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Discussion Starter · #1 ·
Recovery may bring new wave of development

By Thomas A. Corfman
Tribune staff reporter
Published April 20, 2005


The market for retail space along the Magnificent Mile is improving slightly after a two-year funk.

The vacancy rate for smaller, specialty store space on North Michigan Avenue edged down to 6.9 percent from a year ago, when it reached 7.1 percent, the highest level since 1999, according to the annual survey by Northern Realty Group Ltd. And rents are rising again, after falling last year to their lowest level in more than a decade.

This modest recovery may set the stage for a new period of leasing and development on Chicago's premier shopping strip. A new wave of European merchants is looking for space, and some existing Michigan Avenue retailers are dropping plans to cut back.

The street is likely to see construction of at least one new luxury high-rise. And even the troubled vertical mall, Chicago Place, is under new, more aggressive ownership.

"We've had the war, we've had the recession, we've had high oil prices," said Michael Shields, an executive vice president with Northern Realty. "I don't see anything beyond that trilogy that's going to have any impact as large as those."

Yet several factors could complicate the street's rebound. Retailers could slow expansion plans amid economic indicators showing that slowly rising interest rates and skyrocketing gas prices are forcing consumers to cut back spending. And the lineup of anchor retailers could change in the midst of unprecedented consolidation in the department store sector, creating the possibility of a large vacancy.

Nonetheless, Michigan Avenue's vacancy rate has apparently topped out, though the street's biggest shakeup could follow Federated Department Stores Inc.'s acquisition later this year of May Department Stores Co. The deal would give Cincinnati-based Federated control over Lord & Taylor and Marshall Field's at Water Tower Place, 835 N. Michigan Ave. It already operates Bloomingdale's at 900 N. Michigan Ave.

Some observers think that's one store too many. Adding to the uncertainty, rivals such as Neiman Marcus Group Inc. and Saks Inc. are both exploring strategic alternatives.

"This is a degree of turmoil that no one has ever seen in department stores before, so I am not sure if anybody knows how to interpret it," Shields said.

When Michigan Avenue's fully leased department stores are included, the vacancy rate slipped 1 percentage point, to 4.3 percent, over the last 12 months. In 2002, the total vacancy rate was just 1 percent.

The Northern Realty survey includes buildings on North Michigan Avenue from Oak Street to the Chicago River. Only retail space with a street entrance or escalator access to the street level is included.

A department store's defection could present an opportunity for new merchants. High-end European retailers traditionally make Chicago their third or fourth choice for U.S. expansion, after New York, Los Angeles and perhaps Miami. But Michigan Avenue has moved up in the pecking order, some retail real estate specialists say.

"After New York, Chicago is the next stop for the Euros now," said Faith Hope Consolo, chairman of the retail division at New York's Prudential Douglas Elliman Real Estate.

For example, representatives of Zara, a moderately priced fashion chain owned by Spain's Inditex Group, have recently been scouting Michigan Avenue for space for a new furnishings concept called Zara Home. The chain has 16 apparel stores in the U.S., though none in the Chicago area.

At least one new luxury development could be started this year on Michigan Avenue, as the Fourth Presbyterian Church seeks zoning approval for a condominium development on a site behind the historic church.

Although that project would not include retail space, the Terra Foundation for the Arts is evaluating proposals from several developers for a high-rise or midrise building that would replace the shuttered museum at 664 N. Michigan Ave.

Among those who have made proposals is Chicago-based Prism Development Co., confirmed Donald Ratner, the foundation's executive vice president. Prism's plans do not include a hotel, he added.

Sometime this summer, Terra expects to either reach an agreement with a developer or decide to conduct its own redevelopment, which would add about 40,000 square feet of space on four levels.

Strategic Hotel Capital Inc. is also considering a retail redevelopment of the InterContinental Chicago hotel, 505 N. Michigan Ave., which it purchased earlier this month. But Wm. Wrigley Jr. Co. has seemingly dropped plans to add a shopping plaza to the street level of its namesake building.

Although street-level stores can command rents of more than $300 a square foot, difficulties in renting out upper-floor space helped drag the average rent down.

Landlords have raised average asking rents 7 percent, to $37.28 a square foot, compared with a year ago, when rents hit their lowest level since 1993. Average asking rents were $128.42 a square foot in 2001, the highest level since Northern began the survey in 1991.

But in a hopeful sign, several Michigan Avenue retailers that a year ago were quietly marketing some or all of their space have stopped doing so, and now apparently plan to fully use their space. They include fashion house Escada AG, 840 N. Michigan Ave.; computer superstore CompUSA Inc., 101 E. Chicago Ave.; and clothier Eddie Bauer, 600 N. Michigan Ave.

Demand for retail space, as measured by net absorption, rose for the first time since 2002.

Net absorption, the annual change in the amount of leased and occupied space, is nearly 5,500 square feet this year, compared with a negative 10,300 square feet in 2004, the study found.

Of the 141,025 square feet of vacant retail space, less than 10 percent is on the street, a sign of the challenges that some vertical-mall landlords face.

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so what kind european retailers do you expect to see? its not an upscale european retailer but i would like to see a celio they don't have a single store this side of the pond, if we could land the first one i think that would be awesome.
 

