THE NATION'S THIRD-LARGEST CITY, WITH A metro population exceeding 8 million spilling far afield into what was once farmland, is poised to embark on the largest expansion of its local transportation infrastructure since the current expressway system was erected in the 1950s.
The development community is watching these plans closely, of course. Most office and industrial construction, in particular, has followed a familiar pattern in the past by clustering around major expressway interchanges.
Chicago's warehouse and distribution network has grown rapidly in recent years. Build more roads to accommodate more trucks, real estate executives reason, and the industrial growth will be transformed into an all-out boom.
“If we don't build highways that doesn't mean that new development won't occur. But it's clear that the construction of highways can contribute to and help shape development,” says Eugene Ryan, associate director of the Chicago Area Transportation Study.
This publicly funded confederation of transportation providers in northeastern Illinois oversees all future planning. With the population in some collar counties up 25% and more over the past decade alone, Ryan warns that the region is falling behind in new investment.
“We haven't had very much new road development here in recent years,” Ryan says. “Population and employment are growing far faster than local transportation capacity. We will have to catch up sometime soon.”
Four major highway projects dominate the local transportation agenda at the moment. Planners are considering:
the construction of a new access road and ring around O'Hare International Airport that could cost $2 billion;
the extension of Route 53 north from its current terminus at Lake-Cook Road north to I-94, at a cost of $830 million;
the 12.5-mile extension of I-355, also known as the North-South Tollway, south from its current stopping point in southwest suburban Bolingbrook at I-55 on to I-80 at the little town of New Lenox, at a cost of $700 million or more;
and the construction of the Outerbelt Expressway, dubbed the Prairie Parkway, along a 33-mile pathway linking I-80 to I-88 at a cost that could exceed $1 billion.
Chicago's roadways are groaning with automobile gridlock, and most experts agree that fresh transportation capacity is an urgent priority. But actual construction on some proposed projects might still be years off as politicians wrestle over the details of the planning. The extension of 355 south to I-80 is given the best chance of happening first, maybe within five to six years. The longest wait of all is likely to be for the Prairie Parkway in Kendall County, which is expected to be completed in 10 to 15 years.
Open-space preservationists have succeeded in erecting legal barriers in the way of some projects, such as Route 53, contending they would ruin the environment and actually create more congestion instead of offering relief for existing roads. Finding the billions of dollars to build the highways also presents a formidable challenge. State officials aren't sure that motorists will accept the big boost in tollway fees — now 40 cents per car at most toll plazas — that together with federal aid would be necessary to finance expansion of the system.
Due to the slow progress of the largest projects, developers trying to guess where to place their next big corporate park have become frustrated.
“It's very important to monitor where roads will go and how close they are to getting done,” says James McGill, executive vice president of McShane Corp., based in suburban Rosemont, which has acquired a 400-acre tract in north suburban Mundelein with plans to erect an industrial park. The land is adjacent to the pathway of the proposed Route 53 extension and its value potentially could multiply several times if the extension moves forward.
“We have a great piece of land, and if the Route 53 extension goes through, that will be icing on the cake. That extension, in fact, would open up a whole new office market in the northern suburbs, and we'd probably decide to do a mid-rise office campus instead of an industrial park on our land,” McGill says. “But we're not ready to bet everything on the highway extension just yet.”
The land rush
Some far-sighted speculators have rushed to pick up choice exurban parcels at bargain prices with the expectation of reselling the land for development.
For instance, Inland Real Estate Development Corp., based in Oak Brook, has amassed some 4,000 acres in far southwest Kendall County, where the Prairie Parkway is proposed. The plans were originally unveiled 15 years ago.
Inland recently bundled a key 70-acre parcel lying adjacent to one proposed center line for the Prairie Parkway and offered it for sale for commercial development, asking $5 per sq. ft. and more for raw farmland that cost the firm as little as $5,000 an acre to acquire.
“The planning for the parkway has changed our perspective on our landholdings,” admits Matthew Fiascone, an Inland senior vice president. “Homeowners don't want to live near a superhighway. So we're likely to begin planning for industrial parks on sites that we had earlier envisioned for residential subdivisions.”
The Prairie Parkway has the backing of the powerful speaker of the U.S. House of Representatives, Dennis Hastert, whose district happens to encompass most of the proposed 33-mile highway.
“New infrastructure projects this big often bring a mixed-bag response from local communities that will be impacted,” says Roger Dahlstrom, a senior research associate in the center for governmental studies at Northern Illinois University in DeKalb. Whether or not a new highway is built, he foresees more development pressures on little Kendall County towns such as Yorkville, which has a population of 7,000 forecast to multiply to 35,000 by 2020.
“Bigger cities like Naperville and Joliet to the east are filling up and land development opportunities there are disappearing,” Dahlstrom notes. “Thus development is moving to the periphery of the metropolitan area, and new highways will become necessary to serve this growing population.”
The Route 53 extension would cut through some of the most prosperous northern Chicago suburbs in Lake County, where owners of $1 million homes have predictably waged vociferous protests. Environmentalists have voiced the loudest opposition to this project. Lake County activists have a long history of environmental activism safeguarding wetlands and natural prairie land from all kinds of development pressures. The I-355 extension has had less environmental opposition because it mostly would wind through flat farmland with little ecological significance.
But developers can hardly wait for Route 53 and other highway projects. Alter Group Ltd., based in Skokie, has owned 600 acres in the village of Round Lake Park since the mid-1970s. The tract lies within a half-mile of a proposed Route 53 interchange.
The land, envisioned for an industrial park, has languished because the clogged two-lane roads in the vicinity make truck access for large-scale distribution nearly impossible. “If Route 53 gets extended it would relieve traffic in the area and improve the business climate in Chicago's north suburbs appreciably,” says Stephen Park, Alter's senior vice president for development.
