UNIQLO in Chicago, IL with Sanjiv Chadha
Guest: Sanjiv Chadha
Topics: Uniqlo, project management
Transcript:
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management
Welcome to retail retold everyone. Today I’m with Sanjeev Shahada. Sanjeev is an architect who spends a lot of time drawing and designing retail real estate across the United States. He’s done a lot of work for DLC, and I think you’re gonna find him really interesting and thought provoking. He is the CEO and founder of shahada associates based in Chicago, Illinois. Welcome to the show Sanjeev.
Sanjiv Chadha 0:48
Thanks a lot, Chris. Thanks for having me. Yeah, gives me the opportunity to correct you once in a while.
Ressa 0:54
So what’s the first correction? Go ahead?
Chadha 0:57
Well, that’s the only correction is I’m not the founder of the company. The company was originally Neil autonomous and Associates in the 1940s 80 years old. When I bought into it sometime in the 1990s, we changed it to NWS architects. And we got a lot of hits, because that is the same thing as National Weather Service. So and then in 1996, we started a minority company, culture and Associates, which is a sister company of NWS architects. And that’s also about 20 years old. And the reason for that company was, how do I put this gently, a lot of big corporations had quarters and quarters, whatever, for Minority Participation, and they asked us to open a company minority company that time. So my background, we are in Chicago, we’re licensed in 48 states. I think 75% of our work is out of state. And at any one time, we’re working in about 20 states.
Ressa 2:00
And give us context of size, how many architects,
Chadha 2:05
we have 16 Architects and three locations, we have a full time office in Phoenix. And because since the pandemic happened, we were losing projects in California. And we brought in an architectural firm to be a sister firm in the Bay Area in San Francisco. And we’ve always had the same size between 18 to 22 people depending on how many interns are there and stuff. And for some reason, whatever, a lot of projects on the east coast on the West Coast, we do less projects in Chicago. And our background is sales, a large 280,000 square feet stores. Nowadays, obviously, nobody’s building those big anchors. So it’s a lot of junior anchors. But since the last 10 to 15 years, we’ve done a lot of industrial to a lot of LEED certified industrial, which is a unique thing. And we do offices depending on the market. So two years ago, we did over 200,000 square feet of offices law offices in the central business district of Chicago. This year, we are downsizing offices because people are not coming back to work. So it’s retail offices industrial and about eight churches per year to
Ressa 3:20
that’s what what’s the primary business I see you at ICSC shows connecting with you. Is your primary business retail or is it pretty equal?
Chadha 3:28
The moment it’s about 65% retail, but in some years, it’s flipped when when retail is not doing that? Well, no. Which is a funny story. Because for us, this kind of retail, which is not ground up is optimum. Because we are a cheaper low cost provider. And there’s a lot of retail being refurbished, redone whatever. And we get a lot more work in this market as opposed to when retail is booming, and new shopping malls are coming up. So for us now, you guys DLC. Dollar General is one of our biggest clients, we do about 50 to 60 stores for them every year. They’re keeping us really busy with their new prototypes and stuff too. So we do the Dollar General we do a DGX and the new one that’s come out also,
Ressa 4:12
it’s really interesting. So what what is your call it you know, unique value proposition to the market? What do you think separates you and your group from and you’ve been around for, you know, 80 years what what, what what do you think is attributed to your success and what keeps you guys in the game and and what’s different about you from everybody else?
Chadha 4:37
Little story on this. So I’ve been in this company since 84. And I bought it after 911 NWS architects. I’ve had only one job. And most of us senior project managers will have been with us 10 to 15 years and they understand retail they understand retail in the sense that they understand retail is a five year lease or a seven and a half year These are a 10 year lease. So we value engineer design going in day one. That’s why these kinds of markets are great for us. And we also provide the other service of as his drawings and as built drawings for other people, including for other architects to the BOMA numbers, you know, like you and I discussed it. I think that’s how I met you through DDR, because I was working a lot for DDR in those days. And we would Yeah, every model of this. Yes, right. So that’s right, that gets us a foot into the door. You know, we measured your model, we know your vacancies, before you go to ISC, we do your LOD s for you. Now, when you have a store deal to do, even if it’s 10% of those ello DS, we get a shot at it. I think that’s what brings us into the picture more often. And the reason I mentioned that I’ve been here for 30 plus years, is we’ve never had a marketing person or a business development person. It’s only by word of mouth, like you put it on LinkedIn, or somebody recommends us or somebody leaves their job, or my project managers find out what else is going on. So we have nobody doing business development. And we still been okay with the last recession, we did have to layoff one person, this recession, or whatever that says we haven’t let anybody go.
