Loop retail vacancy rises slightly in 2004; market still strong
Chicago’s Loop retail vacancy rose in 2004, increasing two percent to 13.03%, as measured by storefronts and to 18.16% by square footage. Even with this vacancy rate, the market remains robust, according to John Vance of Stone Real Estate Corp., which just completed its annual Loop Retail Space Survey. “The Heritage at Millennium Park added significant supply to the market, but vacancy remained stable because different retailers continue to realize the vitality of the Loop’s retail market,” said Vance. Last year’s powerhouse retail categories, drug stores and banks, opened only 6 units, down from 11 in 2003. This year, office supply stores Staples and Office Max, and full service restaurants Lloyd’s Chicago and Morton’s Steakhouse absorbed the largest blocks of space.
The Loop boundaries for the annual survey are defined as Lake Michigan to the East, the Chicago River to the West, the Chicago River to the North and Congress Parkway to the South. For purposes of analysis, department stores were excluded.
Fast Casual food concepts (e.g. Sopraffina, Café Baci, Chipotle) continue to occupy the most square footage in the Loop, followed by Apparel tenants (e.g. Ann Taylor Loft, Petite Sophisticate, Parade of Shoes. It is noted that Parade of Shoes closed all Loop stores in 2004). Traditional Fast Food concepts (e.g. Subway and McDonald’s) and Fast Casual food concepts still hold the largest number of storefronts.
Area-by-area analysis
Michigan Avenue Corridor
Chicago River south to Congress Parkway; Lake Michigan to the east side of Wabash Avenue
The Michigan Avenue Corridor’s vacancy rate jumped to 24.13% in square footage and to 15.56% in storefronts. Although this could be interpreted as a sign of weakness, the higher vacancy stems from the new square footage coming to market from the Heritage project. The completion of the Heritage will revitalize Wabash as a vibrant retail corridor and will bridge State Street to Michigan Avenue. Recognizing the underlying strength of this submarket and the continued influx of residents to the area, Staples signed a 19,000 square foot lease at the Garland Building. After a lengthy search, Morton’s Steakhouse bet its success on the proximity to the Hard Rock Hotel with a lease at 65 E. Wacker Place. The full impact of Millennium Park remains to be seen, but initial indications are that the Park has generated significantly higher pedestrian traffic along Michigan Ave. south of the Chicago River and the east-west streets from Randolph south to Adams. The completion of the Lake Shore East project along Randolph and the maturation of the Hard Rock Hotel are developments to watch during the next 24 to 36 months.
Central Business District
West side of Wabash Avenue to the east side of Clark Street, and the Chicago River to Congress Parkway
Although this submarket added 15,406 square feet of vacant space, the vacancy rate essentially remained the same at 18.09%. Barnes & Noble College Booksellers is replacing Crow’s Nest Records at the DePaul Center on State Street and the University has converted the lower level of the former Music Mart retail space to classrooms. The anticipated completion of the Urban Outfitters and Office Depot leases in the former Toys R’ Us space on State Street in early 2005 should push the vacancy rate downward in this submarket.
LaSalle / Wacker Corridor
West side of Clark Street to the Chicago River and the Chicago River to Congress
The LaSalle Wacker submarket still has the highest occupancy rate in the Loop. Despite negative media attention regarding the demise of the LaSalle Street office market, the retail market on this street remains robust. The vacancy rate increased less than 1% to 14.07% and the continued office building development along Wacker Drive has intensified retailer interest in this corridor. Charles Schwab expanded its presence at 150 S. Wacker, E*TRADE opened its first Downtown branch at 123 S. Wacker and Ace Hardware signed a lease for its first Loop store at 300 W. Adams.