It was a typical A-list event that brought the crème of Chicago society out to celebrate the grand opening of a new store during a private shopping benefit for Northwestern Memorial's new Women's Prentice Hospital. Debutantes, socialites and grandes dames mingled and cooed over the merchandise and the swanky, newly renovated digs.
But this wasn't the velvet-rope opening of another designer boutique on North Michigan Avenue's Miracle Mile, where the fashion-conscious locals and tourists flock for a peek at the latest wares from Louis Vuitton, Burberry and Tiffany & Co. It was blocks west in a former retail backwater known as River North. The to-do was for Bloomingdale's Home + Furniture, which has taken up residence in the historic Medinah Temple.
That River North is a hot location for a high-end national retailer speaks volumes about the changes that have taken place in downtown Chicago in the past decade. The 2000 census revealed the city experienced population growth of about 4 percent in the 1990s, to 2.9 million. While that's considered modest growth, it signifies a major turnaround for Chicago, which lost 7 percent of its population during the previous decade, when the suburban sprint put a chokehold on most major metropolitan areas.
Another measure of the turnaround: Household income in the city increased 8.2 percent last year, after increasing 9 percent in the 1990s and shrinking 1 percent in the 1980s. According to the city's department of planning and development, about 240,000 people, with an average household income of $52,000, live within a three-mile radius of downtown.
Why the migration back into Chicago's center? The theater district has been revitalized, there are more upscale restaurants and improved public schools — all of which have brought young families, singles and empty-nesters downtown for more than just a visit: They're buying townhomes and condos and renting apartments, which are rising at a record clip. Gail Lissner, vice president of Appraisal Research Counselors, says an unprecedented 4,900 apartment units will be delivered downtown this year. By comparison, only 5,200 condos were built between 1964 to 1990. And these upscale urbanites are looking for retail that fits their lifestyle.
RIVER NORTH
Bloomie's chose River North for its first stand-alone home furnishings store for good reason. By the beginning of next year, the area is projected to have 18,000 residents, up from the 5,000 a decade ago, according to the River North Association. The neighborhood is bordered by the Chicago River on the south and west, Division on the north and Wabash on the east, two blocks west of Michigan Avenue. Morene Dunn, executive director of the River North Association, says the area had fallen into disuse until the 1980s when art galleries started moving into the northeast corner and a developer started buying up buildings in the southeast corner. She says renovations brought workers; workers brought restaurants and the galleries and workers brought nightlife, which River North became known for.
Now, it's also the place to find home furnishings and decorators. Those thousands of new residents will need to outfit their thousands of new housing units. The neighborhood now draws home-furnishings buyers from around the city.
Bloomingdale's Home + Furniture occupies the former Chicago headquarters of the Ancient Arabic Order of Nobles of the Mystic Shrine — more commonly known as the Shriners. The historic 130,000-square-foot Medinah Temple was built in the Islamic Revival style in 1912, but as membership fell, the cavernous building, which has been used for lectures and concerts as well as the organization's famous circuses, fell into disrepair. The building was put up for sale in 1998.
The four-story building features replicas of the two original green 10,000-pound onion-shaped domes along with stained-glass windows and intricate ironwork. The building was renovated as part of a $63.5 million rehabilitation project that included the temple's neighbor, the Tree Studios, the country's oldest existing artist studios.
Another recent retail coup for River North was the announcement that chi-chi contemporary furniture retailer Room & Board and its sister shop, Retrospect, are relocating there from a 48,000-square-foot Michigan Avenue store. Room & Board will buy three of the five stories in a building at Rush and Ohio streets that had been leased to Walt Disney Co. for DisneyQuest, an indoor entertainment venue that opened in 1999 and closed within two years. The deal was reportedly worth about $14.4 million, or about $300 a square foot, although one source says that figure sounds a little high for the property and that mid-$200s is more likely.
The neighborhood also is benefiting from news that the nearby Merchandise Mart is revamping, closing most of the small retail shops that comprise much of the building's first two floors. The space is being earmarked for upscale bath and kitchen retailers. For years, wholesalers that deal only with the trade have occupied the upper floors of the mart. Soon, about 80,000 to 90,000 square feet of space will be taken up by home furnishings stores that are open to the public.
But even trendy residents can't live by furniture and nightclubs alone. Whole Foods has opened a store just a few blocks away from the Medinah Temple. And, grocer Jewel-Osco jumped on the bandwagon by opening a 32,000-square-foot store in Grand Plaza apartment towers, which is also home to a 35,000-square-foot Bed Bath & Beyond at State Street and Grand Avenue in the neighboring 'hood known as Old Town.
