Loop retail vacancies drop to lowest in at least 12 years
Micah Maidenberg – February 24, 2014
Retailers kept gobbling up space in the Loop last year, pushing the neighborhood’s retail vacancy rate to its lowest level in at least 12 years. The retail vacancy rate in the Loop dropped to 10.8 percent at the end of 2013, from 11.9 percent at the end of 2012, according to a report from Chicago-based Stone Real Estate Corp. Vacancies peaked in 2004 at 18.2 percent.
“The market is just starting to get tighter,” said John Vance, a vice president at Stone. “Frankly, I think it would be healthier if the vacancy rate was a little higher for good spaces.”
Long known for its office towers and white-collar workforce, the Loop has transformed itself over the past several years into more of a 24/7 shopping environment. Before the crash, developers built condominium towers and student housing, while Millennium Park has pulled tourists south of the Chicago River. Another development boom underway will add hundreds of apartments and hotel rooms to the neighborhood, further boosting demand for retail space.
“When you go with a high-traffic spot, your chance to build a business happens a lot faster,” said Rich Labriola, founder of Labriola Baking Co., who plans to open a 9,000-square-foot pizza restaurant in the Millennium Park Plaza apartment building just north of Millennium Park. He said he’s still negotiating a lease.
Stone’s report tracks lower-level, first- and second-floor retail spaces in the central business district, between Lake Michigan on the east, the Chicago River on the north and west and Congress Parkway to the south. The vacancy rate last year was the lowest since 2002, when Stone began compiling its report. The report excludes department stores like Macy’s flagship at 111 N. State St. and the Sears Holdings Corp. store at 2 N. State St., as well as the upper two floors of the Block 37 mall, because the large blocks of space would have an outsized impact on the vacancy rate. The upper-floor spaces in Block 37 are starting to fill in, however, with celebrity chef Richard Sandoval leasing about 22,000 square feet for a third-floor food court.
The vacancy rate fell the most in the Michigan Avenue corridor, dropping to 10.9 percent at the end of 2013 from 13.6 percent a year earlier, Stone’s data shows. New leases like the re-opened Lakeshore Athletic Club at 211 N. Stetson St. and deals at Millennium Park Plaza pushed the rate down, Mr. Vance said. Net rents along Michigan Avenue south of the river have surged in recent years and now range from $125 to $175 per square foot, up from about $60 per square foot in 2007, Mr. Vance said. But retailers will have more choices on the avenue in the next couple years as developers market space in new projects, like John Buck’s planned apartment tower at 200 N. Michigan Ave.
“I think what’s going to happen is the rents won’t drop but the acceleration of the rents will slow down,” Mr. Vance said.
The Central Loop had the lowest vacancy rate, 9.7 percent, but that was up from 8.5 percent at the end of 2012. Puma SE’s decision to close its 7,900-square-foot store in the Block 37 mall helped push the rate up. Ada’s Famous Deli also closed at 14 S. Wabash Ave. and the Marquette Inn shuttered at 60 W. Adams St. More store closings are coming on State Street. Sears’ recent decision to close its store> on the strip will leave a 33,000-square-foot hole at State and Madison and State and Dearborn streets. And New York-based Thor Equities LLC must find tenants for a 30,000-square-foot store Forever 21 is vacating for a smaller space at State Street.
Retailers that signed leases in the Loop last year included:
- Ajida, a Japanese restaurant, which leased space for a new restaurant at 201 N. Wells St.
- Charles Tyrwhitt, a men’s clothing store, which leased 2,300 square feet at 208 S. LaSalle St.
- Killerspin, a ping-pong recreational facility, which leased 5,900 square feet at 140 S. Clark St.
- Ross Stores Inc., which leased about 30,000 square feet at 20-28 E. Randolph St.