Elgin Area Chamber Of Commerce: Allstate Outlines $232 Million Deal To Sell Headquarters In Chicago Suburbs

Elgin IL

01 December, 2021

2:32 AM

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Press release from the Elgin Area Chamber of Commerce: November 30, 2021 By Ryan Ori CoStar News Allstate has a contract to sell its suburban Chicago headquarters for $232 million to an industrial developer, moving the sprawling property a step closer to a conversion from Fortune 500 corporate offices to a distribution center. The insurer outlined details of its plan to sell the campus in Northbrook, Illinois, to Reno, Nevada-based warehouse developer Dermody Properties. The securities filings and news release announcing the deal are the first time Allstate has commented on a deal with Dermody, the details of which were first reported earlier this month. Allstate's pending deal with Dermody is a dramatic example of the major shift in real estate values that has taken place since the onset of the COVID-19 pandemic in early 2020. With more people working from home, e-commerce orders have accelerated while the use of office space has sharply declined. There are record levels of office space available in the Chicago area. Meanwhile, 29.1 million square feet more industrial space has been leased in the area than vacated, a record pace that is more than twice level seen over the past five years, according to CoStar data. Overall area vacancy is 5.3%, the lowest in more than two decades. The campus is 232 acres, according to the purchase and sale agreement, which is larger than previously reported. Allstate said it has a purchase and sale agreement with Dermody for buildings at 2675, 2700, 2755, 2775 and 3075 Sanders Road, north of Chicago. Allstate said it has 2 million square feet of office space there. Allstate's announcement comes less than two months after the company said it was seeking a buyer for the property. Demolition of the 1960s and '70s buildings is likely to begin soon after the sale is completed sometime in 2022, said Dermody Properties President Doug Kiersey. The firm's initial plan is to build about 3.2 million square feet of e-commerce distribution buildings, either as build-to-suits for specific tenants or as multiple speculative warehouses, Kiersey told CoStar News. No tenants have committed to the project, and talks with prospects have been preliminary, Kiersey said. There are about 1 million residents within a 10-mile radius of the site, he said. "That's a major driver of demand for our customers," Kiersey said. "On top of having a wonderful location, this is a rare infill site of scale. There are lots of infill sites of 5, 10, 20 acres, but we feel a site of this scale is quite valuable." The $1 million-per-acre price tag reflects that, although a similar site in Seattle, North Jersey or near a California port could be twice that price, Kiersey said. Dermody and Allstate are considering forming a joint venture in which the insurer would invest in the redevelopment of the site, according to regulatory filings. There are contingencies to the sale, including whether Dermody can obtain zoning approvals to redevelop the site as an industrial property. The purchaser's contingency is "relating to governmental approvals with respect to the entitlements for the property and certain economic and tax incentives," according to a filing. It's unclear which governments ultimately will decide the fate of the site. Although it has a Northbrook address, Allstate's campus is mostly in unincorporated Cook County between the suburbs of Northbrook, Glenview and Prospect Heights. About 30 acres is in Prospect Heights, Kiersey said. Dermody wants to have the entire site annexed into one of the suburbs and have the site rezoned, Kiersey said. Office Use Shift Allstate has been on the campus along Interstate 294 since 1967. The main building is an 850,000-square-foot structure at 2775 Sanders Road. It's not known where Allstate will have its headquarters after the campus is sold. The company has not responded to requests for comment about the future of its offices. "Allstate is selling the property as employees have more choice about where they work and many are choosing to work from home," Allstate said in a statement. "The company plans to keep a significant presence in the Chicago area, including its existing office space in downtown Chicago." Allstate leases 102,000 square feet in the Merchandise Mart, also known as theMART, along the north edge of the Chicago River, according to CoStar. Nearby, Allstate has a smaller space within the River Point office tower. "The sale will also reduce real estate expenses and further advance Allstate's multi-year Transformative Growth initiative to increase personal property-liability market share by building a low-cost insurer with broad distribution," Allstate said in the statement. Dermody does not plan a leaseback of office space to Allstate after the sale, Kiersey said, but the 2022 sale date will be planned around Allstate's "operational needs" for the campus. The developer plans to keep or repurpose much of the Allstate campus landscaping, such as ponds and mature trees, to make it attractive to passers-by, Kiersey said. Much of the site borders a forest preserve, expressway and the high-traffic Willow Road, minimizing the new project's effects on residential areas, he said. The traffic impact of a distribution center is expected to be less than it was during Allstate's peak, when there were about 13,000 employees commuting to the site daily, Kiersey said. "We don't believe our project will reach those sorts of traffic counts," he said. Source: www.CoStar.com This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author's own.