Every Chicago developer, big or small, wants a piece of Fulton Market, the once gritty area where Class A office buildings, boutique hotels and new apartment projects have defied the pandemic that battered commercial real estate.
Fulton Street Companies – the largest smaller developer in the neighborhood, as CEO Alex Najem calls it – has nine projects that are either completed, under construction or proposed in Fulton Market. That’s nowhere close to the scale of the bigger developers Najem is up against, including Sterling Bay, whose dozen or so Fulton Market projects total more than 4.4 million square feet and Shapack Partners, developer of 10 planned projects and two hotels totalling at least 2.5 million square feet in the district.
For Najem, the key is focus – not just Fulton Market, but in its most sought-after locations. After all, it’s right there in his company’s name.
“Are you really in Fulton Market, if you’re not on Fulton Market (street)?” asked Matt Pistorio, founder of Chicago commercial real estate agency Madison Rose, which manages FSC’s leasing at 1045 West Fulton Market. “It’s a running joke we have, but, if you’re located at Fulton Market (street), that’s a premier address like Wacker Drive.”
Unlike other Chicago developers that spread their bets across the city, Najem narrowed his focus. His strategy has been a success so far, even though he jumped into the Fulton Market race in 2017, years after the pioneers such as Sterling Bay and Shapack Partners.
About 12 years ago, Najem was representing tenants looking for restaurants and retail spaces as a broker for the development firm Cedar Street. He got his first taste of Fulton Market in 2014 when he led Cedar to buy and later sell four loft buildings. Eight years later, Najem’s company bought those same buildings for $33 million. Of the nine planned sites and completed projects on his firm’s website, seven have Fulton Market addresses.
“I had to build my own reputation and the only way to really win for me was to have the best locations, the best architecture, and the most flexibility,” Najem said in an interview. “If I could build the same product as somebody else but I had a better location I would always win the tenant.”
Ahead of the trend
Born in Texas, Najem grew up mostly in Indianapolis, frequently visiting Chicago. He started his career as a trader at the Chicago Board of Trade in 2006 and pivoted to real estate four years later.
Najem’s love for restaurants and experience in helping his uncle in the hospitality business prepared him to understand what tenants want and build his network.
In December 2017, he partnered with longtime friend Ross Babel, a residential developer focused on ground-up development across Chicago. While their business started from buying a three-story fire station on 114 North Aberdeen and leasing it out to two tenants, FSC had plans for bigger ground-up projects based on Babel’s expertise in getting project permits and Najem’s ability to raise money and buy properties.
The redevelopment of a dilapidated 15,000-square-foot meatpacking facility at 1100 West Fulton Market put FSC on the map. It created a 45,000-square-foot, three- and five-story showroom, retail, and office space, with large loft-style windows on the ground level, metal awnings, and a rooftop terrace for furniture brand Herman Miller, the single tenant.
1100 West Fulton (FultonSt.com)
While companies tried to find buildings with large floor plates before the pandemic to fit employees into a single floor, Najem “saw the expectation that people would rather control everything in the building, the aesthetics, the roof deck, and the way people entered and exited the building,” said Jim Plunkard, partner and co-founder of Chicago architecture firm Hartshorne Plunkard Architecture that worked with FSC on the 1100 West Fulton Market project.
“It gave him a lot of feedback to stay in this district and to grow in this district,” said Plunkard recalling when FSC signed Herman Miller for a 15-year lease. “Najem was ahead of the trend.”
As commercial property sales plummet and firms adapt to remote work, Najem’s strategy created a windfall. The building generated “an exceptional amount of interest and bidding activity” and sold at a record $925 per square foot in December, said Cody Hundertmark, at Cushman & Wakefield, who represented FSC in the $41.75 million sale to Australian Zagame Corporation.
“Best of Both Worlds”
Over the past two years, he bought about four acres in Fulton Market and completed a 160,000-square-foot Class A building at 1045 West Fulton Market that’s ready for tenant move-in.
“Right when the pandemic hit, they [Fulton Street Companies] decided to launch a project at 1045 West Fulton Market,” said Madison Rose’s Pistorio, who is in charge of leasing at the building. “In a way Alex was kind of gambling, even when the pandemic started, because he knew it was going to take off.”
By now, there is “enough interest to lease the entire building,” Najem said of the 1045 West Fulton Market property. “The amount of interest over the last month has been more than I’ve ever experienced in my time in Fulton Market.”
1045 West Fulton (FultonSt.com)
While FSC’s successful redevelopment helped create a buzz in the neighborhood, Sterling Bay and Shapack Partners are catching up.
Sterling Bay has at least eight residential and commercial projects totaling about 3 million square feet either under construction, approved, or proposed in the district, according to local commercial developer SVN Chicago. At a price tag of more than $105 million, Sterling Bay also plans to buy a vacant 2.7-acre site running along the west side of Peoria Street and Metra tracks, the largest remaining development site in the Fulton Market District.
Shapack Partners is aiming to build a 28-story residential building at 1353 West Fulton Street and a commercial building at 170 North Green Street with 275 apartments, office space, and 150 hotel rooms. It’s also seeking approval from the City Council to demolish the longtime Bridgford Foods processing plant across the street from 167 North Green Street and develop a 40-story mixed-use project.
Najem says the firms’ aggressive expansion will help keep the neighborhood densely populated. He saw the lifting of the ban on residential development in Fulton Market in 2020 as another chance to make the district that much more sought-after.
Fulton Market Street is the “real walkable street that’ll draw retail, restaurants after the pandemic,” said HPA’s Plunakard. Adding new residential projects to the scene, Plunkard said the area is going to feed on itself when more retailers want to come in – more good news for FSC.
“It’s the best of both worlds because the ban on residential north of Lake Street forced a lot of commercial development,” Najem said. FSC wants to build 1.1 million square feet of residential and office buildings around the 1200 block of West Fulton Street and a 430-unit apartment building on 1325 Randolph Street.
Projects lined up to break ground potentially in May are a 39,000-square-foot, 433-unit project at 1201 West Fulton Market and a 530,000-square-foot Class A office and retail building at 917 West Fulton Market. Najem’s first luxury condo development, where he plans to move in upon completion, at the 10-story, 25-unit condominium at 1010 West Madison, will also break ground this year.
1201 West Fulton (FultonSt.com)
Najem still sees opportunities to buy properties and expand his portfolio, with his latest purchase being four loft buildings on 1144 West Fulton, 112 North May, 1101 West Fulton, and 220 North Aberdeen for more than $30 million.
“I walk there every single day, I see every single project,” said Najem. “I don’t focus on any other parts of the city or anywhere else in the country. I solely focus on Fulton Market and that’s it.”