An incomplete way to frame it: Lake County loses jobs and HQs to Chicago

The shift of headquarters and jobs from Lake County to downtown Chicago leaves a number of suburban buildings vacant:

The far north suburban county is bracing for the loss of about 2,700 office jobs by early next year, from prominent companies Walgreens Boots Alliance, Takeda Pharmaceutical Co. and Mondelez International…

History indicates corporate campuses in Deerfield and nearby suburbs — and the homes and businesses those high-paying office jobs support — can weather the storm. But the challenge has only intensified as more companies move jobs to downtown Chicago, in pursuit of younger workers who want to live in the city…

McDonald’s, Kraft Heinz, Motorola Mobility, Hillshire Brands, Gogo, Wilson Sporting Goods, Motorola Solutions and Beam Suntory are examples of companies that have moved their headquarters downtown in the past few years. Others, such as Walgreens, have established large offices in the city while retaining suburban headquarters…

A 2013 report outlining the county’s economic development strategy said losing any of the larger employers in the biopharma industry — such as Takeda — would be “devastating” to the county.

Such moves have real consequences for suburban areas. Filling and/or reviving large office parks and suburban campuses can be difficult. The loss of jobs and tax revenue can hurt.

At the same time, a story like this can reinforce notions that when Lake County loses jobs to the city of Chicago, this is a bad outcome. When the suburbs lose jobs to the big city or vice versa, someone is winning and someone is losing. Not necessarily: the region is still benefiting as the cities and suburbs depend on each other. From the perspective of the whole region, there is good news here:

-The fact that these companies want to stay in the Chicago region, whether in the suburbs or downtown, hints at the economic vitality and amenities of the whole area. With the bad news of Illinois’ financial issues, big companies are not leaving the state en masse.

-Other parts of the article hint that while the vacancy rate for office space is high in Lake County, there is still some business demand for these headquarters and campuses. Some locations might require more work to find a sizable replacement but they are not necessarily sitting empty for years.

-This presents opportunities – perhaps unwanted – for suburban municipalities to rethink suburban office parks and campuses. Rather than waiting for the big company to use the whole property, these could be future mixed-use sites featuring office, retail, recreational, and residential space. Rather than rely on single employers, suburbs could work to tie these campuses into the larger fabric of their community.

This could become a bigger problem if suburban properties stay vacant for a long time but these changes seem fairly normal for now: businesses move locations within a region to chase what they think are attractive options for workers (particularly young ones) and their bottom line. Perhaps more importantly, the suburb versus city battle over prestigious headquarters does not need to sour relations or perceptions. The region as a whole can continue to thrive even if there are changes to address within the metropolitan area.

Scrambling to fill empty suburban HQs

Chicago looks at development efforts involving several large suburban corporate campuses that lost their famous tenants to the big city:

For many of these suburbs, the solution isn’t to replace one corporate behemoth with another. Instead, they’re dicing up the land for different uses and radically changing the face of suburbia for decades to come — just as the mammoth corporate enclaves and shopping malls once did. In Oak Brook, for example, an unexpected entity pursued the 34 undeveloped acres at McDonald’s. “As soon as we found out they were leaving, we asked if they wanted to donate it,” says Laure Kosey, executive director of the Oak Brook Park District. “They said, ‘Good idea, but we’re going to put it up for sale.’ ”

So the park district bought it. Residents of Oak Brook, a village that levies no property tax, took the unusual step of taxing themselves by voting for a bond referendum that covers the $15.8 million price tag, with $2 million left over for creating soccer fields and spaces for other recreational activities. The deal closed in December with the promise that the land won’t turn into anything other than a park.

A separate McDonald’s property a few miles from the main campus, next to the Oakbrook Center mall, was sold to Houston-based developer Hines last summer. It will likely become a mix of apartment buildings, office space, and shops — what the developer has called a “new village center.” It’s a similar tack to the one Schaumburg is taking after it was rattled in 2016 by the loss of Motorola Solutions’ headquarters, which moved to the West Loop. Chicago-based UrbanStreet Group bought 225 of the site’s 322 acres and intends to remake the parcel into a mini community with houses and apartments, a retirement home, a driving range, a park, and sidewalk cafés…

Nearby Hoffman Estates has already lost one giant — AT&T, which began vacating its 150-acre satellite campus in 2014 for several smaller sites in Chicago and other suburbs — and doesn’t exactly have a sure thing in another: the hobbled Sears Holdings Corporation, which is fighting to stave off liquidation. New Jersey–based Somerset Development is turning the AT&T site into what it calls an indoor downtown, essentially a 21st-century Bio-Dome that packs offices, restaurants, entertainment spots, conference centers, and hotels under a massive roof. It’s possible a Montessori school, public library, and other communal spaces will be weaved into the site, just as the developer did in New Jersey, where it revamped the huge Bell Labs property…

State representative Fred Crespo, a Democrat from the village, is floating a so-called Big Empties bill, which is being redrafted after it was introduced during the last session of the General Assembly. It would provide hefty incentives, including relief on up to half of the property taxes, for developers that make over old HQs larger than one million square feet.

