May 25, 2017, 5:11 PM
These lesser-known submarkets have (almost) everything tech wants.
Tech companies count on a live-work-play culture to bring in the next generation of great talent. But that lifestyle doesn’t come cheap. Being close to retail, residential and commercial hubs generally means you’re paying a premium both as an employer and employee. But not always.
A new alternative is emerging in many cities that’s gaining traction among companies on the hunt for better value: fringe neighbordhoods.
For years these former “ghost towns” sat on the outskirts of cities away from proper development, which left them woefully underutilized. But now, as downtowns fill up and companies fight for space, interest—and investment—in these nearby alternatives is on the rise.
Why? Creative office space is being born from former industrial buildings with high ceilings, lower rents and endlessly customizable options. True, some emerging fringe neighborhoods lack the easy access to public transportation and traditional parking ratio seen in the CBD. But where they may fall short in traditional amenities, they make up for it in total cost and available creative space.
Here are some we have our eyes on.
Up-and-coming fringe neighborhoods to watch
Close in Eastside (Portland)
Probably the most established fringe player—and the most successful in drawing in tech—Portland’s original Meatpacking District now is a hotbed of creative activity. Just a two-minute drive across the river from downtown, Close in Eastside offers easy transit access and plentiful housing options.
Rich in history, the neighborhood has a solid inventory of multi-story industrial buildings that meet the aesthetic in demand from start-ups, creative and tech companies: high ceilings, exposed wood beams and heaps of character. And people are taking notice. Office vacancy in the submarket is down to 4.9%, from a high of 9.3% in 2011.
The American Planning Association’s choice as the hottest neighborhood of 2014, Uptown is culturally diverse, artistic, and harbors an entrepreneurial spirit. The formerly quiet commercial neighborhood has witnessed a slew of residential development in the last few years—fueled in part by companies fleeing San Francisco’s high costs.
Now a true live-work-play community, one unique feature that embodies Uptown’s vibe is The Hive. This full city block of historic industrial structures that have been transformed to include coworking space, a microbrewery, restaurants residential units and an event plaza.
Though office rents in Uptown have skyrocketed the last 12 months, they’re still highly attractive when compared to costs across the Bay.
Downtown Arts District (Los Angeles)
With tenant interest returning to Downtown LA, it was only a matter of time before this industrial zone on the outskirts attracted attention. High-end boutiques, trendy restaurants and coffee shops populate the streetscape. Meanwhile, downtown professionals are moving into redeveloped residential space alongside the area’s mainstay artist lofts. It only makes sense that companies are following, finding homes in reimagined once-defunct-factories turned offices.
North Loop/Warehouse District (Minneapolis)
Known mostly as an industrial area populated with warehouses, factories, and a rail yard, the North Loop later became a lightning rod for Minneapolis’ art scene. Now it has evolved into the Twin Cities’ hotspot.
Further strengthened by the Warehouse District, a seven-block stretch to the south of the North Loop, employees and residents alike have flocked to the area.
Collectively, these adjacent neighborhoods offer one of the greatest densities of tech talent in the Midwest.
The area has seen major redevelopments over the past five years, including new transit connections and Hines’ 225,000-square-foot, wooden T3 (for timber, tech and transit) office building.
Fulton Market (Chicago)
Fulton Market’s burgeoning arts, culture and food scene has quietly pulled this fringe district out of the shadows of its more well-trodden neighbors, the West Loop and River North. Particularly as space tightens and rents push higher in those more established neighborhoods, Fulton Market is primed for tech companies seeking space.
Former manufacturing and production facilities are being gutted and refitted into chic establishments like members-only clubs and modern, tech-friendly offices—but keeping the cool industrial vibe the neighborhood was founded upon. And easy access to public transit via two "L" (rapid transit) lines doesn’t hurt either.
Short North (Columbus)
This 14-block strip has become the city’s creative neighborhood and go-to retail corridor filled with art galleries, trendy restaurants and an abundance of nightlife. The 24/7 vibe—thanks in part to nearby Ohio State University—has been a boon to the neighborhood’s young professional population, and companies are taking notice. New projects will soon bring the neighborhood an additional 60,000 square feet of retail and office space, a 313-space parking garage and a museum.
South End (Charlotte)
The revitalization of Charlotte’s South End is more about reinvention than rebirth. Like most fringe markets, the South End is a former industrial district that today offers restaurants, arts, and culture for residents and employees. In fact, an old Pepsi bottling plant is currently being redeveloped into residential and office space.
Two creative office projects are expected to break ground in the next 18 months, and will add another 147,000 square feet to an office market with a vacancy rate of currently just 3.6%.
The area is supported by Lynx, Charlotte’s light rail, which takes passengers from Uptown to South End along South Boulevard, the neighborhood’s main artery.
Shockoe Bottom & Scott's Addition (Richmond)
Tax incentives have helped spur redevelopment of the Richmond area’s low-cost historic buildings into hip alternatives to traditional office space.
For example, The Edgeworth Building, a former tobacco factory, now offers premier modern amenities, office, retail and plenty of parking options in Shockoe Bottom. A few miles away in Scott’s Addition, local breweries and nightlife have acted as a catalyst for strong industrial, commercial and residential development.
What's next for the fringe?
On the surface, each of these fringe submarkets has the right mix of affordability, amenities and—let’s face it—cool factor to draw in tech companies. And with urbanization displaying no signs of stopping, these fringe markets are primed for growth. If cost is top of mind, or your younger company is looking to make its mark, they might be worth a look.
Just remember that without long-term track records, cautious optimism in new markets is key.
Sidenote: This article includes a sampling of fringe neighborhoods we’ve got our eyes on. For the complete list, which includes some surprises in smaller cities like Cleveland, Pittsburgh and Raleigh-Durham, download this report.
Research: Patricia Raicht, Devon Parry, Henry Gjestrum, Carolyn Bates, Hailey Harrington | Editor: Michael Cronin