Real estate heats up in third-largest U.S. city as a new
business renaissance takes hold
By Peter Grant
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 16, 2017).
In Chicago's trendy Fulton Market district, a once gritty area
known only for Oprah Winfrey's Harpo Studios, construction crews
have started facade work on a new headquarters for McDonald's
Corp., which is returning to the city after more than four decades
in the suburbs.
McDonald's, now building at the former Harpo site, isn't alone
in making that move. Conagra Brands Inc., Hickory Farms Inc. and
other traditional American heartland companies have shifted major
operations to Chicago in recent years as well. Overall, businesses
returning to the city or moving there for the first time have
leased more than 7 million square feet of space since 2008,
according to real-estate services firm JLL. That is enough to fill
almost two Willis Towers, which tops Chicago's skyline and was the
world's tallest building for a quarter-century.
Like many other major U.S. cities, Chicago is enjoying a boom as
big employers opt for downtowns over suburban office parks that are
being shunned by young workers. More than $20 billion worth of
residential, office, cultural and retail projects are in
development or on the drawing board, according to the city Planning
and Development Department.
But Chicago's growth engine is different from those benefiting
booming cities on this country's East and West Coasts. Unlike
cities such as San Francisco and Boston, where the technology
sector is fueling economic development, Chicago lately has been
relying heavily on growth of food and consumer-products
companies.
While most of these companies are decades old, they also are
recognizing the need to attract a young and urban workforce as they
add new products, technology and services in response to shifting
consumer preferences. McDonald's executive workforce, for example,
has launched a mobile app, added self-order kiosks and added
healthier items to its menu.
Hickory Farms, a food retailer founded in Toledo, Ohio, in the
early 1950s, moved its headquarters to Chicago earlier this year to
tap the city's talent pool in e-commerce and marketing. "We often
refer to ourselves as a 66-year-old startup," said Chief Executive
Diane Pearse.
Officials in the administration of Mayor Rahm Emanuel, who was
first elected in 2011, say the longer the list of relocations, the
more other companies are considering Chicago moves.
"It has become an easier sell," said David Reifman, commissioner
of the Chicago Planning and Development Department.
At the same time, Chicago's growth pace also has been threatened
by problems unique to many older Midwestern cities. Once dominated
by manufacturing, the city still has hundreds of acres of underused
industrial land, some of it prime riverfront real estate.
Also, many working-class and low-income neighborhoods in Chicago
are losing population, partly due to the city's high rate of
murders and other crime. Unlike cities such as New York and San
Francisco, which are seeing record real-estate values practically
across the board, values in some Chicago neighborhoods are still
well below their precrash highs.
Mayor Emanuel bristles over critics who call him "Mayor 1%" for
focusing much his economic development efforts on attracting major
corporations and luxury housing developments to the downtown core.
In an interview earlier this month, he ticked off a wide range of
programs designed to add jobs in struggling neighborhoods and
affordable housing throughout the city.
He pointed out that he has opened up hundreds of acres of land
that had been set aside for industrial use, for commercial and
residential development. Past efforts to preserve it for Chicago's
historical heavy manufacturing were backward looking, he said.
"Denial is not a long-term strategy," Mr. Emanuel said.
Chicago's current boom stems back more than 15 years to when
Boeing Co. relocated its headquarters there from Seattle after a
highly publicized search, and UAL Corp., the parent of United
Airlines, moved back to the city it had left in 1962. The boom was
stoked by demand for luxury apartment buildings in top
neighborhoods from young people and empty nesters preferring urban
living.
Like in most parts of the country, Chicago development stalled
after the 2008 crash. One of the symbols of the recession became a
circular hole on a prime site in the city, the foundation for what
was intended to be the tallest residential building in North
America.
But both the residential and office markets picked up steam
starting about five years ago as the latest wave of corporate
relocations began. Developers began snapping up sites, including
the hole at the prime site that was purchased by Related Cos. The
New York-based company, which has built more than 2,000 units
during the past five years, plans to reveal its plans for the hole
later this year.
Meanwhile residents and tourists have been flocking to new
shopping, entertainment and cultural events along the city's
reinvigorated waterfront. Other megaprojects in the pipeline
include a $1 billion, 94-story condominium and hotel tower being
planned by Magellan Development Group and Dalian Wanda Group of
China, the redevelopment of Chicago's 92-year-old Union Station,
and a new 51-story tower anchored by Bank of America scheduled to
open in 2020.
Chicago's downtown renaissance has made it easier for
corporations throughout the Midwest to move there. Many of these
companies want to capture that energy as they try to reinvent their
brands and products for the 21st century.
Take the case of Conagra, the formerly Omaha, Neb.-based food
company known for brands including Slim Jim snacks, Chef Boyardee
and Peter Pan peanut butter. Soon after becoming CEO in 2015, Sean
Connolly decided to move Conagra's headquarters to Chicago to take
advantage of its creative talent pool, according to a spokesman for
the firm.
"We needed to make a drastic change to be truly competitive,"
the spokesman said. Chicago "provides the perfect setting for us to
breathe new life into these brands."
Corrections & Amplifications Conagra Brands Inc. has shifted
major operations to Chicago in recent years An earlier version of
this article misnamed the company. (Aug. 15, 2017)
Write to Peter Grant at peter.grant@wsj.com
(END) Dow Jones Newswires
August 16, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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