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West Loop vs. River North: A Real (Estate) Perspective
By: Christian Peppler, Commercial Real Estate Broker
Newmark Grubb Knight Frank
Episode IV: A New Loop
Recent changes in Chicago’s real estate landscape have given companies a viable alternative to the oh-so-à-la-mode River North neighborhood – the West Loop. Having spent years in between both areas, I have become somewhat conceited regarding one of the hottest questions in today’s market: West Loop or River North?
Allow me to begin (Tarantino-style) via conclusion: the West Loop is generally a better business decision. There are exceptions, of course, but I will attempt to illustrate my theory as it relates to traditional office users and in particular…. startups.
A River, Overrated
First of all - proximity to successful companies means nothing. Do destined-to-go-viral website domains mystically appear beneath the footsteps of Emerson Spartz’s morning commute? Does Shawn Riegsecker walk around on his lunch break offering Best Places to Work practices to pedestrians? Does Kevin Willer randomly fold Series A contracts into paper airplanes, and periodically toss out his window?
Sure, there are reasons to choose a particular state or city…. but choosing a sub-market based on what where the cool kids are doing? Better make sure the new office has room for all the slap bracelets, pet rocks and Air Force One’s you’ve accumulated over the years, posers.
Don’t get me wrong, I love River North, and I’m proud of the successful companies who have chosen to set up shop, validating its reputation as a hub for technology, innovation, and creativity – but I challenge anyone to name one tangible characteristic the West Loop does not offer as well. Open loft offices? Check. Public transportation? Check. Bars/restaurants? Double-check. Oxygen? (believe it or not, the West Loop air has been scientifically proven to provide just as much oxygen as the rival River North ozone) Check.
That said, there is one thing the West Loop cannot offer yet: ridiculously high occupancy levels, resulting in ridiculously high rental rates….
Bootstrapping? You Call This Bootstrapping?
Here’s a sound bite used in every corporate real estate services pitch, like, ever:
“Rental obligations are the 2nd largest liability on the balance sheet – eclipsed only to workforce and payroll.”
Now, consider an early stage startup that does not pay its founders, interns, employees etc. Real estate suddenly becomes the numero-uno liability, and what most directs finite resources away from recruiting, R&D, marketing, core, etc.
Let’s breakdown the numbers based on two real estate listings, one in the West Loop, the other in River North. Both are nearly identical in terms of layout and appearance:
River North
West Loop
325 W Huron
208 S Jefferson
2,000sqft
2,000sqft
$25.50/sqft
$18.50/sqft
$4,250/month
$3083.33/month
$51,000/year
$37,000/year
Both building have open-loft-styles, are fully wired, and managed by reputable companies. Both landlords would be willing to build-to-suite suite whatever a prospective tenant requires at the same additional costs (not to mention identical weather, local TV stations, and of course, oxygen levels). The real difference? $14,000 per year. That’s enough money (if you think like I do) to host employee pizza parties, 5-days a week ($5,214/year for two nightly pizzas + $6,240/year for two nightly cases of craft beer = $11,464/year).
Conclusion
The majorities of groups I’ve worked that ultimately end up in West Loop seem to share a common pioneering attitude, in the most literal sense of the word. Like all ventures into new arena, whether a new product, service, idea, policy or territory, some just seem most comfortable on the edge of the frontier.
