Why the tech boom isn't helping the South Side
By Joe Cahill August 18, 2014
When a new industry takes root in the city, it's natural to hope for big follow-on economic benefits.
Fast-growing companies create jobs and spur spending in the areas where they locate. Restaurants and retail outlets spring up in a virtuous cycle that attracts even more investment.
A big chunk of Chicago's hopes for economic renewal are pinned to the technology sector, which finally is gathering steam locally after decades of false starts. Dozens of fledgling tech firms are investing and hiring in the city.
As my colleagues Ryan Ori and John Pletz reported Aug. 9, these companies are propping up the downtown office market and driving demand for space in River North and the Near West Side.
But so far, the boomlet hasn't reverberated elsewhere. Aside from outposts along the north branch of the Chicago River, in Ravenswood and in a few other places, most tech companies are clustered in the Loop and nearby neighborhoods.
“By and large, we haven't seen any migration out to the neighborhoods,” says Howard Tullman, a veteran entrepreneur who oversees 1871, the high-profile tech incubator at the Merchandise Mart.
That's too bad, because a lot of Chicago neighborhoods need help. Many never recovered from the demise of the Rust Belt economy. As my colleague Greg Hinz has written, economic activity has become more concentrated around downtown during the past couple of decades.
Tech companies didn't cause this imbalance, and they certainly can't correct it by themselves. But if tech is where the growth is in today's economy, it's also where the hope lies.
As with all companies, business needs dictate the location choices of tech firms. Their paramount need is talent, so they seek neighborhoods popular with young software engineers and Web designers. This brings them to places offering the 24/7 work-play atmosphere found in a relatively small number of Chicago neighborhoods.
A lot of neighborhoods in Chicago need help.
Acknowledging that “it's important to have businesses developing in other parts of the city,” Mr. Tullman says 1871 has reached out to Blue1647, a year-old incubator in Pilsen, to discuss possible sharing of resources.
And technology companies are helping extend the Near West Side revival. With big investments like Google Inc.'s Fulton Market facility, there's reason to hope momentum will reach the United Center and beyond.
But what about places like Garfield Park or Englewood? Such neighborhoods have little to offer businesses other than low rents, a factor that has become less important to tech companies that can afford to spend more on office space now that cloud computing has reduced the need to invest in lots of routers, servers and other hardware.
Neighborhoods with an industrial base might be able to parlay it into new tech investments. That's happening with the light manufacturing sector in the Kinzie Corridor and the logistics industry on the north branch.
Improving broadband service in outlying neighborhoods also would help. But I think something bigger is needed, something along the lines of Wm. Wrigley Jr. Co.'s research center at Goose Island or the UI Labs technology development center nearby. Unfortunately, Chicago's new health care tech incubator has joined 1871 at the Merchandise Mart.
Of course, it would be nice to see neighborhoods spawning their own tech startups. That requires a long-term commitment to better education and a curriculum that teaches the right skills.
In the meantime, tech companies seem likely to stay in their comfort zone.