October, 17 2016
Potential changes to zoning rules meant to protect the city’s manufacturing could radically reshape Chicago
In a city where broad shoulders and a brawny industrial past are a civic cliche, there was always something magical about seeing sparks fly at Chicago’s A. Finkl & Sons Steel plant. In an industrial strip on the Chicago River, located in the near northwest side and sandwiched between two of the city’s hottest real estate markets, Lincoln Park and Bucktown, curious cyclists or drivers could roll down a rickety stretch of Cortland Street, bumping over embedded rail tracks and a paint-flecked bridge across the north branch of the Chicago River, and spy cylinders of red-hot, molten steel through the sliding doors of the century-old factory. Furtive glances at the Vulcan glow made more sense after passing the scrap heaps at Sims Metal Management next door; perhaps those husks of old cars or shredded pieces of aluminum fed the industrial beast.
When the manufacturing center was razed last year (Finkl had already moved to a newer facility on the city’s South Side), it seemed symbolic of a shift that had been going on for decades, part of the slow decline of the heavy industry that helped build the city’s economy in the 19th and 20th century. But talk to developers, investors, and city officials today about the 28-acre site, and it appears like a new era is just getting started.
The Finkl site sits inside the North Branch Corridor, a 740-acre swath of warehouses, factories, and industrial sites that’s historically been a vital part of the city’s manufacturing base. Since 1988, it’s been a Planned Manufacturing District, or PMD, a zoning regulation meant to protect legacy businesses and jobs from encroaching development pressure.
But the loss of Finkl, as well as the continued growth of adjacent neighborhoods filled with high-end retail and million-dollars homes, has turned the aged industrial corridor into a potential gold rush for developers looking to tap into what many consider the city’s greatest asset hidden in plain sight.
“Look at Hudson Yards in New York, which is zoned for mixed-use development,” says Michael Drew, a principal at Structured Development, a firm that pioneered retail and office development in the adjacent Halsted Triangle area. “That’s valued at roughly $20 billion dollars, and it’s only 16 acres. The North Branch Industrial Corridor covers 740 acres.”
Valuable real estate is only the beginning. City officials and tech companies eye the area as a potential hub of high-tech manufacturing; on Goose Island, a 160-acre artificial landmass in the river off Division Street, UI Labs, a $320 million digital design and manufacturing hub, opened last year, a bid to make the city an “epicenter for advanced manufacturing.” Mayor Rahm Emanuel, whose Great Rivers Initiative seeks to turn the Chicago River into “Chicago’s Backyard,” believes a waterway once derided for its pollution could be totally remade with riverfront bike paths, new green space, and recreation facilities, and has sunk millions into boathouses and a fancy downtown riverwalk.
“We’re looking at a fairly dynamic environment that we need to get ahead on,” says David Reifman, the Commissioner of the Department of Planning and Development, which is beginning to consider land-use plans for the area. “The city has been passive in the past, but the Mayor has said we need to be more comprehensive, thoughtful, and systematic about the way that we address transition.”
With the city is in the midst of holding public meetings to discuss alterations to the PMD rules and new land use plans, it’s a matter of how, not when, this whole area undergoes a massive shift. And this may just be the beginning. City officials plan to analyze all of Chicago’s 26 industrial corridors, meaning policy and planning decisions about the North Branch could have a lasting effect on how Chicago leverages the potential of its industrial past while encouraging new and old manufacturing businesses alike.
“We believe this is the next great frontier for Chicago development,” says Matt Garrison of R2 Companies, a realty firm heavily invested in the transformation of the island. “A lot of big things have happened on Goose Island in the last few years organically. Imagine what happens with the city behind it.”
The North Branch Corridor is unique in its both geographic expansiveness and central location. From the boundaries of downtown near Chicago and Halsted, perched near the northeast corner of the Loop, the city’s central business district, it heads up the banks of the Chicago River, which heads northwest past Goose Island and bisects Bucktown and Lincoln Park. That waterfront access explains why it became a manufacturing and industrial center filled with river freight and barges.
That activity and potential attracted Anton Finkl, a 19th-century Bavarian immigrant who made his fortune devising a better way to clean bricks charred from the Chicago Fire, to open a steel plant on the North Branch in 1879. His company, and the other factories that used to line this stretch of the river, are an important link in the city’s economic evolutionary chain. In some central way, losing this old factory was like tearing the area’s history out at its roots (the structure was listed on Preservation Chicago’s list of most endangered sites before demolition began). Its loss can be held up as a prime exhibit of the city losing a connection to the industrial heritage that helped make it an economic powerhouse.