The redevelopment plans sound like they have promise. The goal is to reduce the ways that headquarters are often set apart from the surrounding land by reincorporating the properties into the fabric of the suburb as well as introduce a variety of uses that will generate more around-the-clock activity. Big office campuses and/or buildings can be impressive displays but they may not contribute much to local community and social life.

On the other hand, I wonder how to weigh these changes against the loss of status that can come with the move of major companies out of the community. Particularly for edge cities, suburbs with millions of square feet of retail and office space and often located near major highways (like Oak Brook, Schaumburg, and Hoffman Estates), a Fortune 500 company helps establish the suburb’s reputation. New mixed-use neighborhoods may be attractive but they don’t have the same oomph as saying the suburb is home to Sears or McDonald’s or Mondelez.

I, for one, will be very interested to see how this all plays out within twenty years. These properties offer unique opportunities for established wealthier suburbs to do something unique. However, the redevelopment plans could go awry or the what is constructed may not be that interesting or the suburb’s status may never quite recover.

Amazon HQ#2 may be headed to a wealthy suburb

Crystal City, Virginia may be the new home of Amazon’s second headquarters site. Here are a few features of the suburban neighborhood located in Arlington:

With the Ronald Regan Washington National Airport two miles to the east, the heart of Washington D.C. five miles to the north, and a few stops on Washington’s Metro linking all three, Crystal City is in the right geographic spot for the Seattle-based company…

Today, the neighborhood, although a part of Arlington, has its own distinct downtown area. The walkable Crystal Drive is dotted with businesses, restaurants and public art, while public/private partnerships are bringing investment in parks and open space

Home prices in Crystal City might be more affordable than they are in Seattle, but that’s not saying much. The median home value in the 22202 area, a zip code Crystal City shares with neighboring Pentagon City, Aurora Highlands and Arlington Ridge, is $625,800, according to Zillow — nearly three times the U.S. median.

Might the lack of single-family homes also be attractive to Amazon?

Crystal City is dominated by one apartment building after another, most of which don’t have ground floor retail or restaurants that would create a sense of community or neighborhood vibrancy. Walk a few blocks away from the shopping mall during any evening of the week and it’s a quiet, almost desolate place. This lack of a community might have been the final piece that Amazon was looking for since it means they can come to town without much opposition.

A few quick thoughts:

  1. On one hand, it is interesting for Amazon to choose a suburban location. A sizable headquarters would be a boon for numerous communities, particularly cities that need a shot in the arm. On the other hand, this is an urban suburban location. The location is technically outside Washington D.C. yet it is a community of high-rises with little distance with the central city in the region.
  2. A location in this region contributes to the rising status of the Washington D.C. region. While other cities and regions may still be larger, this region with its collection of government, military, and business opportunities just keeps growing.
  3. It would be interesting to see how much Amazon would want to contribute to a thriving streetscape in the community. Based on several articles, it sounds like there is limited activity in this community after business hours. Does Amazon want to contribute money to trying to develop a vibrant urban neighborhood (even if it is located in a suburb)?

What the losers for Amazon HQ#2 might gain

Amazon may be leading the way to more highly public location searches and there is one way this could help the communities who lose out:

All may not be lost for the 237 also-rans, though. They’ll have thick books filled with available sites, potential incentives and glossy pages touting their best attributes, and they’ve learned lessons for their next big pitch.

“A positive outcome of this could be the self-reflection of communities throughout the country,” Sessa said. “They’ve had to be very honest about where their strengths are and where their weaknesses are. Only one is going to be selected, and the other 237 will have assembled a lot of good information. If the weaknesses are addressed, the beneficiaries will be the companies who reside there now and the companies looking to move there in the future.”

This is a positive takeaway from what promises to be a disappointing outcome for numerous major cities: they will be better positioned to make the next pitch. But, I can imagine multiple ways this self-reflection and self-improvement will not work in the long run:

  1. There are not many future large-scale searches like this for cities to participate in. Amazon is a special case both because of its size as well as its desire to add jobs (rather than relocate existing facilities and employees).
  2. It is unlikely there are enough major companies for every major city to win something in the coming years. Additionally, major companies tend to want to locate near other major companies and in hot areas.
  3. The tax breaks and incentives required to attract these companies may not be worth it, particularly in an era when many communities are struggling to generate revenues.

In my mind, honest self-reflection in many communities would involve the realization that fighting for the biggest companies is not in their best interest.

