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All this month, our Changing Gears series has been looking at empty places across the Midwest – from foreclosed homes to abandoned factories. But as companies adjust to economic conditions, many in the region have been re-evaluating the basics – including where they’re located.
Cities and states bend over backwards to create jobs, and they’re left with some big challenges when a company decides it no longer wants to be there. Tony Arnold of WBEZ in Chicago looked at the issue.
There’s a hot new trend among companies around the Midwest – threatening to leave. Several companies, especially around Chicago, have been asking big picture questions as they take a look at their bottom lines.
One is the food maker Sara Lee, which is going through a major transition as it prepares to split into two companies. One would be focused on meats, such as sausages and hot dogs. The other one would focus on beverages.
Company spokesman Jon Harris says the company believes a downtown location “would provide our new North American meats company with an environment that will be energetic, that will foster breakthrough thinking, create revolutionary products, offer fresh perspectives and really own the market.”
But that means moving from Sara Lee’s headquarters and test kitchens, which are currently based in Chicago’s western suburbs, in a town called Downers Grove.
While no location has been chosen for the meat company, downtown Chicago is preferred, Harris says. If Sara Lee does pack up and move, it would leave behind a massive office building designed to hold at least 1,000 workers.
That’s something Martin Tully, the mayor of Downers Grove, isn’t too excited about, especially as it relates to collecting property taxes. “It’s not insignificant,” he says.
Tully says he’s working with Sara Lee to try to keep operations based there, but it’s hard when the company is going to split up.
Also, Sara Lee has no deep ties to Downers Grove. Its offices have only been there for six years. Tully says those six years have been worth it – even if he has to find a new tenant. As he says – who would pass up having Michael Jordan on your basketball team for six years?
But he has a word of warning for other towns that might be looking to unload one giant piece of land. “You have to be on your toes and alert for those things as a community and as an economic development engine,” said Tully.
Another example is United Airlines, which is moving thousands of employees to what used to be called the Sears Tower. It’s trying to sell its property in Elk Grove Village, in Chicago’s northwest suburbs, not far from O’Hare International Airport, but nobody is really biting.
Mount Prospect – the town next door – wants to take over the land to try to redevelop it, even though there aren’t any buyers.
Stacey Kruger Birndorf, an expert on office space real estate issues for Transwestern, a commercial real estate company, says towns like Mount Prospect have to keep in mind what companies want when they look for a new home.
“I think so much of it is economically driven,” she says. “I wish I could say it’s geographically driven, but so much of it is economics.”
Kruger Birndorf says companies look at the cost of the property, where new recruits would want to work, and proximity to clients. She says young people by and large want to be downtown. But if a company wants a lot of space, the suburbs might be a better fit.
Asked whether it’s worth it for towns to allow big campuses that are hard to re-work into anything other than office space, Kruger Birndorf says towns have to go for it.
“If we don’t have some hope and some optimism,” there would never be any reason to do anything, she says.
As proof, look at Ann Arbor, Mich. Pfizer, the international pharmaceutical company, had a 70-acre facility there, but moved out in 2007. It left a modern research facility empty, and took a chunk of the city’s property tax budget with it.
When Ann Arbor couldn’t find a buyer, the price dropped, and the University of Michigan stepped in.
“You’re getting 2.2 million square feet of office and lab buildings, which seems like an incredible steal for $108 million,” said David Canter, the Executive Director of the North Campus Research Complex.
He’s turning the facility into a new type of research center for academia, putting researchers from different departments into the same workspace. Before taking over the Pfizer complex, each department on the university’s campus had its own building.
Now, Canter says pharmacists, dentists, and mathematicians can all be in the same place.
“As a result, the university will be able to grow without having to invest in designing and developing a lot of series of new buildings that tend to follow growth rather than be in advance of growth,” he says.
Canter says if Pfizer hadn’t left, this research project from the university wouldn’t exist. It’s an example of how thinking creatively about how work space is used can let both companies and towns breathe easier.
November 16th, 2011
Rahm Emanuel has only been in office since May, but today he scored his first major political victory. Chicago’s city council voted 50-0 in favor of a budget plan that calls for fee increases, layoffs and major changes in the way the city does business.
That isn’t to say all the aldermen liked it. During two hours of debate, there were complaints about aspects of the plan that will close libraries and close six mental health clinics.
But there also was praise for Emanuel for working closely with city council members on his proposal to address a $635 million deficit. Ed Burke, considered the city’s most powerful alderman, said the budget process was the most cooperative he had seen in 42 years.
