The following post first appeared on the Built In Chicago Blog.
By Brooke Houghton
Statrt-up Real Estate Advisor
Jones Lang LaSalle
Starting your company in a garage is legendary in the tech world. What’s not legendary, or often talked about, is the downside of working from home — be it from your garage, home office or even the local coffee shop.
The noise, nagging and lack of networking can not only drive you crazy, but it can also hinder the growth of your business. At some point, most small businesses hope to graduate into space that is conducive to growth and productivity. And perhaps, if you’re one of the few and lucky, you’ll be able to bring out an IPO and all the spoils one entails.
Chicago’s tech scene is clustered in the River North area (a.k.a. “the Silicon Loop”). Co-op and co-working locations have blossomed all over the city but especially in this area. Places like 1871, Catapult and WeWorks are beginner alternatives to working from home and offer many of the benefits of having your own space. But it’s still not your own space.
Here’s how you know when it’s time to take off the training wheels:
- Your rent obligation at a co-working location is more than $1500 per month. At this point you can find your own space for approximately the same price. A good rule of thumb is to designate approximately 200 square feet per person to determine how much office space you need. For example, LaunchPad Lab , which used 1871 for a while before subleasing some space, just recently leased 1,500 square feet of space at 650 Lake Street for its expanding business.
- You have clients visiting. The open layout and collegial feel of 1871, Catapult and others is great for energy and creativity but it’s not awesome for presenting to clients or investors. Why have your product, tool or offering clouded by the bells and whistles of the space and other companies?
- You need to add 10 employees by next Friday. With your own office space, you control the layout and arrange employees to best suit your business and maximize productivity.
You’ll find that Chicago’s rents are far more affordable than in Northern California, with average rents around $31.89 versus $54.64, respectively. The River North area (bounded by the River, North Ave and State Street) is the second-tightest submarket in Chicago with a 10.7% vacancy rate. So what’s this mean to you, the start up? If you want space near the rest of the tech market, know that it’s going to be hard to find and not cheap. Look for direct and sublease options (sublease options typically offer a discount of 30% or more in terms of rent).
If you have the 4-6 person firm and need some space right now, there’s a 1,347 sf sublease option at 444 North Wells. At $24 psf gross, it’s a steal for this neighborhood. Contact me if you’re interested!
The best advice out there is to hire someone to help you with your real estate so that you can keep your eye on the ball (fyi, landlord pays for your broker; not you!)
Here’s some info on how Singlehop found their space – their challenges and opportunities!