Office N Illinois

The central business district, decentralized

The success of Sterling Bay’s ambitious Lincoln Yards development may depend on extensive transit infrastructure changes. The success of Sterling Bay’s ambitious Lincoln Yards development may depend on extensive transit infrastructure changes.
Baker Development’s adapt-reuse of a 100-year old industrial building into a high-tech office building at 2017 N. Mendell, Chicago. Baker Development’s adapt-reuse of a 100-year old industrial building into a high-tech office building at 2017 N. Mendell, Chicago.
The Lincoln Yards project would create a mixed-use neighborhood where corporations could have office space outside the traditional CBD, close to where their employees live. The Lincoln Yards project would create a mixed-use neighborhood where corporations could have office space outside the traditional CBD, close to where their employees live.

It wasn’t that long ago that Chicago’s central business district was confined to the Loop. Over the years, office space has crept outward, spilling over the banks of the river to the north and to the west. So just what is it that entices corporations to move out to the fringes of the CBD?

Much has to do with a transformation in people’s life-work balance. The very concept of a CBD—a target on a map ringed by residential neighborhoods—is changing. More and more, people want to live close to where they work, and companies are responding likewise, moving to where their employees live.

There is also cultural shift when a company selects a non-standard location to move its headquarters. Consider 110 N. Carpenter Street in Chicago’s Fulton Market district. That’s the former home of Harpo Studios and the future home of McDonald’s corporate.

“McDonald’s was a case in point to that, where they really wanted to change their culture and recruit a younger employee base,” said Michael Lirtzman, director of leasing at Sterling Bay.

Sterling Bay, in collaboration with Gensler, is developing a new, nine-story, 550,000-square-foot building for the restaurant giant. McDonald’s is expected to move from their suburban location in Oak Brook to the West Loop later this year.

As companies try to gauge the mindset of the Millennial workforce, many are packaging their headquarters—the location, the building, the personality of the office itself—as part of the company’s overall character. And with a national unemployment rate around four percent, it’s a sellers’ market, making competition tough to hire those employees.

“To get what they want and to make the office part of their brand that will attract the talent and employees that they want, it just flat out doesn’t work sometimes in an existing building,” Lirtzman said. “For a lot of companies, it becomes easier to create their own environment, their own campus whether it’s either an adaptive reuse project or a new construction out of the ground, as was the case with McDonalds, than to shoehorn it into an existing building.”

The stock of buildings available in the nearby neighborhoods also offer features that aren’t available in the Loop. Larger floor plates, better daylighting and a more open plan are amenities that shiny, new, Class A towers just can’t deliver. That is true of adaptive reuse, but even new construction benefits from the availability of land and the character of the neighborhood.

“Fulton Market, where we’re doing McDonalds, that initially wasn’t on their radar screen,” Lirtzman said. “When they realized the flexibility that it afforded them, all the other answers fell into place very quickly.”

According to Daniel Slack, principal, Baker Development Corporation, expansive and open floors are a major attraction, and they are something that the CBD just can’t provide. In the urban core, building floor plates usually fall within the 25,000- to 30,000-square-foot range, whereas in the neighborhoods, they can be upwards of 50,000 square feet.

“From a corporate standpoint, you’re able to have whole departments if not companies on a single floor,” Slack said. “So cross communication, collaboration and chance interactions that can occur between those departments and people within those departments is much greater and of a higher quality when you give the people the opportunity to be together and congregate together.”

When converting existing space in the neighborhoods, there are aesthetic opportunities that the Loop also can’t furnish. “Look at the Google headquarters,” Slack said, referring to the former cold storage facility in Fulton Market that features exposed brick, concrete and turn-of-the-century charm. “Where can you duplicate a building like that?”

Baker Development recently converted a similar project into office space at the 2017 Mendell Building. Overlooking the North Branch of the Chicago River, where Bucktown and Lincoln Park meet, the building had been a warehouse until its transformation into an office building, hoping to attract residents near the Clybourn Corridor.

“It’s an old loft warehouse building, so we have the high ceilings, concrete columns, beams and exposed brick, but also a very high-tech infrastructure system from a mechanical standpoint,” Slack said. “You go into these old, neat buildings with the high ceilings and interesting architecture and you outfit them with the Ferrari of infrastructure, as I like to call it, so that it operates and behaves just as fine as a Class A office building downtown.”

A bit further north on the river, Sterling Bay is developing their massive, ambitious project, Lincoln Yards. It’s an area surrounded by industrial uses in various states of occupancy and some retail. Sterling Bay is betting that the 70-acre site could be an ideal spot for a live-work community, a spot that residents and companies both will flock to.

“It’s just, on so many levels, ripe for a redevelopment, mixed-use type neighborhood,” said Lirtzman. “The land lends itself to it well.”

Lincoln Yards will transform what had been historically a manufacturing district to a mixed-use neighborhood, with commercial, office, retail and entertainment. The demographics of the surrounding neighborhoods—Bucktown, Wicker Park and Lincoln Park—Lirtzman believes, should help support the initiative.

Fulton Market became so attractive because of neighborhood amenities like restaurants which can serve a business lunch or an after-work wind-down. But corporate relocations really started to get going there after the Morgan Street “L” stop was installed in 2012. Similar transit upgrades may be necessary if other areas of the city hope to be competitive office markets.

Sterling Bay has been in discussions with the city, the state, the federal government and the railroad constituencies to look at moving the Clybourn Metra station, the last stop on the Union Pacific Northwest line as commuters come in from northwest suburbs like Des Plaines, Mt. Prospect and Rolling Meadows. Moving and revitalizing what is now a rather rudimentary station would connect Lincoln Yards to other parts of the city. “All of sudden, you have a transportation hub that connects people coming in from the suburbs into the city,” Lirtzman said.

Transit infrastructure improvements require a capital outlay, but the downstream benefits are unimpeachable. The improved tax base from a new office/residential neighborhood would more than pay for any upfront costs. And these improvements need not be drastic; even modest improvements can have a major impact.

“Simple things like modernization, lighting, making it feel safer and more approachable from a public transportation standpoint I think can help immensely when it comes to attracting not just the corporations, but the people that actually want to work there,” said Slack. “If employees don’t feel safe and don’t feel like it’s a convenient place for them to get in and out of work, they’re not going to use it and they’re going to be less inclined to work for that corporation. And that corporation is going to be less inclined to relocate to that area.”

Employers and employees are changing the way that they work, thus the face of the city too will change. As the central business district becomes decentralized, the residents of Chicago may start to enjoy a better work-life balance.