While he was working on the plan, Emanuel, the former White House chief of staff, said he was no longer going to “kick the can down the road” on the city’s problems — a veiled reference to his predecessor, and political mentor, Richard M. Daley. (I looked at Emanuel and Daley in this story for Atlantic Cities last month.)
In Wednesday’s debate, Alderman Richard Mell told the mayor, “It’s obvious that when you we’re a kid, you never learned the game of kick the can. Everybody felt the pain. The only way you are going to make the gain is to feel the pain.”
Visitors will be among those feeling the pain. As we reported last month, Emanuel’s proposal includes higher taxes at downtown parking garages and at hotels. People who purchase the city’s car registration stickers also will be paying more.
But Emanuel already has convinced city council to eliminate a head tax on companies with 50 of more employees in the city, a move he says is why Ford is adding more jobs at its Chicago plants.
Pete Bigelow · Midwest Memo: Chicago Budget Should Easily Pass, Toledo Gains 1,100 Jobs, Cleveland Eyes China Medical Markets
November 16th, 2011
Three stories making news across the Midwest today:
1. Chicago budget vote tonight. Chicago Mayor Rahm Emanuel’s first city budget will be voted upon by the city council tonight. It is expected to be easily approved. The budget addresses a $635 million deficit through a series of layoffs, library and mental-health clinic cuts and fee increases. Our partner station WBEZ says the only question now is how the city’s 50 aldermen will vote, citing minimal opposition. “It could be six or it could be a unanimous vote,” Ald. Bob Fioretti tells the station. He said he worried Emanuel’s plan to nearly double fees for water and sewer service over four years will hasten an exodus of residents. But, “My yes or no vote isn’t going to mean anything,” he said. “I believe it’s already decided.”
2. Chrysler brings 1,100 jobs to Toledo. Chrysler announced today that it would invest $500 million at a Toledo assembly plant to build its next-generation Jeep SUV. The investment is expected to create more than 1,100 new jobs by 2013, according to the Detroit Free Press. The Toledo North plant will add a second shift. The plant, which opened in 1997, was the only Chrysler plant in North America operating only one shift, according to the newspaper.The investment comes as part of a $1.7 billion move centered around the Jeep SUV. Remaining funds will be invested at other Chrysler plants.
3. Cleveland biomedical companies eye China markets. There’s growing opportunity for Cleveland-area biomedical companies to meet China’s growing demand for advanced health care. The Chinese government has pledged $100 billion to upgrade its healthcare infrastructure, and “it would be insane not to take advantage of that immense growth,” Eddie Zai, founder of the Cleveland International Group, a business investment consulting firm, tells our partner station Ideastream. Zai’s new venture, the Cleveland Bio-Fund, is partnering with Newsummit Pharmaceuticals in Shanghai, to bring $100 million to U.S. medical device companies. The Plain Dealer endorses the developments, calling it, “an example of the kind of commerce that is the path to jobs and wealth.”
Pete Bigelow · Midwest Memo: Google Causes Groupon Angst, Cain Campaigns In Michigan, Tea Party Seeks Ohio Right-To-Work Push
November 11th, 2011
Three stories making news across the Midwest today:
1. More complaints about Groupon. Some merchants have already swore off Groupon after they wound up losing money – or in some cases, their businesses – by running promotions with the Chicago-based company. Now comes another gripe. Merchants tell The Wall Street Journal that Groupon collects money immediately while payments to customers linger for more than 60 days, affecting their cash flow. Rivals of the daily deal site are offering faster payments, which puts a crimp in Groupon’s business model. Meanwhile, our partner station WBEZ reports Google is stepping onto Groupon’s home turf with daily-deal service.
2. Cain campaigns in Michigan. One day after a debate in suburban Detroit, Republican presidential candidate Herman Cain made stops across southern Michigan on Thursday. He discussed the state’s 11-percent jobless rate in Calhoun County, a key battleground that has been split in the two most recent presidential elections. “This is one of the greatest tragedies that we face, and that is we have all these people that are unemployed,” Cain told supporters, according to the Battle Creek Enquirer. Michigan voters head to the primary polls on Feb. 28.
3. Could Ohio become right-to-work state? Two days after voters defeated Issue 2 at the polls, a Tea Party group has started a push to turn Ohio into a right-to-work state. Ohioans For Workplace Freedom said Thursday it is seeking 386,000 signatures to put the issue on the Ohio ballot, perhaps as early as next November. Ohio is one of 28 states that require employees to join unions or pay fair-share dues in places where workers are represented by unions. “A lot of people in the patriot movement feel this was a key component of Senate Bill 5 that never came out,” Tom Zawistowski, president of the Portage County Tea Party, tells the Akron Beacon-Journal.
