Development in Chicago’s West Loop, the city’s preeminent retail center, has pushed up rents and made North Side neighborhoods more attractive to shops and investors.
Retailers are moving into North Side neighborhoods like Bucktown and Wicker Park, in part because of higher rents in the trendy West Loop neighborhood. The availability of vaccines and the arrival of new brands has also played a part. Leap, a Chicago-based company that helps e-commerce brands open brick and mortar stores, has helped companies like A Pea in the Pod and UpWest open in Bucktown and Lincoln Park.
The drop in vacancies has garnered attention from investors who want to see busy storefronts before taking a chance on a property.
“The investment sales market is as hot as I’ve ever seen it,” said Mitchell Kiven, first vice president investments at Marcus & Millichap. “It’s incredibly active right now, everything is getting multiple offers.”
He said listings now get 10 or more offers, whereas “3 or 4 offers on a listing used to be a pretty healthy number.”
Chris Irwin, vice president for retail sales at Colliers, who closed 22 deals in the North Side last year, said activity remained strong through the end of the year.
“I’ve been doing this for 20 years [and] it was definitely in the top five busiest Decembers I’ve had,” said Irwin.
Although the West Loop started pulling retail brands and young urban professionals away from the North Side before the coronavirus hit, its resiliency during the pandemic has created an opening for neighborhoods like the North Side’s Bucktown and Wicker Park. Net rents there top out at $70 per square foot, as opposed to $100 in the West Loop, according to Irwin. Landlords are also offering more flexible leasing options instead of requiring five-year minimums.
“There’s a lot of landlords that have been a lot more open to doing shorter term deals just knowing the space is occupied and there’s income coming in,” said Irwin. “They’re kicking the can down the road, saying maybe things are going to be different next year or the following year.”
Kiven said investors are much less likely to buy properties with retail vacancies than they were pre-pandemic, when empty storefronts meant a buyer could get a discount on a property and add to the building’s value by filling them.
“People want stable cash flow, properties with a history of working the way they were intended to work,” Kiven said.
Irwin believes the worst is over for the North Side’s retail market. Although January has come with a lull in deals, he said “there’s a lot of people out in the market”.
“I think we’re out of the woods,” Irwin said. “I think there’s still businesses that are going to be more affected by Covid, but in general, I think people are just learning to live with it.”