Or, it could simply be seen as a sign of the times, and an opportunity to create jobs for the future. At a 2015 forum at the Chicago Architectural Foundation titled Post Industrial Chicago, developer Andy Gloor, whose company, Sterling Bay, recently turned a cold storage warehouse in the city’s meatpacking district into Google’s new Chicago campus, said it just doesn’t make sense to restrict a prime parcel of land like the Finkl site. Factories aren’t coming back, and it could be turned into a tech center for tomorrow’s economy or a massive corporate campus.
Gloor’s company, Sterling Bay (which declined a chance to be interviewed for this story), has already reaped the rewards of smart adaptive reuse of Chicago’s historic buildings. Along with other developers, it has led the charge into the city’s West Loop and Fulton Market District, a neighborhood of warehouses and meatpacking companies that’s now one of the hottest real estate markets in the country. It’s also viewed by many developers as a precursor of sorts, proof that massive development can work outside of the city’s central business district.
The West Loop isn’t exactly a new find for anybody in Chicago; the area west of Halsted Street on Randolph has been an acclaimed restaurant row for more than 15 years, home to many of the city’s culinary stars, such as Stephanie Izard (Girl & the Goat) and Brendan Sodikoff (Bavette’s), and $135 million in annual business. But development in the warehouse district has been on overdrive in the last few years, thanks to high-profile additions, such as the Soho House and Google, and the city’s push to create a Fulton Market Landmark District.
“Before Soho House, there was amazing food and beverage and artists here,” says Jeffrey Shapack, a developer whose Shapack Partners helped bring the hip chain of high-end hotels/member’s-only clubs to the city. “This was one of the three things that really helped create a new neighborhood in Chicago: Soho and WeWork, then the city agreeing to the Fulton Market District branding, and Google moving into the Fulton Market Cold Storage building.”
Shapack put the Soho House in the Allis Building, a 120,000-square-foot former factory for belts and rubber seals, one of countless examples of adaptive reuse that has remade the neighborhood. The largest Soho House development, it followed a familiar template. In 2003, the company moved in the Meatpacking District in New York, and a Google Office opened years later in Chelsea. In Shoreditch, East London, Soho opened in 2007, and Google followed suit shortly thereafter. The same thing happened in the West Loop, when Google moved in last year to a Sterling Bay-designed space now called 1K Fulton.
These developments, however, are just the opening salvos in what many predict will be a flurry of new commercial, residential, office space, and retail nearby. Hip hotel chains, including the Hoxton, Ace and Nobu, plan to open locations here. Jason Burian, a partner and commercial real estate specialist in the Chicago office of CohnReznick, says the trendy area is tapping into the desire of the booming tech industry to pick up offices outside of the Loop with large floorplates and plenty of character. McDonald’s announced it’s moving its headquarters from suburban Oak Brook to a site on the opposite end of Randolph from Google, in a space formerly occupied by Oprah Winfrey’s production studio, Harpo.
Shapack believes retail is going to be the next big category in Fulton Market, especially as new office spaces begin to fill up and hotel begin to open. New York real estate groups, such as Thor Equities, are already investing in the neighborhood. There are still active meatpackers in the area, but he believes that’ll come to an end over the next few years.
“Three million square feet of office space is being built here in the next 36 months,” says Shapack. “There’s no district outside of the Loop where you’ve ever seen that. It’s a major game changer. That means 25,000 people will be here morning, noon, and night, Monday through Friday.”
It’s a wave of transformation that has yet to crest, and it’s worrying some local residents and business owners, who, accustomed to the neighborhood’s steady growth over the last few years, have watched it positively explode over the last 24 months. Some, such as Morlen Sinoway, who owns a furniture gallery in Fulton Market, believe some the the character that attracted people to the area is at stake.
“The galleries and little businesses, the independents and entrepreneurial people, they can’t afford $40, $50, $60 a square foot for rent,” says Sinoway. “Only the big retail companies and big box stores can afford that. There’s nothing wrong with that, but neighborhoods need a little flavor. Otherwise, we’re all going to look the same, like we’re all on the same street in Anytown, U.S.A.”
