Welcome to the topic “Reshaping Chicago’s Commercial Real Estate – Core Spaces Strategic Office Expansion“
Downtown Chicago’s office vacancy rate is at a current high of 25.8% and has created ripple effects in Chicago across various sectors. Whether business owners are looking into the impact it has had on residential property taxes or value depreciation of commercial properties, it becomes clear why so many Chicago commercial real estate property owners are struggling to navigate in this new CRE reality.
However, not all owners are letting their fate be decided by remote and on-site working trends and tenant preferences. Some developers are leading the charge in turning the tides in their favor. One developer in particular is making big waves in the Chicago commercial real estate market – Core Spaces, a Chicago-based developer that has recently been making headlines by tripling its office footprint in the city.
Core Spaces: A Snapshot of Expansion and Growth
Core Spaces, a primarily student-housing developer that has expanded over the last few years into the build-to-rent home sector, has signed a long-term lease for 36,000 square feet at 1400 N. Kingsbury St.; significantly increasing its office space from the 12,000 square feet the company currently occupies in Bucktown. The new three-story loft office building on Kingsbury St. is strategically located along the North Branch of the Chicago River near Goose Island.
The property is part of a larger project by R2 Developments and Goldman Sachs, which aims to create modern office spaces that foster community engagement. This area has seen considerable redevelopment, making it an attractive location for businesses seeking modern amenities and a vibrant environment.
Why Goose Island?
Many are wondering why Goose Island specifically, and not the ever popular office area of Downtown Chicago. This is where Core Spaces showcases its shift in approach. The decision to move to Goose Island rather than a more traditional downtown location speaks to Core Spaces’ priorities.
The company has chosen to prioritize a community-oriented atmosphere over the convenience of public transit access typically found in downtown areas. This strategic choice aligns with their goal of preserving the neighborhood feel that has characterized their current Bucktown office location.
Embracing In-Person Collaboration
Joe Gatto, managing director at Core Spaces, has emphasized that maintaining a strong company culture is paramount. The new office is designed to enhance this culture and accommodate nearly 200 employees who predominantly work on-site four to five days a week, shedding light on the company’s belief in the value of face-to-face interactions for maintaining a strong corporate culture.
Plus, by opting for a location that encourages employee engagement and community-centric appeal,, Core Spaces sets an example for other businesses navigating similar decisions in today’s evolving workplace landscape.
Enhancing Employee Experience – Investment in Amenities and Community Features
Modern Features
The new office at 1400 N. Kingsbury St. has undergone significant renovations by R2 Developments and Goldman Sachs, the owners of the property, to create an inviting and functional workspace. The improvements include modern office features and amenities designed to enhance employee experience and well-being.
Moreover, the space also has the addition of a new riverwalk on the western edge of the building, overlooking the “Wild Mile” stretch of the North Branch, a project that the city has improved and rebranded to encourage recreational use.
Community Feel
In the words of builders: “We believe in this (creative office) asset class. Because we spent that money, we were able to attract quality tenants like Core Spaces.”
In addition to Core Spaces, other tenants in the building include Leapfrog Brands, and Printer’s Row Coffee recently opened a shop there, further contributing to the vibrant community atmosphere. The building is currently about 75% leased, indicating strong demand for quality office space in this redeveloped area.
All these enhancements reflect a growing emphasis on creating attractive workplaces that enhance employee experience.
What This Move Means for Chicagonians? – Implications for Chicago’s Commercial Real Estate
Resilience of Office Demand
Core Spaces’ move highlights a potential shift in demand for office space, particularly among companies prioritizing collaboration and company culture. While many firms are adopting remote work policies, Core Spaces is betting on the value of in-person interaction. For you as a real estate broker and your office space owning clients, this indicates that certain sectors may continue seeking larger office spaces that facilitate teamwork and creativity.
Community-Oriented Locations
By relocating to Goose Island instead of downtown Chicago, Core Spaces has prioritized a community-oriented atmosphere over public transit convenience. This trend may resonate with other businesses looking for similar environments that foster employee engagement and satisfaction.
Increased Investment in Amenities
The renovations at 1400 N. Kingsbury St., which include modern office features and community-focused improvements, reflect an increasing emphasis on creating attractive workplaces that enhance employee experience.
As companies recognize the importance of amenities in retaining talent, this could lead to increased investment in property upgrades across the market. Guiding your clients towards renovating and investing in properties that offer these desirable features can help them gain a competitive edge in a vacancy-driven landscape.
Potential for New Developments and Increasing Resale Value
Core Spaces’ expansion aligns with broader trends in commercial real estate where developers are increasingly focusing on mixed-use developments that combine residential, retail, and office spaces. This could open up opportunities for you as a broker to engage with clients interested in investing in or leasing such properties. Moreover, you can guide them through how these investments can keep their offices consumed as well as increase the value of their property.
For instance, the land where Core Spaces will relocate to was bought by R2 and Goldman Sachs with an adjacent parking garage back in 2015 for 6.7 million US dollars. The developer then converted the garage portion into a 40,000-square-foot REI store and that was sold earlier this year to a California investor for a whopping 20 million US dollars. This shows the intensely lucrative side of investing in these properties for both you and your commercial real estate clients.
Core Spaces’ Broader Business Strategy
Core Spaces has established itself as a key player in both student housing and build-to-rent markets. The company owns or manages 64 student housing properties nationwide and has an extensive pipeline of over 43,000 beds under development across various stages. Its recent ventures into build-to-rent homes cater specifically to millennials who prefer renting over owning as they start families.
Despite facing challenges with local opposition to its proposed $85 million build-to-rent project in Glenview last year, where residents argued against what they deemed excessive density, Core Spaces continues pursuing growth opportunities in markets like Dallas and Nashville. This adaptability can serve as a model for other developers navigating similar hurdles.
Diversifying Capital Sources
To fuel its growth strategy, Core Spaces has been actively diversifying its capital sources. In May 2023, they launched an investment platform called Global Wealth Management aimed at providing access to Core’s institutional investments for high-net-worth individuals and financial intermediaries.
“The fundamentals in student housing remain strong, and it’s proven to be an increasingly attractive asset class for private wealth,” said John Wieker, chief investment officer at Core Spaces, emphasizing their strategic focus on sectors with robust demand. This diversification strategy not only enhances their financial stability but also positions them favorably within competitive markets.
Conclusion
All in all, Core Spaces’ strategic expansion highlights how market resilience amid changing workplace dynamics works and brings to light an opportunity for commercial real estate brokers to position their clients advantageously within this shifting commercial real estate environment. By recognizing these trends early on, clients can better navigate their real estate decisions effectively, ultimately leading them toward successful outcomes in their business endeavors.
After all, by tripling its office footprint in the city, Core Spaces is not only reflecting its growth but also setting a trend that could influence the commercial real estate landscape in Chicago and beyond!
Also Read: The Real Cost of Empty Chicago Offices: How Downtown Vacancies Affect You in Real Dollars
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