The explosive growth of e-commerce and waves of retailer bankruptcies, combined with rents that skyrocketed in recent years coming out of a recession, have slammed streets known for huge, attention-grabbing spaces.
Experts say streets like North Michigan Avenue will not be knocked from their perch as the go-to destinations for retailers and consumers alike, and there already are signs of the Mag Mile bouncing back after a couple of years of slow leasing.
“We’ve been an owner of Michigan Avenue retail space since the 1970s and we’ve seen a lot of cycles,” said developer Lee Golub of Chicago-based Golub & Co, whose current investments include the ongoing Tribune Tower redevelopment. “Right now you have some spaces that are available. But the need for retail and the need to be on Michigan Avenue, I don’t see that going away.”
Completed leases for marquee spaces on North Michigan Avenue averaged US$450 per square foot in 2018, down from US$550 the previous two years, according to commercial real estate brokerage Cushman & Wakefield. The area surveyed was between the Chicago River and Oak Street.
Streets like New York’s Fifth Avenue and Miami’s Lincoln Road also are feeling the pinch.
“North Michigan Avenue, like many retail corridors in the country where most of the properties are flagship spaces, has been hit particularly hard,” said Chris Conlon, chief operating officer of Acadia Realty Trust, which owns three properties on the avenue. “Large-format stores, it appears to us, are the last to move. Those large-format stores up and down North Michigan Avenue have struggled to find their footing.”
Manhattan’s Fifth Avenue, one of the priciest retail streets in the world, has seen asking rents for the highest-quality spaces fall 11 per cent since prices peaked in the first quarter of 2017, The Wall Street Journal reported in May.
Other top shopping locales, such as San Francisco’s Union Square and Rodeo Drive in Beverly Hills, California, have remained flat, according to the report.
In Chicago, retailers, real estate investors and brokers remain bullish on North Michigan Avenue’s long-term prospects, no matter how much the retail world continues to change.
By the end of the year, the avenue is expected to get a caffeine-like jolt when the world’s largest Starbucks – a four-level, 43,000 sq ft Roastery – opens in the former Crate & Barrel building at Michigan and Erie Street.
It will be just the third such Starbucks concept in the country, following openings in Seattle and New York.
Farther south, the 20,000 sq ft riverfront Apple store that opened in October 2017 and an ongoing redevelopment of neighbouring Tribune Tower into residential condominiums are further reminders of massive investments being made on the avenue. The commitments help offset the sight of big vacancies, including the former multilevel Apple store that remains vacant at 679 N Michigan.
“We like seeing Apple’s store starting right at the river,” said Jim Gabel, CEO of Canadian outdoor retailer Roots, which in May opened a two-level store about two blocks away at 605 N Michigan. “We felt that was sending the right message in terms of people’s commitment to Michigan Avenue.
“Starbucks has its new 40,000 sq ft store that’s opening a block away from us. That told us that people were making big investments in the street and that, as we are, they’re planning to be there long-term.”
This article appeared in the South China Morning Post print edition as: Chicago’s ‘Magnificent Mile’ shows retail resilience
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