Revelers attending holiday events downtown may notice a novel set of stores and attractions popping up along the Magnificent Mile.
There aren’t enough of these new tenants to fill the many vacant storefronts along North Michigan Avenue. But by offering shoppers fresh options, including handcrafted goods from Mexico, luxury apparel from outlets that were until recently only found online, or a chance to follow Harry Potter to Hogwarts, landlords are trying to remake a street still reeling from COVID-19, competition from e-commerce and the loss of many top retailers.
“We love that our store surprises people,” said Gabriel Neely-Streit of Colores Mexicanos, a gift shop that opened last year on Black Friday at 605 N. Michigan Ave. “Customers ask us all the time, ‘how did we get here?’ “
Just a few years ago sisters Leti and Erika Espinosa, along with their partner Neely-Streit, were selling at street markets and summer festivals the artisanal goods, including textiles and ceramics, they discovered while traveling in Mexico. Establishing a store in the city’s premier retail district, home to luxury retailers such as Burberry and Louis Vuitton, lets thousands of shoppers experience this aspect of Mexico, something difficult to find in the U.S., according to Erika Espinosa.
“We feel like we’re giving two big contributions to the avenue,” she said. “One, we are showing the real cultural weight of Mexico, and two, we are helping bring in tourists and keep up traffic in the area.”
The sparks of energy provided by new concepts like Colores Mexicanos are just what the Magnificent Mile needs, according to JLL Managing Director Peter Caruso, a broker who represents Michigan Avenue landlords. The long list of stores that exited or will soon exit the street includes Macy’s, Banana Republic, Best Buy and The Gap, all of which sell goods commonly found in average suburban malls, he said. That’s an unworkable strategy on the Magnificent Mile, which needs to attract customers from across the Chicago region.
“There is no more exclusivity to Michigan Avenue, and that was its draw,” he added. “The onus is on retailers to get more creative.”
But it will take years for the Magnificent Mile to recover. E-commerce and changing consumer buying habits battered the street years before COVID-19 pushed its vacancy rate to a historic high. Even today, after the return of many tourists and shoppers, more than 900,000 of the 3.2 million square feet on the Mag Mile is available, nearly double the vacancy rate before the pandemic, according to Cushman & Wakefield.
Other key retail districts have recovered from the COVID-19 downturn, Caruso said. The work-from-home strategy adopted during the pandemic led consumers to buy nearly everything close to home, giving a jolt to suburban retail properties, where tenants have filled long-vacant stores.
“We’ve had stuff that sat vacant for five or six years that is now fully leased,” Caruso said.
As of July, visitor traffic to suburban retailers was up 16.6% over pre-pandemic levels, according to a September report from Cushman & Wakefield. And suburban retailers leased another 4.1 million square feet during the first half of this year, a 36.3% year-over-year increase.
But while the Magnificent Mile is stuck in the doldrums, it’s hardly alone. Other key Chicago markets were hurt even worse by COVID-19, including the Central Loop, River North and West Loop, all areas where more than one-third of the retail spaces are available, according to Cushman & Wakefield. And the nation’s other top retail markets, or “high streets,” such as 5th Avenue in Manhattan, are also struggling to attract new tenants and visitors.
“I think of North Michigan Avenue as a comparable market to 5th Avenue,” said Cushman & Wakefield Executive Managing Director Gregory Kirsch. “And between the two it’s an almost statistical dead heat in terms of vacancy. This is a high street problem.”
Kirsch added that there’s no reason to despair. It took seven years for the Magnificent Mile to fully recover from the Great Recession of 2009, and the blocks between Oak Street on the north and the Chicago River to the south attract around 55,000 people per day, more than any suburban mall. Still, COVID-19 was worse than 2009.
“The market will recover,” Kirsch said. “But it’s a seven-year recovery cycle at minimum.”
Holiday shopping on the Mag Mile will most likely look a lot different by then, he added. The district returned to health after the Great Recession by attracting flagship retail operations needing 30,000 to 40,000 square feet on several floors, but few remain. Instead, the street will see a host of smaller stores in the future.
“That’s all part of the evolution of retail,” he said.
Jewelry designer Swarovski recently closed its outlets along North Michigan Avenue, including one in Water Tower Place, Kirsch pointed out, but this summer signed a deal to occupy 1,700 square feet on the first floor of 636 N. Michigan Ave., a former Rolex store.
“That’s a good example of a retailer that downsized, but eventually decided to stay,” he said.
Another source of tenants is likely to come from retailers that began life online, but now realize establishing bricks-and-mortar stores in high-profile locations is a great way to advertise and build their brands.
“The Magnificent Mile is one of the best locations in the country to hang out your shingle and attract new customers,” said Andrew Codispoti, co-CEO of Goodlife, a high-end store selling jackets, shirts and other accessories.
The online retailer opened its first physical store in 2019 on Manhattan’s Bleecker Street, he said, and in spring 2022 made the jump to Chicago, opening a 1,300-square-foot store in The Shops at North Bridge, an indoor mall at 520 N. Michigan Ave.
“A store this size is our sweet spot,” Codispoti said.
Goodlife’s T-shirts typically cost $60 to $68, so a steady stream of customers means the company can afford high street rents, he added. Establishing bricks-and-mortar locations became even more important in 2021, when the cost of digital advertising soared.