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My concern, which is mentioned in the article as well, is that consolidation in the department store sector is going to lead to one of the big stores on North Michigan closing. Now that Federated owns Fields, Bloomingdales and Lord & Taylor, something's gotta give, and methinks it will be Lord & Taylor, since it's the least potent name of the three. That would leave a pretty gaping hole that would be very difficult to fill. I'm guessing that they wouldn't even try to put retail above the second floor if that happened, and just turn the upper floors into a boutique hotel or something.
 

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Discussion Starter · #3 ·
could they change the lay out to fit it smaller boutique store or is that to costly? do you think they could land a major european department store in there?
 

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They could easily change the layout to make the whole L&T store an extension of the mall portion of Water Tower Place. But I don't think any developer is looking to add retail space on Michigan Ave area that's above the 2nd floor and/or lacks an entrance from the street. There are big vacancies on the upper floors of Chicago Place and 900 N. Mich. already.

European department store? Well, I guess anything's possible. But can you name any European department stores currently doing business in the U.S.? I suppose it would be a good location for a 3-4 story flagship store for a specialty retailer like Pottery Barn or Barnes & Noble.
 

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Discussion Starter · #5 ·
yea i get your point... but we could be the first to get a Euro department store.... ok maybe not. what about an ikea? there's still only one in schaumburg right? i think a flag ship ikea on north michigan would work.
 

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IKEA is opening its second Chicago store in Bolingbrook. I'm sure you heard that before selecting that location, they were looking at locations near the Kennedy Expressway, as well as the south Loop. The city rejected the Kennedy location because of traffic concerns and IKEA rejected the south Loop location. I don't think IKEA was holding out for a Michigan Ave location. A Michigan Avenue store would get lots of foot traffic, but pick-ups/deliveries from there would be a nightmare.
 

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What's happening:

Intersection of Van Buren & Wabash. They are tearing the Parking Garage down
Between Wells & Franklin on Washington (southside) they are tearing down the Parking Garage.

Any ideas?
 

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2 parking garages getting torn down? awesome! the one on wabash & van buren is shit ugly too... glad its goin. hopefully they will be replaced by some nice new residential towers.
 

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Does anyone know how well Saks does at Chgo Pl? Frankly it surprised me when the men's store openned across the street; they're apparently doing better than I thought.

You'd think somebody could turn it around. With Nordstrom and North Bridge developed, Chicago Place no longer was alone in the middle of the Mag Mile. It's now pretty steady traffic from North Bridge to 900; you'd think that would help Chgo Place. One thing I do like a lot is their food court up on top, all glassed it.
 

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Chicago3rd said:
What's happening:

Intersection of Van Buren & Wabash. They are tearing the Parking Garage down
Between Wells & Franklin on Washington (southside) they are tearing down the Parking Garage.

Any ideas?
No clue, but I wish they'd hurry up, I've been listening to them dismantle it with jackhammers for the past three weeks while I've been at work.
 

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I thought Chicago Place was a lot better off than it apparently is. Anyone have hard numbers on this vertical mall?
 

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Discussion Starter · #12 ·
Gap Inc. Names New Store Concept

By ANNE D'INNOCENZIO
AP Business Writer
Published April 22, 2005, 3:40 AM CDT


NEW YORK -- Gap Inc.'s new store concept catering to the over-35 woman now has a name and a launch date, company officials say.

Forth & Towne, announced last September, will start this fall with four stores in the Chicago area and one in New York, company officials said Thursday at investors' annual meeting.

Forth & Towne -- Gap's first new chain in a decade -- aims to appeal to boomer women, who grew up with Gap, but with whom the store "lost touch," said Paul Pressler, president and chief executive at a meeting in San Francisco, which was broadcast on the Web.

With the over-35 group accounting for 39 percent of women's total apparel expenditures, this market represents a "sizable opportunity" for Gap, whose sales have been wavering, although profits have improved, boosted in part by cost-cutting.

Pressler told investors that the company -- which operates stores under its namesake brand, Old Navy and Banana Republic -- will unveil more details about the clothing this summer. But he said the new store will offer a broad range of sizes, with a focus on fit, and assortments that serve a variety of occasions. The clothing will be priced between Gap and Banana Republic, he said.

Pressler told investors that this group has been shopping more at department stores, though they didn't necessarily prefer that channel.

The test stores will range from 8,000 square feet to 10,000 square feet. Pressler noted the company created an address with the name "Forth" and wanted to evoke a sense of place with the word "Towne." Fitting rooms will be at the center of the store, with "neighborhoods" of merchandise around them, he said.

The retailer aims to add at least 50 additional stores in the United Kingdom, France and Japan through 2007, and begin exploring the Chinese market in 2006.

The company said it hired Stephen Sunnucks as president of Europe for Gap Inc. International, a new position. Sunnucks, 47, spent four years as chief executive of New Look, a fashion retailer with 700 stores in the United Kingdom, Ireland and France.

Gap said it will also open 200 new Old Navy stores through 2007, and extend its Banana Republic brand through jewelry, handbags, personal care products and petites.
 

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simulcra said:
I thought Chicago Place was a lot better off than it apparently is. Anyone have hard numbers on this vertical mall?
No hard numbers but first there was the perception that no one knew there was a mall there. That is why they redid the entrance opening it up more and lowering the Chicago Place sign and slimmed the lower portion of the columns insides....so it wouldn't be so cavernous.

But that worst thing to happend to Chicago Place was the couple of floors that became vacant when ROOM & BOARD moved to the old Disney Quest Building.
 
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