The boom days of commercial development in Oak Brook and Oakbrook Terrace may be over, but that doesn’t mean all activity is at an end.
It has been almost 40 years since developers started snapping up acreage in what would become the premier stretch of the so-called East-West Corridor, along Interstate Highway 88, featuring state-of-the-art office towers, shopping malls, hotels and industrial parks.
The surge of developers has diminished since Oakbrook Center opened in 1962 and became a powerful commercial magnet that only a few visionaries could have imagined. Its attraction hastened the exhaustion of vacant land for commercial buildings.
While there are still a few scattered parcels to be found, officials say the scarcity of large plots is forcing developers to consider expensive alternatives.
“I see every bit of vacant land being developed within the next 5 to 10 years,” said Mayor William Kallas of Oakbrook Terrace. “There are opportunities for developers we promote that are easy for them to justify: buy, tear down and build bigger.”
Stephen Veitch, Oak Brook’s village manager, agreed. “You tear them down and start over, but a couple of things that make Oak Brook worth it are its location and accessibility to transportation and our (village’s) cost structure–the fact there are no local property taxes.”
Unlike neighboring Hinsdale, however, whose downtown business district and office park along Interstate Highway 294 are virtually 100 percent developed, Oak Brook and Oakbrook Terrace still have a few parcels of open land. There are four multimillion-dollar office buildings in various stages of completion in the two villages.
Developers said they anticipate little difficulty in leasing the more than 800,000 square feet these structures will add to the local market.
“Oak Brook stacks up well compared to other office centers,” said Greg Van Schaak, vice president of Hines Interests LP, a family-owned Houston-based developer. “It’s one of the best commercial markets in the country because of the quality of the mall and the amenities around it . . . which are as good as you’ll find anywhere.”
The “economic realities” of the Chicago-area market, he said, are that Oak Brook offers prospective tenants rates $5 less per square foot than downtown Chicago, mostly due to Cook County’s real estate taxes, and $2 to $3 more than farther away sites in Naperville and the Fox River Valley.
Hines, which owns and manages more than 7.5 million square feet of commercial real estate in the Chicago and suburban market, is in the final construction stages of a $40 million office building at 700 Commerce Drive in Oak Brook. Called Oak Brook Pointe, the five-story structure will have 213,000 square feet of office space when it opens in June. It shares a 15-acre site and will be next door to 800 Commerce Drive, a two-story, 80,000-square-foot building formerly owned but now leased by McDonald’s Corp.
Oak Brook Pointe already has lined up at least three major tenants, Van Schaak said. They are Premier Inc., a California health care company that will occupy more than half the building, London-based Regus Business Centres, which has leased the top floor, and New York-based MONY Life Insurance Co., which has taken 25,000 square feet.
“It’s unusual to be (nearly) totally preleased,” Van Schaak said. It happened, literally, by design. “This building has the largest floors–40,000 square feet–of any new building in the area,” he said. “The tenants we’ve attracted really appreciate and look for floor efficiencies.” Lease rates, he said, will run $18 to $20 net per square foot. (Net means the tenant is responsible for operating costs above the lease rate.)
Hines’ first venture into Oak Brook was the 1998 acquisition of the neighboring building, he said. “What attracted us was the pent-up demand in Oak Brook, which we see as a very special place.”
Major companies gravitate toward amenities, Van Schaak said. “Our prospective tenants all said, `We want to be close to communities where executives live, near the mall, hotels and good highway infrastructure.’
“In order to attract a high-quality work force, tenants have got to offer a lot. Employees want to be close to places to go at lunch time for shopping, dining and relaxation. Here, they’ve got it all in one of the best malls in America.”
Nearby, the John Buck Co., which has developed two other buildings in Oak Brook, is in the final stages of completing a six-story, 184,000-square-foot office building at 2001 York Center, at 2001 York Rd., just north of 22nd Street. Ninety-three percent of the building space is leased or in negotiation, said Susan Hammersley, project manager. The first tenant, Prism Communications, was scheduled to move into 7,000 square feet of the building earlier this month.
The 2001 building is the first of possibly five that eventually could be built on three parcels of land the company plans to develop with its partner, the Travelers Investment Group, she said. The two companies own slightly more than 23 acres, and their “vision is to develop an approximately 1 million-square-foot business park on the east and west sides of York Road,” she said.
