Chicago’s Magnificent Mile is no longer a sure bet for retail landlords

The boulevard has taken some steps in the right direction. Concepts including It’Sugar, Foxtrot, the Museum of Ice Cream and Aritzia have leased space on North Michigan Avenue in the past year.

But the shopping district, which extends from the Chicago River north to Oak Street, can’t count on retailers alone to fuel its comeback. In March, a panel formed by the Urban Land Institute released a 31-page report with recommendations on how to restore North Michigan Avenue’s vibrancy. Solutions included crime-control measures and new physical features, like a pedestrian bridge stretching to Oak Street Beach. Others see promise in filling empty retail space with experiential attractions, like “Prince: The Immersive Experience,” a show running at North Bridge.

The North Michigan Avenue market may also benefit from shrinking. The district has too much retail space, especially in buildings with multiple floors, says Kirsch. Retailers today are a lot choosier, favoring smaller, more-visible spaces on the ground floor. Space on the second floor or above is much harder to lease than it was.

“There’s almost zero demand for multilevel flagship retail,” Kirsch says.

That’s a problem at 830 N. Michigan, the empty four-story building across from Water Tower Place. Same goes for the building next door, at 840 N. Michigan. Swedish apparel chain H&M plans to close its four-story, 60,000-square-foot store in the building and find a smaller space nearby, leaving the property with just one tenant, Verizon, which occupies about 27,000 square feet.

The properties were worth a lot many years ago, when the market was stronger. The 117,000-square-foot Uniqlo building sold for $166 million in 2013, while a New York investor paid $144 million in 2014 for an 88% stake in 840 N. Michigan.

But they’re worth a lot less today, with so much empty space in a depressed market. That’s one reason they’re both logical redevelopment candidates. A developer might pay more today for either building—or even both of them—than they’re worth in their current state for the opportunity to raze them and build a mixed-use tower on the block. A future tower would almost certainly include retail space at its base, just less of it.

The owner of 830 N. Michigan, New York-based Brookfield Property Partners, has put the property up for sale, so it’s possible a developer could buy it with a plan to build a high-rise there. A Brookfield spokeswoman declined to comment. Executives at White Plains, NY-based Acadia Realty Trust, which owns 840 N. Michigan, did not respond to requests for comment.

Although the North Michigan Avenue retail market is struggling and the condominium market is soft, the downtown hotel market is recovering from the pandemic, and the Mag Mile is a popular tourist destination. A joint venture including Chicago developer Michael Reschke recently broke ground on a 388-room hotel at 150 E. Ontario St., just east of Michigan Avenue.

The downtown apartment market, meanwhile, is booming. The Mag Mile is a strong residential location, says Ron DeVries, senior managing director in the Chicago office of Integra Realty Resources, an appraisal and consulting firm.

“Everyone knows where Michigan Avenue is, so there’s some cachet with the address,” he says. “The boulevard is a really wide street, so it creates good spacing for views.”

But Chicago developer Jim Letchinger isn’t so sure. He thinks living on North Michigan Avenue has lost some of its appeal as the West Loop and other places have emerged as residential neighborhoods.

“The 25-year-olds, the 30-year-olds, they don’t want to be there,” he says. “I think it’s an uphill battle.”

It’s also unclear whether a developer could obtain zoning from the city to build a high-rise on a Michigan Avenue site. A tower would need to have an entrance on a side street to limit traffic congestion on the boulevard, developers say. And a big project could not move forward without the blessing of local Ald. Brendan Reilly, 42nd. He did not return multiple phone calls.

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