Bruce Kaplan, senior vice president of Northern Realty Group, says ground floor rents in River North range from about $25 to $65 a foot, while a Michigan Avenue retailer might pay from $125 to $275 a foot, depending on size, block and configuration. Still, those ranges don't apply across the sub-market: Apple Computer is reportedly paying $70 per square foot of retail space and Starbucks is said to be coughing up $300 a foot for its $3,500-square-foot chunk of the Magnificent Mile.
“Michigan Avenue is the most expensive retail space in the entire Midwest bar none,” Kaplan says. “It's the highest priced retail space between New York and Las Vegas.”
THE LOOP
Just south of River North is the Loop, once the center of business and shopping in Chicago. It lost its allure to North Michigan Avenue after an ill-fated decision in the late 1970s to make the Loop's main thoroughfare — State Street — into an outdoor mall, open only to buses. The plan failed miserably, and the street was reopened to traffic in 1996.
Lately, the Loop is also experiencing dramatic residential growth thanks in part to such projects as Lakeshore East, a 5,000-unit behemoth being erected just east of State Street on a 26-acre site that had been a nine-hole golf course. Sources told the Chicago Tribune the price was about $81 million, or almost $74 a square foot. Joel Carlins, president of Magellan Development Group, one of the developers, says, Lakeshore East will have a gourmet market in the mid-20,000-square-foot range, and the rest of the retail space will be primarily service shops, including a bank, drugstore and a drycleaner.
He says there will be room for boutiques, but no big boxes. To grasp the enormity of the new “village:” a public elementary school is already in the works and Carlins says there will be “places of worship” for residents.
Closer to the heart of the Loop is the Heritage at Millennium Park. Jim Klutznick of Klutznick-Fisher, one of the developers of the Heritage, says 80 percent of the 356 units are sold, ranging from $250,000 one-bedrooms to multimillion penthouses, with the first tenants expected to move in 2005. While no retail tenants have been announced, Klutznick says he plans to fill the building's first four floors with shopping as well as something service oriented, like a salon/spa or fitness club.
With all the development, more retail is needed. The area's sorest spot is the piece of property identified as Block 37. When called upon to name what's wrong with State Street, fingers inevitably point to the 2.85-acre space across the street from Marshall Field's that's been vacant for a dozen years after the block was razed. Since last year, the block's developer, Mills Corp., had been courting London retailer Harrods to open either a replica of the famous store or a pared down version. At the end of March 2003, talks abruptly stopped when the parties reached an impasse. From the beginning, local industry insiders thought it unlikely that Harrods would choose such a spot.
Some went further with their criticism, including Will Ander, a partner with Chicago-based retail consulting firm McMillan/Doolittle, who says, “I thought it was stupid. It's not the right store for that market.” He says instead the city and the developer should be trying to lure Target into the space. He says they should be working on understanding the needs of the people moving into the thousands of condos being developed in the vicinity. Ander acknowledges the central and south Loop haven't been good areas for a while, but he says retailers need to realize “10 years from now [the area] is going to be pretty dynamic.”
Greg Kirsch, principal at Baum Realty Group, agrees, adding another incentive for retailers is the soon-to-be-completed 700,000-square-foot University Center, a dormitory shared by DePaul and Roosevelt universities and Columbia College that will house 1,700 students. That's in addition to the 50,000 students that are already living or attending classes in the area.
Figures like that interested trendy clothing retailer Forever 21 in the Loop. The company is scheduled to open a 25,000-square-foot location at 26-34 State Street by this summer.
Market Profile/Chicago
DEMOGRAPHIC OVERVIEW
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Total Metro Population: 8.5 million
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Rate of Metro Population Growth, 2001-2007: 7.14%
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Metro Unemployment Rate: 4.58%
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Metro Median Household Income: $54,932
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Metro Household Income Growth, 2001-2002: 8.2%
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Metro Median Home Price 2002: $235,000
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Metro Median Home Price Growth Over 2001: 15.9%
RETAIL OVERVIEW
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Total Downtown GLA: 10 million sq. ft.
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Metro Retail Vacancy Rate April 2003: 11.1%
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Average Vacancy Rate Downtown: 7.5%
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Rent Range Per Sq. Ft. Downtown: $20-$150
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Rent Range Per Sq. Ft. Neighborhood Centers: $8-$40
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Rent Range Per Sq. Ft. Power Centers: $12-$40
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Rent Range Per Sq. Ft. Regional Malls: $30-$85