Loop Retail Vacancy Tops 30% for the First Time

Nearly four years since the first lockdown of the COVID-19 pandemic, the number of empty storefronts in the Loop has surpassed a daunting threshold: More than 30% of the central business district’s retail space is vacant.

The Loop retail vacancy rate increased for the fourth year in a row in 2023, rising to 30.13% from 28.32% in 2022, according to a report from Chicago retail brokerage Stone Real Estate. That’s just more than double the pre-pandemic rate of 14.92% in 2019 and the highest level since 2002, when Stone began tracking the Loop market.

Shops and restaurants in the central business district depend on Loop office workers, in addition to tourists and downtown residents, as patrons. Those professionals haven’t returned to offices in high enough numbers for many downtown businesses to maintain profitability, and four years after the pandemic upended in-office work and urban life, retailers are losing confidence.

“We’re going to be at the fourth anniversary of the COVID shutdown, which is a long time, and I think that the retailers, whether they be national or local, over this time period have just said, ‘I can’t do this anymore,’” said Stone Principal John Vance.

Chicago’s office occupancy ticked up by less than one percentage point to 55.1% in the week ending Feb. 23, according to security card swipe data from real estate technology firm Kastle Systems. Still, major commitments by Google and JPMorgan Chase to office space in the Loop offer some hope for retailers that foot traffic and vibrancy will return.

“The fundamental reason that retail wants to be in the Loop is because of the amount of people that have historically come down here,” Vance said. “It’s important that there will be this clawback of people coming into the Loop.”

Vacancy in the central Loop submarket, which includes the once-storied State Street, rose to 26.59% in 2023, up from 24.75% in 2022. The street has endured a number of high-profile losses, including Old Navy, Journey’s and Vans, as well as several retailers that occupied the retail space at the base of the Palmer House hotel. A few small wins in the area, such as Pret a Manger’s lease at 73 W. Monroe St., alleviated some of the corridor’s pain.

The Michigan Avenue corridor also saw an increase in vacancy, which rose to 28.18% from 25.9%, largely due to the closures of the Walgreens at 150 S. Michigan Ave. and Liberty Travel at 200 N. Michigan Ave.

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“While the storefronts facing Michigan Avenue and Millennium Park enjoy strong pedestrian traffic from tourists and residents, the submarket will struggle to backfill these two large spaces,” the report said.

The LaSalle-Wacker corridor had the highest vacancy rate, at 36.22%, rising from 34.48% in 2022, but that was due to the removal of the retail space in the James R. Thompson Center from Stone’s analysis as Google’s overhaul of the building gets underway. Another ray of hope for landlords who own retail space in the submarket is news that Mayor Brandon Johnson’s administration is proceeding with a city initiative that could provide millions in public financing to convert vacant office buildings to apartments in the LaSalle Street corridor.

“If a residential component existed on LaSalle Street, or in and around LaSalle Street, so that retailers could reasonably think, ‘Wow, there’s Saturday-afternoon business down here, there never was before but now there is,’ that would greatly help that retail environment,” Vance said.

Vance said 2024 will likely be a year where retail landlords and tenants work out what it takes to get long-empty spaces occupied, whether that’s building owners investing money in improvements or breaking up larger spaces so they can be occupied by multiple tenants using less space.

“That will take some time to work through the system. I don’t think there will be a ton of newer deals done in the Loop,” he said. “I do think, though, that groundwork will be laid to figure out how these spaces get leased, and that’s the job of 2024.”

Rachel Herzog is a commercial real estate reporter for Crain’s Chicago Business. She joined Crain’s in 2023 from The Real Deal, where she had covered commercial real estate in Chicago. Before that, Herzog wrote for the Arkansas Democrat-Gazette. She is a graduate of UNC-Chapel Hill, receiving a bachelor’s degree in media and journalism, as well as a separate degree in Hispanic literature and culture.