- Allstate Corp.’s suburban campus outside Chicago, with its interconnected buildings, manicured grounds and acres of parking, represented a new vision for the U.S. office when it opened in 1967.
- But thousands of older buildings across the U.S. face an uncertain future.
- An outdated office makes the decision to end a lease or sell a building easier.
- Bridge, which bid on Allstate’s headquarters, is in contract to buy several office properties in a number of major U.S. cities and convert them to distribution facilities, Mr Poulos said.
When Allstate Corp.’s suburban campus outside of Chicago opened in 1967, it symbolised a new vision for the U.S. office, with its interconnected buildings, manicured lawns, and acres of parking. That vision is no longer alive as reported by The Wall Street Journal.
E-commerce warehouse
The insurer reached a deal last month to sell most of the campus.
The new owner plans to demolish the office buildings and convert the Northbrook, Ill., site into more than 3 million square feet of e-commerce warehouses and other logistics facilities.
The American office building, where millions of white-collar employees have headed to work for more than a century, is in a state of reckoning.
But thousands of older buildings across the U.S. face an uncertain future.
As more companies elect to make remote work or a hybrid model a permanent part of their corporate culture, they are looking to cut costs on real estate.
Lowest occupancy rates
In New York and San Francisco, more than 80% of all office space is more than 30 years old, and Chicago isn’t far behind, according to Phil Ryan, director of U.S. office research at Jones Lang LaSalle Inc. These three cities also have some of the lowest office occupancy rates in the country: Less than 40% of the workforce was back in the office as of early December, according to Kastle Systems, which tracks how many people swipe into buildings.
What happens to these ageing edifices across the U.S.—whether they are converted to other uses, torn down or upgraded to suit modern needs—will go a ways toward shaping what work, the modern city and surrounding suburbs will look like in the decades ahead.
“There’s just not a lot of need for big-floor-plate, white-elephant suburban office buildings,” in and around cities like New York and Chicago, said Steve Poulos, chief executive of industrial real-estate developer Bridge Industrial.
Distribution facilities
Some of these white elephants will follow the Allstate campus in the service of e-commerce, becoming fulfilment centres for booming online retail.
Bridge, which bid on Allstate’s headquarters, is in contract to buy several office properties in a number of major U.S. cities and convert them to distribution facilities, Mr Poulos said.
But these conversions can be tricky, and may not offer widely applicable solutions.
Urban office buildings built during the mid-century or later tend to have larger footprints than those converted to apartments in Manhattan, and these newer buildings often have too much windowless space for apartments.
Others may face local zoning issues if an owner tries to change a property’s purpose.
Office buildings that have outlived their usefulness and are unsuitable for conversion could simply be abandoned.
Real-estate
Still, some real-estate executives insist that sprawling suburban locations can continue to thrive as offices.
Capital Commercial Investments Inc. in November bought the former office campus of retailer J.C. Penney Co. in Plano, Texas, with plans to modernize and lease it as offices.
Such projects make sense in markets where there is strong demand for office space and an influx of workers, said Doug Agarwal, founder and president of Capital Commercial.
His firm has refreshed large suburban complexes by adding glass, removing ceiling tiles, updating technology, and sprinkling in gyms, pickleball courts and social areas.
“We’re finding ways to make the space more acceptable and actually sought after by large corporations,” Mr Agarwal said.
Accommodation
Some companies are hanging on to their offices, even as they offer more flexible work options.
The company is largely maintaining its existing offices to accommodate the hiring of more workers and give the company flexibility as its work evolves, said Tim Ryan, PwC’s U.S. chairman.
Allstate’s Illinois headquarters opened during the heyday of America’s suburban office boom in the decades after World War II.
It included a pharmacy, salon and cafeteria on site.
In the 1970s, the insurer boasted in newspaper job advertisements about training and working at “our beautiful corporate office complex in Northbrook.”
Headquarters to be sold
With the headquarters set to be sold, Allstate will maintain two smaller offices in downtown Chicago and facilities in other cities.
But the company expects many employees to spend much of their work time at home.
While Allstate’s embrace of remote work has been popular internally, some employees have become nostalgic.
Christy Harris, Allstate’s chief talent officer who worked in the Northbrook office for about 20 years, said she won’t miss the hour-plus commute but she appreciated the campus’s covered walkways, walking trails and bike paths.
“Of course I have a lot of memories there,” she said, “but if I was going to tell you about the memories, it was all actually surrounded by the people.”
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Source: The Wall Street Journal
