Real estate markets are driven by demographic and economic trends, technological change, and behaviors of different population groups. As a result of the pandemic, communities across the Chicago region have been experiencing meaningful shifts in how and where we work – impacting both people and places. With growth in remote work and the flight to higher-quality office buildings, many Chicago suburbs are facing record-high office vacancies. Building owners are facing the reality that many companies are not returning to offices in sufficient numbers, leading them to demise space to attract smaller office tenants or consider alternative uses altogether.
As more communities grapple with how to repurpose and reimagine office space, they can look to some recent examples for key lessons.
Demising and Re-Envisioning Large-Scale Office Buildings
One example of innovative redevelopment in the Chicago metro region is the renovation of the 150-acre former AT&T/Ameritech headquarter campus in Hoffman Estates into Bell Works Chicagoland – a “metroburb” anchored by a mixed-use building. The $191 million project demised the obsolete 1.65 million-square-foot building to support modern office space, restaurants, retail and public spaces. In 2019, the Village of Hoffman Estates established a tax increment financing (TIF) district and agreed to a public-private partnership to help facilitate this redevelopment. Additionally, future plans for the property include residential development. By selling portions of the land to residential developers, the developer anticipates being able to raise additional capital to help fund the costs of redeveloping the former Ameritech building. At the same time, this would increase the density of residents in close proximity to the re-envisioned mixed-use building and the services available.
The Transition to Mixed-Use Destinations
Depending on evolving demographics and market demand, it may be more feasible to demolish office space and transition to other uses. Some communities are experiencing an aging population and/or a trend of younger families moving into the community for the first time, introducing a desire for walkability, mix of uses, and a suburban environment that is distinctly different than the subdivisions and office parks of the 1980s. While these trends certainly pre-date the pandemic, communities may continue to experience a push to transform outdated office campuses into mixed-use destinations. One visionary example is the redevelopment of the 200-acre former Motorola Solutions campus in Schaumburg into Veridian – a mixed-use district with apartment, townhome, office and entertainment components. In 2015, the Village adopted a land use plan and redevelopment strategy as part of its comprehensive plan to guide redevelopment efforts. After a developer acquired the site with the intent of advancing the master plan, SB Friedman assisted the Village with implementation, including underwriting and negotiating a public-private partnership to facilitate development and public investment. The project broke ground in 2019. Various aspects of the project are complete, including portions of the apartment, townhome, office and entertainment components.
Office-to-Industrial Conversions
With industrial growth propelled by the pandemic, other communities are embracing the transition of outdated office campuses to industrial uses. Spurred by one of the strongest years for industrial absorption in the region, these distribution facilities are replacing surplus office supply and helping retailers and logistics companies locate closer to consumers. The redevelopment of Allstate’s former 232-acre corporate headquarter campus in Glenview into a modern logistics park is one example of office-to-industrial conversion in the region. With a key location adjacent to I-294, as well as proximity to higher-density communities, this redevelopment was able to capitalize on the pandemic-related land use shift since it is now more financially feasible to overhaul vacant offices into industrial space because of rising demand and pricing for industrial property.
Redevelopment Strategy: The Bridge from Vision to Implementation
While many communities are concerned about the loss of employment opportunities with increasing office vacancies, municipalities can potentially unlock significant economic and social benefits by planning for the transformation of obsolete office campuses. To do this, they can work with planners to:
Engage owners of office campuses to determine how motivated they are to participate and evaluate if the buildings may be reusable;
Conduct a market study to assess the performance and health of their office assets in the regional and national context, evaluate opportunities to transition to alternative uses, and identify market-feasible uses for the future;
Engage residents to garner input on future development and identify community needs (e.g., affordable housing, open space) that could potentially be incorporated into the project;
Identify key elements, such as unique cultural or social needs, that can help create a sense of place in suburban contexts and that have the potential to make the community more competitive;
Evaluate what infrastructure may be needed to support redevelopment;
Work with planning, zoning, public works and other departments to address regulatory challenges associated with large-scale redevelopment;
Craft an implementable development plan for the site/area; and
Consider public-private partnerships to assist with extraordinary development costs associated with complex redevelopment projects.
SB Friedman provides analytical, strategic and financial consulting services in support of complex, high-impact development projects. Founded in 1990, we serve a full range of clients in the public, private and nonprofit / institutional sectors.
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