Steingold’s Expanding; Southport has been “a beacon of light” during COVID compared to Armitage and Damen Avenues

Aaron Steingold says his deli on Southport Avenue is doing 2.5 times more orders per month than it did in its previous location. He’s preparing to expand into an adjacent storefront.

With shoppers venturing out again, neighborhood retail corridors in Chicago are seeking paths to post-COVID prosperity.

A look at shopping strips on Damen, Armitage and Southport avenues reveals the challenges of adapting to a retail landscape altered by the pandemic.

Though the recipe for success will vary by street, the key will be having a good mix of retailers. They’ll need restaurants to drive foot traffic, brands that got their start online and creative leases. Gone are the days of long leases for large spaces and retail models that rely too heavily on in-store sales. As the line between digital and in-person commerce fades, brick-and-mortar stores must serve as brand-building outposts, showrooms and pickup spots for online orders.

“It’s not enough to hang your merchandise on display and expect it to sell off the shelves,” says Niclas Behrndtz, retail expansion manager at Rains, a Danish outerwear retailer that opened on Damen in March. “You need to be interactive; you need to reach the customers in a whole new way.”

A new analysis from Stone Real Estate counts Armitage, Damen and Southport avenues as Chicago’s primary boutique retail corridors. They are often go-to spots for brands looking to set up shop in Chicago, and their fate post-pandemic could influence the city’s ability to attract retailers. Such retail strips also bring business and vibrancy to neighborhoods—a vital task as offices permanently adopt flexible work schedules and residents continue spending time and money near home.

Armitage became a magnet for online brands in the years leading up to the pandemic. That helped it weather COVID’s retail downturn. The vacancy rate on Armitage between Sheffield Avenue and Halsted Street decreased to 7.2 percent in 2020 from 8.8 percent in 2019, according to Stone’s report. That’s about as good as a retail street could hope for during COVID, says William Winter, senior associate at Stone.

Online brands won new customers during the pandemic as more consumers shopped digitally. A May survey from McKinsey found that 40 percent of Americans changed brands during the pandemic. To strengthen ties with those new customers, they are opening brick-and-mortar outlets, often targeting ZIP codes where e-commerce orders were sent.

Brands that started online occupied 22.1 percent of retail space on Armitage last year. When traditional retailers such as Vosges Haut-Chocolat and L’Occitane en Provence vacated, online brands Mugsy Jeans and Rothy’s took their places.

Online brands occupied only 1.3 percent of space on Damen last year, as the once-hip corridor’s troubles worsened during the pandemic. The stretch between Willow Street and North Avenue saw vacancy rates rise to 29.3 percent in 2020 from 22.9 percent in 2019, according to Stone. That’s double the sub-10 percent rates on Damen between 2013 and 2016. Soft-goods retailers, which were already leaving the strip before the pandemic, continued their outward march last year as five brands left.

“Damen, it has lost its way a little bit,” Winter says. “In the early days, when Damen first emerged as the go-to street, it was a lot of gritty local brands that aligned with the ethos of the neighborhood. Over time, those have been filtered out.”

But observers point to signs of recovery on Damen as new businesses take the place of traditional retailers. Primary care practice One Medical Group replaced Nike Running, and facial bar Face Foundrie recently signed a lease.

Warby Parker, an eyeglass brand that started online, is also set to open on Damen this summer. Most of the company’s customers shop both in-store and online, says Sandy Gilsenan, senior vice president of retail. Chicago’s been a strong market across all channels—Warby has five other locations here, including on Southport and Armitage—and customers have been asking about a location on Damen, she says.

The story is similar with Chicago-based Foxtrot, which delivers wine, beer and snacks. The brand launched online in 2014 and opened its first brick-and-mortar outpost in 2016. Foxtrot looks at retail as a way of connecting with customers, and it uses its locations as shipping hubs, says Carla Dunham, chief merchandising and marketing officer. Foxtrot is planning to open a location on Damen at North Avenue this month. Experts say any business that was deemed “essential” during pandemic lockdowns is a good get for a retail strip.

Such moves could attract more digital-first retailers to Damen, says Nicole Cardot, vice president at Baum Realty Group: “You do need a couple of these pied pipers to come to the market, and more will follow.”

Vacancies on Southport between Addison and Roscoe streets rose to 4.5 percent in 2020 from 0 percent. It’s the highest rate the retail corridor has seen in five years, Stone’s data shows. Gone are restaurants, soft-goods merchants and national brands, including Canadian retailer DavidsTea, which closed all of its U.S. locations.

Even so, Southport’s vacancy rate beats any that Armitage or Damen have notched in the last eight years.

Southport is populated by national retailers that had more financial cushioning to endure the pandemic than independents and smaller local chains. Beauty giant Sephora recently opened, and several online retailers with Armitage locations have also opened on Southport. Local restaurants, such as Southport Grocery and Crosby’s Kitchen keep foot traffic flowing.

Southport has been “a beacon of light” during COVID, says Chris Irwin, senior vice president of retail sales and leasing at Colliers. Retailers that were ailing before the pandemic failed, and leasing activity slowed for a while, but Irwin says he’s been busier in the last two months than he’s been in 10 years.

Steingold’s of Chicago relocated this year to an area just north of the stretch analyzed in Stone’s report. Owner Aaron Steingold says he isn’t worried about the empty storefronts, either. The deli is doing 2.5 times more orders per month than it did in its previous location and is preparing to expand into an adjacent storefront.

“We just needed more people walking by,” Steingold says. “Southport offers that.”

Article from Crain’s Chicago Business

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