Northwest Indiana continued to attract new retail businesses in 2021 even as the sector has been reshaped by e-commerce.
The Region’s retail sector has risen to increased prominence. Long home to the second-largest enclosed shopping mall in Indiana after only the Castleton Square Mall in Indianapolis, Northwest Indiana has emerged as a retail hub that attracts shoppers from across the state line.
“Northwest Indiana’s strategic location and proximity to Chicago have been a key reason for the strong retail trend,” said Brett McDermott with Crown Point-based Latitude Commercial, one of the Region’s leading commercial real estate firms. “Retailers are now seeing the Region as a suburb of Chicago and have slowly started to plant their base here. It took years for Whole Foods to finally commit to opening a store here and now it has been a very successful store for them along with numerous retailers and restaurants.”
Northwest Indiana remains a shopping destination for south suburban and Chicago residents, particularly those who live near the state line. South Side Chicagoans often flock to the Super Walmart and other stores in the Marina District in north Hammond. It’s continued to attract new businesses like Starbucks, Taco Bell, Popeye’s, Capriotti’s and Midwest Express Clinic.
“Indiana’s low tax rate compared to Chicago has also been a key contributor and will continue to play a big factor in the retail growth,” McDermott said. “Owner-users, along with nationals, are seeing that they can own property and pay one-fourth of the amount of taxes they pay compared to Cook County. With tight profit margins these days due to cost of goods and higher wages, this will continue to be an important aspect in driving businesses to the area.”
The Region’s retail sector is relevant because of “proximity to Chicago, residential growth, distances between regional shopping areas such as Chicago, Oakbrook, South Bend and Lafayette,” said David Lasser of Merrillville-based Commercial In-Sites, a leading commercial real estate firm in Northwest Indiana.
Centrally located, the Region has many logistical advantages, said Micah Pollak, an associate professor at Indiana University Northwest.
“One of the greatest advantages Northwest Indiana has, and one of the key reasons it is relevant to Indiana and the greater Midwest area, is its location,” he said. “The Region is less than an hour from Chicago with access to four major interstates, three international airports, three Class 1 railroads and an international port. Due to its location, Northwest Indiana will always play an important role in retail trade through transportation and logistics. Lake County is also the second-most populous county in the state and in addition to being a significant logistics hub, it is one of the larger retail markets in the state.”
Retail in Northwest Indiana has been thriving, especially along U.S. 30 and U.S. 41, as well as in St. John, Valparaiso, Chesterton and Munster’s Centennial Village, Lasser said. Railers are benefitting from residential growth, which should be fueled more by the South Shore Line expansion projects.
Northwest Indiana’s retail industry also benefits from “excellent marketing campaigns through the Northwest Indiana Forum, The South Shore Convention and Visitors Authority, the state of Indiana IEDC, NIPSCO, NIRPC, The Lake County Indiana Economic Alliance and others,” Lasser said.
But the retail industry has been changing in Northwest Indiana and across the nation. Trends include more convenience, more access, more locations, shorter wait times through multiple drive-through lanes and home delivery, Lasser said.
Long-standing business practices are evolving in the digital age.
“The first challenge is retail firms need to continue refining their business models to address both longer-term uncertainty and changes to how consumers shop,” Pollak said. “Should there be another substantial wave of cases or a new variant, firms need to be prepared to pivot how they operate to remain open. The pandemic has also changed the purchasing habits of consumers and there are now much stronger preferences for online shopping options. While we will likely see a rise in in-person retail shopping during this year, it’s unlikely to return to pre-pandemic levels.”
The COVID-19 pandemic will have a lasting impact on the retail industry in Northwest Indiana, Pollak said.
“The labor market has undergone a dramatic shift. As part of the ‘Great Reassessment’ of work many workers are now less willing to work in customer-facing in-person service-based jobs, which describes much of the retail sector. With the tight labor market, retail firms need to find ways to make jobs more attractive to workers in ways that go beyond simply offering higher pay,” he said. “The pandemic has upended how consumers make and receive purchases, with growing demand for online ordering combined with faster or same-day delivery. Many retail stores in Northwest Indiana, ranging from general merchandise to grocery, now offer some form of online ordering with same-day home delivery, something that was rare before the pandemic. Even as we continue to emerge from the pandemic, it’s likely this trend will continue and represents an exciting change in retail trade.”
The industry’s evolution is reshaping the marketplace and creating opportunities, including for workers, Pollak said.
“The expansion of online purchasing with home delivery has meant the creation of new job opportunities, from store pickers to delivery,” he said. “These new jobs also match well with the changing preferences of workers for more flexible schedules and work environments that involve less in-person customer-facing interactions. While plenty of consumers will continue to do their shopping in-person, many others have embraced the convenience and time-saving nature of online ordering with home delivery and are willing to pay for these new services.”
While Amazon and other online retailers have rendered many big-box stores obsolete, the space won’t necessarily sit vacant for an indefinite period.
“I think we will see our big boxes being demised or used for more entertainment purposes such as trampoline parks, fun centers, etc. to backfill them,” said Myles Rapchak with Latitude Commercial. “It’s very important to keep our mall and shopping areas occupied so that all of the outlet restaurants and small shops space can thrive as well. Any way to fill these large vacancies and bring people to them is a must for the overall success of surrounding businesses. It’s time to be creative.”
Creative reimagining of vacant big-box space will be needed at a time when most department store chains are contracting or going out of business altogether. KMart, once the nation’s second-largest retailer, is down to just four stores in the United States.
“The demise of big-boxes and malls are trends I think we’ll continue to see for years to come,” Rapchak said. “With so many consumers doing their shopping online, the need for 30,000+ square feet just isn’t there anymore. That’s why we are seeing the industrial market booming for the distribution of soft goods. With big boxes being phased out, it directly affects malls as they have lost their anchor tenants which we are seeing at Southlake Mall currently.”
But the Region continues to see investment in new stores and restaurants, such as at the booming Beacon Hill development in Crown Point.
“Centennial Village and Maple Leaf Crossing are both great developments in Munster. Centennial really offers a walkability feel due to the condominiums and hotel. There are a few more stages to that development which will bring even more high-end retailers to Northwest Indiana,” Rapchak said. “The Broadway corridor in Crown Point has seen massive development as well, especially near the Summit (and Broadway) intersection. This has brought great new restaurants and retailers to Crown Point and I for one am very excited about the growth, being a resident there.”
And there’s reason for optimism for the continued growth of the Region’s retail sector in the future.
”There are a lot of new construction projects going on right now. Because demand is so high and inventory is so low we’ve seen more construction of speculative developments than ever before,” Latitude Commercial President Aaron McDermott said. “A lot of it is because of the residential growth happening. Think about it this way: when you have more homes you have more demand for retail services and medical office demand, just to name a couple. When you have greater retail and office demand you need to supply and service those, which in turn brings more warehouses to house distribution centers and construction-related businesses.”
“Retailers are now seeing the Region as a suburb of Chicago and have slowly started to plant their base here.”
Brett McDermott, Latitude Commercial