JULY 30, 2019
JENNIFER WATERS
Chicago's Population Is Shrinking, But Here's Why It's a Leader in US Job Growth City's Investment in Luring a Certain Type of Company Creates Real Estate Opportunities
Chicago's total population numbers are dropping, but its employment base is growing thanks to a surge in tech jobs. (CoStar)
Chicago’s overall population may be falling, but its labor market is growing with technology chief among new jobs. That's fueling the growth of office and multifamily construction in the third-largest U.S. city.
The latest figures from the Bureau of Labor Statistics show Chicago is thriving in new jobs, adding some 164,000 nonfarm jobs since January, the second-highest in the nation with only New York City ahead of it, at 349,000, in pure numbers.
On a percentage basis, Chicago’s June-to-June results come in at 1.8% higher, ahead of Los Angeles at 1.4% and New York at 1.2%. The national employment increase was 1.5% in the year-over-year comparison. Booming markets such as Dallas-Fort Worth at 3.2% and Houston at 2.7% are racking up greater percentage gains, but remember, larger populations need bigger growth numbers to log higher percentage gains.
This is all good news for Chicago, which has long been Illinois’ chief driver of growth on a number of levels, including commercial real estate. And it comes at a time when the city is losing population overall, according to the U.S. Census Bureau. In April, the bureau’s data showed that Chicago suffered its fourth straight year of declining numbers as 22,068 residents fled the city, accounting for 0.23% of the population — the largest in the nation.
What this means, however, is that while overall population is falling, the sum of people working is growing — a trend that has fueled a number of new office and multifamily housing projects in recent years.
Powering much of that growth in jobs is the tech sector, which has been at the forefront of a number of office development projects in recent years thanks to the likes of Google, Apple, Salesforce and even McDonald’s, with all occupying big chunks of space in the Loop and West Loop business districts, as well as a number of still-young companies such as Uber and GrubHub.
Chicago was noted in a tech jobs report released this week from real estate services firm CBRE. The city was No. 3 behind Orlando, Florida, and San Diego on its tech talent momentum list, which ranked 50 U.S. and Canadian markets according to their ability to attract tech workers and expand jobs.
Chicago’s tech labor force grew 8 percentage points faster in the past two years, 2017 and 2018, than the previous two-year period that began in 2015 to 6.9% from a -1.1%, CBRE said.
“It didn’t happen overnight, but Chicago’s tech ecosystem has matured to the point where opportunities are countless across all stages of the spectrum, from startups and growth-stage companies to the more established Fortune 500 businesses,” said Dan Lyne, a CBRE senior vice president and part of the firm’s tech and media division, in the report.
There are a number of reasons why Chicago’s tech community has grown, chief among them is that the Midwestern city is smack dab in the middle of the country and much more affordable than almost any large coastal city. What’s more, former Mayor Rahm Emanuel can be credited for his unrelenting efforts to attract big tech firms to the city and encourage smaller ones to grow.
“Employers are increasingly identifying Chicago as a market where they can access a deep pool of tech talent at a significant discount from a labor and occupancy costs perspective,” said Brandon Svec, a director with CoStar Market Analytics.
Since 2013, Chicago’s tech labor pool has nudged the city into the sixth-largest tech market in the country in terms of total employment, according to CBRE. The firm’s report said the annual cost for a 500-employee, 75,000-square-foot office in Chicago is approximately $40 million. That is far below the most expensive markets of San Francisco at $59 million, New York at $55 million, Washington, D.C., at $51 million and Seattle at $50 million.
“This relative affordability compared to the coasts has been a significant contributor to the growing demand for office space in Chicago,” Svec added. The rate of tech firms’ leasing activity has nearly doubled in recent years, he said, accounting for nearly 30% of the leasing activity since the start of 2018 after making up about 15% of Chicago leasing activity in 2014-15.
“Chicago is the top city for attracting talent from the Big Ten university system, which boasts two of the top 10 computer science schools in the nation and three of the top 10 engineering schools,” said Brad Serot, CBRE’s vice chair, in the report. “Tech firms need to recruit the best and brightest, and Chicago provides the dynamic employee base to sustain growth now, and in the future.”
Tech degree completions in Chicago underscore that point, growing 36.9% from 2012 to 2017, with 7,375 degrees in hand in 2017, according to CBRE.
And that growth is also behind multifamily housing, which has seen a surge in demand since 2015, according to CoStar research. Downtown Chicago has been one of CoStar’s top five most-active submarkets in the country. Some 4,000 new units have been brought on line in the past year alone.
In recent months, Essex on the Park, The Paragon and NEMA Chicago have opened for a combined total of 1,750 new units within a radius of a few blocks, and there are a number of new units under construction or in the planning process in the neighborhoods of Fulton Market, Lincoln Park and Logan Square.
