How Tech Talent is Changing Chicago’s Commercial Real Estate Market
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Chicago is at the epicenter of a continental migratory pattern.
Every year thousands of graduates from all over the Midwest and beyond make their way to Chicago in hopes of making their dream life a reality. But they aren’t the would-be comedians or architects or bankers of past decades. They’re experts in science, technology, engineering, math, or computer science. And they’re changing the fabric of the city, one brick at a time.
As more tech companies come to Chicago, the myth of the Silicon Valley office with abundant light, ping-pong tables, and copious greenery is becoming a reality across the city. However, as an increasing number of companies reach for a slice of the tech talent pie, the demands of recruiting talent only continue to escalate.
If tech talent is the fuel driving business change in Chicago, then commercial real estate (often in the form of office space) is the car. We sat down with CBRE Vice Chairman Brad Serot to talk about CBRE’s 2019 “Tech Talent” report, the shifting terrain of commercial real estate in Chicago, and what growing companies need to consider as they make real estate decisions.
Chicago Ideas (CI): Let’s start with talent, a hot topic for virtually every fast-growing company these days. How do you define “tech talent” and what is its relationship to real estate?
Brad Serot (BS): CBRE formally defines tech talent as highly skilled technical workers who create and enable the software, devices and technology that is integrated into almost everything we do. However, if you take a macro look at tech talent, it’s really much broader than that. It’s expanding both in terms of industry and occupational roles. Fast growing tech companies are hiring for more than just a technical engineer or data scientist, and this goes for the Fortune 500s and traditional corporate conglomerates as well. They’re expanding technical roles in marketing, finance, research and nearly every department.
CI: According to CBRE’s “Scoring Tech Talent 2019” report, Chicago has seen a rapid shift in the momentum of its tech talent acquisition over the past two years. As someone who works with a number of the companies leading this charge, what factors do you think are contributing to that?
BS: We represent the lion’s share of fast growth tech firms in the city of Chicago so get to see a lot of this first-hand. The real shift we’ve seen is that the talent pool continues to increase by a large margin. If you look at companies like Salesforce, Google, Uber and Glassdoor, all of which significantly expanded their footprints here over the last year or so, the major tech players in coastal markets are coming to Chicago in a big way. If they don’t have a presence here today, they are seriously considering it for their second or third location.
There are a number of reasons these companies are looking to Chicago. It really comes down to the cost of doing business – cost of labor, cost of hiring and recruiting talent, cost of real estate, and the overall livability of the city. Chicago is significantly less expensive than similar sized coastal markets. Real estate costs are approximately 40% of what they would be on the coasts. Moreover, Chicago is also an incredibly livable, accessible city. People love living in Chicago so recruiting here is attractive.
CI: Some of these conditions are present in a lot of midwestern cities, but Chicago still has a significant advantage of quality in its tech talent compared to some other large midwestern markets. What is it about Chicago that makes this the case?
BS: Chicago has a lot going for it. We are the number one city for attracting Big Ten talent, which boast some of the top technical schools in the country. Within a two to four-hour drive, we have two of the nation’s top 10 computer science programs and three of the nation’s top 10 engineering schools. Additionally, Illinois universities graduate 25,000 new STEM grads annually that help feed the demands of growing tech firms in Chicago. These promising students are graduating and looking for a market where they can both enjoy their personal lives and benefit from a breadth of career opportunities. It is really hard for smaller midwestern markets to compete with Chicago on those two fronts. I grew up in St. Louis, so I can say that.
CI: So looking to the future, how do you think that the trends in how the tech talent pool in Chicago is composed are going to influence real estate moving forward?
BS: The big trend as it relates to real estate—not just in Chicago but nationally—is that everyone is thinking about how to attract, retain, and recruit the best and the brightest new workforce, predominantly millennials whose preferences differ greatly from prior generations of workers. It’s all about labor. One obvious way to do this is to create a dynamic workplace where employees feel comfortable and are proud to work. Finding the right real estate within budget that offers the space, amenities and perks that appeal to various professional and personal lifestyles is increasingly critical in the talent competition.
“Workplace” is a term that every one of our clients is asking us about now. And for good reason, as millennials today would forgo pay for a better work environment. They’re asking “what can we offer in terms of health and wellness, inclusion programs, natural light and building amenities to achieve both a productive office space and sought-after work environment?” C-suites across all industries are fighting to create the better, brighter and cooler workplace to meet the progressive needs of millennial workers.
CI: If you could predict one big shift we can expect to see in the tech real estate market in Chicago this time next year, what would that be?
One, the workplace will only become more fluid. It will be increasingly employee-centric, providing for choice, inclusivity and wellness needs across all facets of life.
And then from a more tangible real estate perspective, we are going to continue to see up-and-coming submarkets like Fulton Market expand and thrive. Fulton Market is really in its infancy. Traditional companies, like law firms and financial firms, are also going to be looking at alternative submarkets like Fulton Market or Goose Island as they recruit the best millennial talent in the city.
CI: What is one piece of advice you would give to any fast growing tech company looking to expand to Chicago?
BS: Keep agility and flexibility in mind as you scale your business. We have seen too many early stage or maturing tech firms make critical mistakes by signing long term lease obligations when they were not in the right position to do so. We always say that your current situation is not your final destination. With the market constantly changing, your company continuing to evolve, and talent pools shifting, we encourage our clients to place a great deal of value on flexibility. Lastly, always keep your people in mind as you’re designing your office space.