How Goose Island Grew to become A Area of interest Workplace Hub

“You’d have to beg for people to go over there. Now you get inquiries all the time.”

Matt Pistorio R2 Companies

Chicago office broker Matt Pistorio got his groove back on Goose Island right before the pandemic. He’s spent the past three years as a principal at developer R2 Companies, telling anyone who will listen that he can help turn the gritty industrial area once known as “Little Hell” into a thriving, diverse neighborhood.

“You’d have to beg for people to go over there,” said Pistorio, who joined R2 from the brokerage Telos Group, which he co-founded in 2012. “Now you get inquiries about Goose Island all the time.”

Debates have raged for decades over whether the factories and warehouses on the 160-acre landmass on the Chicago River should be replaced by multifamily housing for the wealthier people who started trickling to the city’s Near North Side in the 1980s.

Now, more than three decades after then-Mayor Richard Daley pushed through its zoning as a Planned Manufacturing District, the city is about to find out whether the artificial island has outgrown that designation.

Several big projects are poised to transform its southern tip. Canadian developer Onni Group is close to breaking ground on thousands of apartments that will be walking distance to River West, where Bally’s is building a $1.6 billion casino and entertainment complex.

Chicago’s biggest industrial real estate players are also circling, pouring almost $200 million into the island where FedEx and Amazon and candy maker Mars, with its made-in-Chicago Wrigley’s brand, have hubs. About half that investment came from Prologis, the nation’s largest owner of industrial real estate, which bought a 340,000-square-foot warehouse at 930 West Evergreen Avenue. The property is fully leased to a logistics venture of Related Companies and Greenfield Partners, as well as a division of Mars, which broke ground this year on a $40 million research and development facility adjacent to its offices.

“You have access to all the major neighborhoods and you’re close to Interstate 90,” said Jason St. John, founding partner of Greenstone Partners, a commercial brokerage whose headquarters is on the island. “That’s why Prologis did what they did with buying this site. Goose Island is a prime example of last-mile logistics, super-urban infill real estate.”

Proximity to the highway doesn’t necessarily mean easy access, though. Once considered a shortcut for both north-south and east-west drivers via Halsted and Division streets, respectively, some motorists avoid Goose Island altogether due to bottlenecks. The island lacks an “L” train station, leaving public transportation to city buses that refuel on the cracked pavement of a weedy North Branch parking lot. Amenities are also scarce: There are no bars and the island’s single restaurant is the 49-year-old Goose Island Shrimp House.

Industrial roots

Goose Island is an odd place, typically associated more with the beer brand bearing its name than the island itself, which was created by William Ogden in the 1850s when he dug a canal that gave a stretch of the Chicago River a second branch and separated the island from Old Town, Cabrini-Green and the rest of the Near North Side.

Named for the waterfowl kept by Irish immigrants, it was the site of power plants, a train yard and grain elevators, and began losing the residents who worked at its factories at the end of the 19th century.

But its long-established industrial vibe is starting to change. R2 is turning the former Morton Salt Shed property into a 4,000-seat live performance venue. On an August evening, music from performers tuning up for a nighttime show wafted through the streets, softening the fading sun that illuminated its brick industrial structures.

Workers still flowed through the streets as shifts changed at Mars, FedEx and Amazon, and the island’s recent deals are nothing if not industrial. James Martell’s Logistics Property Company paid $55 million for vacant land at 1237 West Division Street, a site just across the river that, like the Salt Shed, is referred to as “Goose Island-ish.” The developer plans the city’s first two-story warehouse on the site, a 600,000-square-foot facility.

Much of the development is being driven by R2, a specialist in adaptive reuse of aging industrial buildings whose CEO, Matt Garrison, said in 2015 that he’d buy the entire island if he could. The firm has transformed properties such as 1315 North Branch Street into creative office lofts that were fully leased during the pandemic as many other Chicago buildings lost tenants and, according to Pistorio, still attract employees for in-person work. Citywide, the number of workers in offices last month was just 40 percent of pre-pandemic levels, Kastle Systems data show.

