Tag Archives: headquarters

Remembering the frenzy and promise regarding Amazon HQ2

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Amazon announced part of their HQ2 is coming along on schedule but the full project will soon go on pause:

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John Schoettler, Amazon’s real estate head, said in a statement the company is pushing out the groundbreaking of PenPlace, the second phase of the sprawling northern Virginia campus. The first phase of the campus, known as Metropolitan Park, is expected to open on time this June and will be occupied by 8,000 employees.

The move comes as Amazon CEO Andy Jassy has taken steps to curtail expenses across the company in the face of slowing revenue and a gloomy economic outlook. That’s led to the company announcing the largest layoffs in its history, totaling more than 18,000 employees, while also reevaluating its real estate portfolio and sunsetting some projects…

PenPlace encompasses three 22-story office buildings, more than 100,000 square feet of retail space and a 350-foot-tall tower, called “The Helix.” The development is larger than Metropolitan Park, which sits south of PenPlace, and includes two additional, 22-story office towers, as well as a mixed-use site featuring retail, restaurants and green spaces.

Amazon selected Arlington as the site of HQ2, in addition to the Long Island City neighborhood of Queens, New York, as part of a closely watched, splashy search for a second headquarters that kicked off in 2017. The company announced in 2019 it would halt plans to build its new headquarters in New York after it faced pushback from local activists and city council leaders.

Numerous communities across the United States submitted proposals to host this second headquarters and the company sought tax breaks. The promise of the new headquarters involved at least these two big features: the status of Amazon in your community plus the thousands of jobs in a corporate headquarters.

With the changes in the world, will these promises pan out for Arlington, Virginia and the D.C. metro area? It sounds like at least 8,000 employees will be onsite. However, the headquarters may never be as big as once envisioned. Does Amazon have the same status in 2023 that it did in 2017? This include everything from its financial outlook to its recent layoffs to changes in the everyday Amazon experience for customers.

On the whole, I would guess local leaders will still pitch this as a big win. We got Amazon and all these jobs (and implying that others did not). The long-term effects might be less clear, particularly if tax breaks for Amazon and opportunity costs and the longer-term fortunes of the company are factored in.

In the consternation over Caterpillar moving from Illinois to Texas, a reminder that the company moved from Peoria to a Chicago suburb in 2017

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Caterpillar Inc. recently announced plans to move from Deerfield, Illinois to Texas. This prompted concerns about another big company (following the announced exit of Boeing’s headquarters) leaving the Chicago area and Illinois.

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While this fits one narrative of Chicago, the region, and Illinois losing residents and companies to places with growing populations and more conservative business climates, this is not the only move Caterpillar has made in recent years. The company started in 1910 in Peoria and stayed there for a long time before relocating to Deerfield in 2017. Here is how the Chicago Tribune described that move:

Caterpillar will take over the former headquarters of premium spirits maker Beam Suntory, which announced plans last year to move its 450 employees and global headquarters to Chicago’s Merchandise Mart, joining corporations including McDonald’s, Motorola Solutions, Kraft Heinz, Wilson Sporting Goods and Conagra Brands that have recently moved or made plans to relocate downtown. Beam Suntory’s move will be completed by the end of June.”

“Following a thorough site selection process, we chose this location because it is approximately a 20-minute drive to O’Hare airport and convenient to the city of Chicago via commuter train, achieving our goal to be more accessible to our global customers, dealers and employees,” Caterpillar CEO Jim Umpleby said in a news release Wednesday. “This site gives our employees many options to live in either an urban or suburban environment. We know we have to compete for the best talent to grow our company, and this location will appeal to our diverse, global team, today and in the future.”…

In 2011, Caterpillar’s then-CEO Doug Oberhelman talked of moving jobs out of Illinois because of the state’s tax and spending policies. But in 2015, the company said it would stay in Peoria and build a new corporate headquarters, reassuring employees worried about a move. That changed again in January, when the company said it was abandoning plans for the new downstate headquarters.

So is this a story about Chicagoland and Illinois losing important companies or a broader example of companies responding to global markets and leaving behind long roots? Caterpillar is a company started and based in a smaller Rust Belt city for decades and now will move to two of the biggest metropolitan areas in less than a decade. How long will it be in Irving, Texas before again seeking greener pastures and business advantages?

Sears in decline leads to another large available suburban office campus

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Sears recently closed its last department store in Illinois and just announced that their large suburban campus will soon be up for sale:

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The Hoffman Estates campus features a 2.3 million-square-foot corporate office and 273 acres, including 100 acres of undeveloped land. It was home to more than 4,000 Sears employees as recently as 2017, according to company filings…

When Sears Tower opened in 1973, it was the world’s tallest building, a fitting corporate home for the nation’s largest retailer. Sears left its namesake home in 1992, moving its corporate headquarters to Hoffman Estates and selling the tower two years later. In 2009, the name of the building was changed to Willis Tower as part of the deal for the London-based insurance firm to lease office space there.

