Just Like Off Broadway, Off Michigan Is Far Less Expensive

Implications: This announcement of the latest Chicago Steve & Barry's store raises some eyebrows due to their seemingly sudden conversion to chasing "expensive" real estate.   My familiarity with this specific location allows me to show that this is not any different than any of the other opportunistic locations Steve & Barry have been seeking. If anything, it is probably LESS EXPENSIVE than some of their other Chicago locations. I believe that this location further establishes Steve & Barry as one of the most imaginative and clever retailers that have hit the market in many years.

Analysis: There are two main reasons for my firm belief that this is not a departure from their 200 store, successful real estate model that should worry the many Steve & Barry watchers in the investment community.

First and probably most importantly, this location has not been considered to be an "expensive" location from its inception or it would not have managed to attract a CompUSA store in the first place. Its "expensiveness" has been further diluted by the fact that the retail industry has known this to be a loser for CompUSA and their co-tenants ever since the stores opened in their new building. In fact the location has been quietly marketed to retailers as an increasingly cheap sublease for many years. The location suffers from not only being quite a way off Michigan Ave. with virtually no signage or exposure of any kind to the throngs of tourists and Michigan Ave. Shoppers, but to compound the problem, it is a basement store accessed only by a narrow and long escalator.

Of equal importance is the fact that Steve and Barry's probably paid less for this location than they did for most of their other Chicago locations. Certainly for the next four years until October 2012 they will enjoy a very reasonable sublease rent. The combination of a lousy retail leasing market, particularly for this type of "oddball" location, and the size of the store which would "fit" very few other retailers, made this a slam dunk for the Steve & Barry's real estate person.

Not only is this a perfect fit for S&B but because of the very high percentage of tourists shopping along Michigan Ave. and the increasing fame of the S&B operation, they should do quite well. Regardless of how well they do, they will have almost four years to test this "downtown" concept and by that time they will have many other similar locations to choose from if they find they can't get together with the landlord on an extension of their sublease.

I think it is a brilliant and very inexpensive way to test a whole new market for the S&B operation!