On the fringe: Oswego, Kendall County still experiencing some growth
April 9, 2008
By Maureen Wilkey
When Michael Cassa started working as the executive director of the Oswego Economic Development Corp. 10 years ago, the city was a sleepy exurban town with a population of about 8,000 and only one neighborhood shopping center. But in the last couple of years, Oswego has boomed with more than two million square feet of retail, mostly in new power centers along Illinois Route 34.
“Commercial permits are actually up,” says Cassa, trying to dispel rumors that the housing slowdown would cause a relaxation in retail development in the area. “There’s not a slouch in commercial development. I can’t predict what will happen after 2009, but in the foreseeable future, we’re doing well.”
Development started in the area around 2002 when Oswego Commons, a 500,000 square foot retail center, was developed by the Ryan Cos. The center is anchored by a Target, a Dominick’s and a Home Depot and has been fully leased since 2005, Cassa says.
Oswego Commons was followed by Gerry Centennial Plaza, a 302,000 square foot center that was developed Jos. Freed and Co. The center is anchored by a Bed Bath and Beyond, Michael’s and Circuit City and shadow-anchored by Meijer. It’s also home to several fashion tenants such as Maurice’s, Lane Bryant, Rue 21 and Claire’s. Inland Real Estate Investment Trust built the center on land originally out. After Freed developed the center, Inland bought it back and is currently leasing the center, which has about 10 spaces left.
“What you have is the best of all worlds,” says G. Joseph Consenza, vice chairman of the Inland Group. “Not only do you have a grocery store, you have an absolute super discount grocery store. Then you have all of your other sundries and thing with it that make people want to come down and shop.”
After Gerry Centennial was built, the 800,000 square foot Prairie Market was built on the east side of Oswego. The property was developed by KDR Properties and is anchored by a Wal-Mart Super-Center, which opened in 2006. Kohl’s, Best Buy, Lowe’s and Dick’s soon joined the center. But the center is really characterized by the new restaurants it brings to the area, Cassa says.
“Centennial is a great place to go for clothes, but Prairie Market has the restaurants,” he says. “They have many of the major chains you would want to eat at: Olive Garden, Panda Express, Famous Dave’s, TGI Friday’s, Chipotle.”
Just east of Oswego in neighboring Montgomery, Inland is also working on the Ogden Hills shopping center, The 550,000 square foot center is anchored by JC Penney, Menard’s and Office Depot and represents Montgomery’s only frontage on Route 34. Matt Fiascone, a senior vice president with Inland, says that having both ends of the major retail corridor covered has been a benefit to the company.
“One of our REITS bought both ends of a major corridor, so everybody drives by one of our centers to get there,” he says. “Plus there’s almost every major retailer you can think of somewhere along that strip.”
The three shopping centers in Oswego have added more than 2 million square feet of retail space to the corridor over the last five-and-a-half-years, and there’s still more to come, Cassa says. Ohio-based Centennial Real Estate has proposed a lifestyle center along the corridor. The center would be about 400,000 square feet and include high-end stores and, hopefully, the one thing Cassa thinks is missing from the Route 34 corridor: a bookstore.
“We really have all of the basic stores, but there’s a pretty high income here relative to some other areas and I think people could use some higher-end fashion retail and a bookstore,” Cassa says. “We really don’t have a Borders or a Barnes & Noble.”
The lifestyle center is still in the process of going through zoning and city council regulations, but it would be located just east of Prairie Market.
Cassa says the OEDC worked with the local government and the International Council of Shopping Centers to create success in the Oswego area. He attended ICSC conferences to make deals with retailers that benefited both parties, says. The retailers would be able to discover new area and Oswego could get in some large national chains through connections at ICSC.
However, with such a high amount of retail coming into a small area in a short amount of time, some real estate professionals are concerned with the large number of homes that have been built in Oswego just before the credit crunch. Some subdivisions have been built and had trouble selling, says real estate attorney Brian Kozminski with Levenfeld Pearlstein LLC, and that, in turn, poses problems for people looking to develop and lease retail space that would potentially service those homes.
“There’s a lot of new retail growth when a subdivision reaches critical mass,” Kozminski says. “They need things like grocery stores and Targets and there’s a big push for that kind of growth. But now that housing growth has slowed down or stopped, it’s tough for some of the prawl that’s happened out on the fringes.”
While Kozminski has seen sprawl as somewhat of a problem in the Chicago market, he says the problem is worse in less robust markets such as Phoenix, Arizona and Charleston, South Carolina. While growth may slow down in times when the housing market is flat, Kozminski says he sees no limit to how far out from Chicago the market can grow. As jobs are created in farther out suburbs like Naperville and Aurora, housing and retail will continue to fill in for people who are looking for large homes and lots.
“People want a big house and they will go as far as they need to go to get it,” Kozminski says. “And the businesses will follow as far out as people will go.”
Kozminski says that while the “gigantic shopping centers” of a few years ago may no longer be viable in exurban areas, there will still be infill growth of small neighborhood centers to provide basic services.
Cassa says that Oswego is still growing, with the city council attempting to make plans to bring a Metra station to Oswego that would extend the Burlington Northern Santa Fe line from Aurora. The school districts continue to grow and retailers are also drawn by the low 7.25 percent sales tax in Oswego and the high quality of life.
“We have great services, like schools and a library, and the area is very safe,” he says. “Retailers report lower theft rates here than in other stores throughout the state.”
Oswego has been one of the top 20 fastest growing communities in the state for the past several years, and Cassa says he thinks the city will continue to grow. With much of the basic service retail built out, the OEDC will now focus on getting some smaller boutique type businesses
into the downtown area, as well as some mix of office and industrial along Route 34.
“We haven’t really been hit yet by the results of the sub-prime crunch,” he says.
Reprinted with permission from the April 2008 issue of Illinois Real Estate Journal.