As Corporate Giants Flood Chicago, Boutique Offices Gain Ground With Smaller Players
Chicago’s Central Business District became one huge construction site over the past few years, with dozens of cranes sprouting up across hot submarkets like West Loop and Fulton Market, often for giant trophy buildings meant to attract blue-chip corporations.
But some developers look at the city’s tight office market and see different opportunities — including launching more small, boutique office properties.
Smaller in scale, they say this new crop of buildings will provide unique spaces to companies that may provide services to large corporations, but don’t want to get swallowed up by occupying space in a giant tower.
“They want to have that thing that makes people take notice of them,” Lamar Johnson Collaborative associate principal Drew Ranieri said.
By June, they will put the finishing touches on the project, located at 215 North Peoria St. in Fulton Market. It's a former industrial neighborhood that already hosts regional and world headquarters for companies like Google, McDonald’s and Glassdoor.
“We believe there is a need for smaller offices, ones that offer tenants the kind of light and air you get when occupying an entire 10K SF floor plate, but can’t get when you’re just one tenant on a 30K SF floor,” Wislow said.
Unlike the many adaptive reuses of the neighborhood’s industrial structures, this one will provide nearly 12-foot, floor-to-ceiling windows, while also using exposed concrete interiors that give it the industrial feel many clients still desire, even in new construction, Ranieri said.
“It hearkens back to what was there, and it’s part of Chicago’s architectural heritage,” he said.
Other massive office projects are on the way in Fulton Market. In December, Sterling Bay received a certificate of occupancy for its 333 North Green St., a 19-story, 553K SF office and retail building that company officials said is already 90% leased. Officials from Ryan Cos. US, along with co-developer IBT Group, have rolled out plans for a 700K SF office and retail building at 1200 West Fulton Market, two blocks west of Google's expanding regional headquarters. The developers plan to break ground in the fall.
Wislow said that he expects a robust demand for space in the relatively new submarket to continue to fuel even more large office projects, supplying a steady stream of potential tenants for boutique offices, all eager to do business with the neighborhood’s big players.
“One of the best ways to do that is to have a sexy office in Fulton Market, and go to the same restaurants and shop in the same stores,” Wislow said. Fulton East developers are currently negotiating with three potential tenants, he added.
The CBD’s office market has been on a tear recently, with Fulton Market leading the way. Downtown tenants absorbed 1.7M SF in 2019, a 195% increase year-over-year, according to a report issued last week by Cushman & Wakefield. Tenants in Fulton Market signed 600K SF of new leases last year, pushing the district’s vacancy rate down to 6.7%, the lowest of any in the CBD, the firm added.
The plausibility of new boutique offices is perhaps best illustrated by the success of 811 West Fulton Market, a 70K SF building built on spec by Shapack Partners, and quickly leased to the furniture company Knoll, BlackEdge Capital and coworking provider The Wing.
Shapack sold the property in September for $50.3M to Boston-based Intercontinental Real Estate, one of the few buildings to trade last year in Chicago’s depressed investment market. At $775 per SF, it was the highest-ever price per SF for a Chicago office building, according to Cushman & Wakefield.
“It certainly warmed our hearts to see Shapack succeed, and it shows there is not just tenant demand for boutique office, but investor demand as well, due to its uniqueness in the marketplace,” Wislow said.
But Wislow and Julmy aren’t considering a sale, a decision which may set it apart from Shapack Partners’ effort, Wislow said.
“It’s for a similar set of users, but we’re not merchant builders, we’re in this for the very long-term, and we consider our building to be a generational hold," he said. "So we’re also willing to put a little more into it, and make it a little more upscale.”
The upscale touches come from an 8K SF landscaped rooftop park, as well as a premier office space on the top floor with a 23-foot, angled wall of glass. The building’s core systems are also on the south side, rather than the center, turning the interiors into mostly column-free spaces. The developers will cover much of that southern facade with a natural wood veneer cladding, another nod to the neighborhood’s older buildings.
“We want people to feel like their coming into a residence, one that makes a quiet statement of elegance, but feels like it’s been lived in a long time,” he said.
Fulton Market isn’t the only neighborhood getting a set of new boutique offices: developers Moceri + Roszak, a partnership between Thomas Roszak, Dan Moceri, Michael Moceri and Paul Baulier, recently finished 145 South Wells, a 20-story, 210K SF ground-up, concrete, loft-style building in the Central Loop.
Like Fulton East, it provides small floor plates, and aesthetic similar to the industrial loft buildings, but in a modern building. Each floor has 12-foot ceilings, floor-to-ceiling windows and open layouts. An amenity center occupies more than 12K SF on the top floor, giving tenants access to a set of conference rooms, an outdoor deck, a martini and espresso bar, a golf simulator and other features.
“There’s really nothing like it at this size in the downtown, and it’s definitely different in its look and feel, but tenants won’t be going into an old building with a rickety elevator,” Roszak said.
Earlier this month, Moceri + Roszak signed a lease with Firmspace, an Austin, Texas-based shared office provider. The company will occupy the top three floors later in the fall, marking its entrance in to the Chicago market. Firmspace officials say the building will help them build their brand, currently located in Austin, Denver and Houston, as a more upscale coworking provider.
The small floor plate will allow clients more privacy, security and intimacy than the massive offices occupied by many other, more traditional providers, and being on the top floors will keep workspaces flooded with light, Firmspace CEO Anish Michael said.
“We’ve done the research, and at the end of the day, we believe coworking as it’s been done, does not enhance productivity," he said. "Being in a boutique building like this fits with our vision to improve the coworking experience.”