Office vacancy rates in the Loop during the pandemic have surpassed their ’70s peak. So what’s it going to take to bring people back?

These days, State Street is not such a great street. On empty downtown storefronts, placards read “Retail Space Available.” Tantrum and Forever 21 are closed for good, as are Morton’s the Steakhouse, Everest, and Toni Patisserie. On Adams, the Berghoff Restaurant is boarded up, awaiting an uncertain reopening.

Anyone who remembers the desolate Loop of the 1970s would feel a strong sense of déjà vu walking among the aimless, socially distanced pedestrians on State Street today. Early this year, reports from the Chicago Loop Alliance said foot traffic is less than half of what it was prepandemic, probably because only 20 percent of offices are open with staff working onsite.

“There without question is concern that vacancy in the Loop is higher than it has been,” says Todd Siegel, senior vice president at CBRE Group, a commercial real estate agency. “The biggest challenge that retailers have faced is this inherent lack of footfalls. Since last March, there’s been a focus on the suburbs, on urban submarkets like Bucktown and Lincoln Park.” As Loop businesses sent workers home, retailers followed them to their neighborhoods. Now, as retailers anticipate a partial return of workers to the Loop, storefront business “is starting to claw back a little bit.”

So far, the new businesses don’t look too different from the old ones. Primark, an Irish fast fashion retailer, is scheduled to open on State Street this spring a few doors down from where its spiritual cousins H&M and Forever 21 used to be. Primark chose Chicago as its first Midwest market two years ago and forged ahead despite the pandemic. In the Willis Tower, a new sushi stand and a coffee shop await the return of office workers.

But the Loop won’t make a complete comeback this year, and even when it does rebound, it won’t be quite the same place it was before. The Loop was the city’s fastest-growing residential neighborhood over the past decade, but the pandemic has slowed that growth. And now that businesses have discovered their employees can work remotely, at least part of the time, office footprints are shrinking. Gensler, an architecture and design firm on Madison Street, sent all of its 212 employees home March 16 of last year. They’ve been telecommuting ever since. The company plans to start bringing in its staff once COVID cases decline more, but only 15 to 25 percent initially. They will return to a “new way of working,” in which the office is less a place for focused labor at a desk and more a place “for people to connect,” says Todd Heiser, co–managing director of Gensler’s Chicago office. “We’re not going to go to the office for eight hours. The time in the Loop, the time in their office, maybe because of their commute, people might decide to come in from 12 to 5.”

One reason the Loop has boomed over the past decade is the city’s success in attracting corporate headquarters. Walgreens and Wilson Sporting Goods moved in from the suburbs because young tech talent wanted to live and work downtown. As a result of the pandemic, and the looting and vandalism last spring and summer, demand for residential and commercial real estate is down in the Loop. The Loop currently has two years’ worth of condo inventory (the citywide average is six months), and newly built apartment towers aren’t filling as quickly as expected, says Michael Mandile, who specializes in Loop properties at Mandile + Lorimer Property Group at Compass. Consequently, sale prices are down as much as 10 percent since the pandemic began, and sellers are throwing in amenities such as free parking. Magellan Development Group has scaled back its Lakeshore East project overlooking Millennium Park — lowering the building’s height, eliminating one of two planned hotels, and reducing the number of apartments from 640 to 599.

In office towers, sublease availability is at an all-time high, as businesses such as Uber and the restaurant software startup Toast shrink working space. Demand isn’t coming back this year, or even next, says Peter Billmeyer, cofounder and managing principal of Bespoke Commercial Real Estate. As a result, he doesn’t anticipate much new construction in the 2020s. “[This year] is going to be really challenging for landlords,” Billmeyer says. “If you’ve got an organization of 100 people and 20 to 30 of them work remotely, you’re going to need less space.” Jon Cordell, a CBRE executive vice president, has already helped a law firm move to a new space designed for post-COVID working: The square footage is the same, but it has fewer offices, a larger break area, and a “town hall” where partners and associates can mingle.

Smaller footprints, however, leave commercial landlords with a big problem to solve. Last year, Ben Carson, then the U.S. housing and urban development secretary, suggested transforming office space emptied by the pandemic into affordable housing, though critics call the idea impractical because of how dramatically building infrastructure like plumbing and electric would have to change. Plus, Billmeyer points out, Chicago developers are less likely to make the office-to-apartment switch than Manhattan developers because there is more space to expand outward here than on an island.

Life science is one area where business has flourished during the pandemic, and it just happens to be a field where Chicago sorely needs real estate. A CBRE report from October noted that the city is seeing a surge in demand: The vacancy rate for the 248,593 square feet of lab space in the central business district was zero at the time of the report, while the number of tenants seeking laboratories has tripled since 2019. Sterling Bay and Related Midwest both had large life science projects planned on the fringes of downtown prepandemic, and if the trend continues, it’s not hard to imagine them looking to office conversions, as developers in Manhattan and San Diego have.

Even after the pandemic, the Loop will never return to its ’70s desolation. As the vaccine rolls out, theaters and restaurants will reopen, workers will return, and the area will remain the economic heart of the Midwest. The professional class’s return to cities is a social trend that was interrupted but will not be reversed. Gensler’s Heiser, a Chicago native who lives and works in the Loop, says that if the city could recover from a fire, it can recover from COVID. “Chicago is a very resilient city,” he says. “Chicago understands in its DNA, from 1871, how to reinvent itself.”