Loop retail vacancy increases, but market remains healthy
The Loop’s retail vacancy rate increased in 2003 to 16.52%, but the market remains in equilibrium, according to John Vance of Stone Real Estate Corp., which just completed its annual Loop Retail Survey. “When looking at vacancy by number of storefronts, the vacancy rate is only 11.00%, which we believe is a more meaningful measure of the health of the market,” said Vance. The Loop’s strongest retail corridor, according to the survey, is the LaSalle-Wacker Corridor, which benefits from the high retail occupancy of several significant buildings, such as Sears Tower, The Chicago Board of Trade and The Bank of America Building.
At the end of the Fourth Quarter, 2003, Chicago’s Loop Retail Market contained approximately 3,336,515 square feet of retail space. According to our survey, storefront vacancy in 2003 increased to 11.00% from 9.81%, and based on square footage, vacancy rose to 16.52% from 13.38%. This vacancy increase is mainly due to additional supply. The Loop boundaries 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.
In terms of square footage by retail category, Fast Casual food concepts (e.g., Potbelly Sandwich Works, Sopraffina, Café Baci) occupy the most square footage, followed by Apparel (e.g., The Gap, Ann Taylor). In the storefronts by retail category, traditional Fast Food concepts (e.g., McDonald’s and Subway) and Fast Casual food concepts maintained their first and second place positions respectively from the Fourth Quarter, 2002.
As reported throughout the year, the retail banking sector aggressively expanded in the Loop during 2003. Bank of America, Fifth Third Bank and Washington Mutual added retail branches in their attempt to gain market share. Landlords were eager to lease retail space to banks, as banks offer office buildings a sophisticated ground floor image and financial stability. The Financial Services category added a total of nine storefronts and increased their square footage by approximately 64,492 square feet. Eight of the nine banks replaced traditional retail stores and six of these nine storefronts were prime corner locations.
Michigan Avenue Corridor
Chicago River south to Congress Parkway; Lake Michigan to the east side of Wabash Avenue
The Michigan Avenue Corridor experienced a slight vacancy rate in crease from 18.90% to 19.12% in 2003 in terms of square footage and a slight increase in storefront vacancy, from 10.96% to 11.11%. The high vacancy in square footage can be attributed to large vacancies along Wabash Avenue as well as Randolph Street. The Hard Rock Hotel at 230 N. Michigan delayed its opening from the Summer, 2003 to early 2004. The hotel, along with the continued progress of Millennium Park, should generate sufficient new traffic to solidify the retail component of Michigan Avenue south of the Chicago River.
Central Business District
West side of Wabash Avenue to the east side of Clark Street, and the Chicago River to Congress Parkway
With 110,000 square feet of new retail space in the recently completed Dearborn Center, the Central Business District now contains approximately 1,277,125 square feet of retail space. This submarket has a 17.97% vacancy rate, which is high primarily due to the 96,000 square feet available at Dearborn Center, and is more than a 5 point jump in vacancy from 2002. Although State Street had lost some leasing momentum during the prior two years, it did rebound in 2003 with the opening of Nordstrom Rack, Forever 21 and H&M’s lease signing of its second Chicago store.
LaSalle / Wacker Corridor
West side of Clark Street to the Chicago River and the Chicago River to Congress
This submarket, with a total of 1,280,807 square feet of retail space, remains the largest in the Loop. Although its square footage vacancy rate increased to 13.49 % from 10.96%, it still has the Loop’s lowest vacancy rate. Contributing to the corridor’s high occupancy rate are the fully leased retail components of Sears Tower, The Chicago Board of Trade and The Bank of America Building. Multiple stores by tenants within the trade area also highlight the retail vitality of this market. National brands such as Ann Taylor Loft, Petite Sophisticate and ROCS, and independent retailers Picture Us Galleries, Arts & Artisans, and Uhlemann Optical have at least two stores in this submarket.