Appendices. 128 Wicker Park Bucktown Market Assessment

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1 Appendices 128 Wicker Park Bucktown Market Assessment

2 Glossary of Terms At the request of the WPBCC and WPB SSA #33 staff, the following definitions of terms used within this Market Assessment report is provided to assist readers of this report. Format tenant (page 8): A format tenant is a retailer or restaurant that has developed uniform store size(s) and configuration(s) for duplication at each selected location. These units are typical for major restaurant and retail chains. McDonald s is an example of a format fast food restaurant. Lender workout (page 8): For banks and other commercial and real estate lenders, a workout represents a problem loan requiring special attention by the lender or group of lenders owning the loan. It is typically a delinquent loan, a loan with collateral that has been reduced in value, or both. The goal is to get help the borrower become current. A workout may include extending loan terms, requiring additional collateral, or ultimately pursuing legal remedies, such as foreclosure, to enable repayment. Net absorption (pages 8 and 15): Net absorption is the square footage leased in a specific geographic area over a fixed period- of- time, after deducting space vacated in the same area during the same period. It is typically reported by established real estate resources every quarter (3 months), annually, or both. Net absorption, as a term is applied to all real estate uses. Triple- net (NNN) and gross rents (page 8): A triple- net rent is the base rent to be paid per square foot for the space to be occupied by a tenant under the terms of a commercial lease. Often, in commercial leases, tenants will pay for other items besides the actual space occupied. Common items include common area maintenance and real estate taxes. These additional items are referred to as add- ons. They are also quoted on a per square foot basis. The sum of the triple net rent and the add- ons yields the gross rent amount, again on a per square foot basis. Modified gross rents (page 8): Using the above definition as a starting point, a modified gross rent includes a base rent per square foot for occupancy with a partial add- on of expenses, such as common area maintenance or real estate taxes. The sum of the base rent per square foots plus the partial add- ons (also on a per square foot basis) yields the modified gross rent. It should be noted that a modified gross rent is often listed as such, without breaking out any add- ons. Showrooming (page 8): Showrooming represents an emerging retail trend. Customers enter a store, look at an item, use smart phones to compare prices, and then, buy the product either online or at another store for the lowest price. Showrooming is challenging for both retail Wicker Park Bucktown Market Assessment 129

3 chains and independent retailers to fight, given their operating overhead. The trend is also having an impact on store sizes, particularly for big box stores. Best Buy, as one example, has received the most press on the impact of showrooming on their business model. Underground restaurant (page 8): A food operation that operates outside of local food regulations and generally without a permanent location. Chefs test new restaurant concepts or introduce themselves to a certain or new audience. Communication for these events or locations is through social media. Bonus market (page 16): A bonus market is a supplemental group of consumers, beyond nearby residents, available in any market geography. For example, tourists from outside of Chicago function as a bonus market for WPB businesses. 130 Wicker Park Bucktown Market Assessment

4 Interview Summaries General Perceptions Distinctions were made between Wicker Park and Bucktown. Wicker Park is considered younger, edgier, and more transient; Bucktown is more residential, family- oriented, and engaged in what is going on in the neighborhoods. Density of independent businesses throughout both neighborhoods is not embraced. Wicker Park Bucktown s lack of daytime population presents a challenge for ground floor businesses. The Kennedy Expressway is a barrier for residents travelling from neighborhoods located to the east. Most ground floor businesses attract a large percentage of their customers from throughout the Chicago area. Tourism attraction will supplement this broader draw. The neighborhoods are less diverse than they appear. A Latino population still remains, but there are few African- Americans. Wicker Park Bucktown is unique and has minimal competition with neighborhoods like Lincoln Park or Lincoln Square. There is more customer sharing than direct competition. Obtaining financing for operations and expansion remains difficult for WPB s small businesses. Businesses and Uses Bars and restaurants are generally doing well. Certain retailers, including spas, are doing well. The real tenant turnover is in boutiques, candle stores, and knick- knacks. Restaurants continue to actively seek Wicker Park Bucktown locations. Retail struggles throughout both neighborhoods, and certain retailers are priced out of the leasing market. The unique retail cluster at the north end of Damen Avenue contributes to community character. Office uses, services, or professional practices work best near Western Avenue and nearby areas lacking pedestrian connectivity. Tech firms with contract employees are now providing some growth in the neighborhood employment base. Division Street s sidewalk width makes it a prime location for restaurants in the city, especially with a patio license. Patio sales can represent up to 30% of annual revenues for neighborhood restaurants. Wicker Park Bucktown Market Assessment 131

5 Real Estate and Development Humboldt Park has recently begun to compete for tenants. Outsiders are entering the WPB market looking for deals, particularly on foreclosures. High real estate taxes remain problematic for development and for tenants. Rents are declining. Property owners are renting to less experienced business operators, and some churning of business tenants results. New development in this economy requires bankable leases. The required rents and build- out concessions exceed the capacity of most small businesses to operate in new developments. The focus is the project, not Wicker Park Bucktown s business mix. Rents in WPB are wide ranging- - - $65- $70 PSF NNN in blocks north of Milwaukee/Damen/North to $12 PSF on the neighborhood s outer fringes. Newer space typically rents at $20- $24 PSF NNN. Restaurant spaces with black iron are leasing for about $30 PSF NNN. A handful of property owners were identified as problem owners. These owners invest minimal amounts in their properties and lease to sub- standard tenants. Regulatory City fees are described as onerous and challenging for owners opening and operating a business, regardless of use, in Wicker Park Bucktown. Wicker Park and Bucktown s division among multiple City aldermanic wards presents difficulties in addressing business- related issues with the City. Programming The Chamber should be viewed as a connection opportunity for the area s business community versus as having responsibility to improve individual businesses. Owners are responsible for improving their businesses, not the Chamber. Arts programming represents a growing opportunity for Wicker Park Bucktown and for the Chamber. 132 Wicker Park Bucktown Market Assessment

6 Public Improvements The need exists for a parking structure somewhere in the neighborhood. Greater emphasis on the neighborhood transit links would better connect the commercial nodes. Wicker Park Bucktown Market Assessment 133

7 List of Separate Attachments The following files have been provided to the WPBCC and WPB SSA #33 at the conclusion of this project. All of this data is in Excel. 1. WPB Business List including worksheets with the Market Share data included in this report. 2. Demographics for 2011 and The demographic data for 2012 vary slightly from that of 2011, given changes to the data by Alteryx and demographicsnow.com, BDI s data services. 3. Consumer and Business Survey data. 134 Wicker Park Bucktown Market Assessment

8 Maps: WPB s Market Geographies The following pages include full- page maps of WPB s market geographies, as assessed in this study. The source for all maps is BDI s data service cited throughout this assessment. Wicker Park Bucktown Market Assessment 135

9 Core Market 136 Wicker Park Bucktown Market Assessment

10 Plus Market (Additional Census Tracts Added to Core Census Tracts) Wicker Park Bucktown Market Assessment 137

11 Radii (.5 Mile and 1 Mile) 138 Wicker Park Bucktown Market Assessment

12 Radii (3 Miles and 5 Miles) Wicker Park Bucktown Market Assessment 139

13 5- Minute Drive Time 140 Wicker Park Bucktown Market Assessment

14 15- Minute Drive Time Wicker Park Bucktown Market Assessment 141