It seems you cannot go a day without seeing a news article that another major retailer is exiting space. Most recently hearing of Macy’s leaving their 170,000 square foot Michigan Avenue Water Tower location that they have been in for 45 years really got me thinking….what happens now? Does the trend continue?
It seems that may hold true. In the Chicagoland market alone, we have seen large scale retail space continue to empty. Per Crain’s Chicago – on the Magnificent Mile alone retail vacancy rates were 10.5 percent as of late last year, up from 7.4 percent in 2019 and 6.5 percent in 2018, according to brokerage CBRE.
Best Buy, Forever 21, Express and GAP’s plan to shutter their flagship stores in 2021 are just a few that leave large holes in the Magnificent Mile’s stretch of retail offerings. So how do we keep this trend from progressing? Or is it inevitable?
More and more retail purchases are done through online shopping and, with a global pandemic, foot traffic has come to a halt. Retailers are having to reinvent themselves and navigate competition like Amazon. But what’s more concerning is what happens to those large vacant spaces. If you are in a suburban market, developers and property ownership groups have repurposed malls and strip malls into everything from distribution, multi-family, medical, entertainment districts and the list goes on.
I am curious what happens to what once, not so long ago, was a large tourist attraction. Do real estate groups try to fill these with entertainment venues? The market is ever changing, and one thing is for sure, it is not going to slow down.
With it not slowing down, it brings up another question. Is the building still insured properly? Do you understand the vacancy clause within your policy? Do you know excluded coverage for critical items? Make sure you have it reviewed and updated. An uncovered loss does not just affect your bottom line, it can have repercussions with future coverage and carrier selection.
I would be curious to hear from ownership groups on how you think this changes the landscape of not only the Magnificent Mile, but real estate leasing in general. Drop me an email at email@example.com or connect with me on LinkedIn. Would love to hear from you.
by Chris Jones