What kind of development would cluster around a Route 53 extension? Most big office users in the northern suburbs, such as Allstate Insurance and Brunswick Corp., the bowling and boating company, are situated closer to Lake Michigan along I-94. Mark Smith, senior vice president at CB Richard Ellis, foresees mostly industrial development along a new Route 53 corridor.
To the south, the extension of I-355 to I-80 would create a different scenario. I-80, known as the nation's transcontinental highway, is widely viewed as the next frontier for industrial settlement within the Chicago orbit, with a half-dozen major corporate parks already under development. Until now, most new tenants along I-80 have been distributing to a broad Midwest or even a national market. The extension of I-355 would allow logistics companies intent on reaching close-in Chicago suburbs, and even O'Hare International Airport, to acquire sites on I-80 for the first time with the prospect of convenient access.
I-355 currently terminates in Bolingbrook at I-55, which has become a major hub for industry. Matthew Ward, a vice president at Jones Lang LaSalle Inc., predicts an extended I-355 would provide workers from the fast-growing city of Joliet adjacent to I-80 easier access to employment centers in Bolingbrook.
“You would see Bolingbrook become an office hub for the first time. The town would have two interstates crisscrossing it, and whenever two big highways of that kind intersect, there will be office development,” Ward says. “Some of the land now designated industrial there would probably get redirected to offices.”
At the same time, industrial development around Joliet also would benefit from an I-355 extension. Centerpoint Properties Trust, based in Oak Brook, is erecting a massive 2,250-acre truck-train depot, called the Centerpoint Intermodal Center, on the site of a former U.S. Army Arsenal. I-355 would enter I-80 several miles to the east of Centerpoint's property. (please see story on page 53.)
“Nobody questions whether this will be a prime development submarket. The only question has been when,” says Sean Maher, senior vice president of investments at Centerpoint. “Infill is occurring, and now this area is getting the recognition it deserves.”
Other developers in the region include Catellus Development Corp., which has been able to attract a Kellogg Co. warehouse to its 380-acre park west of Joliet on I-80, and Trammell Crow Co., which has purchased a 150-acre tract south of I-80 in the farm town of Channahon.
Patrick Gallagher, a principal at Trammell Crow, expects to offer leases to tenants for as little as $2.75 per sq. ft. In Bolingbrook, to the north, prices in similar industrial developments run closer to $3.75 per sq. ft.
“With another north-south highway, the I-80 market will become increasingly competitive,” Gallagher says. “It's already the go-to destination for tenants who are very price sensitive.”
Heavy-handed competition looms ahead. Michael Cushing, senior vice president of IDI Inc., which owns the Rock Run Business Park on 385 acres along I-80 in Joliet, believes that the extension of I-355 will leave rental rates to the north depressed for years. “With more choices, corporate tenants will have more leverage in negotiating for leases,” Cushing says.
Other developers don't know exactly what to make of the I-355 corridor. “The extension of that road will be a development stimulator, no question,” says James H. Purinton, president and CEO of Orix Real Estate Equities Inc. in Chicago, which so far has made no investments in the area.
“When interchanges get built, all four corners of those interchanges become prime locations for commercial development,” says Purinton. “But the difficult part of this will be in the timing. Pioneers who speculate on land sometimes guess wrong and buy too early.”
Indianapolis-based Duke Realty Corp., which has developed major industrial projects around Chicago, has so far shunned the I-80/I-355 market. “The problem is that projects of this magnitude don't become reality overnight,” according to Jim O'Connor, a senior vice president at Duke Realty. “The I-355 extension seems likely to move forward, but whether it becomes a reality in three years or five years or longer is anybody's guess.”
Still, many other developers that have purchased land in the vicinity of the proposed highways are banking that their patience will be rewarded in the long run.
H. Lee Murphy is a Chicago-based writer.
North Shore appliance retailer benefits by proximity to I-94
WHY ARE MAJOR INTERSTATES SO ATTRACTIVE FOR development? One powerful reason is the heightened visibility which they provide corporate tenants. When Abt Electronics & Appliances decided a couple of years ago to replace its store and warehouse in the north Chicago suburb of Morton Grove with something bigger, company executives searched all around the North Shore for just the right location. They ultimately settled on a site in Glenview flanking the busy Interstate 94 expressway.
The new $25 million, 350,000 sq. ft. store/warehouse, scheduled to open this month, features a 65,000 sq. ft. showroom and a climate-controlled warehouse with 70 truck docks. The site contains 800 parking spaces and room for a 100,000 sq. ft. building expansion.
Family-owned Abt, which sells everything from televisions to refrigerators, has a thriving Internet site and directly delivers most of its products to customers. Thus, truck access was of paramount importance. The former store had just 10 truck docks to serve a fleet of 50 trucks.
“In the past, trucks and their drivers had to stand in line to wait to pick up merchandise,” says Robert Abt, chairman and CEO of Abt. “We can be far more efficient now.”
Also, Abt is erecting a monument-style sign virtually on the roadway fronting its combination store/warehouse, exposure the company figures is equal to a full-page newspaper advertisement every week.
Besides improving operations and increasing its exposure, Abt is hoping the store provides customers with a pleasant experience. For example, the floors and walls of the 2-story atrium entranceway feature marble from Mexico and granite from Greece. A massive, 7,000 gallon saltwater fish tank dominates the showroom.
Industry observers say the store is unusual. “Most retailers today have branch stores,” notes Ernest Olson, director of operations and marketing at NATM Buying Corp. in New York, a co-op supplier to many of the biggest independent companies. “By putting all its resources into a single location, Abt is unique today. But that single location is quite a store.”
— H. Lee Murphy