In Downtown Chicago, the retail landscape is ever-changing.
Of course, retailers face challenges, but opportunities exist to adapt to shifting consumer preferences and urban living.
In a recent conversation with Tim Henry, principal at Avison Young, and Mitchell Kiven, first vice president investments at Marcus & Millichap, we delve into this evolving retail environment to discuss the rise of experiential retail, the expansion of well-known brands, and the transformation of specific neighborhoods.
If we had to choose just one word to describe the future of Downtown Chicago’s retail scene? “Dynamic”—much like the city itself.
Illinois Real Estate Journal: What notable trends have you observed in the Downtown Chicago retail market over the past year?
Tim Henry: While foot traffic and commuter activity has increased, leasing for traditional Loop retail space is extremely slow with vacancies remaining at record levels. While activity within the Loop is not yet to pre-pandemic levels, this past year has seen a marked increase in both commute and foot traffic. [According to the Chicago Loop Alliance,] CTA ridership has increased 22% over the past year while METRA ridership has increased 75%. Additionally, foot traffic in the loop is at 93% of pre-pandemic levels with hotel occupancy rebounding to the same rate just before the pandemic. Leasing for traditional Loop retail space is extremely slow with vacancies remaining at record levels.
Mitchell Kiven: Leasing velocity has remained high in well located retail properties, and retail rents have climbed significantly for the last three to four years. That’s in contrast to the previous decade plus of flat or declining rents. I’ve seen a surge in experiential retail concepts which had been put on hold due to the pandemic, but that segment seems to be healthier than ever. It continues to be true that there’s an overabundance of supply in the Loop in particular (where’s there’s not the same population density), and with hybrid work schedules, it’s created persistence vacancy in that submarket.
Illinois Real Estate Journal: Can you highlight any new flagship stores or unique retail concepts that have recently entered the market?
Henry: Recent openings within the City of Chicago are large F&B entertainment options such as the Guinness brewery in Fulton Market. Additionally, Puttshack and pickleball concepts are expanding throughout the region. Lastly, luxury retailers continue to expand along the Oak Street corridor with expansions/relocations of Hermes and Cartier as well as newer brands entering the market such as AKRIS.
Kiven: I have to mention Dom’s Kitchen & Market because I believe they’re expanding, and I just can’t believe how impressive they are as retailers. They seem like the future of an urban grocery store.
Illinois Real Estate Journal: Are there any particular brands or retailers that have recently expanded their presence in Chicago? What makes these expansions significant?
Henry: Hy-Vee Liquor stores are opening new locations; of the tenants that we represent that are growing in Chicago, I would highlight Gerber Collision & Glass, X-Golf and Evolve Chiropractic. These tenants are service and entertainment providers, sectors that are still growing.
Illinois Real Estate Journal: Are there any specific areas or neighborhoods within Downtown Chicago that are experiencing a surge in retail development or revitalization?
Henry: High density, daily needs-anchored retail is still in high demand. Additionally, Fulton Market continues to be an expanding district for national retailers particularly home furnishings such as Design within Reach and Casper and digital-first brands such as Credo, allbirds, Mejuri and Brilliant Earth. Additionally national retailers are continuing to expand within neighborhood locations such as Southport Avenue in Lakeview and Armitage Avenue within Lincoln Park.
Kiven: I’m not sure how you’re defining the boundaries of downtown exactly, but because it’s such a mature market, I haven’t seen much noteworthy development. In my opinion, it’s the neighborhoods that have more exciting retail revitalization going on. Certainly, Avondale, Irving Park, and Andersonville seem to be transforming into really exciting places to live and shop.
Illinois Real Estate Journal: Can you share insights on the challenges and opportunities facing retailers in the market currently, especially in terms of consumer preferences and demand?
Henry: Traditional mall-based and department stores retailers are always shifting their product offering and store concepts to fit consumer preferences. On trend currently within the Chicago market is Bloomingdales is looking to right-size their current stores, such as the store at Old Orchard closing and a new, smaller-format, trend-based store opening within an old Barnes & Noble space at the center. Additionally, as Abercrombie & Fitch looks to grow their consumer base, they have been opening smaller-format stores within the city, contrary to their mall-based concept in neighborhoods such as Lakeview and Gold Coast.
Kiven: To me, how well a retailer deals with the logistics of shopping and delivery, parking (particularly downtown) and lowering the barrier to entry for their customers is what’s most determinative of their future success. It’s not a sexy answer, but that kind of logistics and supply chain prowess is as important as being a tastemaker or trendy in the current landscape.
Illinois Real Estate Journal: Are there any innovative strategies or collaborations between brands and retail spaces that have recently emerged in Downtown Chicago, and why are they noteworthy?
Henry: The food halls like Revival and multi-choice food offering like Market Creations are thriving for their extensive selection and quick service, which are often viewed as an extension of neighborhood amenities to those commuting into the office.
Illinois Real Estate Journal: As we look ahead, what are your predictions for the future of the retail market in Downtown Chicago, and what factors are likely to shape this landscape in the coming years?
Henry: Never say never! Reality will continue to adapt as new norms evolve. My advice to Loop retailers is to do as their predecessors did. I think we will see retailers in the Loop beginning to adjust the operations from serving the office workers pre-pandemic by opening/staffing for all five workdays to shifting a broader time period on Tuesdays through Thursdays, catering to the shifting office demand.
Kiven: Service and necessity retail continues to experience robust demand, so that’s never going anywhere. We’ll see more experiential concepts gain traction and expand, particularly as downtown continues to rebound and grow.
