State Street Gets Real With Tenants, Rent

November 12th, 2010 | by ashley gordon |

State Street may be still be that great street, but the Great Recession has taken the swagger out of the shopping strip’s once lofty retail ambitions.

In the decade before the financial crisis, when aspirational shopping was in vogue, developers and city officials held high hopes of turning the Loop shopping district into a high-end enclave that could rival the glitzy Magnificent Mile to the north.

That never happened. Instead, as the economy sank, State Street expanded its row of discount merchants.

Ballyhooed deals with the likes of Kate Spade, Coach, Lululemon, Apple, and the superchic Canyon Ranch spa vaporized. In their place: a string of popular-priced stores including Ulta, Loehmann’s, Forever 21, Urban Outfitters, H&M, and most recently American Apparel, hung up their shingles alongside Sears, TJ Maxx and Nordstrom Rack.

The turn of events, in the end, revitalized the street as consumers across income levels, battle weary from the recession, embraced bargain shopping as fashionable.

But two big obstacles remain. Large swaths of empty space at the old Carson Pirie Scott building, now called Sullivan Center, and at the unfinished and legally entangled Block 37 mall, have put a crimp in State Street’s comeback.

The retail vacancy rate in the State-Wabash corridor has soared to the highest level in at least two decades, according to a report to be released this week from CB Richard Ellis Inc.

“The challenge with State Street is we have two big holes on the street,” said Ty Tabing, executive director of the Chicago Loop Alliance, an organization that represents downtown businesses. “Were it not for those two holes, it would be almost fully occupied.”

The two buildings — the Block 37 retail center at 108 N. State St. and Sullivan Center at the corner of State and Madison streets — together account for 92 percent of the vacant retail spaces in the corridor, the CBRE report said.

The properties, both owned by Chicago’s Joseph Freed and Associates LLC, helped push the overall retail vacancy rate for the State-Wabash corridor to 12.9 percent for the 12 months ended Oct. 31, according to Bruce Kaplan, senior vice president of retail brokerage services at CBRE in Chicago. That figure is up from 7.7 percent in 2009 and marks the highest vacancy rate since Kaplan began tracking the shopping district in 1990.

Financial Solutions