To many Chicagoans, Downstate Illinois is a land somewhere beyond DuPage County-inhabited by farmers and fertilizer, cornfields and cows.
Nice for a weekend visit, but not the place where big things happen.
Well, the city slickers should take another look because Downstate development is hardly down and out. One ride on the interstate highway system that crisscrosses Illinois reveals a prairie dotted with real estate projects.
New corporate headquarters are popping up from cornfields. Shopping centers are sprouting where soybean fields once spread wide. And housing developments flourish to accommodate the small, but growing, number of people who prefer small-town America.
“The smaller towns are very attractive places to live, and that is one of the most important attractors in bringing in the future office locations,” said Peter F. Colwell, professor of finance at the University of Illinois at Urbana/Champaign, who specializes in real estate.
“I think there are great questions as to whether people want trophy office buildings in downtown Chicago. Initially, the computer required more centralization; now it doesn’t matter too much. It bodes well for pleasant places to live.”
At last count, four million people lived in Illinois outside the six-county Chicago metropolitan area-a population that equals a city the size of Dallas.
And while Downstate’s scattered residents will never reach the critical mass needed to command real estate developments of the size seen in Chicago, they are witnessing a brisk pace of construction activity for projects that are having a relatively big impact.
The best example is in Rockford, where a new UPS Airlines hub is giving economic development officials there cause to celebrate. The 500,000-square-foot, $60 million UPS building-under construction on 50 acres of Greater Rockford Airport land-will serve as the company’s Midwest regional sorting operation for overnight packages.
UPS expects to operate 15 flights per day out of Rockford when the facility opens in October. A dream come true for civic planners, the UPS project is creating 300 temporary construction jobs and 800 permanent jobs.
“This is the largest single development here in a long time,” said Alvin G. Becker, president and CEO of First of America Bank and chairman of the Greater Rockford Airport Authority. “People have gotten smarter. Efforts here are focused on diversification.”
Becker refers to the fact that Rockford, like a lot of mid-size cities, learned the hard way that overdependence on one industry leads to disaster. In the early 1980s, Rockford’s machine-tool businesses went into a depression, resulting in unemployment rates that hovered around 20 percent for several years.
“We are creating a new industry here which is called transportation,” said Victoria Bensen, director of development for the Greater Rockford Airport.
Before UPS entered the picture, Rockford already had plans to improve its 45-year-old airport. Since passenger traffic would always be limited because of Rockford’s proximity to Chicago, taxiways and runways were being upgraded and lengthened to help draw freight-related business.
“One of the reasons we were attracted to Rockford was that the Airport Authority had a forward-thinking, long-range plan,” said Ken Shapero, spokesman for Louisville-based UPS Airlines. “The cards really lined up on this deal.”
Any city-big or small-would have been happy to lure a new UPS hub, but most Downstate development still springs from the expansion of home-grown enterprises.
Neighborly corporations that like the towns where they grew up are building new facilities. The quality of life Downstate-good schools, relatively low housing costs and manageable traffic-keeps workers and companies from straying too far.
Take State Farm Insurance Companies, Bloomington/Normal’s employment leader with 8,700 workers, which has a 2 million-square-foot computer complex under construction in Bloomington. The series of interconnected buildings is located about one mile from State Farm’s 2 million-square-foot corporate headquarters.
Like most large companies, State Farm re-examines its real estate options from time to time, and has contemplated moving. But it has always stayed put because of long-standing ties to the town where the company’s founder-a farmer who decided to sell insurance-lived.
“Bloomington has been good to State Farm, and State Farm has been good to Bloomington,” said Steve Stockton, vice president/administrative services at State Farm.
But, a big, new building does not necessarily translate into extra jobs. The 2,700 workers scheduled to move into the State Farm computer facility next year are being pulled from 15 scattered locations throughout the Bloomington area.
But with healthy growth in its business, State Farm still expects to add several hundred professional and technical workers a year.
Those steady employment increases, coupled with the stability of Bloomington’s other big employers-Diamond Star Motors and Illinois State University-have a ripple effect on real estate development.
“We’re a good housing market,” said Tom Hamilton, city manager of Bloomington. “One of the complaints from the people who move here is that if you’re not there the day the (for-sale) sign goes in the ground, you don’t get the house.”
The Bloomington area added 900 new homes last year. And where housing develops, retail is sure to follow. Although no new shopping centers have been built in several years, local real estate brokers say big national retailers are shopping the market for sites.
That kind of slow-but-sure growth has kept much of Downstate from the boom-and-bust real estate cycles so evident in Chicago, according to Geoffrey Hewings, director of the Champaign-based Regional Economics Applications Laboratory, which charts the Midwest economy.
“These smaller cities didn’t decline that much during the last recession. They just sort of putt along,” he said.
