Tourists have returned to downtown Chicago this summer, and anyone looking at the crowds in Millennium Park, the Riverwalk and the shops along Michigan Avenue might think the city’s pandemic crisis is over. But “For Rent” signs still cover many downtown storefronts, and office workers remain in short supply, meaning Loop’s retailers have fewer customers.
“Our customers are mostly people who work for financial institutions and law firms, and you don’t see a lot of our customers anymore, guys who are walking around with briefcases,” said Scott Shapiro, the owner of Syd Jerome, a luxury menswear store in the Central Loop. “There are really a lot of young people in khakis.”
The advent of COVID-19 vaccines sparked pent-up demand, helping shopkeepers rent new space across the metropolitan area. But downtown, the pandemic has highlighted the importance of one ingredient: the office worker. While a spring and summer rush of tourists has boosted foot traffic in many shopping districts, the Loop is lagging behind, and street-level businesses could continue to suffer until more businesses call people back to the office.
But all of its empty storefronts could also offer opportunities for the Loop, according to retail experts. New businesses could liven up downtown and help workers leave their cozy home offices, especially if landlords turn to independent, local and creative businesses rather than just national chain stores. It would also make downtown more attractive to others, like the thousands of students and apartment dwellers who have moved in over the past decade.
“You don’t have to be an executive to enjoy the Loop,” Michael Edwards, CEO of the Chicago Loop Alliance, told an advocacy group. “Downtown isn’t just a business district anymore.”
Don Flesch’s central camera has been a mainstay of Loop for photography enthusiasts since the late 19th century. It has been hit hard by the turbulence of the past two years. The store was looted and torched after the killing of George Floyd by a Minneapolis police officer in May 2020, but reopened this year in its familiar location at 230 S. Wabash Ave. It’s a big change from 2019.
“Three years ago, there was thriving activity outside our door with traffic and honking,” he said.
Today’s relatively quiet streets mean the store has limited hours four days a week, and on some days the store accounts for just 50% of pre-pandemic sales. But the 74-year-old, whose grandfather founded Central Camera in 1899, said he wasn’t worried.
Office workers are gradually flocking back, bringing back some old customers, and Flesch decided to introduce new services, such as B. Providing one-hour photo development to attract new customers. Most importantly, he’s looking forward to the fall when photography students from local schools like Columbia College, DePaul University and others flock in in search of new gear and supplies.
“The office workers are not going to come back 100%,” he said. “But we think we’re going to have a big month as universities get back into full swing.”
John Vance, a director at Stone Real Estate Corp., said many downtown retailers are in a similar situation, seeing enough business from tourists and the few office workers who have returned to keep afloat, and at one look decline. But few are willing to pull the trigger on new leases.
“There’s very little leasing velocity in the loop,” Vance said. “You can feel the energy on Michigan Avenue and State Street on either side of the river, but unfortunately, while many[retailers]are looking to expand, the modest recovery we’ve seen hasn’t lasted long enough to help them.” make that decision.”
According to a 2022 report by Stone Real Estate, a third of downtown’s 1,369 storefronts are vacant, and the overall vacancy rate has nearly doubled from three years ago.
Foot traffic equals customers, and retail neighborhoods that don’t depend on office workers perform better, according to Placer.ai, a data analytics firm that tracks mobile devices. Traffic in Old Town, Lincoln Park and Fulton Market was down less than 10% in June from the same month three years ago, while the Loop was down 27%.
And this summer, too, bad news arrived downtown.
Old Navy said this month it would exit its 32,000-square-foot store at 150 N. State St. formerly occupied by Borders Books, leaving another big hole in the retail market.
Still, the retail market is through the worst of the crisis, and some businesses appear willing to take a risk on State Street, Edwards said. British sporting goods outlet JD Sports signed a lease earlier this year to take over a space once occupied by Forever 21 at 10 S. State St. Several outlets agreed to occupy space in Block 37 and the Late summer discounter Five Below will occupy Blick Art Materials, which will move to 16 W. Randolph St., will take over the store at 36 S. State St.
“We don’t want to exaggerate the size of these leases, but people are buying in and things are a lot better than before,” Edwards said.
