Are Tech Companies Breaking the Bank in the West Loop?
Mayor Rahm Emanuel welcomed a startup to Chicago last week as the lease commenced at it's new space in 200 West Monroe Street. The company signed a lease late last year to relocate from 1540 Dundee Road in Palatine to the West Loop. The mayor hopes to highlight companies making the increasingly popular decision to move from the suburbs to Chicago.
While Mayor Emanuel extolled the virtues of the move in facts and figures, one figure he didn't mention was the rent. With a gross lease in a Class B building in the West Loop has about a 56% higher starting rent than a similar lease in Palatine, the company will be paying nearly double what it paid in the suburbs. Are tech companies really breaking the bank to work in the west loop? Or is there more to the exodus of tech companies from the suburbs than starting rents?
For one, concessions can heavily skew the perception of affordability. West Loop leases offer, on average, between 6 and 7 months in free rent and an average TI allowance in the low $30s. This pushes effective rents to a level about 20% below starting rents to around $17. The company's concession package, for example, brings the effective rent to a more affordable $13.40 net.
While tech companies certainly aren't reducing rent expenses by moving, the difference in rent isn't as stark as it seems. Understanding the rate requires more than the asking and starting rent.