Several of the large tax breaks offered by cities for Amazon’s HQ2

One reporter went digging into the proposals cities made for Amazon’s second headquarters and some of the offers are extraordinary:

Example: Chicago has offered to let Amazon pocket $1.32 billion in income taxes paid by its own workers. This is truly perverse. Called a personal income-tax diversion, the workers must still pay the full taxes, but instead of the state getting the money to use for schools, roads or whatever, Amazon would get to keep it all instead…

Most of the HQ2 bids had more traditional sweeteners. Such as Chula Vista, California, which offered to give Amazon 85 acres of land for free (value: $100 million) and to excuse any property taxes on HQ2 for 30 years ($300 million). New Jersey remains the dollar king of the subsidy sweepstakes, having offered Amazon $7 billion to build in Newark…

Boston has offered to set up an “Amazon Task Force” of city employees working on the company’s behalf. These would include a workforce coordinator, to help with Amazon’s employment needs, as well as a community- relations official to smooth over Amazon conflicts throughout Boston. (Surely Amazon can handle these things itself?)…

Fresno promises to funnel 85 percent of all taxes and fees generated by Amazon into a special fund. That money would be overseen by a board, half made up of Amazon officers, half from the city. They’re supposed to spend the money on housing, roads and parks in and around Amazon.

And he has not even been able to see a significant minority of the proposals. It is as I suggested: a tax break bidding war is underway. It would be great to hear public leaders questioned about these offers and why they are willing to give up so much. How might such offers change their communities? How much will a city really benefit from the second headquarters if they give so much away?

A side thought: what if Amazon’s call for a second headquarters is really a way to flesh out what big cities are willing to offer for a major headquarters? The project has to have enough size and prestige that cities would make big concessions. Once they fall over themselves for this, can’t other corporations ask for similar deals?

Chicago’s bid for Amazon HQ#2

Here are a few details of what Chicago is offering Amazon to attract its second headquarters:

“Chicago offers unparalleled potential for future growth for businesses of all sizes and is the ideal place for Amazon to build its HQ2,” Emanuel said in the news release. “This bid will demonstrate to Amazon that Chicago has the talent, transportation and technology to help the company as it reaches new heights and continues to thrive for generations to come.”

Developers of four Chicago sites have provided details of their Amazon bids to the Tribune. Those sites are Lincoln Yards, the planned redevelopment of the former A. Finkl & Sons steel plant and other land along the Chicago River in Lincoln Park and Bucktown; the vacant old main post office along the river and Congress Parkway; 37 acres owned by broadcast company Tribune Media along the Chicago River near Chicago Avenue and Halsted Street; and the former Michael Reese Hospital site and nearby land in Bronzeville.

Chicago’s bid highlighted Chicago’s transportation network, talent pool, diverse economy, airport access, quality of life and proximity to research centers, according to the news release…

On Sept. 7, the day Seattle-based Amazon announced plans to invest $5 billion on creating a second headquarters, Emanuel told the Tribune the city planned to make a bid, and said he’d already spoken with Amazon CEO Jeff Bezos multiple times about bringing HQ2 to Chicago.

No word on the tax breaks and incentives the city and state are offering. I’m guessing they are plentiful.

At the same time, why wouldn’t Chicago have a good chance at this?

  1. Chicago is a top #10 global city.
  2. A central location. I know we are in the Internet/social media age and all but location still matters.
  3. A strong transportation network with multiple airports, rail connections, highways, and shipping.
  4. While the city may be losing residents, the region is still growing slightly and has plenty of workers.
  5. An wild card factor: if President Trump continues to use Chicago as an example of a (Democratic) city with problems, would Bezos and company like to stick it to him and show they are committed Chicago? Lots of cities can offer land and other incentives but Amazon could claim to be a significant part of turning Chicago around. (Whether a single headquarters could do this is another story but there are business considerations as well as political narratives at play here.)

Now to see how long it takes Amazon to announce a decision.

New possible Georgia city just for Amazon

The race is on between cities and communities to put forward an appealing pitch to Amazon regarding its second headquarters. One Georgia community has a unique approach: make a new city just for Amazon.

The Stonecrest City Council voted 4-2 on Monday to de-annex 345 acres of land if the e-commerce giant picks the area for what the company calls HQ2, a corporate hub where Seattle-based Amazon says it will one day house 50,000 jobs…

“There are several major U.S. cities that want Amazon, but none has the branding opportunity we are now offering this visionary company,” said Stonecrest Mayor Jason Lary. “How could you not want your 21st century headquarters to be located in a city named Amazon?”

Amazon is seeking a 175-acre site located near an international airport, public transit and high quality of living. Lary said he hopes MARTA expands rail service to Stonecrest.

The proposed city of Amazon could enter into an agreement with the city of Stonecrest to provide city services, he said.

This would indeed present a unique opportunity for any large company. I could imagine a few stumbling blocks:

  1. Naming a community after your company could have some cool features but also might have drawbacks. If something goes wrong in Amazon, Georgia, is it automatically the company’s fault?
  2. Would Amazon want its own community that is still beholden to its neighbor for city services? Providing all of your own infrastructure could be very expensive but working out deals for essential needs is not necessarily easy.
  3. Would Amazon want the perception of running a company town? This has tended not to work out well in the past. See Pullman as an older example or Facebook as a more recent effort.

I imagine there will be additional creative options proposed by other cities and places. Stay tuned.