Monday, August 11, 2014

The Merchandise Mart's new look

The Merchandise Mart's new look

 - Motorola Mobility's new space at the Merchandise Mart includes a huge rooftop deck. Photo: Stephen J. Serio
Motorola Mobility's new space at the Merchandise Mart includes a huge rooftop deck. Photo: Stephen J. Serio
The Merchandise Mart, an art deco behemoth on the north bank of the Chicago River, used to be known for the interior design showrooms where wealthy Chicagoans perused suitable sofas or curtains. But over the past two years, the 84-year-old building has morphed into the epicenter of the city's burgeoning tech scene.
The pivotal moment came in 2012, when incubator 1871 opened on the 12th floor, attracted by the downtown location and the opportunity to expand within the 4.2 million-square-foot structure. (New York-based owner Vornado Realty Trust says the Mart is the nation's second-largest office building, trailing only the Pentagon.) The reputation was solidified when Google Inc. bought cellphone maker Motorola Mobility and this year moved more than 2,000 employees from the far north suburbs to 604,000 square feet in the Mart, a space larger than 10 football fields.
And the moves continue: In June, San Jose, California-based eBay Inc., which acquired Chicago credit-card software company Braintree Inc. in 2013, announced plans to lease 60,000 square feet in the Mart, more than double its current space in the West Loop. San Francisco-based online review giant Yelp Inc. is set to lease about 50,000 square feet, a big jump from temporary space in 1871.
Completed in 1930 by Marshall Field as a warehouse and wholesale center for department stores, the 25-story building housed federal government offices during World War II. Since Joseph P. Kennedy bought the building in 1945, it has included a mix of showrooms and offices. But the percentage has been moving dramatically toward the latter, as new office leases go for $35 a square foot, nearly double what some showrooms are paying.
“For a long time, the Merchandise Mart was considered a dog with fleas,” says tenant broker Jack Keenan, a managing director at Chicago-based Jones Lang LaSalle Inc. who represents 1871. “It has the wide floors, lots of columns and not a lot of light.”
Now, with tech firms desiring those sprawling floors to foster collaboration, it's a destination, and one whose value is increasing. Vornado paid $384 million for the 25-story building in 1998, and experts say it's now worth $1 billion to $1.2 billion.
The Mart's momentum has created a halo effect: A neighboring building, once called the Apparel Center because of its clothing showrooms, recently added tenants Networked Insights Inc., a software firm, and advertising technology company Rocket Fuel Inc. (It also houses the Chicago Sun-Times.)
Vornado has insisted that it remains committed to having showrooms, which occupy about 45 percent of the building. One-third of the building's 3.6 million rentable square feet is filled with tech businesses, Vornado says.
“The Merchandise Mart used to have showrooms that were only used at certain times,” Mr. Keenan says. Now, it's “like Grand Central station and it's only going to get busier.”
About 15,000 to 16,000 people work in the Mart, and 120,000 pass through its doors each Monday through Friday, Vornado estimates. In its sprawling corridors, techies in hoodies and jeans mix with stiletto-wearing designers and buyers. An Intelligentsia coffee bar serves entrepreneurs in 1871, while Moto workers have their own bike room, a massive roof deck and permission to bring dogs to work. Younger, tech-oriented employees also tend to work later and then unwind nearby.
A few blocks north on Orleans Street, the Green Door Tavern is serving a crowd mostly in its mid-20s and early 30s, says manager Brad Shorten. As office rents climb, some non-tech companies are being priced out of the neighborhood, forcing older regulars to find a new place for lunch.
“We've seen quite a few move west, looking for cheaper rents,” Mr. Shorten says. “They come in and say their goodbyes.”

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