JENNIFER WATERS
Chicago's Population Is Shrinking, But Here's Why It's a Leader in US Job Growth City's Investment in Luring a Certain Type of Company Creates Real Estate Opportunities
Chicago's total population numbers are dropping, but its employment base is growing thanks to a surge in tech jobs. (CoStar)
Chicago’s overall population may be falling, but its labor market is growing with technology chief among new jobs. That's fueling the growth of office and multifamily construction in the third-largest U.S. city.
The latest figures from the Bureau of Labor Statistics show Chicago is thriving in new jobs, adding some 164,000 nonfarm jobs since January, the second-highest in the nation with only New York City ahead of it, at 349,000, in pure numbers.
On a percentage basis, Chicago’s June-to-June results come in at 1.8% higher, ahead of Los Angeles at 1.4% and New York at 1.2%. The national employment increase was 1.5% in the year-over-year comparison. Booming markets such as Dallas-Fort Worth at 3.2% and Houston at 2.7% are racking up greater percentage gains, but remember, larger populations need bigger growth numbers to log higher percentage gains.
This is all good news for Chicago, which has long been Illinois’ chief driver of growth on a number of levels, including commercial real estate. And it comes at a time when the city is losing population overall, according to the U.S. Census Bureau. In April, the bureau’s data showed that Chicago suffered its fourth straight year of declining numbers as 22,068 residents fled the city, accounting for 0.23% of the population — the largest in the nation.
What this means, however, is that while overall population is falling, the sum of people working is growing — a trend that has fueled a number of new office and multifamily housing projects in recent years.
Powering much of that growth in jobs is the tech sector, which has been at the forefront of a number of office development projects in recent years thanks to the likes of Google, Apple, Salesforce and even McDonald’s, with all occupying big chunks of space in the Loop and West Loop business districts, as well as a number of still-young companies such as Uber and GrubHub.
Chicago was noted in a tech jobs report released this week from real estate services firm CBRE. The city was No. 3 behind Orlando, Florida, and San Diego on its tech talent momentum list, which ranked 50 U.S. and Canadian markets according to their ability to attract tech workers and expand jobs.
Chicago’s tech labor force grew 8 percentage points faster in the past two years, 2017 and 2018, than the previous two-year period that began in 2015 to 6.9% from a -1.1%, CBRE said.
“It didn’t happen overnight, but Chicago’s tech ecosystem has matured to the point where opportunities are countless across all stages of the spectrum, from startups and growth-stage companies to the more established Fortune 500 businesses,” said Dan Lyne, a CBRE senior vice president and part of the firm’s tech and media division, in the report.
There are a number of reasons why Chicago’s tech community has grown, chief among them is that the Midwestern city is smack dab in the middle of the country and much more affordable than almost any large coastal city. What’s more, former Mayor Rahm Emanuel can be credited for his unrelenting efforts to attract big tech firms to the city and encourage smaller ones to grow.
“Employers are increasingly identifying Chicago as a market where they can access a deep pool of tech talent at a significant discount from a labor and occupancy costs perspective,” said Brandon Svec, a director with CoStar Market Analytics.
Since 2013, Chicago’s tech labor pool has nudged the city into the sixth-largest tech market in the country in terms of total employment, according to CBRE. The firm’s report said the annual cost for a 500-employee, 75,000-square-foot office in Chicago is approximately $40 million. That is far below the most expensive markets of San Francisco at $59 million, New York at $55 million, Washington, D.C., at $51 million and Seattle at $50 million.
“This relative affordability compared to the coasts has been a significant contributor to the growing demand for office space in Chicago,” Svec added. The rate of tech firms’ leasing activity has nearly doubled in recent years, he said, accounting for nearly 30% of the leasing activity since the start of 2018 after making up about 15% of Chicago leasing activity in 2014-15.
“Chicago is the top city for attracting talent from the Big Ten university system, which boasts two of the top 10 computer science schools in the nation and three of the top 10 engineering schools,” said Brad Serot, CBRE’s vice chair, in the report. “Tech firms need to recruit the best and brightest, and Chicago provides the dynamic employee base to sustain growth now, and in the future.”
Tech degree completions in Chicago underscore that point, growing 36.9% from 2012 to 2017, with 7,375 degrees in hand in 2017, according to CBRE.
And that growth is also behind multifamily housing, which has seen a surge in demand since 2015, according to CoStar research. Downtown Chicago has been one of CoStar’s top five most-active submarkets in the country. Some 4,000 new units have been brought on line in the past year alone.
In recent months, Essex on the Park, The Paragon and NEMA Chicago have opened for a combined total of 1,750 new units within a radius of a few blocks, and there are a number of new units under construction or in the planning process in the neighborhoods of Fulton Market, Lincoln Park and Logan Square.