Why building to suit suits many just fine

Out of necessity as well as efficiency, several major Chicagocorporations are having their own customized headquarters built thisyear.

Several others would have, too, but their upcoming leaseexpirations didn't allow the luxury of waiting for a new building tobe planned, designed and constructed.

One of the city's top leasing consultants, broker Brenda Sextonof Julien J. Studley Inc., has been in the center of much of thisactivity. And she has concentrated on a market she sees as secure asany in today's economy: corporate America.

"Corporate America hasn't died," said Sexton, Studley'scorporate managing director. "Among my clients, the Hartford(insurance company) is a tremendously strong company, Brunswick hasbeen in business for so long, and Angus Chemical is a super success.Life goes on for corporations of this type. They still need realestate to meet their objectives."

Brunswick and Angus Chemical are having headquarters constructedfor them, Brunswick in Lake Forest and Angus in Buffalo Grove.Cincinnati Bell and the Hartford, other Sexton clients, would like tohave done the same, but couldn't. Cincinnati Bell moved into one ofthe diminishing number of buildings with large space available, 2Pierce Place in Itasca, and Hartford renewed its downtown lease.

"In creating their own buildings, Brunswick and Angus add valueto those communities," Sexton said.

It seems strange in these overbuilt times that companies thatwould like to take advantage of the reasonable rents and giveawaysare stymied if they need large amounts of suburban space. TheHartford renewed at 200 W. Madison after considering a combination ofits suburban and downtown units in 200,000 square feet in thesuburbs.

"Hartford's original agenda was to move to the suburbs, but weproved that by staying downtown, they would save a substantial amountof money," Sexton said. "There are so few big spaces available."

Spiegel - not a Studley client - made the decision to haveHamilton Partners build its new headquarters in Downers Grove because"they really had no choice," Sexton said.

By doing so, corporations also gain in company pride andefficiency, Sexton said.

"Angus has its headquarters in one building and its laboratoryfacilities in another," she noted. "Both are cramped and presentfunctional problems. There is a lot of shuttling back and forth.Having a single building will change the nature of the company byreally integrating the product-development people with the salesforce."

Brunswick will own its headquarters, under development byHamilton Partners at Conway Park in Lake Forest. Angus Chemical isset for 20 years at its leased space, in a Buffalo Grove facilitythat fits its needs precisely.

While rents are extremely attractive in existing buildings,Sexton says companies that can commit for 15 years or more shouldseriously consider building to suit.

Van Pell seeks capital. Stein & Co. has made another move tocontinue its "growth" strategy while other companies are worriedabout their "recession" strategy these days.

The company has landed Van Pell, one of the most experiencedcapital-markets experts during his years as a top executive atRomanek-Golub, Balcor Co. and most recently as head of his own firmin Louisvile, Ky. As executive vice president and chief financialofficer, he will seek capital to support Stein's development andacquisition programs.

"While the real estate capital markets have changeddramatically, they are not gone," Pell said. "There is capital, butit is very selective and low-risk. I will be the day-to-day liaisonwith a wide range of capital sources that change almost on a dailybasis throughout the world."

Pell thinks capital for 1992 real estate activity will come frompension funds ("truly long-term investors"), foreign investors andfunds that Wall Street has created just to take advantage of thedepressed real estate market. That activity could be strong incertain areas for specific kinds of real estate, such as industrialin the Midwest, apartments in Texas and build-to-suit in a number ofareas, he believes.

With the total shutoff of construction, a strong landlord'smarket will replace the decade-long tenants' market by the mid-1990s,Pell predicts.