Chicago lost some big corporate headquarters in 2022. Allstate in no hurry for new one after selling its suburban campus.
When Allstate sold its sprawling Northbrook campus in October, long an iconic corporate landmark bordering the Tri-State Tollway, the insurance giant didn’t set off for a trendy West Loop address, the Sun Belt or more exotic destination.
Instead, Allstate packed up its cubicles, stowed its massive signs and moved into an anonymous office building it still owned across the street, downsizing its global headquarters — at least temporarily — to a modest, unmarked space on the first and second floors.
At first glance, it could be your dentist’s office, not the fourth largest insurance company in the U.S. Welcome to the corporate headquarters, circa 2023.
“I think the concept of a headquarters is changing,” Allstate CEO Tom Wilson told the Tribune.
Once a basis for municipal bragging rights and game-changing economic impact projections, massive corporate headquarters have lost some of their luster in the new millennium, a trend that has accelerated during the pandemic. As hybrid working becomes the norm and office vacancies soar, companies are rethinking what and where a corporate headquarters should be.
The Chicago area saw an exodus of corporate headquarters in 2022, including investment firm Citadel, which moved to Miami along with its billionaire founder, Ken Griffin; Caterpillar, which relocated from north suburban Deerfield to Irving, Texas; and aerospace giant Boeing, which moved to Arlington, Virginia, after more than 20 years in the West Loop.
The most recent high-profile departure was announced in November, when Lake Forest-based auto parts manufacturer Tenneco said it was shifting its headquarters to Michigan.
While the exits elicited some civic hand-wringing, the economic consequences may be minimal.
“It’s not that big a deal,” said David Collis, a professor at Harvard Business School and an expert on corporate strategy. “Corporate headquarters have become much less important than they were 20 years ago.”
The traditional corporate headquarters — the locus of activity encompassing management, employees, resources and a physical place to conduct business — has evolved over the years, Collis said. In the 1950s, corporate headquarters were generally situated in big downtown buildings. The corporate campus sprung up in the suburbs during the 1960s, offering shorter commutes, better parking and plenty of room to grow.
During the new millennium, the pendulum swung back to the cities, as corporations looked to attract a younger, tech-savvy urban workforce, Collis said.
Emblematic of the urban shift was the 2018 move of hamburger giant McDonald’s, which left its longtime suburban campus in Oak Brook for a nine-story headquarters in Chicago’s West Loop. McDonald’s brought 2,000 employees from the suburbs to its new downtown digs.
In a September speech to the Economic Club of Chicago, McDonald’s CEO Chris Kempczinski raised concerns about crime in Chicago and the loss of several corporate headquarters.
That same month, however, McDonald’s reiterated its commitment to the city, announcing it would consolidate its Romeoville innovation lab at its West Loop headquarters in 2023, moving up to another 120 jobs downtown.
McDonald’s utilizes the majority of the building at 110 N. Carpenter St., but it may be the exception to a broader downsizing trend in corporate headquarters, Collis said.
“The era of the 3,000-person corporate headquarters, whether it’s a campus or even in a downtown location, is gone,” Collis said. “Work from home and COVID only exacerbates that.”
The post-pandemic hybrid work landscape has left record downtown office vacancies in Chicago, with companies continuing to shed space as long-term leases come up for renewal. For the third quarter, vacancy rates in the central business district rose to 19.6%, while the Chicago metro ticked up to 21.8%, according to a Newmark report.
Vacancy in the suburban office market increased slightly to 25.2% in the third quarter, according to Newmark.
Allstate has given its 5,400 Chicago-area employees the ongoing choice of where they want to work, and 83% are choosing to work remotely, the company said. That turned its massive suburban campus into a ghost town, prompting the decision to sell it, Wilson said.
“That facility is a mile long and a half-mile wide and 2 million square feet, and we had nobody in it,” Wilson said. “We’re heating it, we’re cooling it. And I’m like, we should just get rid of this thing.”
While corporate headquarters are getting smaller, Collis said relocation still has peripheral fallout, including the loss of local philanthropic donations and sponsorships, such as arena naming rights. The exodus also dings the municipal tax coffers, he said.
Griffin, who grew Citadel into one of the largest hedge funds in the world, gave more than $600 million to Chicago organizations over the course of three decades in Chicago, including more than $130 million in parting gifts to 40 organizations in June.
Meanwhile, Citadel principals and employees generated billions of dollars in tax revenue for the city and state over the past decade, according to the firm, money that has also headed south.
The Chicago area is home to 32 Fortune 500 companies, according to World Business Chicago, the city’s economic development arm. Its ranks were thinned by three this year as Boeing, Caterpillar and Tenneco departed for other states.
