Major shopping destinations like the Magnificent Mile have suffered from the same market conditions that have hurt retailers across the country, but a correction in rents and innovation by tenants could have it poised to make a comeback.
With more customers to flocking to e-commerce, Chicago’s retail vacancy rate this year hit its highest point since 2010. The Magnificent Mile was not immune: Its vacancy rate this summer was at 12 percent, up from 4 percent in 2015.
A market correction — and a new focus by tenants — could help reverse the trend, according to panelists discussing the future of Downtown retail Tuesday night at the Chicago Architecture Center.
David Stone, principal/founder at Stone Real Estate, said the Magnificent Mile and other Downtown retail corridors can expect to see more “sober, rational” rents in the coming months.
“I think rents are going to come down in 2019 by about 20 percent, maybe in some cases 25 percent,” Stone said. “They need to.”
The Magnificent Mile has been hampered by large tenant exits, including Apple’s move to a riverfront location in Pioneer Court. More recently, Forever 21 and Tommy Bahama announced plans to close stores on the strip.
Filing those spaces will require retailers and brokers to get creative about the uses. With retailers seeking to create a social experience to help with brand loyalty, a new type of retail concept could help fill the space, said Jay Longo, principal at architecture firm Solomon Cordwell Buenz.
“Retailers are looking well beyond their products,” Longo said. “They’re looking at social experiences, they’re looking at what the [store] design says about the brand. You can create this very custom experience.”
A number of retailers on Michigan Avenue are filing their retail space with non-traditional uses. Starbucks is planning a flagship roastery in the former Crate & Barrel building, filling four floors with a cafe/manufacturing plant/brand museum hybrid, Longo said. The Nordstrom on Michigan Avenue has a very popular bar, and the Niketown has installed a huge treadmill where customers can try out gear.
The local retail market has seen a rebound from earlier doom-and-gloom days, experts have said. Online retailers are increasingly seeing the benefits of brick-and-mortar locations. And with traditional retailers adapting to find new uses, the market is poised to continue reversing the trend.
“Retail hit the bottom 12 months ago,” Stone said. “I think we are seeing a rebound of brick and mortar, which frankly a lot of people didn’t think was going to happen.”