Were they car-sized jelly beans? Early Easter eggs delivered by a giant bunny? Or colorful versions of Chicago’s famous silver statue?
The buoyant orbs bobbing up and down the Chicago River on April 1 turned out to represent J.K. Rowling’s Every Flavor Beans, a gimmick meant to draw attention to the new Chicago outpost of the Harry Potter Shop, which was set to open at 676 North Michigan Avenue in the city’s historic shopping district just north of The Loop.
But they also suggested a turn toward the fun and upbeat in Chicago’s retail landscape, especially Michigan Avenue’s Magnificent Mile, which had been depressed since Covid. Retail vacancies hit an all-time high of 33 percent at the height of the pandemic, according to the Magnificent Mile Association, and although luxury retailers are interested in the area, they’re flocking to boutique-style shops on nearby side streets, leaving a shopping mall and stores with larger footprints struggling to replace tenants.
“These downturns and upturns are not forever. They’re trends. And so the Mag Mile, like all the high streets, is going to come back, and they’re going to be really, really strong,” John Vance of retail brokerage Stone Real Estate said.
When the Harry Potter Shop opened on April 10, shoppers lined the block to get a chance to snag a souvenir or catch a glimpse of actor Tom Felton, who played Draco Malfoy in the movie series.
Still, while the wizarding shop’s launch cast a spell on visitors, it couldn’t magically do away with Mag Mile’s lingering challenges or 26 percent vacancy rate.
Retail brokers, local boosters and city leaders believe their ongoing efforts to revive the district could land it in better shape than it was in, even before the pandemic. But if landlords fail to seize the moment, tenants could set their sights on the city’s other successful commercial districts or outside of Chicago altogether.
Leasing momentum
Harry Potter capped a year of high-profile wins for Magnificent Mile. Japanese clothing store Uniqlo announced its return to Michigan Avenue after leaving the strip in 2021, and running sneaker brand Hoka signed a new lease from one end of the street to another. Luxury athletic wear company Alo Yoga opened a new location on the street, Canadian clothing brand Aritiza opened a three-story flagship store and Hershey Chocolate breathed new life into the struggling Water Tower Place mall at 835 North Michigan Avenue by opening the temporary Hershey’s Super Sweet Adventure. Spanish clothing brand Mango also inked a 16,000-square-foot deal at 664-670 North Michigan Avenue for an outpost that hasn’t opened yet.
“From that first- and second-floor standpoint, there are barely any corners left,” said JLL’s Peter Caruso. “You’re starting to see brands now circling.”
“With some of these large multi-level spaces, you either have to divide it, mothball the third and the fourth level or lose the building to the bank.”
The new activity is reflected in a boost of shoppers. Pedestrian levels are now at 91 percent of pre-pandemic volume, the Magnificent Mile Association found in its most recent count.
But remaining vacancies may be trickier to fill. Much of what’s left are spaces that engulf multiple floors, apparently too big to attract many tenants.
And experiential retail such as the Harry Potter store can’t solve all the problems, Vance said.
“With some of these large multi-level spaces, you either have to divide it, mothball the third and the fourth level or lose the building to the bank.”
Off the ave
But if retail tenants aren’t flocking to Mag Mile’s empty spaces, it’s not for lack of interest in Chicago. Even before the pandemic, such luxury brands as Prada, Cartier and Hermès began taking spaces just off Michigan Avenue, on nearby Oak and Rush streets.
“There is nothing but love between Michigan Avenue and Oak Street. A strong Oak Street is good for Michigan Avenue and vice versa,” Magnificent Mile Association CEO Kimberly Bares said, adding that luxury retailers might soon give Michigan Avenue a second look.
Retail landlord Fred Latsko sees the relationship differently. Foot traffic from Michigan Avenue can be helpful for the side streets, but they serve different customers.
Those seeking out luxury brands on Oak Street aren’t necessarily venturing onto Michigan, he said. Latsko is a fixture on Oak and Rush; he has signed leases with high-end retailers and sold several spaces, including a Barneys department store for $117 million.
“These larger-box stores are filling in with tourist-type attractions, which there is nothing wrong with,” Latsko said. “I think it’s great for Michigan Avenue because it will backfill. It will just backfill with a different kind of tenant.”
Out of the sector
Other property owners are reducing their supply of retail space.
Connecticut-based Commonwealth Development is converting offices in the upper portion of 500 North Michigan Avenue into 320 apartments while preserving the lower floors for retail use. This not only subtracts empty retail space, but it also adds potential shoppers.
“Bringing in more residential through some of these conversions will make it more dynamic,” added Swasti Shah of the Urban Land Institute’s Chicago chapter.
And at the vacancy-plagued mall, Water Tower Place, owner MetLife plans to convert the upper floors to office and medical space while keeping the first three floors as retail.
The hope is that mixing up the property uses on the corridor will make the street more resilient to broader market trends, a report from ULI Chicago noted. A similar effort is underway in the Loop, where office landlords are pushing for more retail and residential space.
The redevelopment efforts are hardly a guaranteed win. Similar to office-to-residential conversions, retail conversions can be costly and complicated by incompatible floor plans.
A targeted approach
Retail brokers say they can’t spur Michigan Avenue’s recovery on their own.
A civic turnaround of this scale demands a group effort — like the early-1900s engineering feat that reversed the flow of the Chicago River and cleaned up the city’s dirty waterways.
The Magnificent Mile Association has been leading the charge to establish a Business Improvement District. If given the final OK by the city, the district will levy a tax on commercial property owners, the revenues from which will be restricted for use in the immediate area rather than contributed to the city’s general budget. Private security, event planning, street decor and infrastructure improvements can be pursued with the funds.
Another upgrade would be a pedestrian bridge connecting Oak Street to Oak Street Beach, among other big swings, as recommended in a report from consultants the Magnificent Mile Association hired.
Such a proposal seems far-fetched, but if the BID’s coffers grow enough over time, it’s not impossible.
In the meantime, the Chicago City Council is cracking down on landlords with stubborn vacancies. A new ordinance took effect last year requiring landlords to register, maintain and insure buildings with vacant storefronts and unoccupied ground-level spaces, theoretically incentivizing them to hustle for tenants.
If these initiatives succeed, Mag Mile could make up or even surpass the missing 9 percent of pre-pandemic pedestrian traffic.
But you have to see it to believe it.
“People who haven’t been here recently and are opining as keyboard warriors from someplace other than right here on Michigan Avenue, they have a different perspective of the Mag Mile,” Bares said. “We’re here every day, We can tell you it’s recovering nicely.”