November 9th, 2011
At a certain point, you can’t tell if you’ve created the momentum, or the momentum has created you — Annie Lennox
There’s no doubt that the Midwest was swept this past year with political momentum. It deposited Republican governors into office in Michigan, Wisconsin and Ohio, and in turn, buoyed successful efforts to strip public employees of their collective bargaining rights.
But with the resounding defeat of Ohio’s Issue 2 on Tuesday night, it appears that momentum has been slowed, if not stopped. And now, like a tide rushing out, governors across the Midwest have to consider whether the momentum that led to swift changes will now work against them.
Those with the most to worry about include Republican governors John Kasich in Ohio, Rick Snyder of Michigan, and Scott Walker in Wisconsin, and the situation also could affect other politicians across the region, both Republican and Democrat.
To be sure, there are big differences in Midwest states and cities, and the situations that they face.
In Ohio and Wisconsin, nothing short of a political revolution took place. Those two governors were bold in their attacks on public employee unions, using budget crises as an excuse, pushing measures through their respective legislatures before union members had a chance to figure out what hit them.
Despite high-profile protests in both places, especially Madison, Wis., the governors’ momentum carried the day.
In Michigan and Indiana, Republican governors have been more cautious. Both Snyder and Daniels have said they aren’t in favor of right-to-work efforts, even though Republicans in both states have called for them.
Daniels took action years ago against state employees, well out of a national spotlight. And Snyder has been judicious in dealing with collective bargaining rights. His one test of the vortex has been to give emergency managers the right to abrogate parts of union contracts in the state’s most deeply troubled cities.
One Democrat who has braved union members’ wrath is Chicago’s mayor, Rahm Emanuel. Throughout his campaign and in his early months as mayor, Emanuel made a longer school day his stop priority. He went around the city’s teacher’s union and offered incentives directly to city schools, including raises for teachers if they’d work longer hours.
Thirteen schools took him up on it, but the vast majority of schools steadfastly refused, setting up what promised to be a long and nasty confrontation with the Chicago Teachers Union.
Last week, Emanuel blinked in the face of a legal challenge by the union, and dropped his diversionary measure. The two sides agreed to collaborate on a compromise, rather than butt heads.
Perhaps Emanuel, schooled by Richard Daley and with two stints in the White House under his belt, saw what Kasich in Ohio failed to recognize and what must now concern Wisconsin’s Walker, who faces a recall movement in 2012.
Momentum, after all, is defined as “the impetus gained by a moving object.” And when political momentum goes against you, it could be best to just jump out of the way.
November 7th, 2011
In Chicago, Groupon Inc. has grown its workforce from 37 employees to more than 10,000 in a little more than two years. That’s provided a nice boost to the city’s economy and employment rate.
And that’s just the start of the company’s impact in Chicagoland.
Former Chicago Mayor Richard M. Daley, tells BusinessWeek that Groupon’s high-tech cache has spread throughout the city and awakened aspiring entrepreneurs. “We were never identified as a tech city. … It’s changed the whole image,” he said of Groupon.
The company raised $700 million with its initial public offering last week. Through that, BusinessWeek opines that Groupon’s “success legitimizes Chicago and the Midwest as an incubator for technology companies” and spawned talk of a “Silicon Prairie.”
Is Groupon’s shine extending across the entire Midwest? That might be a stretch at this still-early juncture. But it has done wonders for refurbishing Chicago’s industrial image.
“We’ve identified the city as a city with tech people, creative people, risk takers,” Daley said.
November 7th, 2011
Earlier this fall, Changing Gears took a look at the future of manufacturing across the Midwest. In Chicago, WLS-TV (Channel 7) has just completed its own look at furniture manufacturing around the metropolitan area.
Yes, furniture manufacturing — something we didn’t know was going on in Chicago. The Made in Chicagoland series looked at three companies:
Richardson Seating Corporation, which makes furniture primarily for restaurants and bars, from custom bar stools to diner booths. Its factory on Chicago’s near west side makes more than 200,000 products a year.
Hoohobbers, a maker of junior director chairs and booster seats for kids. The company in the Lincoln Park neighborhood just celebrated its 20th anniversary.
Baker Road Furniture, which produces high-end cabinetry, made from maple, cherry and oak. Its owners say it is the last such company in Chicago; most similar products are shipped from overseas.
Is there a business people would be surprised to know is operating in your city? Let us know about it.
November 4th, 2011
On Monday, Gov. Rick Snyder delivered the keynote address at the inaugural Michigan Rail Summit, an industry conference that examined several topics related to rail transportation in Michigan.
