The announcement that 1871, Chicago’s premier tech incubator, is vacating its long-standing space at the Merchandise Mart (222 W Merchandise Mart Plaza, Chicago, IL 60654) signals a significant shift in both the city’s startup ecosystem and its broader commercial real estate market. The decision reflects post-pandemic changes in office space demand, impacting not just 1871 but also the Merchandise Mart itself and Chicago’s overall office leasing environment.
1871’s Exit: A Sign of Changing Times
Founded in 2012, 1871 was created to foster tech entrepreneurship in Chicago, providing startups with affordable office space, networking opportunities, and access to venture capital. It played a critical role in branding the Merchandise Mart as a hub for innovation, attracting companies like Google, Motorola Mobility, and Braintree to the building. Over time, 1871 grew from occupying 50,000 square feet to 120,000 square feet, drawing in corporate partners and major industry players.
However, the COVID-19 pandemic transformed the way businesses operate. Remote work, virtual networking, and hybrid office models became the norm, significantly reducing demand for physical office space. 1871’s member base increasingly shifted toward virtual engagement, with fewer startups needing dedicated desks and offices. This tenant decline—dropping from 52 pre-pandemic to just 15—left the incubator struggling to justify its significant real estate footprint.
“While our impact across Chicago and beyond has grown significantly, like many other businesses, we were not able to adapt our real estate model quickly enough to the evolving economic landscape. As such, we have no other option other than to relinquish our space at The Mart.”
1871 plans to go remote temporarily while searching for a smaller, more flexible office space that aligns with its new operating model.
Credit Crains Chicago
Impact on the Merchandise Mart
The Merchandise Mart, a historic 4 million-square-foot commercial building, has seen numerous transformations over its 94-year history. Originally built as a wholesale showroom, it later evolved into a mixed-use commercial space, strongly emphasizing technology companies and design showrooms.
Furthermore, the Mart recently underwent a $40 million renovation, adding modern amenities to attract top-tier tenants. These upgrades and the building’s prime location along the Chicago River help maintain its relevance in a challenging office market.
Chicago’s Office Market Challenges
Chicago’s downtown office market has been under pressure since the pandemic, with vacancies hitting a record 26.3% as companies rethink their long-term office needs. The rise of remote and hybrid work has led many businesses to downsize, sublease, or abandon their traditional office footprints entirely.
1871’s departure underscores this trend. Even organizations that once relied on in-person collaboration are pivoting toward leaner, more flexible real estate solutions. This shift presents challenges for landlords, but also opportunities to reimagine how office space is used. Some buildings are converting to mixed-use developments, incorporating residential units or co-working spaces, while others are upgrading their offerings to remain competitive.
What This Means for Chicago’s Startup Community
1871’s move reflects a broader shift in how startups operate. In its early years, having a dedicated physical space was essential for networking, mentorship, and collaboration. Today, many of these functions have moved online, reducing the need for large incubator spaces.
Still, Chicago remains a strong tech hub, with numerous coworking spaces, accelerators, and investment firms supporting the startup ecosystem. 1871 itself continues to thrive virtually, with over 500 dues-paying members engaged in online programming and mentorship. The key challenge will be maintaining the sense of community and serendipitous networking that a centralized hub like the Merchandise Mart once provided.
Conclusion
1871’s departure from the Merchandise Mart reflects Chicago’s evolving commercial real estate landscape. While the Mart will likely fill its vacancy with another tenant, the move highlights the shifting needs of businesses in a post-pandemic world. For office landlords and occupiers, the challenge now lies in rethinking how office spaces can be positioned to attract tenants in an increasingly hybrid work environment.
