Chicago’s Extensive Commercial Real Estate Vacancy
BACKGROUND
Stone Real Estate found that the retail vacancy rate in Chicago’s Loop was 14.92% pre-Covid level in 2019. In 2023, that doubled to 30.13%. That is over 500,000+ sq ft of vacant retail space.
The high vacancy rate can be attested to:
The closing of major pharmacies and stores in the Loop.
The low foot traffic caused by the low number of professionals returning to office in the Loop.
Additionally, while companies like Google and JP Morgan Chase have committed to maintaining office space in the Loop, much office space in the Loop remains vacant.
Chicago developers suggest that the Loop should become a re-envisioned center of commerce, culture and government by becoming a vibrant, 24/7, mixed-use urban setting. Third places - coffee shops, bars, parks, and libraries - play a crucial role in fostering community and social interaction outside of home and work environments.
FOOT TRAFFIC
Today, about 300-400,000 people move throughout the Loop on any given work day.
SIGNIFICANT VACANT SPACES
As previously mentioned, over 500,000+ sq ft of retail space is vacant in the Loop. Vacant office space square footage is not readily available publicly.
Some distressed buildings in the Loop are being sold at steep 90% discounts.
In 2024, Brog Properties bought a Loop office building for $14/sq ft, receiving 185,000 sq ft for $2.6m.
In 2024, Igor Global bought a 12-story Loop building with half-vacancy, selling at $4m; this was a heavy discount from its initial selling price of $51m back in 2022.
WHY INVEST
In general across the U.S., commercial real estate (CRE) has become a hot topic because of the amount of debt that rests in these vacant spaces. This can pose long-term asymmetric upside if these spaces are re-imagined correctly.
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FOOTNOTES
Vance, John. “Chicago Loop Retail Analysis. 2023 Data.” Stone Real Estate. Accessed July 8, 2024, stonerealestate.com/chicago-loop-retail-analysis-2023-data/
Herzog, Rachel. “Loop Retail Vacancy Tops 30% for the First Time.” Stone Real Estate. Accessed July 8, 2024, stonerealestate.com/loop-retail-vacancy-tops-30-for-the-first-time/
Halik, Andy, Patrick Kearney, and Chris Pemberton. “Repositioning the Loop: Chicago developers, landlords have unique opportunity to reimagine downtown spaces.” Chicago Business. Accessed July 8, 2024, chicagobusiness.com/crains-content-studio/Repositioning-loop-chicago-developers-landlords-have-unique-opportunity
aquinzoncolquitt. “Third Places: What Are They and Why Are They Important to American Culture?” The University of Chicago English Language Institute. Accessed July 8, 2024, esl.uchicago.edu/2023/11/01/third-places-what-are-they-and-why-are-they-important-to-american-culture/
Bradley, Ben and Andrew Schroedter. “As office vacancies rise, developers aim to restore Loop’s vibrancy.” WGN9. Accessed July 8, 2024, wgntv.com/news/wgn-investigates/as-office-vacancies-rise-developers-aim-to-restore-loops-vibrancy/
TRD Staff. “Brog Properties Buys Chicago Office Building at Massive Discount.” The Real Deal Real Estate News. Accessed July 8, 2024, therealdeal.com/chicago/2024/04/19/brog-properties-buys-chicago-office-building-at-massive-discount/
Ori, Ryan. “Chicago Office Tower Sells at Massive Discount, Spotlighting National Plunge in Prices.” CoStar. Accessed July 8, 2024, www.costar.com/article/3150163/chicago-office-tower-sells-at-massive-discount-spotlighting-national-plunge-in-prices
