Some Design Pros Have A Hot Take: Highly Amenitized Buildings Are Killing Neighborhood Retail
Tenants' flight to quality is an oft-repeated refrain in the commercial real estate community. But some architects and designers say the amenities arms race is leading developers to fly too close to the sun, simultaneously torching the fortunes of formerly thriving neighborhood businesses.
Many of the newest office and multifamily buildings are designed to offer a host of top-class amenities aimed at meeting as many tenant needs as possible and deterring them from ever leaving the space.
While developers tout these top-class amenities as a central perk of their buildings, panelists at Bisnow’s Architecture and Design Summit at Hilton Chicago Magnificent Mile Suites last week weren’t as confident that standalone one-stop buildings are the best at supporting healthy neighborhoods.
“I understand the market forces that drive all these buildings to have amenities in-house under the roof,” Ruggiero said. “But what they're doing is, they're sucking the energy away from neighborhoods.”
On a stretch of Broadway between Addison Street and Diversey Parkway, Ruggiero said he can count about 20 empty storefronts. Previously, people would have stopped at those storefronts on their way home from work, but they now have less of a need to because the same stretch also includes office and apartment buildings with retail, restaurants and services all under one roof, he said.
Companies are drawn to buildings with a variety of available amenities, per a Cushman & Wakefield report on which amenities drive leasing the most. Across the office buildings Cushman & Wakefield analyzed, the average building had 14 amenities each, with pressure to grow offerings.
Eighty-four percent of buildings included in the study offered on-site retail, food, and services, making it easier to arrive at a building and not leave it.
Amazon and the rise of online shopping have contributed to some of the decline in the success of brick-and-mortar retail, Ruggiero said. But standalone buildings filled to the brim with retail, eateries and services play a part as well, Ruggiero said.
Additionally, the amenities in these buildings are of lower quality than in distinct retail locations because developers are getting away with providing the “bare minimum” the market requires, Ruggiero said.
“Do I really want to go to a mediocre lounge, a mediocre bar on the 30th floor of my building?” Ruggiero said. “Or actually go out to a place which is much more part of the community, part of a neighborhood where you might actually meet more people and be part of a bigger scene?”
Even when developers create higher quality amenities, they aren’t always accessible to the general public, Lamar Johnson Collective President Sarah Jacobson said. Not only are workers and residents not venturing out, others aren't venturing in.
“Private developers are creating these amazing amenities that aren't open to everyone,” she said. “They've got beautiful outdoor spaces, but have a fence so the public can't get there.”
On the other hand, Jacobson said her developer clients are pushing toward a smaller unit size, which ups the importance of communal, shared spaces. There’s value in creating a special experience for those tenants, she said.
And on the flip side, major buildings like the Thompson Center could also serve as catalysts for growth in floundering neighborhoods.
Jahn President Evan Jahn, the son of the architect Helmut Jahn who designed the Thompson Center, said Google’s upcoming move into the building could be a major contributor to bringing life back to the struggling Loop area.
Google announced plans in July 2022 to purchase the 1.2M SF building for $105M after it undergoes renovations. The company said it anticipates it will move into the Thompson Center in 2026.
“That is an opportunity to catalyze a new neighborhood in Chicago and really engage it, create some vitality,” Jahn said. “It can make a destination that is serving not just functional needs, but is serving open space and other attributes that people want from a neighborhood.”
Neighborhoods need to find uses for lost street-level retail space to bring back some of the missing foot traffic, Jahn said.
“Filling it in with community spaces and other uses that are pulling people out of their buildings … is what makes the city safer and makes it more interesting,” he said. “It's what keeps its competitive advantage over suburban environments.”