Loop retail occupancy rises — again
Chicago’s Loop retail vacancy dropped by more than two percentage points in 2006, down to 14.58%, and more than three and one- half points from 2004, according to the 5th Annual Loop Retail Survey conducted by Stone Real Estate Corp.
“The Loop retail market continues to flex its muscles,” according to John Vance of Stone Real Estate and author of the study. “Each year a different sector shows an overwhelming improvement which keeps the market strong. Last year, the Central Loop significantly improved and this year it is the Michigan Avenue corridor.
“The entire retail market remains solid because the Michigan Avenue Corridor, Central Loop and LaSalle Wacker Corridor all provide retailers a distinct customer market unto themselves.
Michigan Avenue provides a developing residential and tourism market.
The Central Loop (with State Street) offers tourism and an established retail critical mass.
The LaSalle/Wacker corridor boasts strong co-tenancy along LaSalle Street, plus a highly dense office population and heavy commuter traffic. With no significant increase in supply of new space expected, we believe that the vacancy rate should continue to decrease in 2007.
Similar to 2005, banks added six branches to the market and drug stores opened two stores. The Loop saw the return of Fannie May Candies with two stores and welcomes Panera Bread’s first downtown location.
Michigan Avenue Corridor
Chicago River south to Congress Parkway; Lake Michigan to the east side of Wabash Avenue
Michigan Avenue continues to benefit from the tourist traffic generated by Millennium Park and its increasing residential population, and restaurants have followed closely behind. Three pub-style restaurants and one white-tablecloth restaurant will open or have already opened in the trade area. Although still claiming the highest vacancy rate in the Loop, a drop of more than six points to 23.57% highlights the continued vitality of this submarket. If the Lakeshore East and Heritage at Millennium Park developments lease their large blocks of space this year, this trade area should achieve a vacancy rate below 20% in 2007.
Central Business District
West side of Wabash Avenue to the east side of Clark Street, and the Chicago River to Congress Parkway
The trials and tribulations of Block 37, Carson Pirie Scott’s departure from State Street and Palmer House Hilton’s renovation have all been well documented. Although large amounts of space will remain empty along State Street for a period of time, we believe high retailer demand for the street portends a return to a strong occupancy rate within 2 to 3 years. At an occupancy rate of 90.88%, one could argue that additional available space and retailer turnover is even necessary to fully revitalize the street.
LaSalle / Wacker Corridor
West side of Clark Street to the Chicago River and the Chicago River to Congress
The LaSalle/Wacker corridor remains the most stable submarket, ever steady with an 86.83% occupancy rate. The high office population density, strong pedestrian counts and active retail atmosphere along LaSalle Street continue to attract national and regional retailers. Most vacant retail space on LaSalle Street is contained within buildings awaiting demolition or rehab and Wacker Drive has virtually no prime retail space available.
Bounded by the Chicago River on the east, I-90/94 on the west, Lake Street on the north and Congress Parkway on the south.; the former Main Post Office is not included
Stone Real Estate began its research of the West Loop in 2002. At that time, this market contained approximately 1,072,558 square feet of ground floor commercial space and approximately 236 storefronts. In 2006, the market contains approximately 968,380 square feet of ground-floor commercial space and approximately 251storefronts. In 2006:
- 455,676 square feet, or 47% of the total, is occupied by traditional retailers (restaurants, apparel, grocery stores, office supplies and sundries). This represents an 9% increase from 2002.
- 252,274 square feet, or 26% of the total, is occupied by office concepts (architects, design firms, residential floor studios, government offices). This represents a 12% decrease from 2002.
- 260,430 square feet, or 27% of the total, remains vacant. This represents a 3% increase from 2002. According to our survey, the highest retail occupancy rates are found along the dense office corridors of Riverside Plaza and Canal Streets. The newer office buildings along Clinton Street have attracted regional and national retailers like Starbuck’s, Washington Mutual, Au Bon Pain, White Hen Pantry and Subway, but some of the buildings situated west of Clinton still endure longstanding ground floor vacancies.
Beginning west of Jefferson Street, the bulk of retail space is occupied by office users or is vacant. This is due to a dearth of major office development west of Jefferson, and the lack of significant daytime population from which retailers can generate sales comparable to the Loop and mature City neighborhoods. Moreover, this portion of the West Loop is still in its infancy in terms of residential development. Over the near term, we believe that once the office and residential markets expand to this corridor, these office uses will be replaced by more traditional retail uses.