Monday, May 14, 2007

Michigan Avenue Blues

Chess Records may have been at 2120 South Michigan Avenue, but today North Michigan Avenue is where people are singing the 8 and 12-bar riffs. That's right, the unthinkable is happening: large chunks of space are opening up on and near the Mag Mile.

Today I agree with the ubiquitous and eminently quotable Bruce Kaplan about this having a "profound impact" on where things may be going. In a way, it may have started years ago with the 700 N. Michigan Shops, which never really took off the way people expected. (The tenant mix was just never right for me, and I only went there for the food court. Maybe Best Buy will help.)
The Water Tower space not being taken by American Girl, while large, will rent out, and for more money than was being paid. But the existing American Girl and the CompUSA spaces, which technically are off Michigan but important nonetheless, are more problematic. And more retail space is coming, including at Trump Tower.

I don't think this will affect rents greatly, either. But the trend I find disturbing, just like the big box trend on which I recently commented, is the cannibalization of existing space. For instance, in the linked story, Gene Stern of Swiss Fine Timing is mentioned. As I recall, Gene actually came into that space in 2004 through a sublease with Ferragamo, which rented that space and and other space that it decided to sub out.
I have two concerns here. One is high end retailers cutting back on sales space to the point that they are not carrying full lines of merchandise. (What is Ferragamo now -- 1/2 or 1/3 the size it once was?) The other is that so many small tenants may clutter up the area with doors and that it will detract from the beauty of Michigan Avenue. I know it was a big issue three years ago when we negotiated the Swiss Fine timing sublease, because there would be three storefronts in what we thought was a very narrow space. It turned out that it worked out beautifully, and I think the architects and designers did a magnificent job making the area look great. But that won't always happen, and landlords need to be on the lookout when working on their leases with respect to assignments and subleases, megarents notwithstanding.