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2005 : 2004 RETAIL LEASING ACTIVITY REACHES 10 YEAR HIGH IN CHICAGO'S VIBRANT LOOP MARKET According to Baum Realty Group's Annual Loop Report March 7, 2005 Chicago-based Baum Realty Group, a leading retail brokerage firm concentrating on the Chicago metropolitan market, recently published its 2004 Loop Report, which summarizes retail leasing activity in Chicago's Loop. According to the annual report, leasing velocity increased 170% over 2003's pace with 60 new leases signed. "Nearly double the usual number of deals were completed and opened here last year," said Allen Joffe, principal, Baum Realty Group. "Accounting for two-thirds of the transactions were banking institutions, restaurants and convenience stores. Larger space users also took greater interest in the area." In spite of the increase in leasing activity, the Loop's overall retail vacancy rate still increased one point over the previous year to end 2004 at 16.67%. This is largely attributable to the economy's uneven pacing, and a significant amount of retail space added to the market in buildings such as The Heritage at Millennium Park, 180 N. Jefferson St., the new ABN Amro office tower at 550 W. Madison and the CTA's new corporate headquarters at 567 W. Lake St. Conducted annually by Baum Realty Group, the Loop Report is an analysis of the retail real estate market of roughly 106 blocks bounded on the north by Wacker Drive, on the east by Michigan Avenue, on the south by Van Buren Street and on the west by the Kennedy Expressway between Lake Street on the north and Van Buren on the south. This definition was expanded in 2001 to reflect the significant commercial and residential development activity flourishing west of the Chicago River to Halsted Street. The Loop continues to be a strong market for the food service sector with its growing office and residential population. In 2004, the greatest volume of transactions, 41.67%, was food related – coffee, fast food and full service restaurants. The largest shift in leasing activity was in the banking/finance sector, where velocity decreased 15.7 points from 2003 to 16.67%. "Retail banking has been on a roll in the Chicagoland area for a few years," said Joffe, whose firm exclusively represents Washington Mutual Bank in this market. "In 2003, at the height of the movement to accommodate consumer demand for increased bank branch locations, the Loop saw a record level of leasing activity for this sector at 32.35%. Last year's pace shows the trend slowing as banks and financial institutions meet expansion needs." The highest retail vacancies, according to the report, were along Randolph Street, which ended 2004 with a rate of 25%, equal to 2003 levels. Ending the year with the lowest vacancy rate was LaSalle Street at 7.27%, up from 6.56% in 2003. The greatest change in vacancy occurred along Dearborn Street, which increased 10.12 points to end the year at 19.05%. Gross average asking rents finished out 2004 at $53.04 per-square-foot. This is $4.48 less than 2003's average of $57.52 per-square-foot. State Street Renaissance Continues Last year saw a number of big space blocks leased as construction projects marched forward and nationally recognized tenants continued to locate within the Loop. After three years of vacancy, the former Toys 'R' Us space is being remodeled to include an Urban Outfitters and Office Depot. DePaul University signed a 15 year lease with Barnes & Noble to occupy 30,000 square feet of multi-level space at The DePaul Center. Thor Equities signed Zales, Blick Art and a cell phone operator to leases at 36 S. State St. In November, 108 N. State St., formerly known as Block 37, received approval from the Chicago Planning Commission. Construction is scheduled to start in 2005 on a development that will include a CBS broadcast facility, 400,000 square feet of multi-level retail space with three restaurants and a high speed rail connection to O'Hare and Midway airports. "2005 is going to be another great year for State Street," said Joffe, "thanks to planned new construction, adaptive reuse projects and the area's continued growing cachϑ with shoppers and retailers. "Look for the addition of a new 98-room hotel at the redevelopment of 202 S. State St. ABC7 Chicago should open its new live studio for TV and radio broadcasts at 190 N. State by Thanksgiving. Ground will be broken at 151 N. State (at Randolph Street) on a 39-story condominium high-rise with 22,000 square feet of retail space on two floors with The Gap as the anchor tenant. The Page Brothers building at 177 N. State may have a multi-story restaurant in redevelopment plans if the owner of the Chicago Theater is successful in acquiring the property." What's Ahead The development of Block 37 will be a tremendous boost to the Loop. In addition to increasing traffic as well as office, retail and restaurant space, it should spur retailers to get off the sidelines and make decisions to locate somewhere in this market. It also will facilitate additional hotel and residential development. Mesa Development, developer of The Heritage at Millennium Park, is under contract to buy buildings at Wabash and Monroe from The Art Institute to build another residential high-rise with street level retail. The Loop also will benefit from the scheduled opening of the first residential buildings at Lakeshore East. Expected to take as long as 10 years to reach final completion, Lakeshore East is a downtown Chicago neighborhood occupying 26 acres bordered by the Chicago River and Lake Michigan. "We anticipate a greater number of deals will be completed and opened in 2005 than last year based on new retail space that will come on line," said Joffe. "More than 25 transactions already are in the pipeline." The South Loop will continue to attract additional student population. Currently some 1,700 students live at University Center, 525 S. State St., and more than 600 at 2 E. 8th St. This area will continue to see more residential development and conversions of older buildings for residential and university/college facilities. The West Loop remains attractive to retailers thanks to its growing office and residential markets. Most recently, USG announced it will relocate to 550 W. Adams in 2006. Much of the area's 15,000 square feet of new retail space that came on line in 2004 have leases that are signed or pending in 2005. Demand will continue to increase as the population increases in this sub-market. |
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