A flurry of store closings along Michigan Avenue has awakened local leaders to the perilous state of Chicago's premier shopping district.
As my colleague Ally Marotti reported this week, there's a growing consensus that the Magnificent Mile needs reinventing, a new identity less centered on traditional brick-and-mortar retailing.
Where the consensus starts wobbling is on the question of what, exactly, Michigan Avenue should become. An esplanade of al fresco art galleries? A mecca for outdoor theater and other live performances? A destination for indoor skydiving?
All these and other ideas are circulating as observers grapple with the issue of Michigan Avenue's future. The uncertainty is understandable. After all, examples of successful reinventions of urban shopping hubs undone by online retailing are hard to come by.
Confounding as the challenge may be, it's equally important to Chicago's long-term prosperity. Michigan Avenue is a key economic driver for the city, creating jobs and flooding municipal coffers with tax dollars. Cash-strapped Chicago can't afford a sustained slide in the retail, hotel and restaurant taxes Michigan Avenue generates.
What's more, the Mag Mile supports property values for some of the city's priciest real estate. Building owners in the area paid $1.8 billion in property taxes to the city and other local taxing bodies in 2017, according to the Magnificent Mile Association, which represents businesses on and around Michigan Avenue.
But Michigan Avenue is more than just Chicago's biggest shopping strip. It's one of the city's world-class attractions. We don't have ocean beaches, mountain scenery or major historic sites. We do, however, have a shopping thoroughfare on par with any in the world. Michigan Avenue puts Chicago in the rarefied company of New York's Fifth Avenue, Los Angeles' Rodeo Drive, Paris' Champs-Elysees.
"It's a key part of what makes us uniquely Chicago—you have the lakefront, you have the Magnificent Mile," says Jack Lavin, CEO of the Chicagoland Chamber of Commerce.
The Mag Mile draws visitors from across the country and around the world. It's a key element of Chicago's appeal as a convention destination. And it burnishes Chicago's reputation as a global city, giving us an edge in the worldwide competition for corporate investment and jobs.
"You can't play the global game without Michigan Avenue," says consultant Paul O'Connor, who led Chicago's successful effort to win Boeing's headquarters 20 years ago.
It's important to remember that every dollar spent on Michigan Avenue by out-of-town visitors is a net gain for metropolitan Chicago as a whole. That money wouldn't have otherwise been spent elsewhere in the region.
O'Connor points out that Michigan Avenue's dynamism spills over its boundaries. Nearby neighborhoods such as River North, Streeterville and the Gold Coast owe a fair amount of their vitality—and property values—to their proximity to the Mag Mile.
Retail has always been central to Michigan Avenue's drawing power. For generations, people have been coming for the shopping, to get stuff they couldn't get in Toledo or Tokyo. Restaurants and hotels sprang up to accommodate the shopping tourists. (According to the Magnificent Mile Association, 65 percent of downtown hotel rooms are in the Michigan Avenue area.)
The internet is changing all that. Now anybody anywhere can get anything they want from pretty much any retailer without leaving home. Michigan Avenue storefronts are going dark as more and more consumers opt to shop from the couch, a trend accelerated by the ongoing coronavirus pandemic.
Macy's, Gap and Express recently joined the parade of merchants abandoning prominent Mag Mile perches once considered some of the most valuable retail spots in the world. Retail vacancy rates on the street have climbed to 10.5 percent from 6.5 percent in 2018, and are expected to exceed 16 percent when Macy's and Gap clear out.
As vacancies rise, rents sink, falling about 20 percent to the mid-$400-per-square-foot range, according to one estimate.
Declining rents depress real estate values, leading to lower property tax collections. Store closures mean fewer jobs and less sales tax dollars. Empty storefronts mean dwindling shopper traffic and fewer customers for nearby restaurants and hotels.
Chicago must find a way to halt this downward spiral before it becomes unstoppable. The city needs a healthy, vibrant Michigan Avenue as an economic engine and global drawing card. That requires a new identity that's not tethered so tightly to traditional merchandise sales. Forging that identity will take ideas, energy and commitment from the private and public sectors.
Calling the current threat to Michigan Avenue's future "an inflection point for Chicago," O'Connor says "if Michigan Avenue goes into decline, Chicago goes into decline."
Reinventing Michigan Avenue is just one of the challenges Chicago will face when the pandemic ends. And it's one we can't afford to duck.
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