Loop Report,
"The Loop has two main geographic anchors to support retail," Allen Joffe, principle of the Baum Realty Group, tells GSR. "In the west, there's a lot of corporate headquarters, many of which locate there to be near the commuter train stations. To the east, there's the new Millennium Park, which is a huge draw. There are also a lot of people moving into the Lake Shore East development on that side of the Loop."
Compiled annually by Baum Realty Group, the Loop Report is an analysis of the Chicago CBD retail real estate market—roughly 106 blocks bounded on the north by Wacker Drive, on the east by Michigan Ave., on the south by Van Buren St. and on the west by the Kennedy Expressway between Lake Street on the north and Van Buren on the south. The report's definition was expanded westward in 2001 to reflect the commercial and residential development activity flourishing west of the Chicago River to Halsted Street.
"Nearly double the usual number of deals were completed and opened here last year," says Joffe. "Accounting for two-thirds of the transactions were banking institutions, restaurants and convenience stores. Larger space users also took greater interest in the area."
In spite of the increase in leasing activity, the Loop's overall retail vacancy rate still increased one percentage point over the previous year to end 2004 at 16.67%, according to the report, which attributes the increase to the economy's uneven pacing, and a significant amount of retail space added to the market in buildings such as the Heritage at Millennium Park, 180 N. Jefferson St., the new ABN-AMRO office tower at 550 W. Madison and the Chicago Transit Authority's new corporate headquarters at 567 W. Lake St.
The Loop continues to be a strong market for the food-service sector. In 2004, the greatest volume of transactions, 41.67%, was food-related: coffee, fast food and full-service restaurants. The largest downward shift in leasing activity was in the banking/finance sector, where velocity decreased 15.7 percent points from 2003 to 16.67% last year. "Retail banking has been on a roll in the Chicago area for a few years," notes Joffe, whose firm represents Washington Mutual in the market. "In 2003, at the height of the movement for increased bank branch locations, the Loop saw a record level of leasing activity in this sector. Last year's pace shows the trend slowing, as banks and financial institutions meet expansion needs."
Some Loop submarkets are particularly strong, such as State Street. "The State Street renaissance is for real," Joffe tells GSR. "The redevelopment of Block 37 is finally going to happen, and that'll give State Street yet another push." Block 37 is a vacant city block along State whose redevelopment has been in the works for more than a decade, with various developers involved; Mills Development Corp. is slated to begin work on a mixed-use project there this year. Also coming soon to State and its vicinity are a new 98-room hotel at the redevelopment of 202 S. State St.; a new live studio for TV and radio broadcasts (by Chicago's ABC affiliate) at 190 N. State; and a 39-story condo development at 151 N. State with 22,000 sf of retail space and the Gap as the anchor tenant. The Page Brothers building at 177 N. State may have a multistory restaurant in redevelopment plans if the owner of the Chicago Theater is successful in acquiring the property.
Elsewhere in the downtown market, Joffe believes that the new Trump Tower, which will soon rise on the Chicago River near Michigan Ave., will have a positive impact on retail leasing and development. "It'll be interesting what happens around Trump's development," he tells GSR. "A lot of the buyers there are wealthy individuals from Europe and the Far East, many of whom will establish second residences there. Their presence could help generate some interesting retail activity."
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