When Boeing chose Chicago for its headquarters in 2001, it was viewed as a huge win for the city, which bested Denver and Dallas in a heated competition. While it brought only 500 jobs to the city, it was projected Boeing would generate $4.5 billion in local economic benefits over two decades. In return, the city and state offered Boeing $62 million in grants and tax breaks over 20 years.
Boeing’s decision to leave in 2022 may not have a significant economic impact, however, in part because the company said more than 400 employees would remain in Chicago.
The city didn’t comment on last year’s corporate departures for this story. Instead, it touted the pending arrival of three foreign tech companies — Paris-based Inarix and Carbon Saver, and Shanti from Mexico City — which are planning to locate their first U.S. headquarters in Chicago during 2023. All three companies were lured without incentives, the city said.
“The presence of corporate headquarters in the Chicagoland region brings significant economic benefits to local communities,” Michael Fassnacht, president and CEO of World Business Chicago, said in a statement. “Not only do these headquarters provide employment opportunities for residents, but they also serve as a testament to Chicago’s standing as a major player in the global business world.”
The city has also been courting Allstate, the fourth-largest Fortune 500 company in the Chicago area, to relocate its corporate headquarters downtown, but the insurance giant is in no hurry to find a new home base.
Founded in 1931 as part of Sears, Allstate has been a corporate fixture in what was previously unincorporated Northbrook since 1967, when it moved its offices from Skokie to a six-building complex on Sanders Road near I-294.
In October, Allstate sold 232 acres of its corporate campus for $232 million to Dermody Properties. The Nevada-based developer is turning the property, which was recently annexed by Glenview, into a 10-building, 3.2 million-square-foot logistics park.
Allstate retained 50 acres, including the office building at 3100 Sanders Road, which has become its corporate mailing address and for now, its headquarters.
In addition to the suburban building, Allstate leases 42,000 square feet of Chicago office space in River Point, at 444 W. Lake St., where several hundred people manage the company’s $61 billion investment portfolio. The company also leases 120,000 square feet on the fourth floor at Merchandise Mart, where Allstate CEO Wilson works.
The company bought a 10-story building at 29 N. Wacker Drive in January 2022 for $29.7 million, according to CoStar, but Wilson said it is mostly leased out and unlikely to serve as a new headquarters.
“When the time is right, we’ll figure out what we want a headquarters to look like and where it should be,” Wilson said. “But right now, we’re operating just fine with it being a relatively small office.”
Built in 1987, the curving five-story glass building occupies a quintessentially suburban setting, partially obscured by trees amid retention ponds, a large parking lot and expansive fields to the west of Sanders Road.
The 370,000-square-foot building formerly was home to Allstate’s life insurance business, which the company sold for $2.8 billion to private equity firm Blackstone in November 2021.
Vacated and renovated in 2017, Allstate has since leased out most of the building to other tenants, reserving 50,000 square feet for its own use.
There is a sign for Old World Industries, an auto aftermarket company and one of the building’s largest tenants, atop one of four wings, but there is no outside sign that Allstate owns or inhabits the building. The insurance company plans to change that.
“We just haven’t gotten through the permitting process with our new village, which is Glenview,” said Michael Thomas, vice president of administration and real estate for Allstate. “As you’re coming down Sanders Road, you’ll see our sign there.”
Finding the Allstate office upon entering the building takes some sleuthing as well.
“Welcome to our new way of working,” reads a poster on the window of the ground level office inside the airy atrium. An illuminated Allstate “good hands” logo sits above a modest reception desk behind an unmarked glass door.
Allstate has three distinct office spaces in the building, all of which were renovated in phases in the fall. Thomas said they are testing the environs to see which are most appealing to a mostly remote workforce.
Completed in October, the modern section features about 18,000 square feet of eclectic clusters, meeting rooms, video screens and private free-standing booths. Sports-themed signs, plants and artistic dividers separate the collaborative areas rather than hard walls.
A more traditional 15,000-square-foot space, completed in December, features a recycled cube farm and corner offices transplanted from the former headquarters.
Below grade is a 17,000-square-foot meeting and events space completed in September, where training sessions and other group activities can gravitate.
The temporary headquarters can accommodate about 400 employees, with about 100 showing up on any given day, Thomas said. On a late December weekday morning, about a dozen employees wandered the wide-open spaces of the modern section, while the cube farm and events space were unoccupied.
The new headquarters may get busier with the new year, but after 55 years at its former campus across the street, Allstate is content to take its time as it navigates the uncertainties of the post-pandemic corporate landscape.
“We’re going to test and learn and get feedback from our employees on what works and what doesn’t, and build a future from that,” Thomas said.