Sears is not the only corporate mainstay to pull up stakes recently and put its suburban campus on the market.

Last month, insurance giant Allstate reached an agreement to sell its longtime headquarters in unincorporated Northbrook for $232 million to an industrial developer that plans to turn the 232-acre corporate campus into a massive logistics facility.

And what will happen to these properties? There are multiple options including:

  1. Staying as office or corporate space. Could there be another company or organization who would want this property? A suburb can spend a long time looking for a comparable replacement.
  2. Redevelop the land as a mixed-use development. See “The Metroburb” not too far way created from a former Bell Labs facility. This is a trendy approach that mixes commercial or office uses with residences.
  3. Convert the property to housing. There is demand for new housing in attractive suburbs and large tracts of land do not come open often.

Making this choice will require negotiation and conversation between the parent company of Sears, potential buyers, municipal leaders, residents, and others (which could include regional officials and actors in the real estate world). The whole process could take years and the outcome might retain some hint of the Sears headquarters or it might not.

“Welcome to the Metroburb” in the NW Chicago suburbs

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This week I heard a radio ad saying “Welcome to the Metroburb.” Here is more on this new development outside of Chicago:

https://bell.works/chicagoland/explore/

Chicago area suburbs advertising their communities is not unusual; see examples here and here. Far less common are new suburban developments making broad appeals in mass media. This project has been in the works for a while now – see an earlier post – and it is on an intriguing site as Bell Labs was important for the Chicago region (read more about the effects on local development of their Naperville facility) and the country as a whole.

If you ran a business or were searching for a residence or wanted to be part of an interesting scene, would this ad or website persuade you? This is a unique development and a large one. Suburbs around the United States are looking to fill empty suburban headquarters, denser suburban areas are popular, and standing out in a crowded suburban landscape can be difficult.

Interestingly, there is also a partner project involving the former Bell Labs facility in Holmdel, New Jersey.

Agglomeration, working from home, and the character of places

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Why do certain industries cluster together in one location? Social scientists have answers:

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Economists believe agglomeration — like the clustering of tech in the Bay Area — has historically been the result of two main forces. The first is what they call “human capital spillovers” — a fancy way of saying that people get smarter and more creative when they’re around other smart and creative people. Think informal conversations, or “serendipitous interactions,” over coffee in the break room or beers at the bar. These interactions, the theory says, are crucial to generating great ideas, and they encourage the incubation and development of brainiac clusters. The other force is the power of “matching” opportunities. When lots of tech firms, workers and investors clustered in Silicon Valley, there were lots more opportunities for productive marriages between them. As a result, companies that wanted to recruit, grow or get acquired often gravitated to places like the Bay Area.

However, remote work could actually improve certain matching possibilities. Companies can hire smart people anywhere in the world when they drop the requirement that they physically be in a central office. Not only that, they can pay them less. Moreover, killing the office can significantly lower costs for companies, which no longer have to pay for expensive real estate.

So, in this theory, the future of work and the economic geography of America really hinges on whether companies can create those “human capital spillovers” through computer screens or in offices in cheaper locations.

This is a phenomenon with a pretty broad reach as cities could be viewed as clusters of firms and organizations. What has been interesting to me in this field in recent years is how places like this come to develop and what it means for the character of the place.

Take Silicon Valley as an example. This is the home of the tech industry and, as the article notes, the big firms have committed to physically being there with large headquarters (including Google, Apple, and Facebook). These headquarters and office parks are themselves interesting and often a post-World War Two phenomena as highways and suburbanization brought many companies out of downtowns to more sprawling campuses. At the same time, the impact of all of this on the communities nearby is also important. What happens when the interests of the big tech company and the community collide (see a recent example of a Facebook mixed-use proposal)? What did these communities used to be like and what are they?

This is bigger than just the idea of employees working from home. This potential shift away from clustering would affect places themselves and how they are experienced. If thousands of workers are no longer in Silicon Valley, what does this do to those communities and the communities in which more workers are now at home? Silicon Valley became something unique with this tech activity but it could be a very different kind of place in several decades if there is new activity and new residents.

The same could be said for many other communities. What is New York City if Wall Street and the finance industry clusters elsewhere or disperses across the globe? What happens to Los Angeles if Hollywood disperses? And so on. The character of places depends in part on these clusters, their size, and their history. If the agglomerations shift, so will the character of communities.

Companies moving out of California – yet continuing offices and operations in California

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I have read several news stories discussing the move of companies out of California. Such news feeds chatter about companies and residents leaving places because of politics, taxes, discontent, etc. But, the details in this one story suggest some companies are shifting some workers and activity while retaining operations in California.

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“Oracle is implementing a more flexible employee work location policy and has changed its corporate headquarters from Redwood City, California to Austin, Texas,” the filing said. “We believe these moves best position Oracle for growth and provide our personnel with more flexibility about where and how they work.”