Ressa 6:16
You’re in a lot of different areas of commercial real estate and you’re getting, you get to see things all over the country and a little inside scoop. And you mentioned one thing that was interesting that was keeping you busy on the office side, but what are you seeing in the market today? Like right now what’s happening? And what type of work are you doing? And what are people requesting of you? Because I think that gives people insights of what’s coming in 2021 If you’re drawing it now, that means it’s going to start to get approvals and be built next year. So what’s happening?
Chadha 6:45
So depends now when we look for Brookfield, Chris Criss, they’re enclosed malls. We’re converting a lot of the empty stores, including the JC Penney’s, and MTCs. into things we were actually into entertainment complexes like Main Event and round one. Now, of course, because of the pandemic and occupancy restrictions, a lot of those on hold for for your kind of retail, and we work for a couple of other companies in this area called pine tree and stuff. It’s a lot of industry, not industrial, but storage facilities are going on. For for multistoried. Retail, we’re putting this news concept which is in Chicago, which is a big thing. And this is a third project industrial kitchens. So on the first floor, or the second floor, but below a condo building where you had retail and offices, we’re putting industrial kitchens now. And these are the ghost kitchens and Chicago’s a big area for food manufacturer, I guess. And because of the pandemic, again, those people can use these places for you know, Moms and Pops can use a pre registered kitchen for you already. You bake your stuff or you make your stuff and you put it in your food truck. And so and of course you know this and you’re doing this also a lot of a large Kmart and stuff. We’ve come for Sterling companies out of Florida, we’ve converted into emergency health care centers by cutting the buildings up into smaller buildings in a dialysis center for you guys in Rome, New York. So medical is a big thing. And I guess my God, in fact, we found a commode, a large theater in downtown Arlington Heights, Illinois, into medical office, because I guess their assets are good and they sign long term leases. So it’s worth filling up the slopes lab and all that stuff to make a medical office out of that.
Ressa 8:44
You mentioned earlier that you’re downsizing offices right now. So in the office market, people are hiring you to downsize offices. How how pervasive is that? Is that a big thing you’re seeing
Chadha 8:58
in the downtown Chicago area, what we call the CBD, the central business district. This approximately about 800,000 plus square feet of sublease space we are involved with. We did the headquarters for a company called Pure circle which makes an artificial sweetener called stevia or something like that. Sure, they got bought over. They want to sublease their offices just have a downtown presence. They have 45,000 square feet, they only want to keep seven Bitcoins. I think you have heard of CareerBuilder in the old days, they were one of the biggest things. Other guys came on board. They just build their offices last year 110,000 square feet in downtown Chicago. The whole thing also flows out for sublease now. So we’re working with JLL brokers to see if we can, you know divide the floors up or whatever. I still don’t think people are signing those leases but they are at least looking at them. And we are doing another one for a company called newlywed foods which is A big food conglomerate all over the world I’ve never heard of before.
Ressa 10:04
Because you’re getting hired to do these concept drawings because JLL or someone calls you and says, Hey, I’m looking, I’m thinking about this, can you make this work? I need this to, you know, get this design so that I can show it to people. And then that’s the types of things that people are thinking. Yeah.
Chadha 10:24
And some labs to labs are coming into downtown Chicago too. So
Ressa 10:29
on the retail front, Are you still seeing retailers open up stores or retailers opening up stores and are you drawing retail locations?
Chadha 10:39
So for for retail, our biggest client used to be GGP, Brookfield and then starboard, starboard is not doing anything anymore. There’s gone by I don’t know whatever. So for Brookfield, we have a number of grocery stores a number of cutting a portion of the mall down trying to create Costco beds. Some of them have been postponed they were supposed to start this year now I’m told they might get funded next year. So there’s a lot of cuts, chopping down a mold and creating big pads for people like Costco. Yes. And the AMC theater thing hasn’t hit yet Brookfield, but that will happen to we’ve taken like 80,000 square feet Macy’s and made them into 60,000 square feet Hobby Lobby’s they have national deal with Hobby Lobby is across the country to and I guess TJ Maxx company started something called Sierra, we’re doing a couple of those, again, all these on the boards, nothing is allowed to be started with construction yet because they’re not getting funded. I mean, our fees are low. So they found that part but construction has not started, won’t start till next year.
