Almost a half-century after opening, Water Tower Place, the once-bustling retail mall at the north end of Chicago's Magnificent Mile, remains shiny marble on the outside, but inside it's losing some of its sparkle.
Macy's, which anchors the south end of the building, announced plans earlier this month to close in a few months, leaving behind a more than 300,000-square-foot hole.
In June, restaurant group Lettuce Entertain You closed Foodlife, credited by some as Chicago's first food hall, and Mity Nice Bar & Grill. Both had been there for 27 years. Another Water Tower retailer, Gap, which has been closed since the early days of the pandemic, announced it would not reopen.
Elsewhere on Michigan Avenue, there are store closing signs at Gap, which is expected to close its flagship this month, and at Express, which an employee said will close in February. Former Apple, Dylan's Candy Bar, Na Hoku and Roots stores are vacant, and as is a former Topshop store across the street from Water Tower Place that briefly hosted a Toys R Us-themed pop-up exhibit. Next door, Columbia Sportswear remains boarded up and temporarily closed.
How effectively Water Tower Place can fill its empty spaces -- amid a pandemic that has devastated the retail industry and accelerated changes in how people shop, as well as looting incidents that have tested the city -- will help determine the health of Chicago's premier commercial street.
Macy's exit is "not a surprise, but the fact that it's happening is still a bucket of cold water in the face because of what it symbolizes," said David Stone, founder of retail brokerage Stone Real Estate. "Michigan Avenue has been seemingly invincible, and this is telling us that it's not invincible."
Macy's space, which spans all eight floors of the vertical mall as well as a mezzanine level, is available for the first time since the mall opened more than 45 years ago.
The department-store chain occupies 323,812 square feet, including 227,212 square feet of selling space, the company said.
Then a Marshall Field's department store, it was the largest tenant when Water Tower Place opened in late 1975. The Marshall Field's name disappeared in 2006, and the store has continued to operate as Macy's since then.
CLEARANCE SALE
"This will be the largest retail space currently on the market in Chicago, and certainly the largest availability on North Michigan Avenue in at least a generation," said retail broker Greg Kirsch, the Midwest retail leader at Cushman & Wakefield. "And it comes at a tough time."
Macy's, which has been scaling back in Chicago and throughout the country, said it plans to close after a clearance sale lasting 8 to 12 weeks. Its State Street flagship remains open.
"The covid-19 challenges may have been the nail in the coffin, but it's probably been a long time coming," Gabriella Santaniello, CEO and founder of retail research firm A Line Partners, said of Macy's exit from Water Tower.
Macy's, which announced plans to close 125 stores nationally in February, has more stores than it needs, and its suburban mall locations tend to be stronger than city stores, she said.
In their heyday, department stores signed sometimes decades-long leases for relatively tiny rents, in exchange for the enormous number of shoppers they attracted. Macy's has been paying a small fraction of the going rate on the Mag Mile, where first-floor rents in top spaces topped $550 per square foot during a boom in recent years, according to industry experts.
CITY'S HELP SOUGHT
Finding a replacement for a store of Macy's size will be especially difficult during the pandemic, when few retailers are looking to expand. It gives owner Brookfield Properties the opportunity to bring in new retailers and reconfigure the mall, experts said -- if it can line up new tenants during a shaky economy.
In a statement, Brookfield acknowledged big changes may be coming to the property but said it will need the city's help.
"Macy's departure from Water Tower Place presents us with an opportunity to repurpose a significant amount of square footage with a rebalanced mix of retail, dining, entertainment, grocery, fitness, medical and office space," said Chris Pine, executive vice president of anchor and box leasing a at Brookfield Properties.
"To fulfill this opportunity and deliver a new vision for Water Tower Place, we will need significant support and collaboration from our partners at the mayor's office, alderman's office, tax assessor's office, the Mag Mile Association and the local community," Pine said.
Brookfield could add millions of dollars per year in rental income by replacing Macy's with a series of smaller, high-rent shops. Macy's first-floor space alone could be worth more than the entire eight-story flagship currently brings in, Kirsch said.
The big vacancy also brings a potential chance to reconfigure the mall's entrance, which includes stairs and cascading water fountains, he said.
"Covid inspires grand plans," Kirsch said. "It's a bad time now, but ultimately North Michigan Avenue remains relevant and spaces will fill."
'REALLY QUIET'
About a dozen shoppers stood outside Macy's as it opened last week, hoping the clearance sales had begun yet sad about the impending exit.
"We lost Lord & Taylor, now Macy's. They drew the foot traffic," said Cheryl Cornett, 74, who lives in the area. "I'm concerned for Michigan Avenue. It might not be so magnificent."
Lord & Taylor, one of the original anchor tenants at Water Tower Place, closed in 2007, not long after Marshall Field's converted to Macy's. Several stores, including an American Girl flagship, combined to fill Lord & Taylor's space.
Each floor at Water Tower Place had just a handful of shoppers walking around on a recent morning and at many stores, employees outnumbered customers. A usually bustling Starbucks on the second floor has closed. Abercrombie & Fitch has yet to reopen and in a handful of other vacant storefronts, displays advertised other shops in the mall.
The mall felt "really quiet" compared with before the pandemic, said Maria Ibaraz, 26, of Chicago. She and her sister Frida, 18, were the only customers at women's apparel retailer Altar'd State. Ibaraz said she would miss having Macy's there, even if she usually prefers shopping at stores like Forever 21.
With far fewer office workers and tourists, foot traffic has declined by about 50% to 60% around Michigan Avenue, according to Magnificent Mile Association CEO Kimberly Bares.
"We're one of the great avenues of the world, and it's incumbent upon us to remain one of the great avenues. That may mean doing things differently," Bares said.
SAFETY CONCERNS
Julia Cathey, 57, of Matteson, Ill., who was at Macy's Wednesday, said she doubts she'll return to Water Tower Place often once the store closes. She's also concerned about smash-and-grab robberies and other incidents in the area.
"I don't feel as safe coming down the last few years," she said.
Macy's was among stores vandalized and looted during civil unrest last summer, but there have been previous incidents at the mall as well, including a gunshot fired outside Macy's seventh-floor entrance in 2018. No one was reported struck.
Since January 2019, a curfew at the mall bans unsupervised teens on Friday and Saturday evenings. The mall said it had been having issues with disruptive teens for months and imposed the curfew shortly after an incident involving 60 young people gathered on North Michigan Avenue. Some were believed to be involved in an attack on people at a nearby Red Line station and the mall was forced to close early that day.
Alderman Brian Hopkins, whose ward includes the northern stretch of the Magnificent Mile on which Water Tower sits, said Macy's already planned to close its Water Tower Place store before violent incidents last summer. But he said it's fair to question how large a role last year's unrest, or even perceived safety issues, have played in other store closures.
In addition to supporting the Water Tower curfew, Hopkins in 2019 helped block plans by Dave & Buster's to move into the vertical mall, after residents expressed concerns about fights and other incidents outside the chain's nearby location on Clark Street, which has since closed.
Neighbors have broadly supported other concepts, such as the high-end Spirits & Spice store that opened in Water Tower during the pandemic, Hopkins said.
His constituents "want Water Tower Place to succeed and they're open-minded," Hopkins said. "You can't overstate the importance of it. It's the top corner on the top retail block on the Mag Mile.
"I don't believe the Macy's space is going to remain vacant very long."