Stem­ming the job drain in Lake County

With moves by Mon­delez, Wal­greens and Takeda, who’s go­ing to take their place in Lake County?

Chicago Tribune (Sunday) - - FRONT PAGE - By Ryan Ori and Lau­ren Zum­bach

Even af­ter years of high-pro­file of­fice moves from the sub­urbs to down­town Chicago, Lake County’s cur­rent predica­ment stands out.

The 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.

Mean­while, it’s un­clear what drug­maker Ab­bVie’s $63 bil­lion deal to buy Ire­land’s Al­ler­gan will mean for area em­ploy­ment. Ab­bVie has 9,300 work­ers in Lake County, mak­ing it the county’s largest em­ployer.

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.

“I do not think the sky is fall­ing, by any stretch,” said Kevin Con­si­dine, pres­i­dent and CEO of eco­nomic de­vel­op­ment group Lake County Part­ners.

By now, Chicago’s sub­urbs are fa­mil­iar with the chal­lenge of re­tain­ing their largest cor­po­ra­tions and re­plac­ing those that have left. Sub­ur­ban com­pa­nies in re­cent years have shifted thou­sands of jobs down­town in pur­suit of young, ur­ban work­ers.

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.

On June 25, Ja­panese drug­maker Takeda said the al­ready an­nounced shut­down of its U.S. head­quar­ters in Deer­field would come by year’s end, and work at the 1,000-em­ployee cam­pus will shift to the Bos­ton area af­ter Takeda’s ac­qui­si­tion of Ir­ish drug­maker Shire. That same day, North Chicago-based Ab­bVie an­nounced it would buy Al­ler­gan.

Those changes come as Deer­field pre­pares for Wal­greens’ re­lo­ca­tion of 1,300 jobs to Chicago’s old main post of­fice re­de­vel­op­ment in the next few months, as well as snack-maker Mon­delez’s shift of 400 jobs to Chicago’s Ful­ton Mar­ket dis­trict next spring.

“It’s a con­cern,” said Brad Joseph, prin­ci­pal at Chicago-based real es­tate in­vest­ment firm Core Ac­qui­si­tions, which owns a build­ing in the Park­way North of­fice com­plex in Deer­field. “You can’t ig­nore the ex­pan­sion that’s go­ing on in Ful­ton Mar­ket and the West Loop that’s at­tracted a lot of sub­ur­ban com­pa­nies.

“But we think there’s still a crit­i­cal mass in the north sub­urbs that is at­trac­tive. We still see the north­ern

sub­urbs be­ing in play for a long time, whether it’s mil­len­ni­als mov­ing back to the sub­urbs or the great ex­ist­ing com­pa­nies there to­day. It’s not a one-com­pany town.”

Early this year, Core Ac­qui­si­tions demon­strated con­fi­dence in the of­fice mar­ket by buy­ing a 100,000-square-foot build­ing that will be­come va­cant when in­surer Markel Corp. moves out in Jan­uary. In­ter­est from po­ten­tial ten­ants has been strong, Joseph said.

There are prece­dents to sup­port such con­fi­dence.

When spir­its-maker Beam Sun­tory moved its head­quar­ters to Chicago’s Mer­chan­dise Mart in 2017, Cater­pil­lar quickly signed a lease to fill the space in Deer­field, mov­ing its head­quar­ters from Peo­ria.

In an­other high-pro­file move in the north­ern sub­urbs — although just south of Lake County — Kraft’s mas­sive former North­field head­quar­ters didn’t sit empty for long af­ter the newly formed Kraft Heinz re­lo­cated to Chicago’s Aon Cen­ter in 2016.

In that in­stance, an ex­ist­ing sub­ur­ban be­he­moth, Med­line In­dus­tries, bought the 679,000-square-foot build­ing and made it the health care sup­plies com­pany’s new head­quar­ters as part of a com­pany ex­pan­sion.

Takeda can hope for a sim­i­lar result, as the com­pany seeks a buyer for its 770,000-square-foot cam­pus along the Tri-State Toll­way and Lake Cook Road.

The com­pany has yet to com­ment on the process to sell its cam­pus, other than to say it wants to com­plete a deal be­fore April, the end of its fis­cal year.

The three-build­ing prop­erty has some of the high­est-qual­ity of­fice space in the north­ern sub­urbs, and its lo­ca­tion adds to the ap­peal, real es­tate ex­perts say.

The 70-acre cam­pus also in­cludes land, and zon­ing ap­proval in place, to build a fourth build­ing — for more of­fices or some­thing else, such as a ho­tel or apart­ments.

“Is it bad news that a com­pany like that is leav­ing and va­cat­ing three build­ings?” said Dan McCarthy, an of­fice ten­ant bro­ker at Jones Lang LaSalle. “It’s not great, but it cre­ates an op­por­tu­nity for a user like we saw with the Kraft build­ing or for a spec­u­la­tive in­vestor who likes the lo­ca­tion and the as­set and wants to take the risk of find­ing a user for it. It’s a great op­por­tu­nity for some­body.”

