CHICAGO-While the potential of a “housing bubble” has dominated real estate headlines, a bigger balloon may be hovering over North Michigan Avenue, suggests Northern Realty Group president Bruce Kaplan. “Michigan Avenue may be the best example on Earth of a market gone mad,” Kaplan told more than 400 at RealShare Chicago Thursday.

His company’s annual survey of the two-million-sf North Michigan Avenue retail market suggests the air is going out of the balloon. Despite some of the highest rents in the US, asking rent rates along the “Magnificent Mile” have fallen for three straight years, while vacancy has increased for two years in a row. While vacancy has jumped more than two points in a year to 7.1%, asking rental rates have fallen 40% to $35 per sf.

While the retail sector was crowned king among local product types, Kaplan all but declared the regional shopping center an endangered species, noting virtually none are being built now, while “lifestyle” centers are the rage. Meanwhile, as Walgreens stores have become the product of choice among anxious Section 1031 investors, cap rates for those properties have dropped to the 6.5% range.

The trends are reflections of changes in consumer buying patterns in the first decade of the millennium, Kaplan said. However, the consumer has kept his sector extremely healthy.

“In the past two years, we’ve seen a recession, terrorism, a war in Afghanistan and a war in Iraq. Despite all those shocks to the consumer, the consumer has kept on spending,” said Jones Lang LaSalle chief executive officer for the Americas Peter Roberts. “Retail has the strongest fundamentals across the US.”

“Was there a recession recently?” Kaplan quipped during a town hall meeting. “It’s a very exciting time to be in retail.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


GlobeSt Net Lease Spring 2024Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join now!

  • Free unlimited access to's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.