“Acquiring new customers online isn’t cheap, you spend a lot of money on the various digital channels including Facebook,” he said. “But in our stores, we get a lot of eyeballs, and if someone walks in, and starts looking at and feeling the products, we’ve got a great chance of converting them to a regular customer.”
The Shops at North Bridge also rents space to several other “digitally-native” brands, including Frank and Oak and True Classic Tees.
Some Goodlife products are for sale at Nordstrom, but customers at Goodlife’s own stores can buy a much broader range of items, Codispoti said.
Providing such variety is what high streets need most of all, according to Caruso.
“I think that the Magnificent Mile just feels tired, and it feels tired because retailers haven’t changed in two decades,” he said. “We’ve got to figure out what the 21st century looks like.”
The Chicago Department of Planning and Development and The Magnificent Mile Association, a nonprofit business group, have also said the blocks between Oak Street and the Chicago River need a refresh. Last year they asked the Urban Land Institute to convene a panel of experts and come up with ideas. And in a 2022 report the Urban Land Institute envisioned North Michigan Avenue becoming more like the Champs de Élysées in Paris, with a pedestrian bridge linking the street with Oak Street Beach, new pocket plazas and sidewalk cafes, and a grand public common stretching from the historic Water Tower complex to Lake Shore Drive.
Caruso said he sees some interesting experiments. Canada Goose at 800 N. Michigan Ave. gives customers the opportunity to try on garments in its “cold room,” a freezer that mimics Arctic conditions, so they can make sure their new parkas will provide enough comfort.
“I don’t think it takes a whole lot for retailers to be different,” he said.
Caruso also praises the Starbucks Reserve Roastery, the world’s largest Starbucks, which opened just before Thanksgiving 2019 in the old flagship Crate & Barrel store at 646 N. Michigan Ave. The five-floor, 35,000 square-foot location does more than offer cups of coffee. Starbucks showcases its coffees, the company’s history, as well as the roasting process, and offers a unique menu featuring local drinks.
“They’re doing what all retailers should be doing,” Caruso said. “They’re showing customers something they can’t get anywhere else.”
Vancouver-based Aritzia is another good example, he added. The women’s fashion boutique gave the district a much-needed boost when it agreed last summer to lease 49,000 square feet at 555 N. Michigan Ave., the former home of The Gap. It was the largest retail lease on the Magnificent Mile since 2015, according to CoStar. The new store will open in 2023, and although Aritzia already has a smaller Gold Coast location, Caruso said the bigger boutique should still draw crowds.
“Aritzia only has a couple of stores in the entire market, so they haven’t over-retailed themselves,” he said. “They don’t have 20 stores in all the malls.”
The Espinosas and Neely-Streit said Colores Mexicanos offers goods hard to find anywhere but Mexico. Their store now supports about 50 Mexican families that hand produce rainbow-colored blouses, huipiles and dresses, as well as jewelry and other embroidered items.
“There are a small number of people who carry on these traditions,” Neely-Streit said.
The trio established their first store last year when a small spot opened in a city-owned property on the Riverwalk. After operating there for five months, the Magnificent Mile Association, along with several city agencies, helped them move to the much bigger space on North Michigan Avenue, the former location of Roots, a Canadian outdoor apparel outlet shuttered when Roots USA Corp. filed for bankruptcy in 2020.
Colores Mexicanos was only supposed to be there for one holiday season, but with so many customers, the partners said they decided to stay.
“The store has grown our business tremendously, and it’s allowed us to double the number of families involved,” Neely-Streit said.
Like an increasing number of retailers, Colores Mexicanos does more than sell goods. The store hosts musical performances, Day of the Dead parties and traditional painting demonstrations. Property owners all along North Michigan Avenue are renting out former retail spaces to performance groups, cultural institutions, and specialty museums, a strategy that fills vacancies and brings in some variety.
The Shops at North Bridge this year presented Prince: The Immersive Experience, an interactive showcase of the singer’s life and work, while the former Tribune Tower at 435 N. Michigan Ave. now hosts the Museum of Ice Cream, and in November, Harry Potter: Magic at Play, another interactive exhibition, took over 30,000 square feet on three floors in Water Tower Place.
All the new cultural activity does bring energy you can’t find in a suburban mall, Kirsch said, but in the long run, it won’t be enough to fully revive the Magnificent Mile. There is just too much vacancy, and these tenants typically pay less rent than retailers selling apparel or other luxury goods.
Perhaps the most useful strategy would be to shrink the amount of retail space, he added. There are five or six sites now occupied by low-rise buildings, including 830 N. Michigan Ave., a 117,000-square-foot property owned by Brookfield Properties, that could over the next 10 years be replaced with apartment towers of 50 or 60 stories. That would cut down on vacancy and bring in thousands of new residents ready to shop.
“A lot of these sites are so expensive that what makes the most sense is to go vertical,” Kirsch said.
Espinosa and Neely-Streit said their rental rate is likely lower than a traditional retailer, so it’s possible they will have to find a new home when the street recovers and others hunger for their 6,000-square-foot space.
“The rent is by far our biggest expense, but we are able to survive,” Neely-Streit said. “We don’t know if the economics will allow our store to remain permanently, but we will make the most of every month. Whatever happens, this is a triumph because we’re bridging the gap between downtown and the neighborhoods where we all live.”