That’s not to say that Downstate hasn’t had its share of problems. The downtowns of most mid-size cities have struggled to find alternative uses for space long ago vacated by retailers headed for outlying malls.
And local governments are still bedeviled by what to do with old manufacturing sites left by the big companies that once dominated their economies.
In Springfield, the city turned to tax increment financing-a way to pay for infrastructure improvements through future property tax receipts-to help develop Park South.
The 125-acre, mixed-use project is on the site of the old FiatAllis heavy equipment plant. Once Springfield’s biggest employer, FiatAllis closed in 1985. Lexis Document Services will anchor the development with a new 31,400-square-foot building set to open this summer.
It is challenges like those that are making Downstate planners just as savvy as their big-city counterparts when it comes to the development game, putting a renewed emphasis on the retention of old industry and using government programs like tax increment districts to keep the money and the projects rolling.
“We have gone back to the basics in terms of development philosophy,” said Tucker Kennedy, regional marketing manager for the Peoria Area Economic Development Council. “The days of the four-part, direct mail program and video are a thing of the past. We look at existing businesses and our existing workforce.”
Peoria, just 39 miles northwest of Bloomington on Interstate 74, is enjoying development activity from local companies.
L.R. Nelson Corporation has just finished its new $10 million, 250,000-square-foot corporate headquarters. Built on 42 acres on the northwest side of town, the facility consolidated the operations of the lawn watering equipment maker.
Although Peoria was eager to keep L.R. Nelson at home, that’s not to say the company didn’t get other offers.
“We were approached by a number of cities,” said Dave Ransburg, Nelson’s chairman and CEO. “But we wanted to preserve our workforce.”
The city of Peoria has also teamed up with The Prudential Cullinan Properties Limited to develop City Center Plaza, a 14-acre corporate campus in Peoria’s Southtown area just west of downtown. Adjacent to Peoria’s Civic Center Complex, the project further expands the city’s business core.
Construction will start this spring, and a 40,000-square-foot regional Red Cross office will anchor the development.
“Peoria has gone through a tremendous redevelopment downtown. They do a bang-up job there,” said Lori Healey, deputy director of business development with the Illinois Department of Commerce and Community Affairs.
While most Downstate towns such as Peoria have resigned themselves to a city center devoid of major retailers, Urbana is still betting on the viability of in-town shopping.
Situated in the middle of downtown Urbana, Lincoln Square Mall is now undergoing an $8 million renovation. The 300,000-square-foot shopping center dates to the early 1960s, and was one of the first enclosed downtown malls.
But the property fell on hard times in the 1970s when most major retailers took a hike to new outlying malls. Anchor tenant Bergner’s hung on until continued economic decline, not to mention a parent company in bankruptcy, forced it to close at the beginning of 1993.
Several months later, Lincoln Square was in receivership and taken back by its lender, IDS/American Express.
Redevelopment ideas for Lincoln Square included converting the property for some public use; a convention center was one possibility mentioned. But Oak Brook-based MidStates Bradford Companies, acting as receiver for the property, thought upgrading and repositioning the old mall might work.
Success hinged on finding a new retail anchor. Herberger’s, a fashion-oriented retailer based in St. Cloud, Minn., agreed to take the big vacant Bergners’ spot and will open its first Illinois store at Lincoln Square this August.
“We grew up in small markets and we believe in a return to downtowns where the opportunity is right,” said Steve Lindgren, Herberger Inc.’s marketing director.
Along with the 121,000-square-foot Herberger’s store, Lincoln Square is getting overdue structural improvements, plus an interior facelift. Landscaping and parking will be improved with $2 millon in tax increment financing through the city of Urbana.
“You couldn’t continue to do retail there if you didn’t come back with a package like this. It has a particular sparkle to it,” said Bob Super, a principal at MidStates Bradford. “The alternative was continued decline.”
That’s not to say that Lincoln Square won’t have its competitors.
Just across town in Champaign, a 600,000-square-foot retail center is being codeveloped by Orix Real Estate Equities Inc. of Chicago and Wilkinson Development Group of Ormond Beach, Fla.
The first phase of Champaign Town Center includes a 125,000-square-foot Lowes home improvement store, set to open in December. A 240,000-square-foot Target store and 39,000-square-foot Circuit City are slated to follow in the spring of 1995.
Champaign Town Center typifies the retail development that is hot Downstate. The project is near the area’s regional mall, and instead of providing a strip of stores for local shopkeepers, the center only will include the so-called “category killers”-big retailers that attempt to dominate the market in a product type.
“You are getting a wave of contemporary retailers that have buying power to provide these communities with the goods and services that they didn’t probably see unless they came to Chicago,” said Mark H. Tanguay, president of Tanguay-Burke-Stratton Comprehensive Real Estate Services in Chicago. “They are doing what Wal-Mart has been doing for years.”
