CHICAGO—Rental rates have recently increased significantly in the River North submarket, and many of its office tenants have responded by redesigning their spaces to allow more workers per square foot. That's the conclusion of Aaron Zaretsky, the leasing director of Urban Innovations, the company that in helped create this market more than thirty years ago by renovating many of its industrial spaces into modern offices.

Urban Innovations has just completed a series of leases within its roughly 600,000 square foot portfolio in the neighborhood, and Zaretsky tells GlobeSt.com that the occupancy rate is now around 98% or 99%. As a result, River North rents have risen as much as 10% in the past year. “Companies still want to be where they can attract great human capital.” And “River North's proximity to all public transportation service lines, day and evening entertainment and vast number of newly constructed homes are second to none… providing an attractive place for many to live and work.”

SPINS, LLC, signed a new lease for 20,500 square feet at 222 W. Hubbard and was represented by Ted Prillaman and Joe Zona of Newmark Grubb Knight Frank. Simple Truth Communications Partners has expanded its offices by an additional 7,500 square feet of space at 314 W. Superior. This brings the total square footage to 15,900 square feet for the company that was represented by Jonathan Seeley of DTZ Americas, Inc. Tiger Financial Management signed a new long-term lease for 12,500 square feet, taking over an entire floor at 440 N. Wells. Kevin McLennan and Brad Serot of CBRE represented Tiger Financial in the transaction. The Chopping Block at the Mart, LLC signed a new long-term lease for 4,000 square feet of office space at 300 W. Hubbard. They were represented by Christine Bower of JLL. Rubin Postaer and Associates, Inc. signed a lease for 4,400 square feet at 325 W. Huron. They were represented by David Tropp of CBRE.

However, “before we saw most companies providing about 150 square feet per person; you now see each person getting about 110 square feet or even 100 square feet,” he says, and open benching concepts are becoming even more popular. People are packing 30% to 40% more heads into spaces than they did five years ago. That's how tenants are justifying these higher rents.”

Zaretsky expects that these office design strategies will soon bring more fundamental changes to the neighborhood's historic structures. “Building systems have to change.” Landlords will need to boost their HVAC capacity, for example, and resize bathrooms to handle the denser populations.

Another new development in this corner of Chicago's downtown is that few tenants want to sign long-term leases. “Landlords would love to lock in long-term leases because rents have never been higher,” Zaretsky says. But with so many firms adding new employees, and the prospect of even faster growth in the years ahead, three-year deals and one-year lease extensions have become the norm. “Unless we're talking about a nonprofit that does not worry about growth, most tenants don't feel the cost savings are worth it to lock in long-term rates.”

As Zaretsky considers the future of River North, he expects that the recent increase in rental rates will start to plateau. Part of the reason is that the type of office long-available in River North can now be found all over downtown Chicago. The West Loop has started offering creative spaces, and he points to Blue Star Properties' The National at 125 S. Clark St. as an example of how even the most traditional office buildings are adopting the new aesthetic. The 500,000 square foot former headquarters of the Chicago Public Schools “The Loop is creating a market similar to what we created in River North.”

Instant Insights /

River North's Appeal Remains Undiminished

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