Windy City Density:
Chicago’s Affluent Population Boom


Dan Park

Developers and investors are increasingly interested in Chicago; its feverish construction activity continues to increase the population density of this toddlin’ town. According to The New York Times, between 2010 and 2016, the city’s density has increased by 1.2 percent.

Most of that population growth is taking place in the city center, with the arrival of younger, more affluent residents setting up house in the Loop, the West Loop, and Wicker Park. The only other city to achieve this kind of density: Seattle. Higher-wage jobs are increasing here, with offices hiring and retail selling to a higher educated and higher paid demographic.

Higher-wage jobs are increasing here, with offices hiring and retail selling to a higher educated and higher paid demographic.

As a result, the Chicagoland office sector is seeing strong growth. The average vacancy in its central business district (CBD) has dropped more than 34 percent since 2012, while office rents increased 24 percent. The tech job sector has grown as well ( Source: the Building Owners and Managers Association of Chicago).

The study shows significant numbers of new tenants are moving to the CBD. This is due to corporate migration from the suburbs and growth in the high-tech industry. Some 3 percent of office tenants in 2016 were corporations that had relocated to the CBD from suburban locations; 75 companies had relocated to almost 4.29 million square feet of downtown space from the suburbs since 2012.

Chicago developers are expected to deliver nearly 6,600 apartments in 33 different projects, according to Curbed. In October 2016, the city of Chicago had issued almost 40,000 building permits — that’s 2,000 more than those issued in 2015.

The cost of living is also a big plus to companies moving to Chicago to attract employees, according to the UBS Global Real Estate Bubble Index. In many major markets, real house prices have risen nearly 50 percent, on average, since 2011. Housing in Chicago, in contrast, is affordable, according to the study.

In addition, Elon Musk’s The Boring Company is in negotiation with Mayor Rahm Emanuel’s office to build a high-speed rail line from downtown to O’Hare International Airport. The system will cost almost $1 billion to build. Tunneling technology may serve as a solution to cutting down the 40-45-minute average travel time it takes the Blue Line L to travel from downtown to O’Hare.

KBS owns two properties in Chicago:

500 West Madison

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Located in the West Loop, this is an iconic, 40-story, 1.46-million-square-foot tower. It’s Chicago’s largest Class A, LEED-Gold-certified building, featuring a distinct art-deco design. The property sits above the Ogilvie Transportation Center, one of two main suburban train stations connecting the Chicago suburbs with downtown Chicago. It’s been named Building of the Year — twice — by the Building Owner and Managers Association.  The first two levels at 500 West Madison contain 64,289 square feet of retail space with 45 stores and restaurants. The second level connects directly to the Ogilvie rail station providing direct access to city trains, buses and expressways.

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500 West Madison is located in Chicago’s premier West Loop office submarket, home to the majority of the city’s newest Class A office developments. Driven by availability of developable land sites, proximity to public transportation and availability of multifamily housing, the West Loop is the epicenter of new development, adaptive reuse and urban renewal within Chicago’s central business district (CBD). 500 West Madison is arguably the most well located transit-oriented office building in the entire Chicago CBD. The property provides unmatched access to suburban trains, city trains, buses and expressways, which puts it at the nexus of Chicago’s transit network.

The Ogilvie Transportation Center adjoins 500 West Madison and serves as terminus for three Metra routes operated by Union Pacific. More than 106,000 commuters pass through the property each day to commute to and from the majority of Chicago’s most affluent suburban communities.

213 West Institute Place

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This 157,166-square-foot converted loft-office building is located in the River North area of Chicago. Built in 1908, the property features exposed brick and timber, dramatic lofted ceilings, oversized windows, modernized tenant spaces and fully renovated common areas. It was once home to Gormully & Jeffery Mfg. Co., a bike manufacturing facility; it underwent a full renovation in 2017. In addition to the renovation, the property also offers an on-site 32-stall surface parking lot, walkable amenities (98 walk score), superior access to north Chicago and direct access to the Loop with access to the brown, purple and red line transit stops. River North offers an abundance of restaurants, bars, cafes, lounges and music venues.

 

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Dan Park is a senior vice president for KBS, overseeing 3.3 million square feet of office space in the central region of the United States.