Downtown Redevelopment Perspective

The Village retained the services of Chris Aiston to provide and updated perspective on the viability of the downtown or Main Street commercial business district in respect to redevelopment efforts and market opportunities.  The following five goals were the focus of the review and resulting report:

  1. Consider the recent development history of and the existing land use conditions within the Village’s “Main Street Sub-Area” (or “downtown”);
  2. Review various planning initiatives concerning the downtown’s prospective redevelopment;
  3. Consider the area’s existing commercial real estate market and trade area dynamics; 
  4. Provide some opinion as to the relative viability of the Village facilitating the implementation of such redevelopment; and 
  5. Suggest possible ways of affecting this perceived viability. 
Aiston Report Focus

Executive Summary Conclusion

The land use history in downtown Lake Zurich over the past 15-20 years would indicate that the long-held Village vision of significant mixed-use redevelopment has, to date, not transpired. This, notwithstanding the Village’s many proactive efforts toward adopting plans and policies meant to encourage private investment, including but not limited to, creating the downtown TIF District and refinancing its debt, acquiring strategically located downtown properties and, through demolition, making such properties shovel-ready. There is now a need for the Village to recalibrate its land use planning and regulations affecting its historic downtown commercial district and, while perhaps not yet giving up on its long-held vision of mixed-use redevelopment for the downtown, take near-term actions to help raise the awareness of downtown Lake Zurich’s existence and provide reasons for people to visit it.

The growth in popularity of and inherent consumer efficiencies offered at the many and vast shopping centers in and surrounding the Village of Lake Zurich, coupled with constructing the RT 22 bypass, have served to ultimately further erode the economic viability of the downtown, particularly with respect to its somewhat already disadvantaged position vis a vis other suburban downtowns that have Metra commuter rail stations. These conditions were, of course, exacerbated by the recession of 2007-2009 and its aftermath affecting nearly all sectors of the economy. Furthermore, the very real contraction in the need for retail space nationwide over the past ten years has resulted in the vacancy of thousands of square feet of retail/restaurant floor area. One may rightly describe the above events as the crescendo in creating a perfect storm for the downtown.

However, the Village may consider actions in addressing this perfect storm condition and this report both identifies and assesses the effects on the downtown of the aforementioned events, as well as providing example activities that may prove effective in changing the near-term perception of downtown Lake Zurich. These activities include, in the short term, considering retaining professional commercial real estate brokerage to assist the Village in selling its downtown properties, reigniting the RFP process in hope of securing redevelopment proposals for the downtown, identifying and promoting the downtown’s value proposition(s) when targeting desired developers, business interests and consumers, encouraging the development of more housing downtown through modifying land use and development regulations affecting the downtown area, and, if nothing else, in the meantime, creating opportunities for temporary land uses and activities to raise the area-wide awareness of downtown Lake Zurich and provide new reasons for persons to visit the district.

The complete report is available online.

Strengths, Weaknesses, Opportunities and Threats Analysis

Mr. Aiston also presented a SWOT analysis as part of the report.

Strengths

No. of HH within 20-minute walk time from Old Rand and Main Street (2546) and within 3 miles (13,534), with median household income of $98,350 and $133,400, respectively.

Lake Zurich (the lake itself), although with very limited opportunities for direct public access, city-owned properties afford local residents and visitors some access and/or visibility opportunities.

Buying Power within 15 miles from Village geographic center (per 2019 draft Comprehensive Plan), including a considerable number of affluent households ($200,000 median household income or greater), the majority of which are occupied by persons between the ages of 25 and 44. Persons in this age cohort are often engaged in growing their personal property assets, including durable goods, while also looking for life experiences, such as visiting unique places, dining, entertainment and recreation.

Due to pro-active measures by the Village (property acquisition and building demolition), unlike many rural/exurban communities, the existing building inventory does not include a significant number of unsightly, deteriorating and unsafe buildings fronting streets within the downtown (though there certainly are some).

In the last 15-20 years, the community has coalesced and put its collective focus on plans and strategies to revitalize the downtown, producing formal planning documents, development schematics, including considering higher density land use patterns, and gathering in groups to discuss ways to market and promote the historic downtown.

Per the Village’s Comprehensive Plan, under “Feelings about Lake Zurich”, the need to revitalize the Village’s downtown was a common response of survey respondents when asked about pressing issues facing the Village. This could indicate a willingness by constituents to consider raising funds (e.g., increase in sales and/or property taxes, development fees) that would be specifically ear-marked for Main Street area revitalization activities.

