Loop’s retail vacancy rate drops even as supply increases
The Loop’s retail vacancy dropped by almost two percentage points to 16.70%, as the market absorbed approximately 124,000 square feet of retail space. This rise in occupancy demonstrates the continued resiliency of the Downtown Chicago retail market, despite adding approximately 87,000 square feet of supply.
The Central Business District drove down the vacancy rate for the Loop and the LaSalle Wacker Corridor remained the solid performer for the market. “The ability of the market to significantly reduce its vacancy while simultaneously adding inventory highlights the vitality of the Loop retail market,” according to John Vance of Stone Real Estate Corp., which just completed its annual Loop Retail Space Survey.
Banks continued their expansion in 2005 with five new branches in the Loop, while unlike in previous years, drug stores and pharmacies only completed one lease transaction. The combination of the continued revitalization of State Street, Wabash Avenue and Michigan Avenue south of the river, along with retailers following the office building development along Wacker Drive should contribute to a healthy Loop retail market in 2006.
Area-by-area analysis
Michigan Avenue Corridor
Chicago River south to Congress Parkway; Lake Michigan to the east side of Wabash Avenue
The large addition of retail space at Lake Shore East increased the Michigan Avenue Corridor’s vacancy rate by 5.5%, and this trade area still grapples with the highest retail vacancy in the Loop. However, the strong residential condominium sales at Lake Shore East and the Heritage at Millennium Park, as well as the tourist traffic generated by The Art Institute and Millennium Park is beginning to transform this area from a 5 day to a 7 day trade area. The new Treasure Island lease at Lake Shore East and numerous deals reportedly nearing completion at the Heritage at Millennium Park underscores the demand that retailers exhibit for this submarket.
Central Business District
West side of Wabash Avenue to the east side of Clark Street, and the Chicago River to Congress Parkway
The occupancy rate of the Central Business District jumped more than ten percentage points to 91.27%. This is attributable to the completed leasing of the former Toys R’ Us building on State Street, the leasing of long vacant spaces along Wabash and the removal of a large amount of vacant retail square footage from the market at 131 S. Dearborn. Strong leasing activity launched the CBD to the highest occupancy levels in the Loop. The transition of Nick & Tony’s at One East Wacker to McCormick & Schmick’s Seafood Restaurant highlights the strength of this submarket. This submarket should reign as the Loop’s strongest for the next several years. The anticipated leasing of the retail space at Joffrey Tower at State & Randolph, the proposed retail redevelopment at the Palmer House Hilton and the heavily hyped retail portion of Block 37 will make for a healthy and stable Central Business District.
LaSalle / Wacker Corridor
West side of Clark Street to the Chicago River and the Chicago River to Congress
Despite dropping to the second position this year for occupancy rates, the LaSalle Wacker Corridor still maintained a solid 86.10% occupancy rate. Few prominent retail transactions were completed in 2005, as there was no turnover of tenants. Hyatt Center and 111 S. Wacker came on line with their retail components mostly pre-committed to restaurants and 200 W. Monroe leased its long vacant retail space to Equinox Gym. Finally, LaSalle Street remains one of the most desirable streets for both chain and independent retailers.