The vil­lage has re­ceived some in­quiries from prospec­tive buyers and is pass­ing them on to Takeda, said Deer­field Vil­lage Man­ager Kent Street.

Some have been in­ter­ested in the en­tire site, and oth­ers in tak­ing just a por­tion of it, he said. Deer­field would pre­fer a sin­gle user so the town would only be work­ing with one owner.

“It’s all very pre­lim­i­nary, but they’re ask­ing good ques­tions, so some work is be­ing done to in­ves­ti­gate the site,” Street said.

Empty of­fice space

Over­all sub­ur­ban of­fice va­cancy was 22.8% dur­ing the sec­ond quar­ter, com­pared with 11.3% down­town, ac­cord­ing to JLL. Lake County va­cancy was 24.6%, sec­ond-high­est among six sub­ur­ban sub­mar­kets.

Dur­ing the quar­ter, down­town land­lords were seek­ing rents 76% higher over­all than own­ers of sub­ur­ban build­ings. For the high­est-qual­ity of­fice space, rent was 80% higher down­town than in the sub­urbs last year, com­pared with a dif­fer­ence of 46% in 2012, ac­cord­ing to JLL.

Pock­ets of strength re­main in sub­urbs, such as Oak Brook and Schaum­burg, sur­rounded by ameni­ties such as re­tail and en­ter­tain­ment.

It’s yet to be seen what will be­come of McDon­ald’s former cor­po­rate cam­pus in Oak Brook, which in June was sold to John Paul DeJo­ria for $40 mil­lion. The Paul Mitchell hair prod­ucts founder has not dis­closed plans for the 80-acre prop­erty.

There are some signs that young work­ers will re­turn to the sub­urbs to raise fam­i­lies, as pre­vi­ous gen­er­a­tions have done, McCarthy said.

“When you com­bine that with what has been a his­tor­i­cally high spread of rent dif­fer­en­tial, com­pa­nies are go­ing to have to start tak­ing a look at the sub­urbs again,” McCarthy said.

Deer­field of­fice space also has re­mained in high de­mand, in part be­cause of the pres­ence of ma­jor cor­po­ra­tions that at­tract com­pa­nies in re­lated in­dus­tries. And Lake County as a whole en­joys strong em­ploy­ment.

Lake County and Kenosha County, in Wis­con­sin, col­lec­tively added 9,700 jobs in the year lead­ing up to May 2019, a 2.3% in­crease that out­paced over­all job growth in the Chicago metro area, ac­cord­ing to the Bureau of La­bor Sta­tis­tics.

Lake County’s un­em­ploy­ment rate was 3.4% in May, the low­est it’s been dur­ing the past decade.

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.

Con­si­dine, who wasn’t there when the re­port was writ­ten, down­played the po­ten­tial im­pact.

“I’ll be­lieve they had their rea­sons for that opinion, but I think with where the world is now, a fo­cus on health and life sci­ences has tremen­dous up­side,” Con­si­dine said.

Takeda was a big em­ployer with 1,000 head­quar­ters jobs, but Ab­bVie is the county’s largest pri­vate em­ployer and Ab­bott Lab­o­ra­to­ries, Bax­ter, Discover and Wal­greens are all larger than Takeda, he said.

Con­si­dine also doesn’t see Takeda’s depar­ture as a sign they were un­happy with Lake County’s busi­ness cli­mate. Both Shire and Takeda had op­er­a­tions in Bos­ton, and a busi­ness unit fo­cused on plasma-de­rived ther­a­pies, which cur­rently em­ploys 600 peo­ple, will re­main in Ban­nock­burn.

“I don’t like it, but I can un­der­stand it,” Con­si­dine said.

He’s more op­ti­mistic Ab­bVie will stay fol­low­ing its re­cent ac­qui­si­tion of Al­ler­gan. “They have been re­ally com­mit­ted to Lake County and Chicagolan­d … and I’m not see­ing or hear­ing any­thing that would make me think oth­er­wise.”

Ab­bVie said it would keep its head­quar­ters in North Chicago, but also said it ex­pected the ac­qui­si­tion to yield $2 bil­lion in an­nual cost sav­ings by its third year, in part through “elim­i­na­tion of re­dun­dant in­fra­struc­ture.”

That will very likely result in some lay­offs, but the two com­pa­nies don’t have much over­lap in their busi­nesses, said Damien Conover, health care sec­tor di­rec­tor at Morn­ingstar. That sug­gests cuts could hit ad­min­is­tra­tive em­ploy­ees, in which case Al­ler­gan would likely be hit harder than its buyer, Ab­bVie, he said.

The hous­ing mar­ket

Time will tell whether the young work­ers that com­pa­nies are seek­ing in cities will still pre­fer Chicago to the sub­urbs as they get older.

Home prices have come down on the North Shore and real es­tate agents said they’re start­ing to see more mil­len­ni­als, but gen­er­ally not un­til they be­gin form­ing fam­i­lies and weigh­ing where to send chil­dren to school.