Sinoway describes the scene now as luxury blight; vacancies pop up not because times are tough, but because the rent on the block has shot up so high so quickly that despite the real estate rush, there hasn’t been time for turnover.
“You have that little bit of edginess with all these old factories and warehouses, and people from the burbs were so attracted,” says Sinoway. “There was this novelty, a little danger, a little rock and roll. They thought there were discovering their niche in the city. And that flavor will be gone.”
This explosive growth has pushed investment north and west, creating residential pressure on West Town, and causing many developers to swing their attention and take a more serious look at the North Branch.
“I call it the second bite of the apple,” says Shapack. “Twenty years ago, it was all industrial. The city isn’t asking for the industrial companies to move out, the concrete companies aren’t going anywhere. This is just an opportunity to create something new and great for Chicago.”
Any serious change in land use or density, on a scale that would brings thousands more people to areas that historically designed to accommodate a factory workforce, would require serious updating of city infrastructure (two bridges that connect the mainland to Goose Island were built in 1914). Like a change in zoning laws, this update process offers great opportunity if done right.
Jim Merrell, Advocacy Director of the Active Transportation Alliance, sees plenty of holes in the area’s transit infrastructure. While it’s surrounded by trains stations—North and Clybourn on the Red Line, Armitage on the Brown Line, as well as an Metra commuter rail stop—stretches on the river are isolated and needs better connection to the overall network.
This stretch of the riverfront, currently a patchwork of industrial sites and the occasional green space or trail, offers a huge opportunity, especially for pedestrians and cyclists. The river is “the new waterfront frontier for the Mayor,” according to Reifman, and the north branch provides incredible opportunity. It could become a premier bike trail and recreation center immediately, especially if and when it’s linked to the 606, Chicago’s rails-to-trails project on the west side (Sterling Bay has laid out a plan as part of its proposed acquisition of the Finkl site).
“Historically, we’ve gone from one use for the corridor, transportation of goods, to multiple potential uses,” says Josh Ellis, Program Director of the Metropolitan Planning Council. “The question is how do we integrate all of them in a way that can work for everyone who wants to be in that corridor? That’s the challenge ahead of us.”
New infrastructure is still a ways off. But realizing these changes would connect the northwest side of the city and potentially reshape a huge swath of the city’s transport network.
“The middle is really starting to fit in, and it’ll be really improved by a new land use plan and infrastructure investments from the city,” says Garrison.
The biggest obstacle—or opportunity, depending how you look at it—is the Planned Manufacturing District ordinances. The city has held a series of public meetings to discuss the potential zoning changes, a precursor to both a shift in the PMD and forthcoming master plan for the North Branch.
While developers see the area, and sites such as Finkl Steel, as great places for corporate campuses, mixed-use development, and retail, some have pushed back against altering the PMD, saying it would loosen important protections for legacy businesses. Michael Holzer, President of the community development group North Branch Works, believes this area is working because of, not in spite of, the PMDs. Numerous breweries and distilleries look for this type of space, and he claims there’s a 90 percent occupancy rate in the area. Finkl’s move proves his point; the company was able to relocate to a bigger and more modern facility strategically, on its own timetable, instead of being forced out.
“The PMD has worked, and has helped maintain businesses,” he says. “There’s about 10,000 jobs and 400 businesses in the North Branch Corridor, with an average wage of $70,000. We call these head of household jobs.”
During the last recession, Chicago’s manufacturing center, and those in the PMDs specifically, weathered the storm a lot better, according to Ellis. These aren’t your stereotypical smokestack-laden factories, he says, it’s a lot of businesses involved in the construction industries, which benefit from the river access (and helpfully keep heavy trucking off the highways).
“There is still a lot of heavy industry here, and putting residential next to our existing industry would not work, and is simply not compatible,” says Holzer. “Look at General Iron, Horween Leather, and Ozinga Cement; they’re heavy industry that need lots of infrastructure and a lot of protection from residential uses.We have 10,000 jobs here, and you could add another 5,000 jobs at the Finkl site with an urban innovation district. You have to ask, who benefits from a change?”
Others believe protecting these industries is clutching too hard to the past and at the expense of present opportunity. Developer Mike Drew and his company Structured Development played a large role in transforming a zone of warehouses and industrial facilities in the Halsted Triangle, an area downriver from the Finkl site, into one of the city’s prime shopping district. He started working there in the ‘80s, when the neighborhood was known as a seedy spot with numerous “independent contractors,” or hookers, working near the underpass on North Avenue. He’s seen it become a billion-dollar retail district with many of the biggest name in commerce, and thinks the North Branch could be worth multiple times more.