Although currently not comprising significant mass, there is an eclectic retail/service character to downtown Lake Zurich. Businesses such as an independent florist, local barber, shoe repair, ice cream shop and family diner/coffee shop provide the consumer with a good mix of specific goods and services, establishing a setting, or commercial district likely to invite other entrepreneurial retailers, restaurateurs and personal service providers. This character could foster cluster development around creative and unique shopping venues.

The downtown has largely retained a small town aesthetic and character, distinguishing it from many other communities in Lake County that have tried to create or replicate such a “place” in the absence of an original, historic town, or whose once historic feel has made way to massive, new redevelopment.

Weaknesses

There is a lack of anything nearing “critical mass” with respect to an established shopping and/or dining district within the Village’s downtown.

The downtown lacks larger, anchor tenant type retailers (e.g., hardware store, pharmacy, food market).

Much of the existing commercial building stock downtown appears dated and worn, reflecting 1970’s architecture and construction.

Not having a commuter rail station in or near downtown Lake Zurich is a weakness and places the Village at a clear disadvantage with respect to attracting mixed-use development and redevelopment. Such ventures must rely on high density housing in order to offset risk and vacancies associated with filling street level commercial spaces.

There is a lack of available commercial building space (just under 30,000 SF, among approximately 10 properties) within the Village downtown, making new business growth (whether start-ups, relocations or expansions of existing business enterprises) within the subject area problematic. Consequently, at least in the near-term, increasing tenant-ready commercial space will require new building construction or substantial building repurposing, meeting either of these requirements will necessarily come only after considerable investment.

Private commercial property owners have shown to be overly aggressive in their sales pricing, as real estate located in competitive areas within and outside of the Village of Lake Zurich would indicate that such pricing may be unrealistic.

Several individual downtown properties are under the control of only a few private parties. This dynamic often suppresses property sales and redevelopment.

The RT 22 bypass has likely caused reduced awareness of downtown Lake Zurich in the minds of persons visiting other commercial areas within the Village, driving passers-by and even Village residents themselves.

Opportunities

There are several vacant parcels planned for commercial or mixed use in the downtown, including six properties that are owned and controlled by the Village.

There is a stock of underutilized and depreciating buildings in the downtown that, on a case-by-case basis, may be worth rehabbing and/repurposing, creating an increase in both property values and in opportunities for increased business activity downtown.

From all appearances, either through use of city-owned properties or by entering into lease or other shared use arrangements, there is or can be substantial parking to serve new buildings and prospective business parking demand.

In recent years, the overall growing economy, including increased employment and business start-ups, as well as low interest rates, have increased consumer confidence and spending. These factors have also resulted in an overall increase in business investment.

Creating a “Main Street”-type program, structured after the National Trust for Historic Preservation, stressing three of the four-pronged Main Street work plan (i.e., organization, promotion and economic restructuring), either as implemented through the direction of a free-standing organization or perhaps a function of Village department.

Threats

The well-established mass of commercial space along the Rand Road and – to a lesser extent – the RT 22 commercial corridors. 42,000 average daily trips (ADT) along this regional arterial dwarfs traffic volumes found at the intersection of downtown Main Street and Old Rand Road.

Nearly 77% of the entire inventory of leasable retail, restaurant and office building space is found either along the Rand Road or RT 22 commercial corridor, driving consumers and, prospective tenant businesses to these two highways and away from the Village downtown.

There are several other communities with well-established commercial centers and located within reasonable consumer drive-times from persons that may otherwise be consumers or tenants, including Deer Park, Barrington, Long Grove and Wauconda.

On-Line shopping. According to US Census data, ecommerce has reached approximately 11% market share for retail sales across the country.

The Village’s existing zoning/building codes prohibit or discourage the downtown development of buildings of four or more stories and residential structures with greater than 12/du per acre.

Existing code prohibiting tavern uses (i.e., businesses that do not serve food as a set percentage of overall sales as a condition of obtaining and retaining a liquor license).

Under TIF statutes, the Village is limited in its authority to pay critical development costs as a means to incentivize a developer to construct new commercial or mixed-use buildings within the TIF project area.

Downtown residents, in many cases, have shown resistance to infill redevelopment, particularly in the case of high density use or greater mass buildings, as this would be trading neighboring vacant, bucolic lots for a built-up environment, possibly diminishing the historic, downtown charm. Change is often disrupting to and unwanted by current – particularly, longstanding – stakeholders in a community.

Recently, we have seen a general trend nationally for contraction rather than expansion of retailer enterprises. The consensus among professionals in the retail real estate arena is that in the United States, including the Chicagoland market, the development world has simply over-built retail space.