WHY TECH LOVES FULTON MARKET
Chicago, IL | July 06, 2018
WHY HAS FULTON MARKET BECOME SUCH A HOT DESTINATION FOR TECH COMPANIES?
Fulton Market has generated a great amount of hype amongst creative space occupiers in recent years, including start-ups, established corporations, and big-name tech companies who office in the city. Historically known as Chicago’s meatpacking district, Fulton Market is now home to companies such as Google, Dyson, tastytrade, and McDonald’s. The increased popularity has largely been a result of the close proximity the area has to the Loop, Restaurant Row, and trendy retailers and residential, making it easy to establish a desirable work-life bubble for employees who work in the neighborhood.
Even with the influx of office space, the locale has managed to maintain its edgy, artsy vibe thus far. Due to the large-scale development in the area, warehouse and distribution owners have been encouraged to sell their properties to developers. This allows developers to construct new buildings with the larger floor plates that tenants require. Additionally, public transportation and infrastructure has become more abundant due to the rapid growth of the area, making it that much more appealing to office users who commute to the area.
WHICH CHICAGO SUBMARKETS WERE TECH COMPANIES DRAWN TO BEFORE?
There have long been tech companies drawn to the Fulton Market District because of its creative/loft vibe and the fact that it used to be a bargain area to office in. Just 7-10 years ago, rates for brick and timber loft buildings in Fulton Market were as much as 50% lower than today’s rates for similar types of product. Before the neighborhood exploded in popularity, tech companies primarily looked for offices in River North and certain buildings in the Loop, mainly because those were the only areas with enough existing loft space or floor plates larger than 10,000 square feet.
HOW DOES FULTON MARKET COMPARE NATIONALLY TO OTHER TECH HUBS, LIKE SF AND SEATTLE?
The tech hub of Fulton Market is much smaller in size compared to its counterparts out west, but that is changing rapidly with each new development. The Google and McDonald’s buildings add over 1 million square feet to the market, and there is no sign of development slowing down. Some other recent movement in the area include advertising and PR giant WPP’s soon-to-be office space currently under construction as part of the former Coyne College redevelopment at 333 North Green. The firm will make up almost half of the 555,000 square foot property. There is an additional 1.6 million square feet worth of developments currently under construction in Fulton Market, and if all of these projects launch as planned, the market will have over 6 million square feet of office space.
At 7.7 million square feet and a high density of tech firms like Dropbox, Airbnb, and Lyft; San Francisco’s Mission Bay/Showplace Square submarket is currently where Fulton Market could be in 3-4 years’ time. Compared to Fulton Market’s $40-$50/SF gross asking rents, average rental rates across all markets in San Francisco are about $76/SF gross. Within Mission Bay/Showplace Square however, the average rate is slightly lower in the Class B and C product at $55-$65/SF gross, still putting it significantly above Fulton Market’s rates. Similar to Fulton Market, the area is seeing a lot of development and is estimated to reach around 12 million square feet of office space by the end of 2020. In that same timeframe, the population in the submarket is expected to grow from about 35,000 to 60,000+ people.
In Seattle, it would be incorrect to assert that certain submarkets attract more tech companies than others because every corner of the market is well populated with tech. However, South Lake Union is Amazon’s mothership and has attracted the likes of Google and Facebook in large fashion. Amazon’s total footprint alone is about 13.5 million square feet. New construction in South Lake Union is going for high $50’s gross. Additionally, the Seattle market added 9 million square feet of office space this cycle, most of which is spoken for. Comparatively, the city’s downtown CBD Class A space goes for low $50’s gross and Class B/vintage product leases for rental rates in the low $40’s gross – on par with Fulton Market.
WHAT’S ONE PIECE OF ADVICE YOU HAVE FOR TECH COMPANIES LOOKING FOR SPACE IN FULTON MARKET?
Move fast. I worked with a client once for whom I presented a market overview and space suggestions in Fulton Market. Before I could even get back to my office to schedule tours, it was in Letter of Intent and the client’s favorite option was no longer available. Luckily for my client, the landlord’s deal fell through, and I toured the space with my client 30 minutes after being notified that it was back on the market. During the tour, we discussed lease terms with the landlord and signed our own Letter of Intent within a few days. That’s not an atypical scenario when scouting office space in Fulton Market, so act fast if you find a location you really want.
I grew up outside of Atlanta, Georgia and graduated from Indiana University where I studied the underlying fundamentals of what is now the LEED green building certification. I’ve been a broker for 14 years, working primarily with financial services and creative office users throughout the United States. I was always interested in architecture and real estate growing up, but I also had a slight inkling that I wanted to do something creative. I became a broker because I realized it was a way for me to use my creativity and competitive spirit, especially when it comes to gaining clients and negotiating lease or purchase transactions. I was attracted to the fact that brokers are able to create their own destiny within an industry that is typically more corporate and rigid. I feel lucky that I picked the right career straight out of college. Go figure, my favorite tourist activity is the architectural boat tour (pro tip: get your drink from the bar downstairs as soon as you get on the boat to beat the rush).
Learn more about MBRE’s Craig McCaw.