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A report released this month by CBRE, a full-service commercial real estate provider, details the current real estate market conditions that have big implications on tech companies looking for that perfect office space.
The good news is that the market is continually strengthening. The bad news? Rent rates will go up for office spaces as vacancy rates decrease.
“The overall gist of what’s going in the real estate market is that it is tightening,” Senior Vice President Brad Serot said. “There is upper pressure on rental rates. In the tech community, it’s becoming more difficult for tech companies to find that cool, interesting space that has a lot of soul and character.”
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To combat this, Serot said more and more tech firms are looking westward to the meatpacking district or to the more corporate-feeling Loop. As vacancy continues to decrease in River North it is becoming less and less affordable for young companies: “Can you be in River North? Sure, but you’re going to pay.”
The real issue for early-stage tech companies isn’t location though, it’s finding short-term leases and flexible landlords to fit unpredictable company growth, Serot said.
“For young, growing technology firms, you don’t want to go long-term on real estate,” Serot said. “You will sacrifice location and type of building to find a short-term solution.”
In this situation, CBRE works with landlords who are “scared and want a big, hefty security deposit” from tech companies that don’t yet have a track record of success. CBRE recommends that companies get creative with security deposit structures and lease terms to fit both the company and the landlord.
“Part of our job as a broker is telling the company’s story to the landlord: who they are, who they’re backed by and who they are going to be,” Serot said.
CBRE currently works with companies such as Wavetable, Groupon, Uber, GoHealth and kCura to help them find the great office options that are quite hard to come by for tech companies with over 100 employees. Since the beginning, Serot’s advice for these companies has been to be able to quickly adapt
“The advice that I’ve given all these companies that started off small is that you want to be as nimble as possible.”
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