CHICAGO – Chicago's North Michigan Avenue storefronts still bring in some of the highest rents in North America, with new deals averaging $550 per square foot even amid volatile times for retailers.
Magnificent Mile annual retail rents remained unchanged from 2016, according to the Main Streets Across the World report by commercial real estate brokerage Cushman & Wakefield.
The annual report, using leases completed through June of each year, measures retail rents at the most sought-after locations — also known as "high street retail" — throughout the world.
Mag Mile rents had increased $25 per square foot over the previous year, before staying flat in the 2017 study.
Landlords typically view stagnant rents as a sign of weakness. But at this point, when traditional retailers are closing stores and struggling to compete with online venues, many property owners are happy to maintain the status quo.
"It speaks to the demand for high street flagships," said Chicago retail broker Danny Jacobson, a Cushman & Wakefield managing director. "I think the real doom and gloom is in a different part of the retail market. Shoppers are going to continue spending money and seeking experiences at flagship locations like Michigan Avenue."
Chicago landlords achieved the fourth highest rents on the continent over the past year through mid-2017, according to the Chicago-based brokerage. New York was the priciest retail rental market, with three streets with higher rents than the Mag Mile, led by Upper Fifth Avenue's world-high $3,000 per square foot.
The Los Angeles area, topped by the $875-per-square-foot average on Beverly Hills' Rodeo Drive, was the second-priciest place to open a shop. San Francisco, led by Union Square's $700 rents, was third.
Trailing Chicago were Miami, where Lincoln Road rents averaged $300 per square foot, and Toronto, where Bloor Street rents were at $231 in U.S. currency.
Internationally, the most expensive places to open a shop were Hong Kong's Causeway Bay, with rents of $2,725 per square foot, and London's New Bond Street, at $1,719.
Chicago's other high street destinations also saw rents remain flat from the 2016 report, with Oak Street averaging $375 per square foot and State Street at $175.
North Michigan Avenue rents are likely to remain flat or fall slightly over the next year, based on leasing activity in the market, Jacobson said. Online retailers, which already have been adding shops in areas such as Lincoln Park's Armitage Avenue, could pick up some of the leasing slack on Michigan Avenue, Jacobson said.
While there are a smaller overall number of prospective tenants touring Mag Mile spaces, and some vacancies are taking longer to fill, some of the best-known consumer companies are filling the void with spectacular showrooms, Jacobson said.
In 2019, Seattle-based Starbucks plans to open its largest coffee shop in the world, a four-level Roastery flagship, in a building that is currently leased to Crate & Barrel at Michigan Avenue and Erie Street. Starbucks Executive Chairman Howard Schultz told the Chicago Tribune in April that he envisions Roastery shops such as the one coming to Chicago as "the Willy Wonka of coffee."
In another deal that is already affecting the market, Apple recently moved its Michigan Avenue flagship south to a glassy new building along the Chicago River. The deal is likely to continue a gradual southward push of retail toward Millennium Park south of the river, Jacobson said.
The new Apple store is just feet from Tribune Tower, where developers CIM Group and Golub & Co. are planning a major redevelopment that is likely to create new retail space along the north bank of the river.
That redevelopment, as well as Apple's recently vacated store a few streets north, will create new flagship opportunities.
"In addition to sales, Michigan Avenue flagships are a branding exercise," Jacobson said. "Tourists and locals go there to have experiences they can't get other places."
