Empty storefronts: Retail vacancy rate ‘respectable’ at 11%, but appearances trouble officials

The economic development in Evanston is expected to start warming up next month, when a report on Evanston business districts is due.

An empty downtown space is seen in the fall. Real estate analytics firm CoStar’s figures say Evanston’s ground floor retail vacancy rate is just 10%. Credit: Evan Girard

At the city’s Economic Development Committee meeting Wednesday, Jan. 25, Paul Zalmezak, Evanston’s economic development manager, briefed members on what current economic figures say about one of the districts, Evanston’s downtown area, as a kind of prelude to the report.

In February, officials expect to receive the results of a $245,000 study of the city’s business districts conducted by Philadelphia-based consultant Interface Studio LLC.

In May of last year, City Council members voted to contract with the group to conduct the study, described as “a highly focused community engagement and business district market analysis.”

Staff members hope to use the study results to draw up a blueprint to guide the immediate economic recovery of the districts as the city emerges from Covid, as well as lay the groundwork for future success.

At the Jan. 25 Economic Development Committee meeting, Zalmezak spoke about what recent figures say about vacancy rates in the office and retail sectors.

Office markets have been struggling nationally, with many Office workers staying home during Covid and its multiple variants.

Office vacancy rate could point to reawakening market

Evanston’s office vacancy rate stands at a respectable 11% right now, despite the pandemic, said Zalmezak, using figures from CoStar, which keeps real estate analytics.

Evanston Economic Development Manager Paul Zalmezak makes point at the Jan. 25 Economic Development Committee meeting. Staffer Katie Boden is at right. Credit: Bob Seidenberg

He told committee members, “We’ve heard from experts that when the vacancy rate gets down to 10%, that sparks the market to build another office.”

When the market shrinks to a low enough rate, he said, “there are companies that want to be here, but can’t fit into the small spaces that are vacant. So there is an argument to be made that investors in office, when it warms up again – not weather wise, but the market – would consider building more office [space].”

To some degree, Zalmezak said, the city has seen signs of that movement already with the 10-story mixed-use building that developer Trammel Crow is building at the former Burger King site at 1734-40 Orrington Ave.; and an 18-story multitenant office building planned for 605 Davis St.

Ground floor retail market vacancy at 10%

Surprisingly, downtown Evanston’s retail market space showed an even lower vacancy rate for ground floor space, at 10%.

Further, Zalmezak suggested that 10% figure may be a little high. The Panera Bread space, for instance, closed nearly three years ago and is about to go back on the market.

The space, 1700 Sherman Ave., is located along the “no. 1 intersection in the city for retail,” he said.

Although Panera closed in March 2020, the owners did not exit their lease. “They’re paying their rent. The lease ends in three months.”

Similarly, with new ownership at the Orrington Hotel, that should help fill “the Unicorn space,” said Zalmezak, referring to the space around the Unicorn Cafe, another Covid casualtywhich also closed in 2020.

The Unicorn Cafe site and businesses around it are located in a parking garage that serves the Orrington, and now has a new owner invested in improving spaces, Zalmezak said.

‘It doesn’t feel like a 10% vacancy rate’: committee member

Really, Zalmezak argued, the challenge the city faces in its rebuild has less to do with the vacancies and more about the occupants themselves.

“Pick out a category,” he said to committee members. “How many Bubble Tea places do you need?” (The Yelp website actually lists a Top Ten in that category.)

“Remember the burger wars a few years ago?” he said. “We had four burger places. So that is where I think we can be strategic later, when we talk with Interface … What kind of retail do we want to attract?”

Committee member Lisa Dzeikan said that while the statistics showing a low vacancy rate are probably correct, “From a pedestrian perspective, it sure doesn’t feel that way.”

“We have a lot of properties that are in transition,” she said, naming the movie theater that, while now open, has portions not built out.

“The experience in our downtown is not what it has been. I don’t know how you want to define it,” she said, but “it doesn’t feel like a 10% vacancy rate.”

Zalmezak said he did not want “the numbers to intend to suggest that we’re in good shape.”

The two did not resolve the conversation. “When I walk our downtown as a pedestrian, I’m troubled,” Dziekan said. Replied Zalmezak, “I’m troubled as well.” However, he added, “as somebody in the know, I feel like we’re going to be OK in 18 months.”

Old Orchard redevelopment another factor

During the presentation, Zalmezak admitted initial concern at hearing Westfield Old Orchard Mall’s $100 million announcement last December of plans to redevelop that center by adding residences, more eateries and outdoor areas with a pedestrian feel.

Old Orchard, less than three miles from Evanston’s downtown, has been on Evanston’s mind since it opened in the mid-1950s. (Evanston RoundTable reporter Mary Gavin provides some of the details of that history in Encountering Evanston History, published by Evanston RoundTable Media NFP late last year.).

In the city’s instructions to Interface Studio, which came before the Westfield announcement, the mall was cited as a major challenge.

In discussion, Council Member Devon Reid, 8th Ward, said, “I do think we have to be really, really concerned about that. I mean, I think Evanston has better bones, we have more density downtown. We have a lot more to offer.”

But he said, recalling visits to Old Orchard as a youngster, the mall represented “a safe place to take the family because you can kind of let your kids run around. You don’t have to worry about a car popping out of somewhere.

“And I think to revitalize our downtown for the modern era … I really think we need to start thinking [about] getting cars out of our downtown and creating [a] pedestrian friendly area.”

Fourth Ward Council Member Jonathan Nieuwsma, chairing the meeting, said he liked the idea. He also said he disagreed with a bleak assessment of the threat posed by a renovated Old Orchard.

“We have our public transportation. … We’ve got Metra, we’ve got the lakefront,” he said rattling off some of Evanston’s advantages. “I’m not concerned about losing to that [the redevelopment].”

Nieuwsma said the city’s plan to remake Evanston’s business districts should use Old Orchard as a “benchmark.”

Dziekan suggested that the city look to other North Shore communities that “are doing a good job at place-making, that are doing a good job clustering restaurants, that are doing things in a way that I don’t think we’re capturing right now.”

She added, “I would look carefully before we close streets to cars.”

She pointed to State Street in downtown Chicago, which was converted into a pedestrian mall in the late 1970s, and then was later reopened to pedestrian traffic.

“I think there’s a way of doing a lot of things that we want to see without closing it to cars,” she told the committee.