The owner of Chicago’s Water Tower Place plans to invest more than $170 million redeveloping a massive retail property that is often referred to as the original urban vertical shopping mall.
MetLife Investment Management on Monday announced plans for dramatic changes to the property at 845 N. Michigan Ave., which will include demolishing the escalators and water fountains just inside the main entrance and reducing the shopping area from eight stories to three.
The redevelopment will redraw a property that opened to national fanfare in 1975. While earlier downtown arcades and department stores were built with multiple floors, Water Tower Place is widely credited to be the first modern, large-scale vertical mall.
The redevelopment will be closely watched as owners of other huge, multilevel malls in large cities across the country consider alternate uses for upper floors because of pullbacks by department stores and changes in shopping habits.
“It’s being renovated to the way people shop today, and not the way people shopped in 1975,” said David Stone, founder and principal at Chicago-based retail brokerage Stone Real Estate. He will oversee leasing in the redeveloped mall.
“It worked for a very long time, but in recent years it became clear that it needed to be updated,” Stone told CoStar News. “This has been in the works for four years. It’s a very complicated building and it’s really an important asset for the city of Chicago. We wanted to make sure that we got this right.”
Work on the project is expected to begin next year, with an expected completion in 2028, according to a statement from MetLife.
The announced changes come about four years after the New York-based lender became Water Tower Place’s owner after Brookfield walked away from its investment following years of tenant departures and other struggles on one of the country’s best-known retail streets.
Yet the new plan is emerging amid renewed hope for the retail stretch that is often referred to as the Magnificent Mile. A run of big, high-profile leases has pushed down historically high availability on the boulevard, reducing the options for prospective tenants and pushing up rents.
Changes on the Mag Mile include recent openings by retailers such as a Harry Potter-themed store and a $50 million magic venue called The Hand & the Eye, as well as a return to the street by Japan’s Uniqlo.
A multilevel experience celebrating the nation ‘s candy history, called the Candy Hall of Fame Experience, is among recently announced leases on the street.
CoStar News first reported leases by American Eagle Outfitters for a huge space with three of its store concepts, and Levi’s deal to move to a large space within the avenue, as well as talks by Nike to move its longtime flagship to another space.
“The timing is really good,” Stone said of the Water Tower project. “The street has finally come around. There is legitimate momentum now.”
Details of MetLife’s planned redevelopment, previously reported by Crain’s Chicago Business, come four years after real estate giant Brookfield gave up on Water Tower Place and handed it back to the lender.
That move came in the immediate aftermath of COVID-19, and about a year after the largest tenant — Macy’s, which leased almost 324,000 square feet across parts of all eight floors and the mezzanine level — shut down. It left the mall’s anchor space vacant for the first time.
The 818,174-square-foot mall was developed at the base of a 74-story residential tower. The mall has long been known for its soaring atrium and marble exterior.
Tenants include American Girl, the Chicago Sports Museum and Lego Store.
Matt Sharples, regional managing director at MetLife Investment Management, said in the statement that “so many people have cherished memories of their visits to Water Tower Place over the last half century; this redevelopment is designed to ensure that we continue to offer a must-visit destination for future generations."
He added that "while we are still in the design phase, as envisioned this investment will fund significant improvements, reinforcing Water Tower Place as a high-traffic, flagship retail, dining and entertainment destination on the most visited shopping street in Chicago.”
CoStar News first reported in 2023 that MetLife was considering a plan to convert upper floors of the mall into a new use such as medical offices. Last year, JLL brokers began marketing the top five floors for sale or lease.
No deals have been announced for those floors.
The three levels that will remain retail are about 70% leased today, not including the former Macy’s space, Stone said.
One of the biggest changes to the property will be the removal of escalators at the main entrance off Michigan Avenue, which will create an atrium filled with new shops.
Stone said traditional retailers such as apparel companies will be sought for the lower two floors, with some form of new dining to take over the former Foodlife food hall space on the mezzanine level.
“It probably won’t be a food hall, but that will continue to be a food concept run by one or more Chicago operators,” Stone said.
The third floor could be a mix of experience-based retail and traditional shops, Stone said.
As new uses for upper floors are considered, a new floor will be placed across the fourth floor, making upper floors no longer visible from the mall central atrium, Stone said.
The new entrance will improve the flow for shoppers, no longer requiring them to orient themselves after immediately going up on an escalator, he said.
“This will make the shopping center much more shoppable and intuitive,” Stone said. “It eliminates one of the aspects of the original design that has always been a challenge. You’ll be able to walk in and quickly see everything that is around you and above you.”
For the record
Leasing is led by David Stone of Stone Real Estate. The redesign is by Neumann/Smith. The general contractor is Pepper Construction.