When Sears, Roebuck and Co. announced it was closing its State Street flagship back in 1982, Chicago business leaders worried that the retail heart of the city would never recover–with good reason.
Sears’ 1983 exit had a domino effect. It was soon followed by Montgomery Ward, Wieboldt’s and Chas. A. Stevens. As rust seemed to coat the entire recession-bound Midwest, the city’s development chiefs started to talk about replacing the vanishing merchants with office space, a public library–anything but retail.
But now that Sears is planning to return to State Street in late 2000, one of the city’s knottiest development problems appears to be resolving itself. An agreement to provide Sears with a public subsidy of about $10 million to build a 250,000-square-foot store at 1 N. Dearborn St. is scheduled to be announced by Mayor Richard Daley’s office Thursday.
Sears’ return could herald the arrival of other big-time retailers that would not have considered nestling among State Street’s once-motley collection of wig shops and cut-rate electronics dealers, retail experts say.
Spending taxpayer money to attract Sears is “a smart strategy if the city uses Sears as an anchor to attract other businesses,” said Thomas Lys, professor of real estate management at the J.L. Kellogg Graduate School of Management at Northwestern University.
Adds Bruce Kaplan, president of Northern Realty Group in Chicago, which specializes in retail real estate: “It’s a real live symbol of what’s happening on State Street. It’s the first time a department store has opened on the street since the exodus began.”
Of course, State Street’s recovery was well under way before Sears decided to come back. Lots of businesses are looking at downtown sites because of the large influx of largely affluent residents who need places to shop.
State Street’s recent facelift is another draw. In recent years, the city and the Greater State Street Council merchant group has restored car traffic, installed vintage-looking street lights and signs and planted dozens of trees and bushes.
Some retailers such as Old Navy, the hot casual clothing chain owned by Gap Inc., have opened their doors and been doing gangbusters business–without public subsidies.
And the street continues to buzz with new construction such as the Hotel Burnham, which is scheduled to open next month in the Reliance Building at State and Washington Streets, and the School of the Art Institute’s new student residence building at State and Randolph Streets. That development also will include retail and restaurant space.
But it doesn’t take a city planner to realize that Sears’ mixture of appliances, hardware and home electronics will only add to State Street’s growing list of attractions.
Clutching a bag of produce from a farmer’s market in the Loop, retired college professor Elaine Rosen on Tuesday recalled an era, not too long ago, when the area along State Street was a less-than-hospitable place to shop.
“It’s getting better, though,” she said, eyeing the busy corner where the new Sears store is slated to open next year.
“State Street is a viable shopping area, and I think people are figuring out how important that is for this city,” she said.
Ann Reed, a Loop attorney taking a lunchtime shopping break at Carson Pirie Scott, said she already sees a noticeable increase in shopper volume.
“The more the better,” Reed said. “Moving in Old Navy had a great effect. The area looks better. It’s more active.”
Still, giving Sears a subsidy to build a State Street store is setting a potentially costly precedent, Lys said.
It means that every other new retailer looking at State Street will have its hand out. Even long-established retailers may threaten to leave unless they get some financial assistance, too.
“How do you prevent everybody from renegotiating their deals?” Lys asked.
Already, the city has agreed to provide $11 million to a developer to restore the facade of the Carsons building at 1 S. State St.
But that risk is worth the reward of increased sales tax revenues, new jobs and better shopping amenities for residents, said Cynthia Cohen, president of Strategic Mindshare, a retail consulting firm with offices in Florida, California and New York.
Sears, one of the nation’s biggest retailers, isn’t just being greedy in asking for public assistance, she said. Operating an urban store is more costly because almost everything is more expensive–from real estate to store security. Even moving merchandise into the store is more costly because urban stores don’t have room for standard loading docks, said Cohen, who recently conducted a study of urban retailing.
Of course, Sears is likely to do quite well with its new State Street location. Its new urban stores do $75 million to $100 million in annual sales, almost triple the chainwide average. On State Street, Sears is likely to rack up $80 million or more in annual sales, which will go a long way toward offsetting higher costs, said Sid Doolittle, partner with McMillan/Doolittle, a Chicago retail consulting firm.
To be sure, State Street’s struggle to reinvent itself is far from over. The city still does not have a plan to develop Block 37, which has been vacant since the mid-1980s.
Negotiations with Block 37’s developer, JMB Realty Corp., continue to inch forward and should be completed before the end of the year, City Hall sources said.
The current plan includes a Lord & Taylor as an anchor department store. Lord & Taylor, part of St. Louis-based May Department Store Co., reportedly has asked the city for about $20 million in subsidies.
With a Sears deal completed, it’s vital that the city bring in exciting new retailers for Block 37, said Tom Cokins, executive director of the Chicago Central Area Committee, an urban development think tank.
“State Street needs to continue to build on being a destination, not just for office workers, but for visitors to the region,” Cokins said.
“Obviously, you want to bring in something that adds to the personality of State Street. The correct decisions have to be made.”
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