The opening earlier this summer of Offshore—the nation’s largest rooftop venue—spoke volumes, not just about efforts to rejuvenate a lackluster Navy Pier, but about the state of retail itself in Chicago. Just as in other markets, consumers respond to several trends.
Developed by Swiss real estate firm ACRON Group, Offshore features 36,000 square feet of all-weather drinking and dining space atop Navy Pier’s Festival Hall at 1000 E. Grand Avenue, with a full-service bar, kitchen, terraces, seven fire pits and a gaming area. While Navy Pier badly needed a retail overhaul, the sector has been fairly, active in many parts of the city.
According to Newmark Knight Frank’s (NKF) recently released 2Q19 Chicago Retail Market Overview, activity in the Chicago retail market held steady during the first half of 2019. Continuing a long-term trend, food tenants were prominent thanks to expansion among existing restaurants and the debut of new dining concepts.
Not only are today’s consumers attracted to new food and beverage concepts in higher numbers, they also want experiences. That can translate to traditional storefronts as well, and developers are working to future proof shopping centers to curtail the threat of e-commerce.
Stores that provide unique experiences or services are prime candidates to combat e-commerce. This includes personal fitness and entertainment. Experiential retail concepts continue to emerge as well as ‘pop up’ experiences, that offer retailers a chance to refresh their concept. Conversely, big-box retailers are still working through the process of rightsizing or shifting to locations with stronger demand.
Leasing velocity was high in some areas, according to the NKF report, but continued to waver in others.
Fulton Market and West Town
There are currently 196,000 square feet available in Fulton Market, where the average asking rent is $46 per square foot. (topping out at $90 psf). There are another 148,000 square feet of retail space now under construction in the city’s—and possibly the nation’s—hottest neighborhood.
Office users have driven up demand in the hip ‘hood, with the likes of Google, McDonalds, WeWork and many others fighting over limited space. Hotel development is another key counterpart to retail growth and projects such as The Hoxton—which recently opened along with new hot spot bars and restaurants—has helped fuel the rapid transformation of Fulton Market.
A unique experience is open in West Town now at District Brew Yards, where Structured Development LLC and Burnt City Brewing completed the nation’s first brewery collective. The pour-your-own beer hall at 417 N. Ashland will feature brews from Burnt City, Around the Bend Beer Co. and Bold Dog Beer Co., among others.
The 18,000-square-foot former warehouse features refinished concrete floors, exposed brick, retail shop and a self-service tap wall. The redevelopment is part of a burgeoning brewing district located adjacent to the Fulton Market District, less than a mile northeast of the United Center and four blocks from the CTA’s Ashland/Lake station.
Gold Coast, Lincoln Park and Old Town
Oak Street welcomed two new retailers this quarter—Van Cleef & Arpels and Chanel—both of which relocated from The Drake Hotel. Across the street, the former Del Frisco’s Double Eagle Steak House will be occupied by the first significant downtown outpost for Cooper’s Hawk Winery, a 30-location-strong restaurant chain that is primarily located in suburban Chicago.
Asking rents in the tony shopping area top out at $350 per square foot, though the 136,000 square feet of available space can expect to fetch an average of around $200 psf. The combined Lincoln Park and Old Town neighborhoods, on the other hand, comprise much more geography but offer less availability—around 91,300 square feet (with another 93,000 square feet on the way). Asking rents here average around $38 per square foot.
Lincoln Park has greatly benefited from the “clicks-to-bricks” trend as online retailers open physical locations. Most recently Outdoor Voices, Joio, Parachute and Allbirds have all opened stores in Lincoln Park. Lululemon will open its first 20,000-square-foot experiential store in the neighborhood, offering yoga studios, meditation spaces, community gathering space and a health food and juice bar.
Michigan Avenue and the Loop
The highest asking rents in Chicago are along the famed Magnificent Mile. Michigan Avenue retailers can expect to pay $350 per square foot on average, according to NKF, and upwards of $425 psf. There are 52,800 square feet of available retail space in the area, with nothing in the pipeline.
Landlords with vacancies in this area continue to sign experiential and F&B retail tenants. Starbucks’ 43,000-square-foot Reserve Roastery, for example, defies big box trends as the coffee giant will take over a former Crate and Barrel flagship location.
The reputation of State Street—“that great street”—hasn’t aged as well as the Mag Mile’s. Asking rents in the Loop average $100 per square foot and there is a whopping 359,000 square feet of space available.
Retailers on State Street are adopting the “right sizing” trend. The famous 14-floor Macy’s on State Street recently sold the top six floors to Brookfield Properties. The Canadian REIT will convert the block to office space and reportedly has one tenant lined up—online secondary market ticket platform, Vivid Seats.
However, the dependable office market, popular tourist destinations, numerous universities and expanding residential inventory have all contributed to a relatively steady retail market. State Street tends to cater to a more middle-range clientele compared to North Michigan Avenue and Oak Street. Many of the retailers located there, such as Sephora, Nordstrom Rack and Anthropologie, are accessible to the average consumer.
Many in Chicago have confidence that the regional economy and retail market will continue to perform well into the second half of 2019, despite political and economic uncertainty.
Big-box stores and traditional retailers will underperform in some locations. The footprint of retail tenants in general will continue to shrink, as many will only carry limited inventory in stores and fill orders through online shopping.
Experiential, “clicks-to-bricks” and fitness tenants will remain more dynamic. Creative uses for remaining big blocks such as trampoline parks, virtual reality and entertainment venues should continue to rise.