In a sign of the times, 1871, the influential Chicago tech incubator that has launched some of the city’s most innovative startups, is vacating its longtime offices at the Mart.
The decision, announced in a memo Wednesday by 1871 CEO Betsy Ziegler, cites the shifting realities of the struggling post-pandemic downtown office market.
“As an organization, we have continued to perform, but not at a level that allows us to sustain the real estate commitment that once served 1871 so well in the pre-COVID years,” Ziegler said. “As such, we have no other option other than to relinquish our space at The MART.”
Launched in 2012, the nonprofit 1871 has been an anchor tenant at the Mart and the nexus of the Chicago tech scene for more than a decade, providing space, expertise and funding opportunities for a long roster of startups.
Over the years, 1871 has raised $4 billion in venture capital, given rise to more than 850 companies and created 15,000 jobs. But in recent years, its 140,000-square-foot co-working space in the Mart has been underutilized, as more 1871 members build and scale their companies remotely.
The memo did not say if 1871 planned to find new office space or operate remotely itself. Ziegler and 1871 were not available for comment Wednesday afternoon.
“As we deal with our new economic realities, we are embracing a more flexible model that reflects today’s entrepreneurial landscape,” Ziegler said in the memo. “We will continue to leverage our incredible network of partners to showcase Chicago as a global hub for innovation.”
The move out of the Mart comes as Chicago office buildings are at 52% of pre-pandemic occupancy levels, according to the latest weekly report by Kastle Systems. Meanwhile, many downtown Chicago office buildings have a lot of empty office space, with direct and sublease availability at a record 30.8% during the fourth quarter, according to real estate services firm Avison Young.
At the same time, more major companies such as Amazon and JPMorgan Chase are beginning to mandate employees return to the office full-time, citing increased productivity under one roof.
Celebrity video messaging website Cameo recently offered its 26 Chicago-area employees a $10,000 raise to return from their remote locations to the company’s Fulton Market office on a full-time basis. Launched at 1871 eight years ago, Cameo exploded in popularity during the pandemic, achieving a $1 billion unicorn valuation in 2021 before struggling and downsizing in the post-pandemic landscape.
The Merchandise Mart has evolved from old-school showroom center to high-tech office space during the new millennium under the ownership of New York-based Vornado Realty Trust.
Developed by Marshall Field & Co., the Merchandise Mart opened in 1930 to house wholesale products for department store buyers. At 24 stories and 4.2 million square feet, the building was then the largest in the world, only to be surpassed by the Pentagon a decade later.
Converted to government offices during World War II, the building was purchased by Joseph P. Kennedy for $26 million in 1945 and returned to its original use. Vornado bought the building from the Kennedy family in 1998 for $250 million to $300 million.
The massive building was rebranded as the Mart as part of a $40 million renovation in 2016.
Current tenants include Motorola Mobility, PayPal, Conagra and Allstate. In September, Vornado touted that Northfield-based healthcare company Medline was tripling its space at the Mart to 161,000 square feet. Nearly that much space will likely hit the market with the exit of 1871, which started with 50,000 square feet in 2012 and expanded over the years.
In addition to office space, the Mart still serves its initial function as well, housing more than 250 design showrooms, according to the Vornado website.
A Vornado spokesperson did not respond to a request for comment Wednesday.
rchannick@chicagotribune.com