Chicago office owners see rental demand from logistics companies

COVID-19 has been a boon to Chicago warehouse owners as demand skyrockets for places to store the products people buy online. But the rapid rise of companies that help ship things to and from these facilities is now making local office owners winners as well.

As many companies try to reduce office space to accommodate the remote working movement, Chicago’s strong collection of third-party logistics and freight technology companies are almost all looking for more. US trucking firm Xpress Enterprises and logistics software firm Flock Freight both signed new leases for a downtown workspace over the past month, while another freight brokerage firm, Nolan Transportation Group is finalizing an agreement to open a new office in the Fulton Market District, according to sources familiar with the company’s plans. A half-dozen other players in the fragmented and expanding industry are also in the market for more than half a million square feet of combined office space, real estate brokers say, one chase fueled at a time. by the growth of the workforce and the need for employees in these companies. collaborate faster than they can when working from home.

The activity is one of the few bright spots of the pandemic for downtown office owners and belies the downsizing trend in tech, banking, legal and other sectors that has pushed office vacancy in the central business district at its highest level on record.

“The vast majority of my clients implement workplace flexibility and hint at downsizing and restoring space. It’s the subset that universally says they need more and that office culture is paramount to their business, ”says Dan Persa, a senior vice president of CBRE who represented US Xpress on its recent lease. 40,000 square feet at 306 W. Erie St. — five times the size of its current office.

Long a major freight hub, Chicago has strengthened its reputation over the past decade as the capital of transportation logistics with the growth of companies like Coyote Logistics and Echo Global Logistics, as well as technology-driven companies. that help them and retailers ship and track more. effectively like ShipBob, FourKites and Project44. This trio alone has collectively announced half a billion dollars in new venture capital funds over the past four months.

COVID’s assault on supply chains has spurred the growth of these companies, as more companies sought out their expertise and software, resulting in skyrocketing hires. Such growth in other industries no longer means an automatic need for more office space now that remote working has become more prevalent, but the level of employee interaction for logistics companies requires work in the face. face to face, said Jett McCandless, CEO of Project44. An example: His company processes around 60,000 messages passed between senders and carriers every second, and information about each load is synthesized by customer support employees, account managers, and software engineers, among other roles.

“They need to understand what a noise is and what a signal is,” says McCandless, whose company has roughly tripled its annual recurring revenue since the start of the pandemic to more than $ 60 million. “If our system fails… it could mean shutting down a factory for a large manufacturer. It is therefore important that these people come together so that they can move around and talk.

After more than doubling its global workforce since March 2020 to reach approximately 600 people, Project44 is now seeking a downtown office with a surface area of ​​120,000 square feet. That’s about twice the size of its current footprint at theMart, where it still has nearly seven years of sublease from Motorola Mobility.

To help increase the need for workspace, many roles in logistics and freight brokerage software companies are filled by younger, tech-savvy workers who prefer the office to working from home.

Freight tech firm Loadsmart, which is looking up to 40,000 square feet downtown as it moves its headquarters to Chicago from New York City, has a workforce that favors employees in their 20s with less than five years of work experience. These employees can help each other with sales or resolve customer issues when they’ve established a relationship in an office, says Brad Wilkins, Loadsmart’s director of human resources.

“It was the biggest gap people saw during COVID. It’s hard to build trust when someone is a two-dimensional, shoulder-to-shoulder version of themselves,” he says.

Companies like Chicago-based Redwood Logistics, which rely heavily on freight brokerage activities (connecting shippers and carriers for a fee) can oversee more than two dozen stages in a load’s lifecycle, from the shipping-to-delivery order, says Tim Zelasko, whose company recently added 15,000 square feet to his 35,000-square-foot office along the North Branch of the Chicago River. Technology is helping to streamline this shipping process, “but it cannot be done with technology alone because it is such a fragmented industry,” he says, noting that there are “hundreds of thousands “trucking companies. “Most of our customers don’t want to deal with the headaches that arise after a load is put on the road… This is where a lot of on-site collaboration is beneficial, as opposed to to have to jump on five or six different phone calls. In fact, you can just walk up to a human and say, “Hey, here’s the problem I’m facing.”

The fact that office owners are more eager to have them in their buildings than before, when it was less certain that a freight brokerage tenant would succeed, has also helped transport logistics companies expand their space. work, says Adam Pines, vice president of Chicago office rental agency Madison Rose.

“Ten years ago, a lot of these businesses were still seen as bets for homeowner groups to invest in,” he says. “But a lot of businesses have stabilized to the point where they can be viewed alongside a more professional user with an older credit history.”

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