Is Something Wrong With Chicago’s Suburbs?


I previously talked about Connecticut becoming a suburban corporate wasteland as well as the rise of the executive headquarters in major global city downtowns. What we see is that high end functions have shown anecdotal signs of re-centralizing, while the more bread and butter – though still often well-paying – jobs are heading to less expensive suburban locales in places like Austin, Charlotte, and Salt Lake City. These leaves expensive and business hostile suburbs around global cities, like most of those in Connecticut, in a tough spot.

Suburban Chicago isn’t as expensive or business hostile as say Connecticut or New Jersey, but there are so many stories about businesses leaving it that I can’t help but wonder if something is seriously wrong there.

First, downtown Chicago has attracted a number of marquee executive headquarters locations like Boeing, MillerCoors, and now ADM. The suburbs have only picked up a handful of smaller operations, like Mead Johnson Nutritionals.

Second, a number of suburban companies have relocated (or announced relocations of) headquarters to downtown. This includes a Sara Lee spinoff, the old Motorola cell phone division, United Airlines, and Gogo Internet. What distinguishes this from the executive headquarters relocations is that some of these involved big numbers of jobs. I believe there were about 3,000 United Airlines employees and about 2,500 Motorola ones.

Third, even companies that haven’t moved their headquarters have opened downtown offices or relocated operations there. Walgreens moved its e-Commerce operations to the Loop and BP relocated some employees, for example.

Fourth, some suburban based companies have simply abandoned the Chicagoland area outright. Office Max comes to mind, which is moving 1,600 jobs to Boca Raton. Sears is having a slow-motion going out of business sale.

Two recent news articles this week reinforce to me the lack of competitiveness of Chicago’s suburbs. First, when Toyota announced it was relocating its headquarters from Los Angeles and Cincinnati to suburban Dallas, Greg Hinz at Crain’s Chicago Business asked why Chicago wasn’t even on the list of candidate cities for this operation.

I believe Toyota wanted to be in the South. But if you look at where they located, namely the suburb of Plano, you’ll see that this is why Chicago is off the list. Chicago’s suburbs have been losing these types of corporations, not gaining them. If you’re going to choose a suburban location, why would you pick Schaumburg over Plano? You probably wouldn’t unless you had a major reason to be in Chicagoland, such as having a primarily Midwest presence or if your company was founded in the area.

What this shows is that while Chicago’s stellar Loop environment is great for executive headquarters type operations, the suburbs lack appeal to people looking to build a greenfield operation from out of town. This hurts the region’s ability to attract large scale employers like Toyota.

Then yesterday Crain’s reported that Walgreens is looking at relocating its entire headquarters downtown in the old Main Post Office building. This isn’t a done deal by any means, but the fact that a company I’d always considered dyed-in-the-wool suburban would consider this is incredible. (Investors have been pressuring Walgreens to move its HQ overseas, but like Aon’s re-domicle to London, even if it happened it might not involve many jobs, especially since the pharmacy business in the United States is so radically different from that in the rest of the world).

So unlike in even other global cities, Chicago’s suburbs can’t even seem to hang on to large scale employers within the region. I don’t want to overstate a trend here, but this would be at least the third company moving thousands of jobs downtown. That’s huge and I don’t see it happening anywhere else at this scale.

Which raises the question of what might be wrong with Chicago’s suburbs. They can’t seem to be competitive for greenfield operations like Toyota, and they are losing some marquee established employers. I took a quick peek at suburban vacancy rates, and it looks like at first glance every major sub-market is over 20% and there was net negative absorption last year (do some further research before quoting me on that). Is there a big problem going on out there?

I’ve long observed that while Chicago has some great residential suburbs, its business suburbs are weak. Places like Schaumburg and Oak Brook are just generic, unattractive edge cities of a typology that, like the enclosed mall, appears falling out of favor. Chicago seems to lack the kind of suburb that combines residential appeal with a strong business presence and a significant regional amenity draw. Only Naperville would seem to fit the bill here.

So while Chicago’s suburbs are not super-high cost by global city standards, and Illinois isn’t the worst when it comes to taxes and a poor business climate by any means, those suburbs appear to have a serious competitiveness issue. It’s a major concern that regional suburban business centers should look to address. As other edge city environments around the country like Stamford (one part of Connecticut I would say has significant strengths) and Tyson’s Corner upgrade themselves, Chicago’s suburbs are only going to fall further behind.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

Photograph: Outer suburbs of Chicago (by Wendell Cox)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Chicago bankrupting the whole state

Not noted by the author, Chicago has to give away the store to get those major companies, and a hand full of blue chip companies, does not build much of an economy. And their support companies, due to how business is done today, do not need to locate in Illinois at all. So they don't.

When those "deals" (horrible for taxpayers) run out, watch for the moving vans. Why would I say that?

Illinois is a horrible state for business. Taxes are high, regulation has increased, the state is broke, can't pay bills on time, has no money saved for its retirees, unemployment is highest in midwest, the business climate is frankly broken. Its not just the suburbs, but includes the central city. They just mask the major problems better then the suburbs. One party rule is horrible.

To keep those companies, they will have to keep re"dealing". Even Sears which will probably go out of business before too long.

Illinois just isn't worth a premium anymore either. Illinois thinks it competing with "world" cities, but frankly, most of its business is purely midwestern. And those companies can't afford "world" prices.

There is no way Walgreens is moving downtown either. If they move at all, they will be leaving Illinois in the rear view mirror. Their investors want to save on the taxes, and moving to DT Chicago won't do that.

Toyota wouldn't touch Illinois with a ten foot pole. And that is the case for any company that is paying attention and doesn't want to deal with sleaze.

I grew up in Illinois. I sure didn't open my business there though. Didn't even consider it, not even an option.

Central cities may be popular with a handful of executives (and the folks that cover them) today, but its no trend.