Panelists: Don't expect major retail developments in Chicago area

Local officials worried about falling sales tax revenue shouldn't expect any major new retail projects to save the day.

Prospects for 2009 are limited and few new projects can be expected in the near future, according to Michael Firsel, president of Mid-America Development Partners LLC, which has more than 40 projects in various stages of development in the Chicago area.

"We're at a virtual standstill and in fact, we're going in reverse," he told a gathering of municipal and business leaders Tuesday morning at an investors forum sponsored by Lake County Partners, the county's economic development arm.

While businesses such as convenience stores and quick service restaurants should do fine, financing for retailers and developers for new projects is nonexistent, he said. Developers are being asked to front more of their own money and the cost of borrowing is prohibitive.

"No one knows where we're going because we're in totally uncharted waters," he said. "People are just scared to death."

One factor is that land owners have unrealistic expectations of what their property is worth, according to Firsel.

"You can't afford to buy the land and we can't expect municipalities to make owners rich."

Few retail deals will be done without incentives, he added, such as free land; free land and utilities; or even free land, utilities and cash.

"Try doing a Nordstrom deal today anywhere in the United States," Firsel said. "They're very sensitive to these incentives."

In the short term, developers will concentrate on filling existing spaces as they become available.

"Forget about the big 800,000-square-foot shopping centers," he said. "You are going to see a wave of empty stores if you haven't seen it already."

Though he expects the economy to rebound it may be awhile. Shopping areas with higher populations, like Vernon Hills, will be the first to see new projects again, Firsel said. Outer areas, such as Volo and Lakemoor, will take longer to develop.

Retail development follows jobs and other factors, he said. He urged communities to work on master plans and determine what incentives they are willing to consider or give.

"Prepare for the next wave of development now - you've got some time," he said.