It was a timely speech for Snyder. Last week, he unrolled a major initiative to seek $1 billion for investments in Michigan’s transportation infrastructure. Rail’s portion of that is still to be determined, but Snyder called the rail industry a “lifeline” for Michigan business.
He wasn’t the only speaker at the Rail Summit. Others included John Porcari, the deputy secretary of the U.S. Department of Transportation and Kirk Steudle, the director of the Michigan Department of Transportation, among others.
Here’s five things of interest we learned at the Rail Summit:
Grand Scheme Of Things
Improvements along the Detroit-to-Chicago rail corridor were a central theme of the event. But Snyder and others emphasized that are should be viewed more broadly, as the epicenter of a line that stretches from St. Louis from Montreal. “It’s not about a piece of rail in Michigan,” Snyder said. There’s a reason for the emphasis.
Viewed alone, the 280-mile stretch between Detroit and Chicago would fall short of a federal requirement that stipulates a rail line must be 750 miles or more to qualify for certain federal funding. But it could be viewed as a “national system” under the Passenger Rail Investment and Improvement Act if officials determine the value of the line extends from St. Louis to Toronto (788 miles), Chicago to Montreal (850 miles) or St. Louis to Montreal (1,117 miles).
Snyder spoke of rail being a “lifeline” for manufacturing and agricultural exports. But when he pitches his infrastructure improvements, some believe the state legislature will balk at spending public money on something that could be construed as competition for the auto industry.
“A lot of road-construction guys are going to view rail investment as poaching on their territory, and vice versa,” said State Senator John Proos, who represents a three-county area in southwest Michigan. On transportation and infrastructure in the state, he said, “my colleagues see it as a siloed problem that we have.”
Porcari cautioned, “this is not a zero-sum game. The state that put America on wheels can remain confident that automotive will be a very important industry in the future. We need to work on all parts of our transportation system.”
What’s Next: Freight Edition
Snyder outlined a two-pronged approach to where potential rail investment would go in Michigan. For freight, he would like to see investments in efficiencies for intermodal freight yards in Detroit.
Also, he believes attention given to the possibility of building another bridge to Canada has overshadowed another project – the potential for a rail tunnel between the countries. A rail tunnel to Canada would, “make it easier for container loads to go through, and for the automotive industry to do double-decking,” Snyder said. “Those things should be very high on our list.”
What’s Next: Passenger Edition
For passenger travel, he said Michigan would continue to look at the Detroit-to-Chicago line as a critical piece of transportation. Last month, the state used $140 million in Federal Railroad Administration funds to purchase a 135-mile stretch of rail from Norfolk Southern. The purchase will allow Michigan to accelerate service along the line. Steudle said trains are already reaching 95 miles per hour in certain stretches, and testing will begin in a matter of weeks on stretches where trains can push 110 mph.
Also, he wants to ensure that a potential commuter rail project, which could run from Ann Arbor through Dearborn to Detroit, includes a stop at Detroit Metro Airport in its plans. He believes such a system could be tied in with the WALLY service scheduled to operate between Howell and Ann Arbor, a controversial project that Snyder endorses, incidentally.
“I don’t dismiss the WALLY at all,” Snyder said. “I’m going from Ann Arbor to Lansing, I’m going the better direction on U.S. 23. I see the traffic jams. It’s hard to believe there could be a more congested road.”
Ridership On The Rise
The number of people riding on Michigan’s three passenger corridors is rising, even as disruptions mount. n the service that runs between Detroit and Chicago, which Porcari called “severely degraded” in recent years, ridership increased 16 percent in 2010 and is currently up 4.9 percent in 2011. Revenues on the line increased $18 to $19 million, according to Steudle.
On the line that runs between Port Huron and Chicago, via stops in East Lansing and Battle Creek, ridership rose 27 percent in 2010, according to Steudle, with revenues increasing by $6 million. A third line between Grand Rapids and Chicago has increased ridership of 6 percent and a revenue increase of $3 million.
Pete Bigelow · Midwest Memo: Budget Cuts Concern Chicago Aldermen, Japanese Currency Adjustment Angers Michigan Contingent
November 2nd, 2011
Three stories making news across the Midwest today:
1. Chicago aldermen send Emanuel letter. Saying proposed Chicago budget cuts would hurt public safety and quality of life, a majority of the city’s 50 aldermen have called for Mayor Rahm Emanuel to alter his 2012 city budget. Our partner station WBEZ reports that 28 aldermen signed a letter that said the cuts would cause too many layoffs at city libraries, close too many mental health clinics and endanger public safety. Also, the letter stated they have “reservations” about the doubling of fees for city parking stickers for SUVs.
