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Originally Posted by SamInTheLoop
Also, just to expound on the current strong River North Office submarket. One needs to realize that 98% of River North's high quality office space is located within about ~2 blocks of the river (probably 90% within 1 block) in it's very large and/or trophy towers......in other words, the very closest part to the Loop proper......
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Well that's patently false, 600 W Chicago alone is 2,000,000 SF of office which beats out 300 N LaSalle as the largest office building in River North (excluding Merch Mart which is kinda of an office building now, but just a totally unique property not just in River North, but perhaps globally). I have a hard time believing that 2,000,000 SF is less than 2% of the "high quality office space" in RN. I also don't believe that it's the only building outside of 2 blocks North of the River that counts as "high quality office space" whatever that means. 600 W Chicago has been operating as an office building for over a decade now with stunning success. That just goes to show that proximity to commuter rail isn't everything for office leasing and is further from the commuter rail stations than almost anything in the West Loop.
North Michigan Ave and Illnois Center started being built up on expectation of a subway line that never materialized. Then the golden age of the suburb and automobile (1980's and 1990's) led people to believe that transit access simply no longer mattered at all. So you got buildings like 900 N Michigan that were several blocks from even the nearest L stations with a big chunk of office space served primarily by a nasty ass garage at the base. Even then though, no one ever expected N Michigan Ave to supplant the loop, it just became an acceptable place to build such things because 90% of the workers were coming in by car from the burbs and the other 10% were taking the red line from Lincoln Park.
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Part of the reason (in addition to falling for a fashion, which by definition is short-termist) - and this is being overlooked somewhat - that some of these larger tenants are allowing themselves to be duped into going to Fulton market area is that it is quite a bit cheaper. That specific short-termism is factoring into the equation for what is in reality quite a long-term decision.....
Wait until we get another couple back-to-back polar vortex winters........watch the millenials cycle and walk across the expressway then.......there will be major buyer's remorse - again, maybe in 5 years, maybe in as long as 15 - but it will come....
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Better to be "short-termist" than stuck in the 2000's. If prices are low now and what you are saying about it being a truly undesirable area is true, then prices will stay low. Simple economics. However, I believe you are not looking towards the future, but rather living in the past. If there is another polar vortex do you think the employees at Google are going to even leave the house to go in to the office? Or do you think that the defining trends that have shaped the office market beginning in the 1990's, you know the whole hotel stations and work from home, will continue?
Is it possible that the willingness of certain companies to locate in places like River North or West Loop is linked to the ongoing evolution of these trends? Maybe my buddy who works at Salesforce doesn't give a rats ass that there is no easy way to get to Illinois and LaSalle from Schaumberg because he works from home all but three or four days a year and lives in Logan Square? Maybe workers at one of the premier bike parts manufacturers in the world, Sram, don't care how close 1K Fulton is to Ogalvie because, unlike their parents who take the Metra in from Bartlett every day, they live in Avondale and bike to work every day, regardless of weather. Again, that's not a supposition, another friend of mine works at Sram and bikes from Avondale every day.
Perhaps employees at Google feel the same way about the West Loop, if they absolutely have to go into the office to work and it's -20 degrees, it's not like they can remotely call a car to exactly where they are and have it drive them to 20 feet outside of their office lobby. An Uber from Union Station to 1K Fulton is probably $2-5 depending on time of day and surge pricing. That's competitive with the price of a bus ride but involves way less walking. Same goes for McDonalds which is by far the most "conventional" tenant that has located there, their employees will adapt, they will move downtown or to the neighborhoods, they will learn to take the bus or an Uber if it's shitty outside or a Divvy if it's nice out. That's the future, offices are less critical to most worker's lives, short trips are cheap and convenient, new forms of transportation are radically changing the world, companies are cutting costs to make the most of these changes.
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One other pet peeve: Many are being duped into believing that there are literally billions and billions of $ right around the corner in infrastructure improvements and new rail lines, stations, etc etc to the West Loop/Near West Side and Greater Downtown. WTF? How gullible can folks be? One would need to be completely ignorant of the fiscal situation and current local, state and federal politics to even entertain such a notion of something like that coming together in the next decade+.....
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Literally no one is saying this. Are you confusing this with the very real transit investment that did occur at Morgan? I don't think McDonalds thinks a circle line is coming to the West Loop or that Ogalvie will be relocated to Morgan and Kinzie. Where are you getting this stuff from?
What I think is that McDonalds, being one of the most successful, dynamic, and influential companies in history, see's the writing on the wall and knows that the times, they are a changin'. They have the foresight to see that the world is moving from an economy based on old school retail sales in a brand centric environment to one that is fixated on authenticity and experiential sales. They see the West Loop for what it is: the nexus of all that in Chicago. They know they need to not only study it from afar, but actually infuse that new culture into their company if they want to stay on top of the heap for the next generation. So to the West Loop they go. Besides, you talk of these moves as if all these companies were once right on top of the L at Jackson and Wells and are now sacrificing access to infrastructure. I mean have you been to the McDonalds campus? It doesn't have access to shit. They could literally have moved to any location within two miles of the Sears Tower and have had better access to transit infrastructure than they did before. Building an all new suburban style campus on the freight yards on Western South of Tri Taylor would have been a better option than they have now. Building in Lawndale on the Brach's site would have been better. Anywhere but fucking Oak Brook. But what stopped them from moving to the Loop? Well you already said, they are accustomed to Oak Brook lease rates. So the new West Loop office market has stuck the happy medium of being as close to downtown, metra, CTA, and freeways as possible while also offering them real estate costs that fit their model and are acceptable to their shareholders.
Not only are you wrong about the West Loop, but it makes perfect sense within the same parameters you use to knock tenants entering the market.
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