By  on August 2, 2010

CHICAGO — Oak Street, long a mainstay of luxury here, is undergoing one of its most significant transitions in decades.

In the fallout from the recession, stores such as Yves Saint Laurent, Ultimo, Frette, Chasalla and Me & Ro have closed, creating more vacancies than at any time in about 30 years, real estate brokers said.

“It certainly looks dejected at this moment,” said Bruce Kaplan, who specializes in retail as senior vice president for CB Richard Ellis Inc. “I’m sure if you’re shopping on the street you’re wondering what’s going on. It looks worse than what it really is.”

Those empty storefronts, however, are creating opportunities for other global fashion brands as well as local retailers who are taking advantage of lower rents.

Hermès has vacated its 3,000-square-foot Oak Street store just off Michigan Avenue to move west, more than doubling its space to 7,000 square feet at Oak and Rush streets.

This fall, more international retailers, including Italian jeweler Pomellato, Moncler and Bonpoint, a high-end French children’s brand that sells girls’ embroidered cotton dresses for $220, are to open. In addition, the contemporary label Vince will launch a store. New boutiques will take their places among neighbors such as Prada, Barneys New York, Jimmy Choo and Tod’s.

“Oak Street is going to get made over,” Kaplan said.

With its exclusive neighborhood feel, Oak Street is also known for fine jewelry with Graff, Harry Winston, David Yurman, Judith Ripka, Trabert & Hoeffer and Lester Lampert.

For Hermès, staying on the street was important, said Robert Chavez, president and chief executive officer of Hermès USA. “It’s the right ambience for us. It’s like a little neighborhood. It’s very cozy and calm. Our clients like that.”

Hermès first opened on Oak Street in 1989 in a converted town house just off Michigan Avenue. “At that time, the key weight of the street was there,” Chavez said, noting that now the hub of Oak Street activity is at the west end of the block at the corner of Oak and Rush Streets, where Barneys New York, Prada and the new Hermès are located.

The new shops, Pomellato, Moncler and Bonpoint, are at this end of Oak Street. Loro Piana is also moving west on Oak Street to more desirable, street-level space. Most of the new tenants will fill the closed Barneys New York and its former Chelsea Passage housewares space.

Barneys moved into a new 90,000-square-foot space last year, doubling its size. Historically, luxury brands jockeyed over hard-to-find square footage on the street where much retail space is in multifloor converted town houses, leading many retailers to wait years for the right-size street-level location.

But the recent vacancies and lower rents — brokers estimated they have decreased 25 percent, with street-level space going for $250 to $300 a square foot — have also allowed local retailers to gain access. Helen Yi, a boutique on North Damen Avenue in the Bucktown district, launched a weekend pop-up shop on Oak Street in the former Ultimo space. This spring, Fabbri Furs opened at 50 East Oak Street and Sofia, a men’s and women’s boutique, launched at 72 East Oak Street.

“To open on Oak Street, it’s like a dream come true,” said Sofia co-owner Ashley Zisook, who leased 3,000 square feet. “Oak Street is the Rodeo Drive of Chicago.”

The store, which counts Nicole Richie as its first client, mixes gently used items ranging from $1,200 to $1,500 Chanel bags to a $25 cotton dress with pieces from emerging new lines such as SkinGraft and Ani Lee. Richie, whose House of Harlow and Winter Kate collections will be carried in Sofia, visited the shop before it opened, signed the dressing-room wall and purchased a Dana Rebecca ring, among other items.

“Some new fresh retail would reenergize the street,” Kaplan said, predicting that most of the vacancies will be filled in the next 24 months. The stalled Esquire Theater project, a prominent property in the middle of Oak Street, might be redeveloped into retail by then, as well.

Despite its difficulties, Oak Street remains a key option in Chicago for many luxury firms. “Oak Street is a recognizable address for international brands,” said Lorraine Adney, vice president of The McDevitt Co., a real estate brokerage. “Chicago is a really big market but we have pretty limited space.”

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