Ressa 11:42
On the open air strip centers like we own Are you seeing a lot of people are still expanding?
Chadha 11:49
We’re doing a lot of facade. We’re not a lot of we’re doing facade upgrades. This is the time when they want to keep the Dollar Tree or somebody else. Because Okay, I want to spend so much per linear foot or whatever. We want to upgrade the facade and the signage for everybody else. So again, those are small projects, but a lot of even smaller developers between one in Bloomington, Illinois, for a small developer, they have a couple of other properties in downtown Mount Prospect, their number of vacancies and the thing, this is the time to upgrade the whole facade. And again, I say we like this because you don’t go to the counselors of the world. I’m using a name now. But he don’t go to the Gensler. So the world when you have such small projects, you come to smaller people. So I think people my size, midsize firms are not doing badly there. Okay, for now.
Ressa 12:37
So let’s talk more specifically about architecture for a second. What do you think’s changing? In architecture? What are hot trends today? Just, you know, is there anything and we can go as granular high level as you want? Is there anything in in spacing? That’s hot? Is there anything in you know, types of materials that you’re seeing in design? What What, what are some trends and what’s going on? And what are people into these days? What’s what’s hot? What’s not
Chadha 13:08
a lot of different things? You know, RPT because a couple of your people work there. Yeah. So they have and this is totally left field stuff. They have a program where they want to green them all’s LEED certified animals, we were looking at that program for them, and a couple of other people are looking at that too, like bricks more and Regency I, again, I don’t know what the ROI is on that stuff and why they’re doing this. Maybe it’s a marketing tool for with competition, but we’re looking at some of that stuff, which is totally unique for us, because retail was the last industry which wanted to be LEED certified or go green, because you can’t really control your tenants. But that’s one thing I’ve seen, which is new. Obviously, the delivery systems are more sophisticated for a number of clients. We’re doing everything in Revit and BIM, so that we create a model of the stuff. We did a large project in Chicago, which finished earlier this year, which was taking an industrial facility slash retail and converting it into 67 Industrial kitchens. It’s called like we work for kitchens, and everything was done in BIM and Revit. And the construction costs were control much easily. I don’t think we can do that a lot for a lot of developers because it depends on the sophistication of your contractors also who are coming in. And then of course, it’s all the zoom and the Microsoft Teams everything is going there and getting marked up there but I don’t think we are on the cutting edge. We I was on a seminar yesterday listening to virtual reality methods of you know, teaming up, I am still a skeptic because I believe that happens in ground up projects much easily. When everybody’s on the same page when I get an existing building. And I want to model it. I don’t think you’re gonna pay me the money to do that because you don’t really care about the final product. You just want to needs to happen on the tenant to start paying rent. So maybe I’m too old for this, but I’m a little skeptical about some of the delivery systems myself. Otherwise, every material they’re using is green anyway, right? If I follow New York codes are California codes or Illinois codes or Miami, Florida codes, as long as it’s not Texas codes. Everything I’m doing is recyclable, green and renewable. And and so in the past, we used to charge money for that. Now we don’t because whatever we spec out, is already there. Whether it’s a floor tile, a ceiling, tile carpet, it’s there. Yeah, it makes total sense. solar roofs, a lot of solar roofs. Because you guys have a lot of roofing. Yeah. A lot of solar arrays have been put on when we don’t do that. But the highest the third party company to put solar arrays almost everywhere?
Ressa 15:53
Well, Elon Musk is trying to make the roof that is solar itself, rather than put solar panels on the roof. The roof is just solar itself. That’ll be interesting.
