next thirty days at the site of the former Blockbuster Video on South Neil.  A portion of the building was demolished in favor of additional parking and the remaining portion of the structure was reused with an improved facade.  A good reuse of a vacant building.



Speaking of former video store chains, the former Hollywood Video at Neil & Green is being divided for multiple new users.  Hollywood Liquors, owned and operated by a local convenience store owner, will cater to locals and students alike with a wide selection of beer, wine, and liquor.  Also joining the tenant mix in the same building is Jet's Pizza.  With 16 stores currently open and another 17 on the way, this rapidly expanding franchise prides itself on good quality food with fast delivery and carryout.



Speaking of liquor, Binny's Beverage Depot will be taking the entire building formerly occupied by Border's Bookstore.  Only minor renovations are needed and thus the building is a well suited reuse of an existing structure.  Champaign will be their first venture outside of



Chicagoland where Binny's operates 27 locations.  With a distribution network of that size, expect very good prices on wine, beer, and spirits...think Friar Tuck North.



Another good reuse of an existing space (the former Old Navy location) is HH Gregg.  Based in Indianapolis, the electronics and appliance retailer is clustered on the east half of the nation and is growing fast to take advantage of the open market share left by the Circuit City bankruptcy.  With just over 200 stores in operation, HH Gregg prides themselves on customer service and highly trained and knowledgable staff.  Finally, an alternative to Best Buy.



Another smart move is the redevelopment of the Lonestar Steakhouse at Prospect and Marketview into a 4 tenant strip mall.  Small retail space continues to have solid demand in the Prospect / Market Place Mall shopping corridor, and this locations boasts the best traffic counts and visibility in the county.  Chipotle is the only confirmed tenant so far, but an un-named vitamin store, and a mattress store are said to have committed to the site.



Most recently, plans for the redevelopment of the southwest corner of Curtis and Dunlap in Savoy have been announced.  The project will consist of a CVS Pharmacy and a McDonald's.  Reports of a "specialty grocery store" are suspect, as I'm not sure there is enough land there for all three.  Aldi would make sense as their smaller store sizes could fit, and that would give them both a north and a south location in the metro area.  Those of you wishing for a Trader Joe's or a Whole Foods can stop holding your breath.  The demographics needed for those stores do not fit our area.  Trader Joe's would be a slight possibility but highly doubtful unless they have changed their site selection criteria dramatically.



I hope this momentum continues and wish these new retailers the best in our community.



Matt Wavering is a commercial real estate broker with Coldwell Banker Commercial Devonshire Realty and can be reached at 217-352-7712 or mjw@cbcdr.com