Luxury retailer Hermès reopens in Chicago, further boosting Oak Street as the Mag Mile works to come back

CHICAGO -- Luxury retailer Hermès reopens its Oak Street store Friday, a sign that corridors devoted to upscale customers are surging even though some retail districts, including Chicago's nearby Magnificent Mile, are still grappling with competition from online sellers and the loss of top retailers.

Hermès spent more than a year renovating and expanding the retail space at the corner of Oak and Rush streets. The retailer, which sells leather goods and other items handcrafted in France, operated from a nearby temporary site while the work was done.

Most of the retail space in the surrounding Gold Coast neighborhood, especially along Oak Street between Rush and Michigan Avenue, is now occupied, with several retailers such as Bottega Veneta Chicago and Burdeen’s Jewelry recently signing new leases, said John Vance, principal at Stone Real Estate Corp.

“The luxury category in retail, almost counterintuitively, has enjoyed an incredible resurgence since the onset of COVID,” he said. “It’s just performed tremendously.”

The pandemic curtailed spending on many extravagances, including vacations, leaving the wealthy with even more disposable income, Vance said, and shops such as Hermès, Giorgio Armani, Prada and Chanel offered opportunities to spend that excess cash. Even middle-class shoppers started browsing luxury stores more often, buying less expensive items but still fattening store profits.

“There were a lot of people who thought, ‘I’m rich, but I can no longer spend money the way I like, and still want to enjoy some of the best things in life, so instead of fancy vacations, I’ll buy at these luxury stores,’” Vance said.

Hermès, with about 300 stores in 45 countries, continued growing in 2023, Hermès President Diane Mahady said. The brand recorded more than 10 billion euros in sales by the end of September, up 17% at current exchange rates compared with the same period in 2022.

“We’re really lucky to have a very loyal client base, and we love the street and this location,” Mahady said.

Customers typically spend a long time browsing in the store, she said, so Hermès sought to make the experience on Oak Street as comfortable as possible. In addition to the new floor, French architectural firm RDAI remade the rest of the interior, using stone, wood and metal to evoke both Chicago’s industrial past and nearby Lake Michigan.

“We believe in being able to show the craftsmanship of our items directly,” Mahady said.

The prosperity along Oak Street may bring some relief to the Magnificent Mile, which is struggling with a number of empty storefronts, Vance said. As retailers jostle to secure the few remaining Gold Coast spots, some may start giving a second look to North Michigan Avenue, which has a lot of available space and cheaper rents.

“I think the Avenue is already starting to recover,” he said.

Retailers are set next year to fill several vacancies along the Magnificent Mile. Aritzia will occupy about 49,000 square feet at 555 N. Michigan Ave., the former home of The Gap; Alo Yoga will open a store at 717 N. Michigan Ave.; and Swedish apparel retailer H&M will take over the long-vacant former Apple store at 679 N. Michigan Ave., although that’s less space than it now occupies several blocks north.

“That’s going to show other retailers that you don’t have to be on the Gold Coast, that you can go to the Avenue and perform very well there,” Vance said.

The Magnificent Mile’s retail vacancy rate is about 25%, said Kimberly Bares, president and CEO of The Magnificent Mile Association, but that should decrease significantly if MetLife, the owner of Water Tower Place, fulfills a plan to reduce the eight-floor mall’s retail space by more than half, including space once occupied by anchor tenant Macy’s.

And a new mix of office tenants, cultural institutions and others in Water Tower Place will bolster a transformation already underway along Michigan Avenue, she added. Many of the new retailers on Michigan Avenue focus on providing customers with experiences, rather than just products. One example is the five-floor Starbucks Reserve Roastery at 646 N. Michigan Ave., which showcases its coffees, the company’s history and the roasting process. The Museum of Ice Cream in the former Tribune Tower at 435 N. Michigan Ave. is also an example of an entity focused on offering an experience.

“The museum came in just wanting to test the market, and the market performed wonderfully for them, so they just signed a seven-year lease,” Bares said of the Museum of Ice Cream.

Other changes are on the horizon.

The Magnificent Mile Association joined with the Chicago Department of Planning and Development and the Urban Land Institute to brainstorm ideas for reviving the district, and now envisions adding a pedestrian bridge linking North Michigan Avenue with Oak Street Beach, new pocket plazas and sidewalk cafes, and a public common stretching from Water Tower Place to Lake Shore Drive.

“The Avenue was envisioned by Daniel Burnham in the 1909 Plan of Chicago as our Champs-Élysées,” Bares said, “and we’d like to see that come to life.”