State Street Retail Vacancy Rates Decline
New residents in the Loop are helping to bring retailers back to the area, marking a shift for local shoppers.
Updated on Oct. 21, 2026 in Commercial
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Retail vacancy rates on Chicago's State Street fell to 28.8 percent in 2025, down from 35.1 percent the previous year. This shift follows the conversion of vacant office towers into residential apartments, which is slowly bringing more shoppers back to the central shopping district.
Why it matters
The influx of new residents into the Loop is revitalizing the local retail market after years of high vacancy. This demographic shift is encouraging renewed investment in historic properties like Block 37, which is slated for a $25 million upgrade.
State Street saw vacancy drop to 28.8 percent in 2025, compared to 15.2 percent in 2019. Meanwhile, Edwards Realty recently purchased the Block 37 property for just 36 percent of its previous sale price.
The players
Edwards Realty
A commercial property owner and developer currently focused on revitalizing major urban retail assets like Block 37.
Old Navy
A national clothing retailer that is adjusting its physical footprint in major urban shopping corridors.
The details
The retail recovery is primarily driven by the conversion of underutilized office towers into residential units, creating a new local customer base. While brands like Old Navy are returning to the corridor, they are opting for smaller footprints, leasing a 13,000-square-foot space in 2026 after vacating a 32,000-square-foot location in 2023. These changes reflect a recalibration of commercial square footage to match current foot traffic patterns.
Timeline
2019: State Street retail vacancy rate was 15.2 percent.
2023: Old Navy vacated a 32,000-square-foot space.
2024: State Street retail vacancy rate peaked at 35.1 percent.
2025: State Street retail vacancy rate improved to 28.8 percent.
2026: Old Navy announced a return to a 13,000-square-foot space.
The Home Front
This shift follows the national trend of converting underused office space into residential apartments to support struggling city centers. These redevelopment projects are now providing a vital customer base that is beginning to stabilize commercial real estate costs in the Loop.
Residents living in or near the Loop should anticipate continued construction activity as office-to-residential conversions progress through 2026. Keep an eye on local development notices to understand how changes in your neighborhood's commercial mix may influence property values.
The takeaway
The downtown shopping landscape is shifting toward smaller, more efficient retail footprints as the area attracts more full-time residents. Watch for future vacancy reports as a signal of how well the current residential conversion projects are sustaining local commerce.
Further reading
For more on how local business districts are evolving, see Commercial.
Source note: This article includes information reported by The Real Deal New York.
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