The Logistics Campus, a transformative $500 million industrial redevelopment of the former Allstate headquarters, is ready for the trucks to begin rumbling in and out of the sprawling site along I-294 in Glenview.
But nearly two months after the first phase was completed — five massive warehouses totaling more than 1 million square feet of space — the only honking is coming from a gaggle of geese, the center’s sole inaugural tenants.
Whether it’s the broader slowdown in the post-pandemic industrial leasing market or the unusual north suburban location, the Logistics Campus is off to a very slow start.
“The Dermody Properties team doesn’t have updates to share at this time,” a spokesperson for the Nevada-based developer said in an email, declining further comment.
When Allstate decommissioned its longtime campus during the remote working paradigm shift of the pandemic, its iconic Northbrook headquarters resembled a corporate ghost town, replete with vacant office buildings, empty parking lots and a dearth of daily activity.
Sold in 2022 to Dermody Properties, annexed into Glenview and redeveloped as one of the largest urban logistics centers in the U.S., the 232-acre site was projected to become a big trucking deal in the northern suburbs, abuzz with traffic, jobs and e-commerce distribution. After a lengthy slog, the initial buildout is done, but the big rigs have yet to arrive.
Originally targeted for completion by the third quarter of 2023, the first phase was finally delivered on Oct. 1 — a year later than planned. But the Logistics Campus remains essentially vacant, save for the geese roaming the freshly landscaped grounds and newly paved roads with impunity.
Five cavernous white buildings with blue trim stretch out across green fields that months earlier were a boot-swallowing expanse of mud as phase one construction raced to a hoped-for summer finish.
Newly planted trees along the main road, dubbed Protection Parkway by the previous owner, Allstate, have already lost their leaves as fall turns to winter, and the Logistics Campus stands like a model industrial park, with signs hung on every building touting the 1 million square feet of empty warehouse space available.
Leasing started with more promise.
California-based Upside Foods was announced with great fanfare in September 2023 as the site’s first tenant after signing a long-term lease for 187,000 square feet to build out the first large-scale cultivated meat plant in the U.S. But those plans were put on hold in February, with no target date for launch.
In April, Dermody said it had 900,000 square feet of proposals out to prospective tenants, but it has yet to announce another lease.
The Logistics Campus is facing broader industry headwinds, namely too many warehouses in the Chicago area and not enough demand, according to industry analysts.
Catalyzed by remote working, supply chain issues and other pandemic trends, Chicago became a hot spot for development of logistics and data centers, filling the void left by the demise of huge corporate campuses like Allstate and Sears.
But the post-pandemic demand for industrial properties has continued to decline, leaving a glut of vacancies as the market looks to absorb the recent developments — including the Dermody logistics site.
“There is a lot of overdevelopment and a lot of supply that was driven by COVID and e-commerce and trucking companies really booming and growing too fast,” said Joe Karmin, an Industrial real estate broker for Transwestern who focuses primarily on manufacturing and warehousing companies in suburban Chicago. “So as a result, we’re faced with a lot of vacancies.”
In its third quarter industrial market report, Transwestern noted two “concerning trends” for Chicago. Leasing activity dropped to 6.5 million square feet in the third quarter, the lowest level since 2005. Meanwhile, sublease availability grew to an all-time high, with 13.4 million square feet of space on the market.
Overall, the Chicago market had nearly 78 million square feet of space for lease in the third quarter, a 5.5% vacancy rate, according to Transwestern.
Dermody’s recent completion of 1 million square feet of “speculative” space in Glenview pushed warehouse and distribution vacancy up to 11.4% during the third quarter in northern Cook County, according to a report by commercial real estate firm JLL.
The Chicago market delivered 30 million square feet of warehouse and distribution space in 2023, the peak of the pandemic construction boom, according to George Cutro, JLL’s director of industrial research. This year, that number is expected to fall to 14 million square feet, he said.
“We had three years of unprecedented growth due to the pandemic and need for warehouse space, and now folks have taken a pause,” Cutro said. “Part of that pause is due to the uncertainty of interest rates last year, which slowed down our market, especially on the capital market side of things.”
While development continues in traditional industrial zones such as the I-55 freight corridor, no additional warehouse projects are underway in northern Cook County, the JLL report said. But the north suburban commercial landscape has already been dramatically altered by the Logistics Campus.
Located on Sanders Road, the Allstate campus had been a corporate fixture in what was previously unincorporated Northbrook since 1967, when it moved its offices from Skokie to a six-building complex near I-294.
With most of its nearly 8,000 Illinois employees working remotely during the pandemic, the insurance giant agreed to sell its campus to Dermody for $232 million, dramatically downsizing its headquarters to a modest space in a nearby office building it owned.
Dermody broke ground in October 2022, with plans to develop a 10-building, 3.2 million-square-foot logistics park in two phases. At the time, Dermody projected it would bring 1,900 full-time jobs when completed, with 6,000 vehicle trips per day in and out of the center. The first trucks were expected to begin rolling by the middle of 2024.
A recent visit found the traffic light intersection at Willow Road, which once welcomed thousands of Allstate employees each day, wide open into the pristine logistics development, with nary a vehicle making the turn on a busy weekday morning.
A sign at the entrance onto Protection Parkway touted space available, as did banners hanging from each massive warehouse, where loading bays sat unused and parking lots empty.
Several industry sources believe things may get busier at the Logistics Campus in 2025, with a number of prospective tenants in discussions to stake new ground in the northern suburbs.
“I think the location is great — the proximity to Wisconsin, the proximity to Chicago,” said Meredith O’Connor, JLL’s executive managing director. “We love that location for a lot of clients, and we continue to look at it. I think it’s going to find a user relatively soon.”
Until then, the geese rule the roost at the surprisingly tranquil logistics development in Glenview, basking by a retention pond, waddling across the road and exercising something akin to squatters’ rights before the trucks finally arrive.
rchannick@chicagotribune.com