Even if it change focused on retaining factories, a more mixed-use plan might help attract more jobs.
“Anybody in digital manufacturing, regular manufacturing, or logistics needs meeting space, gyms, restaurants, place to get drinks after work,” says Ellis. “There’s a lot of focus on what developers want, but it’s not bad to consider ways development in that area can improve their working experience and give people places to live.”
The final say comes down to the city government. While the city is still in taking public comment and hasn’t formulated a plan for the North Branch, Reifman provided insight into how the city is thinking about the area.
He acknowledges that there are critical services and key industries located in the area, from construction-related companies to the Wrigley Research facility on Goose Island. The city doesn’t want to drive anybody out. Instead, he envisions an area better-suited to attracting new business.
“Look at why these companies are moving to Chicago; there’s a desire for proximity,” he says. “We’re looking at how to better integrate that area. We feel the success of Goose Island and the North Branch depends on having more amenities nearby and connecting it. To the extent residential becomes part of it, we’re certainly looking at that. It’s probably the most controversial aspect of any potential change, but I think to paint it as condo city is an exaggeration of where we’re going. It’s about mixed-use and the types of environments that new businesses and incubators are looking for, that will help create jobs.”
Reifman sketched another vision of how this whole area might looks. Heading northwest from the Loop, there could be three separate areas, or zones, heading up the river: A transitional zone that acts like an extension of downtown, with critical materials and businesses there, a stable zone, with office, retail, and campuses, and then a dynamic zone, near the Finkl site, that could potentially house more high-tech manufacturing.
Transforming old industrial sites into 21st century businesses is an urban development cliche, but it’s actually worked pretty well for Chicago over the last decade. While the coasts tend to get the bulk of the tech press, the city has somewhat quietly built up a sizable tech scene, and the revitalization of the North Branch fits into this growth very nicely.
One developer described the tech boom as “The Mayor’s Triangle.” Start at the Merchandise Mart, the sprawling furniture warehouse downtown that has gone high-tech with startup hubs such as 1871. Then head to the Lightbank and Groupon campus on the Chicago River, home to the boom-and-bust deal site and the massive VC firm led by Eric Lefkofsky, and then head back to the Fulton Market District. This is a concentrated area of development, one that points to the North Branch as possible next steps for expansion.
The most visible place for this type of development is Goose Island. Garrison and R2 have been huge investors and evangelists for what’s happening there now. They envision the island becoming a tech campus and innovation district, home to what they call “horizontal campuses” Properties on the island, such as 1315 North Branch, a space R2 owns with 40-foot ceilings and massive crane bays, would be ideal for this type of conversion. It presents unique, evolving opportunities that can’t be found elsewhere.
“The island is literally a blank space,” says Charles Adler, the Kickstarter co-founder who recently opened Lost Arts, a 10,000-square-foot open creative workspace filled with 3D printing machines, soldering equipment, and high-tech tools that he’s describing as a prototype.
He believes in the area’s potential—he loves the vision of R2, who helped him find the space. But he also thinks the island has a long way to come before realizing its potential and really fostering the innovation its backers like to tout. Lost Arts, which operates on an open, communal model, is his vision for what the community needs.”
“With all this talk about Goose Island, how does it become an arts and technology center?” he says. “How do we get away from focusing on the end, and focus on the beginning, the playful act of creating things?”
Major developments in the area are probably about five years from hitting, he says, but they’ll really open to door for an elaborate and comprehensive change.
“Don’t believe the North Side can’t work for manufacturing,” says Ellis. “Its proximity to the river and highways means it should be there. It’ll change and be more digital, but it’ll still be manufacturing.”
That authenticity, in a way, is up for grabs, and not just on the North Branch. The city’s decisions here will set the template for development across the city. It has the potential to create an engine of economic growth, but also shift the character of a city that’s always prided itself on having a bit more industrial grit.
“Without a land-use plan, we risk looking like Disneyland,” says Shapack. “Whereas Fulton Market has preserved its building stock, creating highly sought after adaptive reuse projects, many of the industrial buildings along the North Branch will be torn down, and developers will start from scratch. We don’t want to end up like parts of the city, where some of its authenticity was stripped by developers tearing down buildings.”