With more retailers pouring into the Loop in 2015, vacancy reached its lowest level in at least 14 years.
Overall vacancy fell to 9.9 percent last year, the lowest point since Stone Real Estate began compiling a Loop report in 2002, according to the Chicago-based retail brokerage.
Vacancy the past two years was 10.8 percent, which had been the lowest level. It peaked at 18.2 percent in 2004.
“There’s a push into urban on the office side and residential, and retail’s following that,” said John Vance, a Stone principal and author of the annual report. “It’s part of an overall trend nationally.”
Continued strong demand from retailers and a downtown revitalization means retailers in key corridors such as North Michigan Avenue and State Street may shift south in search of available space, Vance said.
That bodes well for property owners south of Monroe Street, which has been considered the southern border of the well-known shopping strip, Vance said. In one new project, a venture of New York-based Tishman Realty seeks retailers for the bottom two floors of the former Amalgamated Bank headquarters at 100 and 112 S. State St., where co-working firm WeWork leased the top three floors.
Although vacancy rose in the Central Loop in 2015, to 9.3 percent from 8.2 percent a year earlier, State Street accounted for virtually all of the 46,167 square feet of new clothing-store space in the Loop, including a 23,527-square-foot Saks Fifth Avenue Off 5th store at 6 S. State St.
“The storefront vacancy on State Street is almost zero,” Vance said. “Revenues reported out of State Street continue to be strong, and retailers want to follow that.”
New kinds of retail also may move south of the Magnificent Mile, even though North Michigan Avenue’s vacancy rose to 11.3 percent, from 9.9 percent in 2014, Vance said.
“It will be interesting to see who’s going to be the first non-food, non-service retailer to jump the river, now that there’s so many people around,” Vance said. “Will it be clothing, electronics or hard goods of some sort? That’s what everyone’s waiting for. I expect to see it happen in the next year or two.”
Apple’s planned move to 401 N. Michigan Ave. along the north bank of the river, first reported by Crain’s last August, is expected to boost foot traffic to the southern edge of the Mag Mile. Developments just south of the river are likely to add to the momentum, Vance said, including the conversion of an office building at 360 N. Michigan Ave. to the LondonHouse boutique hotel and the construction of a 432-unit apartment tower at 200 N. Michigan.
Farther south, near Millennium Park, Maggie Daley Park and the Chicago Athletic Association hotel, opened last year. The hotel has a Shake Shack restaurant on the ground floor. Those attractions and a growing number of restaurants continue to swell crowds south of the river, Vance said.
“The East Loop is becoming a seven-day, six-night trade area,” he said. “It’s an exciting time. It’s almost as if the Loop is entering into the next level of its development.”
Stone’s report includes only retail on the first or second floor or below ground, and it excludes department stores such as Macy’s. The boundaries are Lake Michigan to the east, the Chicago River to the north and west and Congress Parkway to the south.
Retail vacancy in the LaSalle-Wacker corridor fell to 9.8 percent, from 13.8 percent, and West Loop vacancy dropped to 13.4 percent from 14.7 percent.