The Real Deal Chicago

Tech tenants pushing River North office rents ahead of other neighborhoods: report

Average office asking rents rose nearly 11 percent in the neighborhood since 2016, nearly double the city’s rate
By Alex Nitkin | October 31, 2018 03:00PM

The 1871 tech incubator inside Merchandise Mart in River North

River North outpaced other Downtown submarkets in office rent growth between 2016 and 2018, driven in part by an wave of new software and technology companies signing leases.

Average asking rents in River North rose by 10.6 percent between the second quarters of 2016 and 2018 to reach $42.41 per square foot, outpacing the city’s 5.8 percent rent growth rate during the same period, according to a CBRE report.

The neighborhood stands out even more sharply looking over a longer term. Since 2010, its average asking office rent has shot up about 90 percent.

The city added about 30,000 technology jobs since 2011, and the companies have roughly doubled their Downtown office footprint since 2014. They now combine for about 13.5 million square feet, according to the report.

River North notched the 14th sharpest growth in average office rents out of every neighborhood in the country between 2016 and 2018. East Cambridge near Boston claimed the top spot, with a 31.1 percent spike, according to the report.

The average asking rent for River North offices is about 38 percent higher than the city’s average of $30.67.

River North remains a “top target” for new technology companies, even as the industry looks increasingly to Fulton Market, CBRE’s Brad Serot said.

Chicago ranks 20th in the nation in tech sector rent growth with an average hike of 9.6 percent since 2016, far behind markets like St. Louis, Indianapolis and Charlotte.

But Chicago also benefited from the more explosive tech booms overtaking coastal cities, according to the report. Tech firms based in San Francisco leased about 1.5 million square feet of space in the city since 2013, alongside another 200,000 square feet leased by tech companies based in New York.

A recent Newmark Knight Frank report showed Chicago office rents at record highs, due in part to corporate relocations and shrinking vacancies Downtown.

Google expanded its Midwest Headquarters this month with a 132,000-square-foot lease in Fulton Market. And Salesforce is reportedly closing in on a 500,000-square-foot lease at Wold Point in River North.

Landlords credit the tech giants for bringing smaller companies and wider talent pools in their wake.