The company already has a significant presence in Austin, opening a five-story, 560,000 square-feet campus overlooking Lady Bird Lake. It also has employment hubs in Redwood City, Santa Monica, Seattle, Denver, Orlando and Burlington…

Oracle follows a handful of similar moves by California companies and high-profile business leaders leaving the state. Tesla CEO Elon Musk announced he had moved to Austin last week at The Wall Street Journal’s CEO Council summit. His exodus followed months of bashing California for its handling of the pandemic. The billionaire CEO said he is maintaining company operations in California, but also has significant operations for Tesla and SpaceX in Texas…

HP Enterprise also announced its decision to relocate its headquarters from San Jose to the Houston suburb of Spring earlier this month. Palantir Technologies relocated from Palo Alto as well this year, landing in Denver. Tech giants Google and Apple have also been expanding their presence in Austin over the last several years.

Headquarters are important, particularly for cities. Attracting the headquarters of a major company is a big status symbol for any big city. See the interest in trying to attract Amazon’s second headquarters. The implication is that the new location has a favorable business climate and is on the rise (with the opposite assumed of the previous location).

But, headquarters are just part of a company. They may be the nerve center and the physical home of company executives. Yet, large companies today can have offices and plants all over the place connected to a headquarters elsewhere.

Another way to read the moves out of California above is to suggest that these companies are hedging their bets by being located in numerous advantageous locales. Having multiple locations can help take advantage of local tax breaks for particular purposes, build on local work forces, maintain their place in local social networks, and provide points to pivot around when conditions change. The headquarters may have moved but they may move again and the companies still see some value in keeping operations going in California (even if some of this is simply due to inertia).

This suggests a different future reality than one where cities serve as anchors for major corporations. Instead, major multinational corporations keep offices and facilities all over the place, ready to move when needed or when an opportunity arises. Austin and Houston might be attractive now, Miami or Denver in a few years (just sticking to US locations). And as cities continue to look for an edge over their competition, attracting another big company is important…even as that company is actually rooted in multiple locations.

The top US cities for Fortune 500 company headquarters, COVID-19 edition

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In an article about working remotely, the Wall Street Journal included this graphic about the locations of the headquarters of Fortune 500 companies:

Fortune500HQLocations

This is an interesting topic to raise as more workers are laboring away from the office. What will happen to headquarters?

One option would be that headquarters remain even as organizational workforces scatter. There will always be a need to at least occasionally hold meetings or access resources or project a presence in a major city. Cities would like this as headquarters are a status symbol.

Another option is that headquarters move to locations more central to their workers or more attractive for workers. This is more unlikely but the same factors pushing workers away from major cities – high housing costs, traffic and congestion, density with threats of pandemics – could affect headquarters as well. It could be a big strategic move to follow workers to a city not on the list above.

The effects of either could be big for cities. Consider New York. It is the clear leader in terms of headquarters, it is a leading global city, and it is not just a center for business but also for news, entertainment, the arts, and other spheres. Even if the headquarters stay, the loss of high-status employees hurts. If the headquarters leave or become shells of themselves, there could be a loss of status.

Finding uses for the “big empties” in the Chicago suburbs

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When businesses move their headquarters from sprawling suburban campuses to the city center, they leave behind a lot of building space and land:

Inside the sprawling, 2.4 million-square-foot headquarters — composed of seven interconnected office buildings — there is an almost eerie ghost-town quality, former employees describe. The bank, dry cleaners, hair salon, coffee shop and small sundry shop that once lined the corridor of the main atrium have all closed. Gone, too, are the Sbarro’s and Panda Express restaurants.

Over the years, Sears has hired leasing agents to bring in sublessors without much success. Today, with the economy uncertain and Sears’ days seemingly numbered, the building has become an even harder sell. Only about 3% of the complex is leased to outside tenants…

If Transformco tried to sell the campus, it would face long odds, local real estate experts said. The large complex, custom-built for Sears, is nearly 30 years old. Suburban business parks are as outdated and obsolete as fax machines…

The entire region is a buyer’s market, burdened by other big empties. Right down the road from Sears headquarters are two such examples.

Perhaps the easiest answer to filling these properties is to bulldoze them and build housing on the land. In the suburbs in which these suburban headquarters are located (Hoffman Estates, Oak Brook for McDonalds, etc.), there would be demand for housing.

But, bulldozing buildings adds costs as would changing the infrastructure for the site. Plus, as the article notes, housing would not bring in the same kind of revenue or status that a large corporation did. Additionally, more housing might even lead to a bigger tax burden for the rest of the community if there is more demand for schools and other local services.

Thus, suburbs often hope to find corporate partners for such properties. Finding someone to take over the whole property would be ideal. Or, perhaps create a mixed-use community with some residences but also businesses and restaurants. See more on efforts in Hoffman Estates to transform a former AT&T campus into a “metroburb” (also mentioned in the article).

Side note: this does not bode well for large tech campuses amid a possible shift to more employees working from home.

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

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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

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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.