Retail suffered because of COVID-19. Two years later, Chicagoland retailers are now on the mend as mandates are lifted and threats continue to lessen.
Downtown Chicago, on the other hand, has been slower to bounce back. COVID-19 caused many to leave Chicago for more space to work remotely, and though people seem to be returning, work culture for many businesses is still largely undetermined, contributing further to retail uncertainty.
The jury is still out on when things will return to normal, but the numbers are slowly trending upward. There’s a significant increase in leasing velocity, which is a welcome sign of hope for businesses.
Some areas, however, are exhibiting a faster comeback than others. Neighborhood locations, like Lincoln Park, Bucktown, Wicker Park, Fulton Market and West Loop are already rebounding. Some rents in these areas are already back to, or above, pre-pandemic rates.
It is tourist-centric retail that remains the main concern.
Places like Michigan Avenue, State, Oak and Elm Street are going to take longer due to their dependency on foot-traffic, and retailers are having to shift gears to compensate, instead prioritizing profitability and sustainability over visibility. There is also discussion around rebranding Michigan Avenue to better attract the post-COVID consumer, and Danny Spitz, CEO & Managing Partner at Greenstone Partners, expanded on a few of the potential changes being considered.
“There’s a push to reinvigorate and reinvent,” Spitz said. “They’ve discussed doing more public outdoor entertainment and perhaps shifting some high-end retail toward Oak Street. Oak Street remains strong from a luxury retail perspective, and there’s discussions about shifting all of the luxury retailers toward Oak Street along Michigan Avenue to create a more complimentary shopping district. There are a lot of ideas, which means there’s going to be some change. It’s unknown right now, though, what that will look like.”
And it’s not just foot traffic that retailers are having to account for. Austin Weisenbeck, Senior Vice President Investments at Marcus & Millichap, said a lot is weighing on tourism, as well.
“It’s coming back, but hospitality and travel is not what it used to be,” Weisenbeck said. “Until Chicago is high again on the destination list for a lot of travelers, I am hard-pressed to think you’re going to see rents and occupancy get back to where they were. This summer will be a big tell. We’ve seen more of our clients traveling in the last two weeks than in the last two years. If travel does continue to increase and weather is good, you should see some recovery starting in those Downtown areas.”
Tourism isn’t the sole driver of sales, of course. Retail is heavily submarket reliant, and numbers will be affected by office-market workplace decisions that are still to be determined. Only time will determine how this will play out.
Michigan Avenue was hit especially hard. A lot of big-name retailers were lost. Malls, for one, are facing a sink-or-swim ultimatum, but evolving to meet today’s consumer demands is no easy feat. Tenants along Magnificent Mile are still deciding if and how to move forward. It was announced this month that Brookfield Property Partners relinquished Water Tower Place to MetLife Investment Management, following the devastating loss of Macy’s in 2021. But this does not mean that Water Tower Place is doomed. One might view it through a lens of opportunity.
“Malls around the country have suffered,” Weisenbeck explained, “but many of them have found someone with a unique vision to come in, with the support of the municipality it’s located in, and give it new life, incorporating some sort of entertainment, lifestyle or mixed-use component. I think Water Tower might end up going in a similar direction. The lender might sell it to someone who has a vision different from how Water Tower has operated for the last twenty years.”
Sean Sharko, Senior Vice President Investments at Marcus & Millichap, continued:
“It allows someone the opportunity to reset the basis,” Sharko said. “Someone could come in and invest money into it again, and not just double-down on a high original cost. Someone could reset the basis to what’s appropriate today so that they can reinvest and make the changes necessary.”
It’s a waiting game. Market experts are optimistic, though, and the outlook is strong. COVID-19 sparked a temporary mindset shift that caused people to want more space, but Chicago will always be attractive—especially to young people. Many people are coming back for the city lifestyle as the world continues to stabilize. Fulton Market, for example, continues to see growth across the board.
The gist of it? It appears there’s a light at the end of the tunnel for retail.