Other locations with improved retail leasing activity, according to Vance, include the Willis Tower in the West Loop, where owner EQ Office just completed a $500 million renovation and added a five-story retail center called Catalog, and the Michigan Avenue section in near Millennium Park.
He attributes Willis’ solid performance to the sheer size of the 110-story building, which ensures a large customer base even with a small percentage of office workers coming to work each day. And Millennium Park attracts a critical mass of tourists, workers, residents and hotel guests who support the surrounding retail community.
Of greater concern is the future of the LaSalle Street and Wacker Drive corridor between Clark Street and the Chicago River, which depends primarily on office workers, Vance added. Losing so many customers has been a pain for local businesses, and the corridor’s vacancy rate soared to 35.6% this year, the highest Stone Real Estate has ever recorded for a retail district.
Many of Syd Jerome’s clients, now at 20 N. Clark St., are still working from home, Shapiro said, particularly attorneys who now handle routine court appointments and even court proceedings via Zoom. That’s reflected in sales, which have fallen 30% to 40% in several months this year and up to 60% in the summer, usually a slow time for upscale menswear.
“There’s no one coming in and buying something on the spur of the moment,” Shapiro said. “The good thing about our customers is that they usually have a lot of money, but now instead of buying new suits, they’re buying third-party homes in Palm Beach.”
Shapiro knows owners of similar businesses in the suburbs or even across the Chicago River who aren’t as dependent on clerical workers, and their businesses seem to have revived.
“It’s like another country,” he said.
But while much of Loop retail is still struggling, Shapiro said Syd Jerome will persevere. His father opened the store in 1958, and since then it’s weathered recessions, multiple robberies, a broken window during the civil unrest of 2020, and the long walk back from pandemic shutdowns even as several local competitors shut down permanently. He now hopes that after Labor Day the office workers will return in large numbers and the store will be ready.
“Being a retailer means being an optimist, so I’ve always made sure we have stock and we’ve kept our tailors employed,” he said. “There will be a return to the office, and people will start dressing better.”
Vance said the new Loop retail store could play a role in bringing workers back downtown, but landlords trying to fill the Loop’s empty storefronts might want to look west to Fulton Market for inspiration to let. Rather than a retail offering from national retailers, the west of the Loop neighborhood, which is now filling up with new office and residential developments, includes a mix of local and independent shops, particularly on Madison Street between Halsted and Racine streets.
Outlets like Tribeca Boutique, a women’s clothing store at 1035 W. Madison, The Fig Tree, a gift boutique next door, and Blowout Junkie, a hair salon two blocks west, are all local retailers, Vance said, making variety lacking in much of the loop.
Damone Richardson, West Loop resident and president of the West Loop Community Organization, said he agrees. He no longer finds downtown areas like Michigan Avenue as attractive as he used to, and frequents the shops along Madison more frequently.
“It’s an opportunity to connect with local owners and find unique products that you can’t find in big department stores or chain stores,” he said.
Edwards said there are already new retail concepts downtown. Outlets like The Color Factory, an interactive art museum in the Willis Tower, the Medieval Torture Museum at 177 N. State St. next to the Chicago Theater, and the Museum of Illusions at 25 E. Washington St. offer experiences rather than just selling things.
The University of Chicago Booth School of Business dreamed up arguably the most unusual concept last summer when it opened Mindworks, a space dedicated to behavioral economics, in the Railway Exchange Building across from the Art Institute. Not only can visitors see exhibits on the discipline that studies how people make decisions, they can also participate in research being conducted on-site by university scientists and graduate students, sometimes as simple as predicting a series of coin tosses.
According to Mark Temelko, a spokesman for the Booth School of Business, Mindworks attracted more than 10,000 visitors in its first year, and nearly two-thirds volunteered to attend research sessions.
“We want to bring the behavioral sciences out of the ivory tower and into people’s everyday life experience,” he said. “It’s a remarkably simple idea.”
Edwards said such ideas would help the downtown retail market eventually recover. But it will take, at least until 2024, when office workers return and property managers try to find the right tenant mix.
“We’ll need another year and a half,” he said.