Tech firms from San Francisco to New York are paying more to set up their offices in the hottest neighborhoods and that goes for Chicago too, with tenants in River North paying a rent premium of 24 percent compared to other areas of the city.
According to CBRE’s recent Tech Thirty report, that’s the seventh-highest premium anywhere in the U.S. The report also found that:
· With a vacancy of 8.7 percent, rents in River North are at $36.11
· Class A rents in River North are a staggering $53.26, making it the most expensive product in the city right now
“Some firms see strategic value in the River North location and the idea of paying higher rents to be in a hot submarket with convenient access to talent and public transportation is worth it to them,” said Kyle Kamin, EVP at CBRE. “The real question is though, even if a firm wants to be in River North, can it find quality available space?”
Vacancy rates in River North are the lowest in the city across all product types.
However, according to Kamin, for the type of product that tech firms are looking for—exposed brick and timber, concrete loft space and a creative workspace design—the available stock is incredibly low at less than 2 percent.
“For properties that fit the aesthetic that creative and tech firms are looking for, it’s really almost impossible to find space in River North right now,” said Kamin.
Other nearby markets that are gaining momentum with the tech industry, such as Fulton Market, are facing the same hurdles. Class A stock in Fulton Market is only 535,510 square feet and it is completely leased. With a rental rate approaching $40 psf and on par with most CBD pricing, the emerging Fulton Market has a difficult barrier to entry as well.
“There is a scarcity of quality creative space in these areas and firms are starting to look at other emerging markets as a result,” said Kamin. “Markets like Goose Island have the type of space that technology and media firms are looking for, and, offer more favorable rents. For firms that might be a bit more cost conscious, such as start-ups and growth stage companies, but still want the type of space that speaks to their culture and provides access to the workforce they desire, they will start to expand their search areas and find suitable solutions outside of the CBD and immediately surrounding areas.”