CHICAGO—It has become common for other Midwestern states to try enticing Chicago-area companies away from the city, but many industrial users decide to stick with Chicago after finding out that they can still sign good deals, even in tight submarkets. Podolsky|Circle CORFAC International, for example, recently completed several lease extensions, totaling about 400,000-square-feet, for manufacturers and distributors in the tight O'Hare and Lake County submarkets.
“There were a lot of states begging to have these deals,” said Corey B. Chase, principal at Podolsky|Circle CORFAC, and were willing to provide collections of incentives and tax breaks if the companies agreed to relocate. Instead, The Popcorn Factory, a part of the 1-800-Flowers Family of Brands, signed two separate lease renewals totaling 148,000-square-feet of space in suburban Lake Forest. And DesignPac, another part of the 1-800-Flowers Family, just completed a long-term lease renewal for 248,912-square-feet of space in suburban Melrose Park.
The Popcorn Factory's leases at 13970 West Laurel Dr. and the adjacent 28160 Keith Dr. were set to expire in June of 2014. The firm uses the buildings for manufacturing and distribution, including a Popcorn Factory retail outlet store.
“That's certainly a tight market and we did not have a lot to choose from,” Chase said. Lake Forest, an affluent bedroom community, only has several dozen industrial structures, mostly built in the '70s and '80s. “There's not a lot in that area.”
“Obviously, we looked at several options, including going over the border to Wisconsin.” But “it is very difficult to move a manufacturing plant,” and both Mirvac Industrial Trust, the owner of the Keith building, and the local owner of the Laurel building, were very flexible.
“We got a big bag of cash for both buildings,” he added, and both owners will allow The Popcorn Factory to spend it on upgrades that will increase their buildings' value, such as new docks or more advanced lighting. Popcorn Factory officials “have a good idea what needs to be done at each building,” each built in the '80s, but they need to control the process and do it at their own pace since “they couldn't afford to do it all at one time and stop operations.”
What the firm may have gained by relocating to Wisconsin, “did not warrant us leaving.”
Other Midwestern states also tried to lure DesignPac away from Melrose Park. But the firm eventually decided moving would have meant losing their employee base, including an experienced cadre of middle managers.
The firm signed a 10-year renewal, giving the owner, KTR Capital Partners, a degree of long-term security. In return, KTR agreed to sweeten the pot and give DesignPac money to update the space.
“It didn't make sense to pull out; this building was working really well for them.” The 454,910-square-foot multitenant structure at 2407-2457 W. North Ave. was built in 2003 and features 30' clear ESFR ceilings. DesignPac uses it to assemble and distribute hand-made gift baskets stocked with gourmet foods and wines. Furthermore, the building includes an ample amount of production office space.
“That is tough to find ,” Chase added. He knows of only a few options for companies looking for that amount of combined distribution/office space in a state-of-the-art building near O'Hare, a submarket that has recently seen a lot of leasing activity. However, several companies have launched projects nearby, and some should get added to the market in 2014. “They'll be very successful, because they'll be almost the only game in town.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
