Co-working company Industrious is opening its biggest Chicago location, and a Chicago-based rival is ramping up its local presence as shared-office providers jockey for market share in the fast-growing sector.
New York-based Industrious leased 46,500 square feet on the 10th floor at 500 W. Madison St., where it plans to open next summer, a company spokeswoman confirmed. The building is connected to the Ogilvie Transportation Center.
Separately, Novel Coworking—which recently rebranded from Level Office—bought a 50,400-square-foot office building in River North that it plans to renovate to turn into a mix of co-working, private offices and office suites, the Chicago-based company announced. The seven-story property at 405 W. Superior St. will be Novel’s fifth Chicago location.
Both deals are part of an expansion bonanza among co-working providers that have snapped up space at a breakneck pace, catering to entrepreneurs, small businesses and large corporations alike with low-risk, flexible workspace that can be leased month-to-month. Many downtown landlords have filled vacancies with leases to co-working providers, betting they will play an increasingly central role in the office market.
The Madison Street building will house Industrious’ seventh location in the city and comes a few months after the company acquired Chicago co-working provider Assemble, which added 42,000 square feet across three locations to Industrious’ portfolio.
In Chicago, “our member community reflects the amazing diversity of the city—from thriving startups such as Foxtrot to larger, more established companies like Pinterest—and we’re looking forward to this new location expanding our footprint in the West Loop,” Mallory Salett, Chicago-area manager at Industrious, said in a statement.
The new location will bring Industrious’ leased total to more than 185,000 square feet in the Chicago area, according to a company spokeswoman. That ranks it among the most prevalent co-working providers in the city, though it’s just a fraction of the roughly 2.2 million square feet of co-working space either active or in the works in downtown Chicago, according to data from brokerage Newmark Knight Frank.
New York-based WeWork has about 575,000 square feet downtown, more than any of the 40-plus co-working companies in Chicago, according to MB Real Estate.
Novel Coworking, which launched its first Chicago location in 2013, will have more than 300,000 square feet in the city including its new building, a company spokeswoman said.
“We continue to see tremendous demand in Chicago from professional service firms and enterprise companies seeking flexible and affordable workspace,” Novel founder Bill Bennett said in a statement. Novel targets companies with 10 to 150 employees that “outgrow” competitor co-working spaces, the statement said.
The Industrious deal helps 500 W. Madison owner KBS Realty Advisors stem a recent string of tenancy losses.
Maintenance supply company W.W. Grainger is moving out of around 76,000 square feet at the building as it consolidates its Chicago operations at theMart (formerly the Merchandise Mart) in River North, while mergers-and-acquisitions adviser Lincoln International will move its headquarters out of the building in 2021 to the 55-story building under construction at 110 N. Wacker Drive.
In addition to the new Industrious location, KBS recently landed a new tenant in software logistics company FourKites, which is taking almost half of Grainger’s space.
A KBS spokesperson couldn’t be reached. The Newport Beach, Calif.-based real estate investor bought the 1.5 million-square-foot building at 500 W. Madison for $425 million in 2013 and announced a plan to spend $66 million renovating the property. That makeover, completed in 2014 and 2015, included new fitness and conference centers and an upgraded tenant lounge, among other improvements.
The 40-story building is 86 percent leased today, according to real estate information company CoStar Group. That is almost even with the average for the downtown office market at the end of the third quarter, according to real estate brokerage CBRE.