How soon that happens will depend on demand and market conditions, Hammersley said. “There definitely are opportunities out there, but (they) will depend on the economics–construction costs, financing, the market, interest rate risks . . .”
In Oakbrook Terrace, a city of 2 square miles and about 4 million square feet of commercial space, the Chicago office of Dallas-based Lincoln Property Co. is building a $77 million project. It will add 430,000 square feet in two large buildings in the Lincoln Centre Business Park on Butterfield Road between Renaissance Boulevard and Trans Am Plaza, said Paul Somers, vice president of development in Chicago.
Two Lincoln Centre will be a 10-story, 250,000-square-foot structure with a curved front facade that blends reflective glass with red and mahogany tones of granite. “It will be the higher-profiled building and have more classic (wood and marble) finishes in the lobbies,” Somers said. It also will carry a net lease rate of about $20.25 per square foot.
The six-story Three Lincoln Centre will offer 30,000-square-foot floors and 10-foot ceilings and will be “ideal for full-floor users who like open office plans,” he said. Leasing at $17.50, he said the building “will be competitive” with others rated Class A in the East-West Corridor.
The developer also has a tentative plan for another building, Four Lincoln Centre, across an oblong-shaped parking area from the Three building. If that “future phase” comes to fruition, the corner will be occupied by a seven-floor, 130,000-square-foot office building. Right now, though, his firm has enough going on with two buildings, Somers said.
Elsewhere in Oakbrook Terrace, the largest undeveloped tract is 100 acres with frontage on Butterfield Road.
Mayor Kallas, who has been in commercial real estate for four decades, is eager for the property to be developed. The problem is that Robert Krilich, who owns 80 acres of it, is in the middle of a federal prison sentence for racketeering and bank fraud.
Krilich has talked about building a condominium complex on the land, Kallas said. Kallas has no objection, but also would like to attract more “cash cow” commercial enterprises. For example, he would like to see a Meijer Superstore occupy 23 acres on Butterfield Road.
Kallas’ wish list also includes an automobile franchise: “We’re home to the Chicago Automobile Trade Association, which has 35,000 square feet of offices. We have the land on Roosevelt Road for a 5-acre, first-class development.”
Looking into the future, Kallas said: “I see every bit of vacant land in the village being developed to its highest and best use. One-story buildings will be at such a premium it’ll be easy for (developers) to justify buying them, tearing them down and rebuilding higher, more economical structures.”
Veitch said modifications of floor area ratios could, perhaps in 20 to 30 years, add about 4.7 million square feet to Oak Brook’s current 8.2 million. “You have to understand that those are very gross numbers that assume every piece of property will be built out to the maximum,” he said.
Looking at the next decade, he said the village “will look a little different, with a handful of new buildings–redevelopments–taking the place of older ones.”
COMMERCIAL PROJECTS IN THE WORKS
Oak Brook
Oak Brook Pointe, 700 Commerce Drive. Developer is Hines Interests LP of Houston. The $40 million, five-story, 213,000-square-foot office building is scheduled to open in June. Lease range is $18 to $20 net per square foot. Major tenants already signed: MONY Life Insurance Co., Premier Inc., Regus Business Centres. Construction company is Turner Construction Co., New York. The architect is Wright Architects Ltd., Chicago.
2001 York Center, 2001 York Rd. Developer is the John Buck Co., Chicago. The six-story, 184,000-square-foot building was to open in February. It was 93 percent leased. The first tenant scheduled to move in is Prism Communications. The company is partnered with Travelers Investment Group and plans to develop 23 acres into a 1 million-square-foot business park. Construction company is Pepper Construction Co., Chicago. The architect is DeStefano & Partners, Chicago.
Oakbrook Terrace
Two Lincoln Centre, on Butterfield Road between Renaissance Boulevard and Trans Am Plaza. Developer is Lincoln Property Co. of Dallas. The 10-story, 250,000-square-foot building, part of a $77 million project, is targeted for opening by late summer or early fall. Lease rates will be $20.25 net per square foot. Construction company is Bovis Construction Corp., Chicago. The architect is HKS Inc., Dallas.
Three Lincoln Centre, same address, developer, construction company and architect as above. The six-story, 180,000-square-foot building will lease for $17.50 net per square foot. Completion is expected by late summer or early fall.
