The Chicago retail market is gradually recovering from the pandemic lows, with new activity driven by local business owners and a cautious return by national retailers. Industry professionals tracking retail leasing in the nation’s third-largest city report fewer closures, more openings, and a shift in who is signing leases and where the strongest momentum lies.
Gregory Kirsch, founder and managing broker of Kirsch Agency, has seen these changes firsthand over the past year. His boutique firm, focused solely on retail real estate, represents about 50 to 60 property owners and 15 to 20 tenants across Chicago’s main retail corridors. According to Kirsch, the pace of new leases has accelerated, and the balance between openings and closures has tipped in favor of growth. “We’re seeing very few closures and a lot more openings,” Kirsch says. “Absorption is occurring pretty rapidly.”
The Boutique Advantage in a Fragmented Market
Kirsch’s move from large institutional firms like Cushman & Wakefield and Newmark to launching his own agency highlights a change in how specialized real estate services are delivered in Chicago. His seven-broker team, focused exclusively on retail, is larger than many national firms’ Chicago retail teams. “We actually have more retail brokers than most of the national companies, and we’re a small shop because we’re very specialized,” Kirsch explains.
Kirsch Agency’s competitive edge comes from its proprietary data systems, which allow the firm to track the highly fragmented ownership landscape of Chicago’s retail properties. “In the Loop, there might be 300 owners, but in a small neighborhood, there might be 500 owners because of all the individual storefronts. CoStar isn’t tracking them the way we will,” Kirsch says. This granular approach enables the firm to identify leasing opportunities and trends that broader data platforms often miss.
Michigan Avenue: A Case Study
The Magnificent Mile, Chicago’s flagship retail corridor, offers a clear example of how the market is recovering. The total available retail space on Michigan Avenue has contracted from 3.2 million square feet in 2016 to 2.8 million square feet today, largely due to the conversion of upper mall floors to non-retail uses. However, vacancy rates, which spiked during the pandemic, are now showing signs of improvement.
Currently, about 30% of the 2.8 million square feet on Michigan Avenue is vacant, with average net rents of $315 per square foot. Kirsch projects that by next year, rents could reach $380 per square foot, and vacancy rates could drop to 12–13% by 2030. This rebound is being fueled by national retailers taking strategic positions at favorable rates and a surge of local entrepreneurs entering the market. High-profile leases, such as The North Face at 605 North Michigan Avenue, have shown strong early sales, reinforcing confidence in the corridor’s recovery.
Changing Tenant Mix
The types of tenants entering Chicago’s retail market are also changing. National chains that once drove much of the leasing activity have scaled back their expansion plans. “Fewer soft goods, more food and beverage, more locals, fewer nationals,” Kirsch says of current patterns. He notes that brands like Chipotle, Panera, and Starbucks, which previously signed 20 to 30 leases per year, are now signing only 8 to 10.
This slowdown among national chains has opened the door for local entrepreneurs, who are stepping in to fill vacancies. According to Kirsch, Chicago’s entrepreneurial culture is driving this trend. Local business owners are operating leaner, often handling much of the work themselves, and are willing to take on spaces that larger chains are passing over. This mirrors what happened after the 2008 financial crisis, when local tenants helped stabilize the market as national brands pulled back.
Infrastructure and Policy
Major infrastructure projects are also influencing the retail recovery. The Google Thompson Center redevelopment in the Loop is expected to bring thousands of employees back to downtown when it opens in 2027. This influx of workers should boost demand for retail and food service businesses in the area.
However, hybrid work schedules continue to limit weekday foot traffic. “The problem with the Loop is that people don’t come into the office much on Fridays, and Mondays are only about half as busy,” Kirsch explains. As a result, quick-service restaurants and other retailers are forced to concentrate their sales into the middle of the week, making it harder to sustain consistent business.
Property tax policy is another critical factor shaping deal economics. Recent changes in assessment practices under the previous Cook County tax assessor led to significant increases in property taxes for some Michigan Avenue properties, with bills reaching $40 per square foot. The resulting burden, combined with vacancies, created a challenging environment for property owners. The removal of the previous assessor in a recent election could signal changes ahead, but the impact of future policy remains uncertain. “Property taxes became a real problem,” Kirsch says, emphasizing how taxes and vacancies have combined to stress landlords.
Market Positioning and Investment Opportunities
Despite negative national headlines, Chicago’s retail market has several structural advantages supporting its long-term stability. The metropolitan area’s population of 10 million, supported by O’Hare Airport — the busiest in the country — provides a strong consumer base. Kirsch describes Chicago as a market where investors may not see outsized returns, but are less likely to face major losses. “Chicago is very stable,” he says. “If you’re looking for a place where you’re not going to make as much money, but you’re certainly not going to lose as much, Chicago represents stability.”
The retreat of institutional investors from Chicago has opened opportunities for local buyers. One example is the former Boeing headquarters, which recently sold for about $40 million after trading for $260 million a decade ago. These discounted prices are attracting buyers with a longer-term perspective and comfortable navigating the city’s unique policy and tax environment.
Landlord Concessions and Lease Economics
Current leasing conditions require significant concessions from landlords to close deals. Standard terms for 10-year leases now include six months of free rent and six months’ worth of tenant improvement allowances paid as cash. These incentives push the landlord’s break-even point to four and a half to five years, compared to the previous average of three and a half years. While deals are still getting done, these economics slow the pace of transactions and require landlords to be more patient and selective.
Geographic Trends
Not all retail corridors in Chicago are recovering at the same pace. Michigan Avenue is now seen as a value play, with opportunities for tenants willing to commit during the recovery phase. In contrast, State Street is still lagging and faces a slower path back to full occupancy.
Neighborhood corridors such as Bucktown, Armitage Street, and Southport are seeing strong rent growth. Rents in these areas have climbed from $85 per square foot net three years ago to $120 per square foot today, with projections reaching $180 per square foot within two years. The Fulton Market district continues to attract development and investment, while affluent suburbs like Glencoe, Winnetka, and Hinsdale remain popular for their stable, high-income consumer bases.
Market Outlook
Chicago’s retail market is on a slow but steady path to recovery. The combination of attractive pricing for new tenants, improving occupancy, and a wave of local entrepreneurship is reshaping the market. For investors and tenants willing to look past negative perceptions and focus on long-term fundamentals, current conditions offer an opportunity to enter one of America’s most stable urban retail markets at a relative discount.
The biggest challenges ahead are policy-related, particularly around property taxation, and the uncertainty of how hybrid work patterns will affect downtown retail demand. Success will depend on choosing locations that benefit from the city’s gradual return to pre-pandemic activity and leveraging the entrepreneurial spirit that keeps Chicago’s retail scene resilient even during periods of national uncertainty. For those who can navigate these complexities, Chicago’s retail landscape offers both immediate opportunities and the promise of long-term stability.
