Empty Storefronts Threaten Chicago’s Image Ahead Of The DNC. Can A Paper-Over Plan Change Minds?

As Chicago’s date with the Democratic National Convention inches closer, the city and other invested stakeholders plan to outfit sagging downtown retail storefronts with glitzy art installations, street activations and pop-up shops.

For four days in August, the city will perform on a stage that has few equals, with scores of delegates, journalists, vendors, protesters and a veritable political carnival crowding its streets. It makes perfect sense that Chicago wants to apply a little makeup and take its best shot at winning America over, reshaping the city’s national reputation as a Midwestern ne’er-do-well with a crime problem.

The city’s play to spruce up its downtown could give it a much-needed shot in the arm, CRE players say. But visitors could also see it as a ploy to paper over record levels of Loop retail vacancy for a short-term image boost — one that might inspire positive momentum for retailers who see successful trial runs without assuaging investors' long-term fears about the health of the area.

“Investors are very savvy these days where if you are just window-dressing and it's smoke and mirrors, they get that because you still have to rely on the underlying fundamentals of the marketplace,” Edwards Realty Co. President Ramzi Hassan said. 

As the city ramps up for the DNC, it is grappling with a retail vacancy rate in the Loop that topped 30% for the first time in 2023, more than doubling its 2019 level of 14.9%, according to an annual analysis from Stone Real Estate. 

The number of empty retail spaces has increased for four consecutive years, and the 30.1% mark is the highest vacancy in the 22 years Stone Real Estate has conducted its annual Loop retail survey. Large swaths of downtown blocks feature lifeless storefronts, which is why the Chicago Loop Alliance, along with the city, property owners and brokers, will intentionally fill them through temporary and longer-term activations, Choose Chicago interim CEO Richard Gamble said at a CLA meeting in early March. 

Efforts may include artist studios, dynamic window displays and even forced perspective or 3D displays leading up to and through the DNC, Gamble said. He didn't clarify how much the city and other invested parties will spend to populate empty storefronts. 

The effort to jazz up empty storefronts dovetails with other efforts to give the city an image makeover.

Former Choose Chicago CEO Lynn Osmond told Bisnow in October that the city’s tourism arm was also focused on a coordinated communications plan in preparation for the DNC to promote positive news stories and shift the national narrative, which has been marred by issues with crime and the migrant crisis.  

“We're really trying to pump out what are the good stories about Chicago that just don't get national play,” she said. 

The public relations offensive could provide a short-term boost to area retail. But some say that the long-term problem will require a more thorough solution. 

While newly activated storefronts could jump-start traffic at hotels and restaurants in the area, they don’t change the central business district's underlying troubles, Hassan said.

One particularly troubled section of the Loop tells the bigger story. Along the nearly 1-mile stretch between Ida B. Wells Drive and the Chicago River on the east side of State Street, about 147K SF of the 291K SF inventory is vacant — more than 50%, according to Stone Real Estate. Even worse, the east side of the block between Monroe Street and Adams Street is completely vacant, deterring leasing activity on the next block to the south. 

It is hard for retailers to volunteer to be the catalyst, the first one in on a completely vacant block, because most would prefer to be the last store in a complementary collection of retailers, Hassan said.

On the flip side, record vacancy levels provide opportunities for stakeholders with a larger vision to create a new corridor of medical space or restaurants — and execute the plan at a discount. 

“It's almost like anything in life. Sometimes you have to hit rock bottom to make a significant change,” Hassan said. 

Installations and potential pop-up shops are nonpermanent solutions that will leave vacancies in their wake when they exit the spaces after the DNC, Stone Real Estate founder David Stone said. But if some shops do well, retailers and brokers will notice, leading to more positive leasing processes in the aftermath, he added. 

“Is it a permanent solution? Absolutely not,” Stone said. “Is it a positive short-term solution? Absolutely.”

Although the plan to fill empty storefronts may only be a Band-Aid ahead of Chicago's turn in the national spotlight, positive perception of the area in a trade like retail is important, Stone principal John Vance said. There is an “emotional, intangible” element of retail that is important to investment decisions, he said. Walking a street with palpable vacancy doesn’t feel good for investors. 

Short-term activations, which lead to people in the streets and lights on in shops, will allow would-be retailers to visualize how that street would look with active retail tenancy, giving small wins to streets that need them, he said. 

“Chicago hosting the DNC is a huge opportunity to really start the process of building back the perception,” Vance said.

But “the Loop retail market is going to be stalled for the next 12 to 18 months while there is work done to change the perception,” he added.

To solve the retail vacancy problem in the long term, CBD investors say people need to come back to the Loop in droves. Some place a bigger emphasis on return-to-office mandates, while others are focused on bringing new types of customers to the streets, including tourists and residents of converted office buildings. 

Revitalizing downtown retail will require years, and it is hard to pin down the timeline for how long the recovery will take, said Stone, who falls into the return-to-work camp. To get things moving, he said the CRE community must center its efforts around people returning to the office more than one or two days a week. 

“People need to come back to work four or five days a week,” Stone said. “Until that happens, I think [the retail vacancy is] going to continue to bump along somewhere around where it is today.”

Major corporations are making investments in office space in the CBD that could benefit struggling retail in the area. Google committed to making the Thompson Center its Chicago headquarters in July 2022, and JPMorgan Chase announced its decision to renovate its namesake tower at the end of February. 

Vance said both decisions are wins that signal the Loop will maintain a significant amount of office density, albeit less than before the pandemic. The lesson CBD investors have learned since then is that the Loop was overdependent on office, he said, adding that the area's future relies on diversification. 

For the CBD to develop its new look as a multifaceted market in the city, CBRE Senior Vice President Todd Siegel said it is important to substantiate itself as a “seven-day-a-week” destination. This includes showcasing opportunities for sales after 5 p.m. for theatergoers, tourists, residents and office workers. 

Proving that the Loop can support that level of sales would allow stakeholders to underwrite stability for retail assets, Siegel said. 

“If we are able to successfully attract and service each of those various different segments, retail in the central business district returns to a place where it was before our era,” he said. 

The city’s efforts to make itself look good ahead of the DNC won’t solve any of the deeply rooted problems that have plagued the Loop since the onset of the pandemic. But Vance said that starting small and generating positive energy is key to reviving a downtown retail sector that will take time to rebuild.

“I just don't think you need to wait for the home run,” Vance said. “Let's get a number of singles going on and get some momentum and build from that.”