CHICAGO-The economic downturn has been especially difficult for both retailers and retail property owners along the State Street-Wabash Avenue Corridor. Yet, the days of high vacancy and dropping rental rates are numbered, according to Bruce Kaplan, senior vice president of CB Richard Ellis.
“I believe State Street has turned the corner,” Kaplan says. “It should be smooth sailing for the foreseeable future, starting in mid-2011.”
Kaplan recently spearheaded CBRE’s 2010 State Street-Wabash Avenue Corridor Retail Vacancy Survey, which reports on market conditions for the 12 month period ending October 31, 2010. The report cites a substantially higher overall vacancy rate and a larger drop in overall asking rent than reported in any previous year since the survey’s inception two decades ago.
“Fortunately, this report will likely mark the end of relatively high vacancy rate for State Street, as two large blocks of vacant space are reportedly close to being leased,” Kaplan says. “As Block 37 continues to steadily fill, and if the widely-reported negotiations with Target are finalized at Sullivan Center in the former Carson Pirie Scott space, the overall vacancy rate should be quite low by this time next year.”
With a total of 2.73 million square feet of retail space in the State-Wabash Retail Corridor, including 1.27 million square feet of department stores, and 1.47 million square feet of specialty stores, the retail vacancy rate for the corridor jumped to 12.9% from 7.7% the previous year and 1.3% in 2008.
The number represents the Corridor’s highest vacancy rate since the survey began in 1990. Until this report, the highest vacancy rate reported on the street was 9% in 2003.
The survey also found that the average asking rent decreased to $36.51 per square foot from $55.83 per square foot in 2009 and $59.47 in 2008.
Despite the overall dramatic rise in vacancy, net absorption was significant at 118,454 square feet, which is the third consecutive year of positive net absorption. The actual amount of vacant specialty store space is now over 353,661 square feet, according to the survey.
A large portion of the retail vacancy is in Sullivan Center, a 15-story, mixed-use historic landmark. Designed by renowned architect Louis Sullivan and built in 1898, the property contains more than 1 million square feet including 200,000 square feet of retail space and 740,000 square feet of office space.
Local developer Joseph Freed & Associates bought the building several years ago with plans to redevelop it. Formerly known as the Carson Pirie Scott, the historic property housed the department store for more than 100 years.
Recent reports indicate Target is negotiating with Freed & Associates to take the former Carson Pirie Scott space, although all parties involved have declined to comment. Local experts say the Minneapolis-based retailer has been trying to expand its presence within the Chicago Loop for some time.
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