Chadha 16:03
And it will leak. I’m told WhatsApp, and I’m told it won’t leak. Problem with roofs anyway. Totally. Well,
Ressa 16:13
that was great market update. I really appreciate it from, you know, the art architectural perspective. And over the course of time, you’ve been involved in a tremendous amount of stores opening and you have a unique story in Chicago, Michigan for UNIQLO. That’s on Michigan Avenue. Why don’t you tell us about that story. Sanjeev
Chadha 16:36
Sure, it was a nightmare at that time. And actually, Deborah Contreras, my friend from DGP, who was the developer on it, and I’m not putting a plug but wn O’Neill, which was the contractor, we presented that at ICSC center build a year ago to our stories. So Chris, this is a clinical and Michigan Avenue is a three story store, which starts from the fourth floor, which already is an awesome thing if somebody could leave the store starting from the fourth, fifth and sixth floors. And then it’s got a whole atrium to it and it’s got the high rise building codes because it’s in Chicago, if it’s about 80 feet tall, it’s a high rise building. In Chicago, you got to negotiate with the building department with all the person with the Michigan Avenue design board. So we came up with the conclusion that obviously the store you’re climbing up an escalator which goes four floors before you reach the base floor plan for Uniqlo that we don’t want any doors in it, but we will create a smoke evac system in the atrium where the escalators are. Sounds like a good idea. The city approved it and said before you open the store, you have to get a smoke evac system tested and it works before we can let you open it. I think it was supposed to open October 15 October 22 soft opening with the mayor’s office and the people from Japan Uniqlo owner used to be the second richest person in Japan that time a year ago. So they had reps coming in for the opening of the store. Three days before the stores to open we fail the smoke evac test. You know they put the smoking machine there and they open the vents on top and the smoke doesn’t rise up the atrium
Ressa 18:26
must have been the architect that designed
Chadha 18:29
I know who to point fingers to so get a call. What do you do? I mean, the mayor is coming and you know, but you can’t call up and say the mayor is coming so let it go. So I start calling up my friends on the fire department John Tavares is the head I talk. He says talk to the inspector will fail you. I call up the inspector on his cell phone and I’m like hey, the males coming in like so what? Like I really have to get this boss what can I do? And he’s talking to me and he’s like my wife screaming at me. I’m talking on the cell phone while driving. I should not be talking to you. I really apologize. But what can we do so we went down to the offices negotiated the fact that we would take another week to rectify the system that 10 days and get a smoker back to prove otherwise we would close the store down but for those days, we would hire fire men on every floor to monitor that nothing happens. And within like if the opening was at six o’clock in the evening by invite only at about two o’clock in the afternoon they said okay we’ll send firemen and put them on every floor and if they can monitor the systems you okay to have the opening and that was fun.
Ressa 19:48
Well the one on that. So hold on so you get you get that was just the invite only didn’t you still have to get the the smokey vac system to work? We did After a week we did Yes. And what was wrong with it?
Chadha 20:03
They they, the machine there brought to create smoke was not strong enough for a six story building. So it was like it just there was not enough smoke production. So yeah, I’m gonna blame the contractor for it or whoever was doing it. They didn’t create the right equipment to do the stuff. So we invited the guys back again. We had doughnuts, and we looked at it and everything passed.
Ressa 20:24
Got it. How concerned was Uniqlo at the time,
Chadha 20:28
we didn’t tell Uniqlo only Deborah and myself and only people knew about this stuff. And I knew if this if this failed, doesn’t matter whose issue it is, but I will not be hired by Brookfield again, after 25 years of working with that I had had that time, a year and a half ago. I had. And
Ressa 20:49
going back to getting the approvals. Was there anything in getting the approvals that was like the entitlements and building that was a challenge? Or is our was that was the city pretty receptive and excited for the use.
Chadha 21:08
So I know you guys don’t have a property there. But Acadia does have a couple of properties there, Michigan, and Michigan Avenue has a Michigan Avenue design board review thing. But you have to present the drawings to them. And then they don’t have a veto power, but they can at least tell you yes or no. So we have to show our drawings to the Michigan Avenue Review Board. And in Chicago, the older person carries a lot of weight. And we have to show it to the older person too. And then the building department so here’s the fun part UNIQLO. That time claimed they were the second largest individual retail in the world after h&m. They have a prototype, they showed us drawings of stores in Berlin and Paris and in London. And the Michigan Avenue board said they do not like the number of mannequins in the windows, they have to reduce them. How do you tell the client that you have to reduce the mannequins inside the window, the neck, and this is on the fourth, fifth and sixth floor so you really can’t see it. Right. And the deal finally was Chris that in Chicago’s signage is counted within I forget now 18 inches on the window. So we have to push the mannequin, six inches or 12 inches for the down, compact, and now it’s not counted. And then we go to the older persons office. And in Chicago, the older people have to bless your drawings before the city will approve them. Unfortunately, our mayor ran into a runoff election. And all the persons office closed all meetings for two months. So it was a fun project to look back on. But it was a lot of headaches. We could not get a review or a sign off from the older person either. Wow. And then finally, the last issue that happened was because of all the signage that was on the building, this was a borders and a Victoria’s Secret and whatever. We were given like 150 square feet for a three story store. And we had to get a drone hire to check all the signage to prove that we could go higher. So it was a lot of fun, but I think we made money on it and I met that’s how I met Sandeep actually, for the first time he heard about that store and he said, Hey, I like the store, come and have a cup of chai with me. And I’m like I drink only coffee but sharp.
