CUT ME MICK
(Rocky Balboa to his trainer, Mickey Goldmill, during his fight against Apollo Creed
on January 1, 1976 in Philadelphia)
After weathering the barrage of punches from the two-pronged attack of Covid and the subsequent Work from Home (WFH) trend, the Loop’s retail market is indeed battered and bruised. But the real story is the resiliency of the Loop’s retail market during this fight over the past three years. The Loop’s 2022 retail vacancy again increased from 27.44% in 2021 to 28.32%, and while this year’s vacancy rate sets another new high, the rate of vacancy increases has decelerated. The pre-pandemic vacancy of 14.92% in 2019 ballooned to 26.29% after the Covid shutdown in March, 2020. Since then, vacancy increased just over two points to 28.32%, which shows that after suffering its biggest setback in its long history, the Loop’s retail market has stemmed the bleeding.
“After the shock from the sudden Covid shutdown, the Loop market has found clarity and resolve in the aftermath,” states John Vance, Principal of Stone Real Estate and author of this Loop Retail Analysis for the last 20 years. “During this time, two fundamentals of the Loop’s retail market have been rediscovered. First, a core principle of central business district leasing is that retailers open stores in CBDs to leverage the density that exists in these trade areas. Second, restaurants, especially local restaurants, provide a special fabric to the character of downtowns, and their presence is a fundamental attraction to the Loop’s office workers, business travelers, residents, theatre goers, students and tourists,” continued Vance. As restaurants suffered the loss of office density and endured the dramatic increase of their cost of goods and labor, many Loop landlords chose to show flexibility to their existing restaurants and retailers to help them to keep their doors open. This cooperation between landlords and tenants significantly contributed to the stabilization of the market.
MICHIGAN AVENUE CORRIDOR (bounded by the Chicago River to the North, Ida B. Wells Drive to the South, Lake Michigan to the East and the east side of Wabash to the West).
The vacancy rate increased from 22.33% to 25.90%, with most of the increase attributed to the large and newly available space at the base of 300 N. Michigan Avenue, CVS closing at 55 E. Monroe and several vacant storefronts south of Jackson. In general, this part of the Loop has largely avoided the closures that other parts of the CBD experienced due to the continued presence of tourists.
CENTRAL LOOP (bounded by the Chicago River to the North, Ida B. Wells Drive to the South, the west side of Wabash to the East and the east side of Clark Street to the West).
The vacancy rate increased from 23.42% to 24.76%. While the reopening of Saks Off Fifth at 6 S. State was obviously welcome news, the vacancy rate nonetheless jumped with the closing of DSW at 35 S. State and Convene at 131 S. Dearborn. One of the main issues affecting State Street is the perception that chronic vacancies exist on the street. This perception can be attributed to the large swath of vacant spaces on the east side of State Street from Monroe south to Jackson and from Van Buren to Ida B. Wells. Add those vacancies to the string of vacant buildings and lack of retail storefronts on the west side of State from Adams all the way south to Ida B. Wells, and one can understand the concerns about the southern portion of State Street.
LASALLE WACKER CORRIDOR (bounded by the Chicago River to the North, Ida B. Wells Drive to the South, the west side of Clark Street to the East and the Chicago River to the West).
The vacancy rate actually decreased from 35.68% to 34.48%, although it still holds the largest of vacancy rates in the Loop. The large Color Factory deal at Willis Tower and multiple small shop leasing to local food operators elsewhere in the Corridor countered the CVS closing at 208 W. Washington and the Walgreens closing at 250 S. Wacker. The Loop may see its first cannabis dispensary in the former GRK Kitchen space on the southwest corner of Wells and Van Buren as the prospective tenant has filed a zoning application for this use with the City. Much of the retail at The Thompson Center has closed, including the large lower level food court, as building renovations have commenced for Google to occupy the office space. With the announcements of multiple building foreclosures on LaSalle Street, the long-term environment for retail on LaSalle Street could be quite positive in the near future if the office-to-residential initiative proposed by the City of Chicago takes hold. In the meantime, LaSalle Street retail spaces hold a vacancy rate of 31.38% and for the storefronts south of Washington, the rate is 37.66%.
WEST LOOP (bounded by the Chicago River to the East, I-90/94 on the West, the south side of Lake Street on the North and Ida B. Wells Drive on the South).
The vacancy rate ballooned from 23.26% to 27.48% as non-retail users who occupied ground level spaces vacated. Additionally, CVS closed two stores at the French Market and 130 S. Canal. And for the first time in many years, almost every building along Riverside Plaza with stores fronting the Chicago River experienced the loss of at least one retailer.