2. Projected layoffs drop across U.S. After planned layoffs across the U.S. hit a 28-month high in September, they dropped 63 percent to 42,759 in October, according to a new report. Government and financial sectors keyed the rebound, said outplacement consulting firm Challenger, Gray & Christmas. But “the two sectors are not out of the woods, by any means,” John Challenger, CEO, tells the Chicago Tribune. Employers have announced a total of 521,823 planned layoffs so far this year, a jump of 16 percent from 2010. The report comes in advance of Friday’s October jobs report from the federal government.
3. Michigan Senator Slams Currency Adjustment. U.S. Senator Debbie Stabenow of Michigan and a trade group that represents Detroit automakers criticized a decision by the Japanese government to lower the value of the yen. “Currency manipulation gives other countries an anti-competitive advantage and directly translates to lost American jobs, especially in Michigan,” Stabenow told the Detroit News. The automotive trade group that the move, the third this year, essentially subsidizes Japanese exports to the United States while weakening U.S. exports to Japan.
November 2nd, 2011
This week, Changing Gears kicks off a look at Empty Places across our region. During November, we’ll be looking at empty buildings, empty property — and how we can fill things up again. In the first part of our series, reporter Dustin Dwyer explores the economic and social cost of emptiness. Things may be better in some neighborhoods, he says, but problems still abound.
GRAND RAPIDS, Mich. — There is no one number that tells the story of all the empty houses, storefronts, offices and factories in the Midwest. But there are many numbers that tell part of the story.
Like this: One out of ten. One out of ten homes in Illinois, Indiana, Michigan, Ohio and Wisconsin was vacant in 2010. That’s according to the U.S. Census.
Or these numbers: Twenty-two percent of office space in the Cleveland area is empty. Chicago offices are 19 percent empty. Metro Detroit: almost 27 percent.
Those numbers are from the real estate firm Grubb & Ellis. Fred Liesveld from the firm’s Detroit office says those numbers have actually been getting better for almost a year. He said of the 27 percent vacancy figure: “We haven’t seen that in a decade. That’s just great news.”
And really, there’s a lot of good news in the Midwest. In every city there’s at least one neighborhood that used to be a lot worse.
Where I live in Grand Rapids, that neighborhood is Heartside. Heather Ibrahim has worked in Heartside for more than a decade, at a non-profit called Dwelling Place. I met up with her during an art event on what used to be one of the neighborhood’s worst blocks.
“Just looking down the street and seeing how many buildings have been revitalized, it’s just amazing,” she said. “It amazes me the changes that have happened.”
Ibrahim says when she first started working in Heartside, maybe half the buildings were falling apart. Now, she estimates 80 percent of the neighborhood has been restored.
But even in Heartside, Ibrahim believes 20 percent of the buildings are still in bad shape. Windows are boarded up. Storefronts are empty.
Now let’s look at Detroit. Last year, a collection of groups called The Detroit Data Collective did a survey of the entire city. What they found is that more than a quarter of the city’s residential space is now completely vacant. We’re not talking about a row of empty houses. We’re talking about an urban prairie.
Jeff Horner, of the urban studies department at Wayne State University in Detroit, has lived in the area all his life. He says he’ll take the prairie over what used to be there.
“You never get used to seeing the same house you drive past that was lost in a fire and here’s still this burned out hulk that just sits there for years,” he said.
And for those who want to just think of this kind of a thing as a Detroit problem, it’s not.
In many ways, Chicago is the shining example of what can go right in the Midwest economy. But after the 2008 real estate crash, the emptiness has been creeping there as well. And, like everywhere, it has a devastating impact.
And now we’re talking about things that can’t be measured in numbers.
“The urban environment has a profound impact on psychological functioning,” said Lynn Todman, an urban planner who works at the Adler School of Professional Psychology. Last year, she did a mental health study in the city’s Englewood neighborhood. The area has been devastated by foreclosures.
Todman says she spoke to one man who had to go into the abandoned houses for his job. The man told Todman about dogfights, squatters and runaway kids.
“I tried to get a little more information out of him about the kinds of things and activities that took place, perhaps things that weren’t widely reported in the news. And he said, ‘you don’t want to know,’” Todman recalls.
Todman says crime-ridden neighborhoods would have crime even if there wasn’t a bunch of vacant buildings. But when there is, the crime can spread. It can affect the people living in the homes that remain.
It can lead to stress, which leads to learning problems for young kids. Heart problems for adults. Drug use.
Add it all up, and Todman says this less-measurable impact of empty buildings – it will go on even after the economy improves and the buildings fill back up.