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Wed November 23, 2011
Empty Series: What do you do with an empty corporate campus?
All this month, we’ve been looking at Empty Places across the Midwest; from vacant lots to abandoned factories.
As companies adjust to new economic conditions, many are re-evaluating the basics, including their locations.
City officials often bend over backwards to get businesses to locate in their communities and provide jobs, but they’re left with big challenges when a company decides to leave.
There’s a hot new trend among companies around the Midwest – threatening to leave. Several companies, especially around Chicago, have been asking big picture questions as they take a look at their bottom lines.
One is the food maker Sara Lee, which is going through a major transition as it prepares to split into two companies. One would be focused on meats, such as sausages and hot dogs. The other one would focus on beverages.
Company spokesman Jon Harris says the company believes a downtown location “would provide our new North American meats company with an environment that will be energetic, that will foster breakthrough thinking, create revolutionary products, offer fresh perspectives and really own the market.”
But that means moving from Sara Lee’s headquarters and test kitchens, which are currently based in Chicago’s western suburbs, in a town called Downers Grove.
While no location has been chosen for the meat company, downtown Chicago is preferred, Harris says. If Sara Lee does pack up and move, it would leave behind a massive office building designed to hold at least 1,000 workers.
That’s something Martin Tully, the mayor of Downers Grove, isn’t too excited about, especially as it relates to collecting property taxes. “It’s not insignificant,” he says.
Tully says he’s working with Sara Lee to try to keep operations based there, but it’s hard when the company is going to split up.
Also, Sara Lee has no deep ties to Downers Grove. Its offices have only been there for six years. Tully says those six years have been worth it – even if he has to find a new tenant. As he says – who would pass up having Michael Jordan on your basketball team for six years?
But he has a word of warning for other towns that might be looking to unload one giant piece of land. “You have to be on your toes and alert for those things as a community and as an economic development engine,” said Tully.
Another example is United Airlines, which is moving thousands of employees to what used to be called the Sears Tower. It’s trying to sell its property in Elk Grove Village, in Chicago’s northwest suburbs, not far from O’Hare International Airport, but nobody is really biting.
Stacey Kruger Birndorf, an expert on office space real estate issues for Transwestern, a commercial real estate company, says towns like Mount Prospect have to keep in mind what companies want when they look for a new home.
“I think so much of it is economically driven,” she says. “I wish I could say it’s geographically driven, but so much of it is economics.”
Kruger Birndorf says companies look at the cost of the property, where new recruits would want to work, and proximity to clients. She says young people by and large want to be downtown. But if a company wants a lot of space, the suburbs might be a better fit.
Asked whether it’s worth it for towns to allow big campuses that are hard to re-work into anything other than office space, Kruger Birndorf says towns have to go for it.
“If we don’t have some hope and some optimism,” there would never be any reason to do anything, she says.
As proof, look at Ann Arbor, Mich. Pfizer, the international pharmaceutical company, had a 70-acre facility there, but moved out in 2007. It left a modern research facility empty, and took a chunk of the city’s property tax budget with it.
When Ann Arbor couldn’t find a buyer, the price dropped, and the University of Michigan stepped in.
“You’re getting 2.2 million square feet of office and lab buildings, which seems like an incredible steal for $108 million,” said David Canter, the Executive Director of the North Campus Research Complex.
He’s turning the facility into a new type of research center for academia, putting researchers from different departments into the same workspace. Before taking over the Pfizer complex, each department on the university’s campus had its own building.
Now, Canter says pharmacists, dentists, and mathematicians can all be in the same place.
“As a result, the university will be able to grow without having to invest in designing and developing a lot of series of new buildings that tend to follow growth rather than be in advance of growth,” he says.
Canter says if Pfizer hadn’t left, this research project from the university wouldn’t exist. It’s an example of how thinking creatively about how work space is used can let both companies and towns breathe easier.