While Silicon Valley’s offices may be shiny, new and futuristic, tech firms in other parts of the country like Chicago are opting for older, more affordable and highly customizable Class B space.
“We’re seeing the most significant demand in the market from the tech sector right now,” JLL Senior Vice President of Agency Leasing Nikki Kern told CNBC. “We definitely are seeing a big push for Class B space from tech users.”
What’s the attraction? Rents that can be up to 40 percent lower than at newer Class A buildings with more modern amenities and services, according to data from JLL’s 2015 Digital Skyline report. Spending less on rent allows technology tenants to spend more on unique upgrades to the interiors of buildings ranging from historic properties to converted warehouses.
The rental gap is closing quickly, though, as demand soars and Class B landlords continue to invest in upgrades of common areas and amenities in the hopes of attracting the tech and creative set.
“The entire country is going to see a difference where the lines are going to be blurred between the Class B and the Class A product, and rental rates are going to not necessarily be one thing in ‘Class B’ and another in ‘Class A,'” said Kern.
The trend is evident at 222 South Riverside Plaza, pictured, a 1970s-style Class B property home to both traditional offices and new creative space. Medix, a tenant in the health care and information technology placement industry, is following the open-plan tech trend in an effort to attract and retain Millennial workers.
“They have to feel and understand that we are moving in the direction to become a talent technology company as well, so we have to look the part,” said Medix president and CEO Andrew Limouris.
About the Skyline Review
For the first time, investors and tenants alike can now access JLL’s 2015 Digital Skyline via a digital platform. The fully interactive website features JLL’s proprietary market insights regarding supply, demand, rents, leverage and investment into 47 markets across the United States – including Chicago – and Canada, with the ability to compare and contrast individual markets or multiples of markets. In addition, the site offer videos and infographics. All information is also available via mobile access.