The Windy City has seen a surge of companies — construction and general business alike — relocating there, and that wave doesn't seem to be slowing down anytime soon.
Developer Sterling Bay is building the new McDonald's corporate headquarters on the former site of Oprah Winfrey’s Harpo Studios, a downtown move from its current headquarters in the Chicago suburb of Oak Brook. Although the building is technically a lease for the burger giant, it will take up the lion’s share of the 600,000-square-foot building.
Another huge name in the food business, Conagra Foods, announced last year that it would also relocate to Chicago from its current home in Omaha, NE, following a similar move by Kraft Heinz to downtown Chicago on behalf of its Oscar Meyer and other meats business units.
However, it was equipment giant Caterpillar’s announcement earlier this month that it would move its corporate headquarters from Peoria, IL, to Chicago that was perhaps the most surprising for those in the construction industry.
As a result of drawing in a slew of companies, Chicago is seeing a boom in commercial construction. The city currently has the second-highest number of cranes of any U.S. city, behind Seattle. But why are so many firms choosing to head for the Windy City? Experts point to the area's relatively low cost of living, proximity to young, talented workers, and access to transit options as factors contributing to the growing trend.
Caterpillar's bombshell announcement
Caterpillar has been in the midst of a high-profile, 10,000-worker, $1.5 billion cost-savings program, but the company had always maintained — until late last month— that it was still committed to Peoria. And that's largely true. Even though Caterpillar is moving its corporate headquarters to either downtown Chicago or the city's suburbs, the bulk of its 12,000 employees will remain in Peoria.
The company considered all its option before deciding on Chicago, and its reasons are similar to those of other companies that are making the leap, according to Rachel Potts, Caterpillar’s global government and corporate affairs spokesperson.
"Proximity to a global transportation hub will result in better access to global customers, dealers and our worldwide operations."
Global government and corporate affairs spokesperson for Caterpillar
"Proximity to a global transportation hub will result in better access to global customers, dealers and our worldwide operations, while also improving the productivity of our senior leaders," she said. "Enhancing executive recruitment is another factor behind the decision. The new location is an opportunity to add to our talented team."
Those factors are exactly what companies are looking for, even those that have been perceived as being too entrenched in tradition to make such a bold move, according to John Dempsey principal of commercial development company CA Ventures' CA Office division.
"Just because it has a name associated with old line business doesn’t mean it's not a new age company," Dempsey said. Caterpillar, he added, is looking to grab hold of young talent that is skilled in the latest technology, as well as other proficiencies. "Cat wants people that know how to market, build deep data mines and that have the financial skills to use the latest in software so that they can make great decisions on a global basis," Dempsey said.
Lower costs as an incentive
Of course, the relatively inexpensive cost of doing business in Chicago and low housing prices compared to cities on either coast is a plus as well. CBRE lists the office rates for some popular areas of the city at just under $40 per square foot. Compare that to around $73 per square foot in San Francisco or about the same in Midtown Manhattan. As for apartments, $3,420 (median price) will get someone a decent-sized one-bedroom apartment in San Francisco, and not far behind is New York City at $3,220. Chicago, however, stands at about $1,480.
It isn't a tough choice for millennials who want an urban, downtown experience but are still paying off their student loan debt. "What other major city can you come to as a young parent and buy or rent a nice residence with the ability to easily walk to work, without feeling like you're always chasing a livable solution?" Dempsey said.
Chad Bermingham, vice president at real estate firm Cresa Chicago, added, "Apartments are cheaper, and you can have a car, and you still get all the amenities of a big city." Of course, Chicago also has sports, restaurants, walkable neighborhoods, public transportation and all the other things that make a big city great, Bermingham said. As for winter, he added that they can vacillate between mild — like this year so far — and frigidly cold and extremely snowy, but the Windy City makes it worth it.
Easy access to transit and young talent
Location was also a significant factor in the decision of Chervon, a global tool company and the owner of former Bosch Power Tool unit SKIL, to remain in the Chicago area. "It’s all about proximity," said Joe Turoff, the company's chief marketing office. The decision to stay in Chicago kept the company close to its existing employees, white and blue collar talent for its recruiting efforts and international travel options via O’Hare International Airport, which was foremost on executives’ minds, he said.
"Chicago has a reputation of [producing] hard workers, and there's no doubt that workforce considerations played heavily into our decision."
Chief marketing officer for Chervon
Caterpillar cited convenient access to its global partners as a reason for making the move as well. Dempsey said business travelers can get almost anywhere with just one leg of travel, versus spending a day trying to plan a series of connections to and from their destinations.
The city of Chicago and O’Hare officials have also made a bet on how important this convenience is to business flyers, as well as to leisure travelers, and broke ground on a sixth runway at O’Hare last August. The expansion should be complete in 2020 and will bring new gates and hotel accommodations.
Chicago is also extending its rail offerings with the $2.3 billion Red Line rail system and scored a $1 billion grant from the Federal Transit Administration in December for the project.
Of course, there’s also the legendary Midwest work ethic. "The typical Chicagoan takes a lot of pride in hard work," Turoff said. "There’s no scientific data to prove it, but Chicago has a reputation of [producing] hard workers, and there's no doubt that workforce considerations played heavily into our decision."
Chicago is home to major universities with classes of graduates who don’t want to leave the city. There’s also the group of young people from the broader Midwest, Dempsey said, who see Chicago as "the beacon."
Nevertheless, Dempsey said that sooner or later, just like everything else, people's tastes will likely change, and they'll want to live in the suburbs again, and then companies will move — again — to capture the workforce. "But you're never going to get the big numbers like there are downtown," he said. Until then, Chicago is the "old time big city," that companies and their employees are betting on, Dempsey said.