Loop retail maintains solid footing
The Chicago Loop’s retail real estate market remains vibrant, as the market’s three main strengths — dynamic Millennium Park tourist traffic, developing downtown residential market and strong office tenant densities — attract more retailers to the Loop. With an infusion of approximately 200,000 square feet added to the market, arguably a necessity in such a tight market, the vacancy actually increased to 14.92% from 14.58%.
“With such a low vacancy rate, in the long term it’s better for the market to add supply and create more prime retail space,” says John Vance, a senior associate with Chicago-based Stone Real Estate Corp. and author of the study. Aside from the available spaces at Sullivan Center and 108 N. State St., which are in high demand from regional, national and international retailers, many of the current vacancies in the Loop are somehow fundamentally flawed, either in their location or by their high asking rents.
The information in this report was supplied by Stone Real Estate Corp., a retail landlord and tenant representation firm. For more information, call their office at 312-372-6200 or visit their Web site (www.stonerealestate.com).
The 2007 Loop retail market remained consistently solid and improved, albeit with relatively few high-profile deals. Banks persisted in their push with six new deals, and the availability of prime corners diminished. The Palmer House Hilton proceeded with its rehab and introduces several national shoe brands to State Street. Ulta Cosmetics entered the Loop for the first time, as did Reckless Records. Local tenants such as Argo Tea grew with two new stores, Oreste Jewelers moved from Southport Avenue to the Leo Burnett Building, Pastoral expanded from its Broadway location in Lakeview and opened a store on Lake Street east of Wabash, and BomBon Café came downtown. The year 2007 marked the loss of longtime retailers the Sharper Image, Rocs and the Savvy Traveler.
Michigan Avenue Corridor
Chicago River south to Congress Parkway; Lake Michigan to the east side of Wabash Avenue
The addition of supply within the Lakeshore East development was somewhat negated by the reduction of supply due to the construction of the Legacy condo project at Monroe and Wabash, and the vacancy rate remained almost flat at 23.51%. The seven-day-per-week market of tourists, plus the development of an affluent residential market, has gained the attention of retailers, and we anticipate that a more visible presence of national retailers will be seen along Michigan Avenue. As Millennium Park represents the major draw south of the Chicago River, we expect demand for space, and in turn rents, to increase along this corridor.
Central Business District
West side of Wabash Avenue to the east side of Clark Street, and the Chicago River to Congress Parkway
The story continues to unfold for the “Return of State Street.” Time will tell if the leasing and successful renovation of the Palmer House Hilton will help anchor the southern end of the street. The rise in vacancy to 13.62% from 9.12% is expected to jump right back as Joseph Freed & Associates leases up the Sullivan Center and 108 N. State projects. The continued success of “Wicked” and “Jersey Boys” extends the trade-area hours for shopping and activity.
LaSalle / Wacker Corridor
West side of Clark Street to the Chicago River and the Chicago River to Congress
This submarket, as in past years, helps keep the Loop’s vacancy rate low. The rate fell to 9.44%, from 13.17%, reflecting the growing recognition of LaSalle Street as the shopping street for business people, supported by the dramatic office population densities of the submarket. Retailers grapple with the five-day-per-week market, but a typical LaSalle Street two-block density of 100,000 people competes nicely with a typical five-mile suburban radius of 100,000 people. As an example of the strength of this submarket, two banks leasing middle-of-the-block spaces on Clark Street speak to the difficulty of finding prime space, even for banks.
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
This submarket’s vacancy dropped to 25.21% from last year’s 26.89%. Most of the transactions occurred in buildings along Riverside Plaza and Canal Street. Food retailers like Starbucks, Roti and Boston Blackie’s enjoy tremendous office population within this trade area without the burden of the developed and competitive retail market existing east of the Chicago River. Potbelly Sandwich Works grabbed marketshare and prime corners with three new restaurants in this submarket. In a nod to the area’s maturing white-tablecloth restaurant business, Sepia opened its doors on Jefferson Street, solidifying the cluster of fine dining pioneered by Blackbird, Avec and Meiji. The retail makeover of Presidential Towers could be the next piece of the long-developing puzzle of office density, residential growth and retail critical mass for this submarket.