5 Reasons Tech Companies Find River North Loft Space Irresistable
There’s been a spate of articles recently about the impact of startups and technology companies on the commercial real estate market in River North. In the April 6th Crain’s article, “Tech still drives Chicago’s office market, but for how long?”, author John Pletz reported that 24 percent of the current office leasing activity in the downtown area was tech driven. He went on to suggest that, “rents in loft-type spaces and other older buildings favored by techies rose 38 percent from 2011 through 2015.”
Boardwalk Capital Holdings owns two such loft-type spaces at 230 West Huron and 343 West Erie. I’m not completely sure that I agree that rents have risen that far and fast in the past four years, but I do concur that the Gallery District in River North is an incredibly attractive area for a particular type of technology firm.
The Office Space Submarkets in River North
Most would agree that a technology firm looking for office space at the Merchandise Mart is a very different being than one that wants to set up shop on Erie, Superior or Huron. I’ve visited 1871 once or twice and while I appreciate the “vibe,” I can see why the Mart isn’t for every technology company. Here’s my take on what makes the Mart’s appeal very different from the Gallery District and properties just west of Orleans.
Timber-Beams and Red Brick Versus Concrete Walls and Suspended Ceilings
The Merchandise Mart was purpose-built back in 1930 to be a single destination for interior design and architecture wholesale goods sellers and businesses. When constructed it was the largest building in the world using over 60,000 tons of steel and untold barge-loads of concrete. As a result, most of the spaces and floors reflect the realities of a building constructed in much the same way as the Pentagon. Ceiling heights, when the concrete joists and the floor above aren’t covered, are typically around ten feet. The concrete support columns can be several feet wide. With a footprint of almost two square blocks, there are many tenants who have no windows in their space.
Unless you’ve got the pocketbook of Motorola or Yelp, the office space you’ll be leasing won’t differ wildly from that you might find in the loop or west of the River. It will be functional and dependable with most of the value being tied into the mailing address, marquee neighbors and exceptional transportation options.
By contrast, the building stock of the old warehouse district of River North was almost exclusively brick construction, wooden beams and wooden floors. That was the preferred form of construction at the turn of the century because it was less expensive and these were, after all, warehouses. However, yesterday’s sow’s ear has been transformed into a silk purse today as the twelve-foot high ceilings, wooden joists, and brick walls of the loft buildings in River North are highly valued.
Loft office space in River North is characterized by a sense of openness, light and warmth. Unlike at the Mart, cubicles are almost frowned upon by the tech companies in the BCH loft buildings. Cubicles create a friction not only with the architecture of the space, but also with the way these entrepreneurs lead their companies. Why lease an open, airy space and then wall employees off so they can’t enjoy it? Why put in the time and energy into finding great people only to wall them off and keep them from interacting with one another?
A Smaller, More Intimate Neighborhood in Which to Work
Another stark difference between working in the Merchandise Mart and the Gallery District of River North are the lunch and after-work options within a two or three block radius. If you think about the Merchandise Mart coffee and food options, almost all are national chains like McDonald’s, Starbucks and Panda Express. When you move past the affordable fast-food joints (Shamrock is the exception) you’re really looking at fairly expensive upscale dining like Bavette’s, Gilt Bar, Kinzie Chophouse and the frequently non-descript sports bars that dot the area along Kinzie and Hubbard.
Within a two or three block walk from the Bauer Building at 230 West Huron you’ve got high-end dining, like Nacional 27 and Farmhouse, but you’ve also got smaller, quirkier, more authentic eateries like Brett’s Kitchen, Club Lago and Mr. Beef. And for a few drinks after work there’s Brehon’s on the corner of Superior and Wells. It doesn’t get any more authentic than Brehon’s!
The map below highlights some of BCH’s recommended eating and drinking spots in a three-block area including a personal favorite, Brunch. (Full disclosure, Brunch is a Big Onion Group restaurant.)
Value and the Potential for Growth
One thing the Mart can offer that loft space in River North often cannot is lots and lots of space to grow. Floor space in a typical renovated warehouse building tops out at 8,000 to 15,000 square feet. A single floor is often divided by a hallway or walls. If you want 200 or 300 employees on the same floor in contiguous, open space, the Mart is likely a better option.
However, the Mart address and space for growth come at a price. In a 2014 Crain’s article describing the flight of home and gift showrooms away from the Mart, the author indicated that the then going rate per-square foot was $35. With two years of growth and increased economic activity, the Mart rent for new technology companies is probably closer to $40 a square foot.
Despite recent increases, the market for loft office space on Erie, Huron or Superior is around $27 to $33 a square foot. That’s a serious savings for any company at any stage in their development or growth cycle.
Boardwalk Capital Holdings Technology Tenants
We’re very fortunate to have several tenants who are either technology companies, or service the tech and startup sector. First among these is the Devbridge Group at 343 West Erie. Devbridge is a consultancy that solves complex business problems using an amazing array of software, design and engineering skills. Founded by Aurimas Adomavicius and Martin Stasatis, the Devbridge Group creates integrated solutions for clients in the manufacturing, financial services and technology sectors. Despite my degree in computer science, the truth is I can’t fully comprehend all that Devbridge does, but I know that they hire wicked-smart people and operate by the guiding principles of Make Great Things, Deliver Results, Embrace Transparency, Seek Mastery, Take Ownership and Have Fun.
The features of the Devbridge Group office, as they describe it, include:
- 13,000-square-foot timber loft
- 14-foot ceilings
- Penthouse floor with windows facing all directions
- 3,000-square-foot dining/entertainment area
- *Cringe* table tennis
- Ceiling-wired audio system in rec area
- Semi-open floor plan with plenty of work pods
- The hottest neighborhood in Chicago for dining and nightlife
You can imagine what a space like this might cost at the Merchandise Mart.
The video below gives a sense of their culture, the quality of the Devbridge Group leadership and the spirit of their people. We’re humbled and proud to share our River North building with them.
Another great tenant at our 230 West Huron building is Breather. Breather describes itself in the following way.
Breather is a quiet space amidst the chaos. It’s an environment beyond your office, home or neighborhood coffee shop. In effect, Breather is whatever you want it to be: a space to decompress after a long day, meet with clients, practice yoga, study with classmates or catch up on work. It’s up to you.
The openness of the loft space at 230 W Huron, paired with the Breather modern design combine to offer a “clean space, clear mind” sensibility. More than just a pretty space, the rooms can satisfy virtually any of your functional needs. The spaces are fully equipped with dry-erase boards, wi-fi, Apple TV, speakers, flat screens, and even phone chargers.
What’s really great about the Breather business model is that the rooms are rentable by the hour, much like a Zip car. Breather is the perfect solution for a consultant that works from home but wants to meet with clients in an upscale office space that says the right thing about them and their business. Rather than a membership at the University Club, rent truly private space by the hour at Breather!
A guide to River North’s startup scene, BuiltinChicago.com, April 12, 2016
Tech still drives Chicago’s office market, but for how long?, Crains, April 6, 2016
How Breather built a network of spaces and succeeded where so many startups fail, Mixpanel.com, January 20, 2016
Big moves for Devbridge Chicago, Devbridge Group website, September 2, 2015
Merchandise Mart is losing one class of tenants, Crains, July 7, 2014