It seems like we made commercial construction predictions for 2012 just yesterday, but once again, it’s time to put on the fortune teller hat and look into our crystal ball for 2013 commercial construction trends.

I’m not saying I’m a commercial construction Nate Silver, but as a national commercial contractor, we have the benefit of basing our predictions on commercial construction news, information from clients and fellow commercial construction experts, upcoming bid work and RFPs, industry economic projections and observations in the field.

This year, I wanted to use a micro example to highlight macro retail and restaurant construction trends. To do this, let’s focus on the famed Magnificent Mile in Chicago. It may not be Main Street USA, but interestingly enough, the trends we are seeing on Michigan Avenue are also applicable to smaller markets. In a very real sense, the Magnificent Mile is a microcosm of the domestic economy and buying trends throughout the nation, making it a great barometer for the commercial construction industry.

Dichotomy in the market coexists
We will continue to see successful retail developers attack one of two markets – the value market or the luxury market. However, what will be different in 2013 is that these two types of retailers will coexist in the same location. No longer will new or renovated shopping centers only cater to one set of buyer or income bracket, but rather, most locations will offer a wider variety of retailers.

Look at it this way, who could have predicted that in 2013 there would be a “99 Cents Only” store in Beverly Hills?

On the Mag Mile, domestic and international luxury retailers such as Neiman Marcus, Bloomingdales, Niketown, Saks Fifth Avenue and Salvatore Ferragamo have initiated major renovations of their existing stores and new stores like Tommy Bahama, Coach, Barbour and Burberry’s are building-out locations along “The Avenue.”

On the value side, Nordstrom Rack has opened on Michigan Avenue, Marshalls on Rush and Ontario, and nearby on State Street, TJ Maxx, H & M, Old Navy and Target are all holding court just down the street from higher-end Macy’s.

This shopping district in Chicago used to be reserved only for luxury retailers, but as the economy, demographics and shopping habits change, so too do the retailers and the new Chicago retail construction jobs we take on. The value stores bring more foot traffic, more revenue and eventually more new stores to the area.

Restaurant growth continues
Restaurants have become a major driver of new commercial construction projects as on-line retailers have taken a chunk out of the traditional tenant demographic. Many mall owners and developers are turning to fast-casual franchises and stand-alone restaurants to help fill vacant spaces inside their center and start new outlot restaurant construction projects.

While the click-and-buy generation has threatened brick and mortar operations and hurt the Best Buys and Staples of the retail world, restaurants still offer an experience and entertainment value that the on-line market cannot compete with. For this reason, I think the restaurant market will continue to grow and bolster the commercial construction industry as owners will be more apt to offer prime locations to restaurateurs.

On and just off the Mag Mile, we have seen an influx of new restaurants arriving in 2012 and 2013; Del Frisco’s, Michael Jordan’s Steakhouse and Season’s 52, while restaurants such as Nomi are embarking on major Chicago restaurant remodels to keep pace with the restaurant activity.

Middle Market squeeze
Of course this activity has left a big question mark surrounding the middle-market retailers and restaurateurs. In the past, this has generally been the most successful market in starting new retail construction projects due to their popularity. But as the dichotomy between value and luxury stores continues to grow, this segment is the most susceptible to a downturn.

Can the Limited, GAP and Talbots stores along with the TGI Friday’s, Red Robin Gourmet Burgers and Chili’s restaurants survive in a market that is looking for high-end products at a perceived value? Moving forward, the middle market retailers and restaurateurs will be the barometer that will gauge the success or failure of the commercial real estate market in 2013.

www.englewoodconstruction.com