The island’s industrial roots won’t disappear any time soon, even as developers march onward with plans to use old buildings for other commercial uses and try to erect new ones. It’s an approach that Pistorio said will distinguish the island’s evolution from projects such as Lincoln Yards and The 78, where Sterling Bay and Related Midwest are trying to build entirely new neighborhoods from the ground up.

“It will be an eclectic mix of industrial, office and retail, which sets it up to make it a really interesting district. It will be unique. It won’t be contrived. It will be an authentic neighborhood,” Pistorio said.

“It’s not a foregone conclusion”

Mike Senner Colliers

Golden eggs

R2 is far from the only — or biggest — real estate player to have moved in on the isolated neighborhood. Houston’s Hines, which bought 1315 North Branch from R2 this year for $47 million, plans to redevelop a one-story structure into a 275,000-square-foot, six-story timber office building at Division and Cherry streets. Dubbed T3, Hines hasn’t inked a pre-lease, blaming pandemic interruptions. Reused existing buildings, by contrast, have scored deals because they’re cheaper than ground-up developments and can offer lower rents than in hot spots like Fulton Market.

Not all have succeeded. The 180,000-square-foot former home of culinary school Kendall College, Goose Island’s most visible building from its southern end and a candidate for adaptive reuse, sits vacant. Kendall bought out the rest of its lease , which had options to extend through 2028, from owner W.P. Carey Group following the school’s 2019 move to Michigan Avenue.

Even brokers like Colliers’ Mike Senner, who’s marketing a development site owned by Lakeview Realty that could become 77,000 square feet of office and light industrial space, isn’t sold on the island’s future as an office hub — even though it could lift the value of Lakeview’s nearby properties.

“It’s not a foregone conclusion,” Senner said.

Rising rents for industrial real estate and the growing need for last-mile logistics space diminish the reward associated with converting more old buildings into offices, Senner said. R2 might have made just as much money flipping 1315 North Branch without turning it into offices, and could have instead “hung gas unit heaters, sealed the floors and leased it to industrial users,” he said.

Optimists say real estate and infrastructure projects will help the island’s transformation. While it’s unlikely to host upscale eateries such as the Restaurant Row establishments on Randolph Street close to Fulton Market workers, at least one is coming.

Hogsalt Hospitality, which runs high-end restaurants in Chicago and New York, is working with R2 to redevelop a building and vacant land along the river known as the Goose Island Boatyard. They hope to turn the 3.5-acre former boat storage facility into an entertainment and dining destination. The city, meantime, aims to expand Division across Goose Island into a four-lane road, which may relieve traffic.

Hines, led in Chicago by Will Renner and Brian Atkinson, insists there’s no need for tenants to demand easy access to retail, saying the rise of food delivery services puts a variety of options at the other end of a cell phone. They also noted that Crate & Barrel’s sister company, CB2, moved to 1315 North Branch from Fulton Market three years ago.

“It’s easy to get to. It’s low-friction office space,” Renner said.

For all that, Hines hasn’t put a whole lot of resources toward getting T3 off the ground. It hasn’t bought the property: Instead, it struck a deal with the family that owns it to build if it draws an office tenant, allowing Hines to sit out the project until the market improves. Hines said interest from prospective tenants has picked up this year.

Pistorio remains on the hunt for opportunities, even as he acknowledges that ground-up success will be limited. He struck an agreement with W.P. Carey, the owner of the former Kendall College building, to handle leasing and plans to bring it to market soon.

“You have incredible ceiling heights, and goofy spaces with garage doors — it’s not traditional office,” Pistorio said, before using a metaphor to differentiate adapted spaces from typical modern offices.

“If you have a bunch of suburban tuna cans on Goose Island, it’s probably not leasing right now.”