Chicago Neighborhoods Experience Flurry of Positive Signs for Retail

by Kristin Harlow

By Jaime Bertsche and Lara Keene, Mid-America Real Estate

Positive signs for retail real estate abound across many Chicago neighborhoods and high streets, with physical stores demonstrating their necessity coming out of the pandemic.

Both of us live and work in the city of Chicago, so it’s particularly heartening to see favorable trends and leasing activity throughout our city of neighborhoods.

It may surprise some to know that Chicago has been No. 1 in corporate expansions for the last nine years, with 441 major business expansions and relocations in 2021. Chicago employment has grown by 75,000 since the start of 2022 and ranks third in the U.S., according to World Business Chicago. 

Jaime Bertsche, Mid-America Real Estate

Google is investing in the city and purchased the 17-story, 1.2 million-square-foot Thompson Center in the Loop with plans to use the building as a second Chicago headquarters. Kellogg announced it will move a spinoff company to Chicago for a new headquarters in the city.  

Some of the economic changes we saw in the market in the second half of last year affected retailers’ expansion plans. Inflation and interest rates challenged retailers to maintain their customer base, keep their own costs in line, and adapt to higher construction costs.  

Despite these concerns, we’ve seen continued deal-making velocity, in some cases unprecedented rents and some neighborhoods livelier than since before the Great Recession.

Lara Keene, Mid-America Real Estate

Given the lack of new retail construction, we’re continuing to see existing space being absorbed and landlords redeveloping existing shopping centers and buildings.  

Urban retail trends

The evidence varies throughout the city, but these retail trends are apparent across the board:

• Continued growth of digitally native brands such as Brooklinen, which opened its first Chicago location in the West Loop; Glossier, which opened in the Gold Coast along with Todd Snyder; and Buck Mason, which opened on Armitage in Lincoln Park;

• Continued rise of luxury brands, including Celine, Akris, Amiri and Loewe, which all opened new locations in the Gold Coast;

• Gen Z’s influence on shopping, including a preference for concepts that emphasize sustainability, such as Patagonia, Reformation and Madewell; 

• Rightsizing and relocations, including by H&M, which downsized and relocated on Michigan Avenue, and Barnes & Noble, which rightsized to 8,000 square feet;

• Increased focus on health and well-being, including beauty and fitness concepts like Face Foundrie, Ever/Body and OVME;

• Pop-up and short-term deals and renewals, including Coach and Hoka on Michigan Avenue;

• Local food and beverage regaining momentum, with groups such as Lettuce Entertain You, Boka and Dineamic expanding with new restaurant concepts throughout the city;

• Rise of veterinary concepts such as Bond Vet, Small Door Vet and GoodVets;

• Entertainment-based retail, including indoor golf concepts such as X Golf, The Green and Big Mini Putt and various local/independent pickleball concepts. 

Key trade areas rising

Our teams are active all over the city of Chicago and suburbs, but here’s a quick look at some key urban trade areas:

Gold Coast: By some measures, the level of deal-making is unprecedented, with record-breaking rental rates and tenant-improvement allowances. Luxury was a bright spot during the pandemic and continues to be hot especially on Oak, Rush and Walton streets. 

West Loop/Fulton Market: As the most active submarket for office, residential, hospitality and retail, absorption continues to push the trade area west creating upward pressure on base rents.

Southport Corridor: There’s continued strong tenant demand on this Central Lakeview retail and restaurant corridor given the sales volumes, despite no vacancy.

Bucktown/Wicker Park: Recent deals demonstrate the area’s momentum, including the opening of Supreme’s Chicago flagship on Milwaukee Avenue. 

Armitage & Halsted: The Armitage Corridor continues to be a hub for digitally native and forward-thinking brands with new tenants such as Todd Snyder, Faherty and Jenni Kayne. The Halsted Corridor is finally seeing new deals, most notably from the medspa category (Laser Away and The Now Massage) after many years of unprecedented vacancy.  

Magnificent Mile: Leasing momentum has picked up on Michigan Avenue with recent signings by Aritizia and Alo Yoga. Landlords are more open to creative options and alternative uses, including entertainment and experiential concepts. 

South Loop: Anchor opportunities are available as multi-level centers remain challenged, but tenant interest is rising and creative deals are being structured along with several renewals.

The Loop: While still the slowest area for recovery, there are encouraging signs as the return to the office continues. On State Street, Saks Off Fifth has reopened, Dick Blick relocated and rightsized, and JD Sports opened its first Chicago location. The future bodes well with Google’s planned redevelopment of a former state office building, which will bring thousands of employees downtown.

Jaime Bertsche is a vice president and Lara Keene is a principal and senior vice president with Mid-America Real Estate. This article originally appeared in the June 2023 issue of Heartland Real Estate Business magazines.

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