Chicago’s Retail Forecast Is Looking Sunnier As Pandemic Clouds Lift

A new report predicts mostly good times ahead for downtown Chicago retail after the city hit a lower vacancy rate than even before the health crisis.

The recovery is being led by the Gold Coast submarket, where space availability fell 200 basis points below the pre-pandemic norm, according to Marcus & Millichap. Vacancies in the Fulton Market-West Loop and Logan Square-Irving Park areas also bested 2019 levels following a surge of demand at the beginning of the year.

Net absorption is set to exceed 2M SF this year, the report said, marking the second straight year it has crossed that threshold, while vacancy is expected to fall to 6.3% by year’s end — the lowest percentage of available retail space in the metro since 2018.

The upturn is being reflected in increased investment volume. Sales activity is up 70% for the four quarters leading up to April. Multitenant trades more than doubled over roughly the same period.

Not all areas of the city are seeing such vast improvements, however. The city’s Magnificent Mile, River North and Loop areas continue to struggle by comparison, which the report attributed to fewer workers regularly coming into the office. Keyless card entry firm Kastle Systems’ Back To Work Barometer showed 40% of Chicagoans had returned to the office the week ending May 25, a 12-week high.

“These areas are likely to see sharp improvements by year-end, however, given CBD foot traffic is at its highest volume since before the health crisis,” the report noted, adding that River North, for example, had already recorded a year-over-year 210-basis-point vacancy drop in March.

Suburban retail markets are also seeing a surge in absorption and lower vacancy, with the Central Northwest submarket, which includes Buffalo Grove and Round Lake, recording the strongest net absorption and a vacancy rate sitting 200 basis points below the Chicago suburban average.

Retail’s improved fortunes in the Chicago metro are mirrored by sales figures showing consumer spending jumped almost 29% in 2021 over the previous year, ringing in at $152.5B. Inflation could cut into consumer appetites this year, Crain’s reported, although a report from Melaniphy & Associates predicts sales growth of 6% to 8% this year.

Foot traffic is also on the rise. A JLL report released late last month indicated Fulton Market saw 73.5% more visitors from January to April 2022 than one year earlier. For Michigan Avenue, foot traffic was up almost 55%.