In the north­ern sub­urbs, though, af­ford­able hous­ing op­tions can be hard to come by, es­pe­cially for sin­gle peo­ple, said Brad An­der­sen, man­ag­ing bro­ker and owner of Grif­fith, Grant & Lackie Real­tors.

That can make the area more chal­leng­ing for young res­i­dents, which also means “there’s not much of a so­cial life for a young man or woman in the north­ern sub­urbs,” he said.

In May, the in­ven­tory of de­tached sin­gle-fam­ily homes for sale in the North Shore-Bar­ring­ton re­gion was up 6.1% com­pared with the same month last year, while the me­dian sales price was down 4.5%, ac­cord­ing to Mid­west Real Es­tate Data re­search pro­vided to the North Shore-Bar­ring­ton As­so­ci­a­tion of Real­tors.

“There’s just too much in­ven­tory, and buyers are more con­scious of what they want,” said Joel Raynes, a Cold­well Banker agent in Win­netka.

Both An­der­sen and Raynes said they saw county and state tax poli­cies af­fect the sub­ur­ban hous­ing mar­ket more than cor­po­rate moves.

Work­ers don’t nec­es­sar­ily fol­low when their of­fice re­lo­cates, whether that means switch­ing jobs or ac­cept­ing a longer com­mute, and some who decide to sell their homes were likely al­ready con­tem­plat­ing a move, Raynes said.

Com­mu­nity im­pact

Ho­tels and restau­rants clos­est to Takeda said they’ll miss the com­pany’s busi­ness, but hadn’t de­pended on it.

“It’s def­i­nitely a con­cern, but it’s been a long time com­ing,” said Mor­gan Stevens, man­ager of the J. Alexan­der’s Red­lands Grill across the street from Takeda’s of­fices.

The restau­rant of­ten saw work­ers grab­bing lunch, en­ter­tain­ing clients or oc­ca­sion­ally host­ing af­ter­noon bar par­ties, Stevens said. But Stevens said Takeda had al­ready be­gun mov­ing work­ers and the restau­rant hadn’t taken a hit so far.

“We’ll have to wait and see,” she said.

The Hol­i­day Inn Ex­press & Suites less than a mile from Takeda’s head­quar­ters also ben­e­fited from the com­pany’s prox­im­ity, said front desk man­ager Lu­cre­tia John­son. She es­ti­mated Takeda’s vis­i­tors spent at least 50 nights per year at the ho­tel.

“It’s a cus­tomer we’re los­ing, so it’s al­ways a big deal, but we do have sev­eral other busi­nesses in the area send­ing peo­ple to us,” she said.

Takeda’s exit will have a dra­matic ef­fect on least one in­sti­tu­tion — Cristo Rey St. Martin Col­lege Prep, a pri­vate high school in Waukegan that re­quires stu­dents to spend five days each month work­ing at area busi­nesses. The work-study pro­gram helps off­set the cost of tuition and gives stu­dents, many of whom come from low-in­come fam­i­lies, pro­fes­sional ex­pe­ri­ence and ex­po­sure to po­ten­tial ca­reers, said Pre­ston Kendall, pres­i­dent of Cristo Rey St. Martin Col­lege Prep.

Each job, shared by a team of four stu­dents, brings the school about $35,000, he said. Takeda had been the school’s big­gest part­ner, pro­vid­ing nine of the 100 jobs in the school’s work-study pro­gram, Kendall said.

Be­tween Takeda and other com­pa­nies leav­ing the pro­gram, the school is still try­ing to find eight more jobs to em­ploy 32 stu­dents. Kendall said the high school has good part­ner­ships with other big em­ploy­ers in the area, in­clud­ing Ab­bVie, which re­cently agreed to fill nine full-time po­si­tions with stu­dents, up from seven.

But find­ing com­pa­nies to part­ner with can be a chal­lenge. Kendall said there doesn’t seem to be a lot of hir­ing go­ing on in the area and main­tain­ing con­nec­tions at some com­pa­nies has been a chal­lenge as em­ploy­ees work­ing with the school take pro­mo­tions or switch jobs.

“We got kind of ham­mered, but they’ve (Takeda) been so good to us,” he said.

JOSE M. OSO­RIO/CHICAGO TRI­BUNE

The con­struc­tion site at 905 W. Ful­ton Mar­ket in Chicago is seen Jan. 8. Mon­delez In­ter­na­tional plans to move its global head­quar­ters, cur­rently in Deer­field, to the ad­dress in April.

AN­TO­NIO PEREZ/CHICAGO TRI­BUNE

Takeda Phar­ma­ceu­ti­cal Co. is seek­ing a buyer for its 70-acre Deer­field cam­pus, seen in 2014, as the com­pany shifts to the Bos­ton area.

E. JA­SON WAMBSGANS/CHICAGO TRI­BUNE

Ab­bVie has an­nounced it will buy Ire­land’s Al­ler­gan, though it said it will not be mov­ing its head­quar­ters.

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