Ressa 23:29
Interesting. So three biggest hurdles were this smoke evac getting the alder person to the bless everything and the Michigan review board and given you the Design Review Board and given Michigan Avenue Design Review Board and giving you their blessing and they wanted the mannequins pushed back.
Chadha 23:48
They rejected us we have to come back next time again a month later.
Ressa 23:52
And all you did was change the mannequins how deep they were into the space. Yep. And that got the blessing
Chadha 23:59
that that’s a blessing. Let’s put it that way. Yeah, they could object anymore.
Ressa 24:04
They couldn’t object anymore. Wow. You mentioned this was at center build. What were some of the things at the center built conference that this story was highlighting?
Chadha 24:13
I don’t know I basically it wasn’t just this story. It was it was I think the thing was the challenge of building something in the sky for a retailer because you know this from the old days, shopping malls, tried to put food courts on the upper levels, and a lot of them fail because they’re not right there in the path of travel. So this was a challenge to start a retailer from the fourth floor in a Sixto building where they take the fourth, fifth and sixth floors, and making people travel up an escalator before you see anything. And again, Uniqlo is not a known name. It’s known across the world and maybe New York has two or three stores. But when we build in Chicago had none. So it was a challenge to attract people to come all the way and so I think the topic was from the developers Side building a retail store in the sky and then we will have to tell stories of you know the challenges that happen and stuff so that was a different you know spiel on that,
Ressa 25:12
ya know you had to deal with the Michigan design board to get it approved the the all the older person and the smokey vac which obviously is a champion the smoke, you know, in some of these things are so crazy to me like the smoky back, it worked. It was just they didn’t use a strong enough thing that just get the smoke up and the design board was the mannequins you just had to pull them back and we’ll talk though I know it was crazy. Really interesting. These are the trials and tribulations for real estate development. Anyway, Sanjeev. This has been great. Thanks so much for the story. We are now going to pivot to the last part of the show. Are you ready?
Chadha 25:57
Oh, one more thing to say though.
Ressa 25:58
You got one more thing to say. Go ahead. I
Chadha 26:00
do like that. Wes. You’re wearing like one of those please. You keep raising up and showing it to me, so I have to say that.
Ressa 26:09
Okay, got it. I will. I’ll put I’ll put you on. I don’t know. I have to check to see if you’re on my naughty or nice list this year Sanjeev. I think I saw a few invoices to approve. And
Chadha 26:23
this is a reimbursable by the way.
Ressa 26:26
Got it. Last part of the show. Retail wisdom. Are you ready? Sure. What is your best piece of commercial real estate advice?
Chadha 26:38
Like everybody else got the best location?
Ressa 26:41
Okay, I’ve heard that one before. Yeah. Thanks. So original Sanjeev so original. Second, what extinct retailer? Do you wish you’d come back from the dead?
Chadha 26:55
For us now, it’s health labs. We used to do all the export fitnesses. We haven’t done one in a year.
Ressa 27:01
That’s an interesting perspective. I don’t think they’re extinct yet. But I think health clubs are still here. But I appreciate the the context. Last question.
Chadha 27:13
That’s the tough one, right?
Ressa 27:15
This is a tough one. One of the hottest products, gift ideas this year for Christmas are the star scope monoculars. It’s like these one, you know, like a binocular but one and people use them for hunting and hiking and outdoor recreation. So they’ve been a hot item because, you know, in a pandemic, people are hiking and doing all these outdoor things.
Chadha 27:40
Hey, have you stayed in Chicago? Ella? There’s no hiking allowed here. By the way. There’s no space to hike. Anyway, go ahead.
Ressa 27:45
What is one of those retail four star scope? monocular
Chadha 27:50
Oh, 139 bucks.
Ressa 27:53
regularly. 7998. Right now it’s 4799. You should get on their website and buy yourself one. But thank you for playing. What am I gonna do? To good gift idea?
Chadha 28:04
Good. I just got your gift in the mail. I want my West.
Ressa 28:10
All right, man. Well, listen, Sanjeev This was great. I really appreciate it. Thank you for coming on. Yeah, thank you for coming on.
Chadha 28:17
Thank you very much.
Ressa 28:19
Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode