Investor appetite for Chicago’s grocery-anchored shopping centers is still booming even after trading volume for the asset class hit a record last year.
In the latest deal, Allied Development paid PGIM $30.2 million for the Marshfield Plaza shopping strip, a 259,000-square-foot property in the South Side’s Morgan Park neighborhood along Interstate 57, public records show. A Burlington Coat Factory store taking up about 65,000 square feet is set to vacate and be replaced by clothing retailer Forman Mills, according to CBRE brokers assigned to leasing and selling the property.
The Marshfield property doesn’t include the Jewel Osco grocery store and Blue Cross Blue Shield Community Center at its south end, which are owned separately and sold last year for $20 million to New York’s Beitel Group. Yet grocery stores and the consumer traffic they attract has appealed to retailers who want to locate nearby, boosting property values and investor demand.
“Most of these shopping centers have performed well through the pandemic,” said CBRE’s Christian Williams, who represented PGIM, an arm of Prudential Financial, in the sale. “It has brought retail back into the forefront as an asset class. People to some degree have refocused on retail and said, ‘Hey it survived the evolution of e-commerce over the past decade and the pandemic.’”
Grocery-anchored centers accounted for more than a third of retail transaction volumes in the first quarter across the nation this year, a spillover of last year’s record pace of deals for the asset class, according to JLL. Last year’s record totaled 735 trades of grocery-anchored assets, 13 more than a previous high set in 2014. Companies spent more than $13.3 billion on the properties, the largest share of any retail property type for a third year and the second-most in recorded history.
As shopping center prices rise, profit margins have narrowed along with cap rates, a measure of the rental income a property generates compared with its purchase price, which dropped half a percentage point from from 2019 levels, JLL said this year.
It’s the second grocery-anchored retail property that Williams’ team has closed in the range of $30 million in the last several weeks. He helped broker a deal for about that on behalf of the Sterling Organization in its sale of the 146,000-square-foot Hoffman Plaza in suburban Hoffman Estates to AmCap.
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