Chicagoland Retail Market, Q3 2026: Transcript
Gordon Lamphere: Chicagoland retail rents are growing. Vacancy is near historic lows, and institutional money is buying grocery-anchored centers with real conviction. And here’s the strange part: leasing is slower, absorption has been negative in stretches, and consumer spending is visibly tired. How are both of these things true at the same time? One word: scarcity. Nobody has built meaningful retail in the Chicago market in a decade, and this quarter proved just how much that protects landlords and how little room for error tenants have left.
First, I’m Gordon Lamphere, a broker, advisor, and Vice President at Van Vlissingen and Co. We’re deep into another meaningful transaction volume year across every asset class we’re going to talk about today. And that volume matters, because it means the analysis you’re about to hear isn’t just assembled from press releases. It comes from lease negotiations we’re sitting in, sale processes we’re running, and site searches we’re conducting.
The Mid-Year Picture
The mid-year picture across Chicagoland is a vacancy story, with vacancy holding roughly flat in the low to mid-fives. Availability keeps tightening because demolitions and conversions are removing a substantial portion of functionally obsolete space from the market faster than anyone can add it. Rent growth, as a result, although it’s cooling to around 1.5% to 2.5%, hasn’t substantially ticked up or dropped down in any meaningful way.
So when we look at the market as a whole, what can we gather? Most of all, there’s a massive divide between the high-growth parts of the market, the markets that have stabilized, and the parts of the market where we could see extreme deceleration. It’s important to understand where each of those sits. And it hasn’t been tariffs driving this. What we’ve seen is a category split underneath that’s textbook.
Necessity Is Driving Everything
Necessity is driving everything. Retail from grocery stores to food and beverage is heavily driving positive growth, and those sections of the market have barely winced at major negative macro trends. In some discretionary categories, however, like apparel and electronics, we are seeing trouble, and that trouble is increasingly concentrated in big box centers that were heavily reliant on those categories.
But here’s what matters most for owners. With no new supply pipeline, every closure or troubled portion of the market is a backfill opportunity rather than a vacancy spiral. When a box goes dark in a decent trade area today, the leasing calls start before the announcements finish, often from medical, fitness, grocery concepts, and experiential users that couldn’t find space during the tightest years.
Retail Has Become What Office Wishes It Were
The national market is telling the same story: vacancy near historic lows, construction completions at rock bottom, and four straight quarters of positive absorption. Retail has quietly become what office wishes it were, a scarce, cash-flowing income asset that trades on in-place economics. The capital markets have increasingly noticed, with institutional buyers backing retail for the first time in decades. Grocery-anchored product in established Chicagoland demographics is increasingly trading at prices that reflect genuine conviction, not distress hunting.
The Split Inside the City
Within Chicago proper, the split is stark, and this is worth naming plainly. Office- and tourism-dependent districts in the Loop and on the Magnificent Mile are still carrying double-digit retail vacancy, while neighborhood corridors and mixed-use districts like Fulton Market and River North have stayed tight, with trophy corridors commanding $90-plus rents. That’s a four-times-plus spread over the metro average inside the same city.
The Mag Mile’s recovery is real but incremental, with foot traffic rebuilding and a few meaningful re-tenancies. The Loop, however, is the more interesting play, particularly with the conversion talk. With a wave of conversions shrinking office inventory, we’re going to start to see thousands of residents on blocks that never had them, and those residents need grocery, a gym, a dry cleaner, and dinner. Loop retail is a 2028 story being set up in 2026, and the investors quietly buying ground-floor space at today’s basis understand exactly that shift.
Two Near-Term Trends to Watch
Two near-term trends to watch: the Bally’s Casino opening in River West, which is going to redraw some of the foot traffic patterns on the Near North Side, and the continued suburban downtown renaissance in the walkable suburban cores of Lake County and the North Shore, where we’re seeing transactions as tight as I’ve ever seen them.
The retail-as-an-amenity thesis I laid out last quarter is starting to pan out, with ground-floor retail as the activation layer of mixed-use projects. It’s showing up in nearly every infill redevelopment conversation we’re seeing on the North Shore. Developers have stopped underwriting that retail as an income driver and started underwriting it as the thing that leases the apartments above it.
A Cautionary Tale
There’s also a major cautionary tale in the suburban markets. Be careful with regional mall exposure that’s dressed up as redevelopment. There are some good redevelopment projects being actively repositioned that are well capitalized, and they could be incredible land plays. But they should be priced as risky redevelopment land plays.
Finally, there’s one retail number I’m saving for the close, and it’s the clearest picture of the two-market split you’ll see anywhere.
Van Vlissingen and Co. has been the Midwest’s oldest commercial real estate brokerage, development, and management firm since 1879, and today is independently ranked the #1 commercial real estate agency in Chicagoland, home to the #1 independently ranked agent, Gordon Lamphere, and the region’s #1 ranked commercial property management team. If you own, manage, or invest in energy-adjacent, mixed-use, or transit-oriented property across Lake County, the North Shore, the Northwest and O’Hare corridors, DuPage and the I-88 corridor, Will County, or southern Wisconsin’s Pleasant Prairie, Kenosha, and Racine markets, contact Van Vlissingen and Co. at 📞 847-634-2300 or 🌐 vvco.com. For a market-wide view of where these dynamics sit today, see our State of the Chicagoland Commercial Real Estate Market for Q2 2026.