CHICAGO—Several well-known local corporations have in recent years abandoned suburban office campuses for spaces in downtown Chicago. And recent media reports have suggested that Walgreens could also leave its north suburban headquarters and set up shop downtown in the old Main Post Office building. But Steve Kling, a principal at Colliers who helps oversee its suburban office group, tells GlobeSt.com that the reports seem premature, and that even if true, the local market could take the hit and still thrive.
“Some speculation has been made,” he explains, “but we work the market pretty closely, and I’ve not seen Walgreens out there looking for space.” Kling does not have inside information, but “I can say that right now, no decision has been made.”
And if, in the worst case, Walgreens does decide to join other firms like Motorola Mobility, United Continental Holdings, Capital One, Hillshire Brands, and Gogo Inc. in moving to the CBD, Kling says “it wouldn’t be great, but it also would not be the end of the world.”
He contends that major employers, especially those in financial services, pharmaceuticals and healthcare, will continue to find the highly-affluent and educated workforce of Lake County quite attractive. “You’ve got plenty of large corporations up there, including Baxter Healthcare, Discover Financial Services, Allstate and Abbott Laboratories; it’s a long list, and if the economy continues its upswing, they will be looking to expand.”
And an empty Walgreens campus would provide excellent opportunities. “These are decent quality B buildings in an A location,” Kling says. However, “they are a little underparked for the current marketplace and will need some new capital to bring them up to modern standards.”
Colliers and Kling do have some experience in filling giant holes in the suburban market. The firm was hired by Philadelphia-based Equus Capital Partners Ltd. to market the four-building, 1.1-million-square-foot Kemper Lakes Business Center in suburban Long Grove after the Kemper left for a new headquarters on Wacker Dr. “It had great bones, but it was way out in Lake County,” Kling says.
Still, the Colliers team went to work and over a six-year period, which partly coincided with the crushing recession, transformed the campus from a ghost town to a thriving mini-city teeming with workers. Fresenius Kabi USA LLC, for example, signed a long-term lease for 262,291-square-feet, and Acco Brands Corp., in another long-term lease, signed for 189,371-square-feet. Today, Kling adds, tenants occupy 93% of the complex. Furthermore, Equus paid about $30 million for the buildings in 2005, and MetLife recently decided to buy them for $130 million.
Colliers was also responsible for refilling Tallgrass Corporate Center, a 548,100-square-foot property in Bolingbrook also owned by Equus, after Tellabs vacated it in 2004. “It took about 36 months to get it done,” Kling says.
And although the Walgreens group is in roughly the same size range as the Kemper property, Kling believes its far superior location, and hopefully the absence of a major economic crisis, would facilitate a more rapid lease-up if the company did decide to move. “I estimate it would take about four years to stabilize it.”
Kling also remains optimistic about the suburbs’ long-term prospects. The downtown tech boom began in the 1990s because “the people who were writing code were living in the city.” But once they begin to confront the expense of raising children in Chicago, the suburbs will attract this new generation of parents. “The amount of office space in the city will eventually get topped out and all of these employers will go to where the highly-educated workers are. I have seen this cycle change two or three times, and it will change again.”