'Any broker's biggest challenge': Future use of Sears HQ in Hoffman Estates a puzzle
After 30 years as the corporate successor to what was once the world's tallest building, the Sears headquarters in Hoffman Estates will be getting a new purpose this year as soon as the sprawling property is listed for sale.
The party or parties that take on that mission will require two things: an amount of money agreeable to owner Transformco — the company that emerged from Sears Holdings' bankruptcy — and an idea compatible with the vision of Hoffman Estates officials.
The aesthetics of the campus' 2.4 million square feet of office space are well known in the world of commercial real estate, as are the surrounding 120 undeveloped acres.
But as village officials consider their preferences and the options a buyer may bring them, they are focused less on the existing buildings than on identifying an experienced master developer with a well-conceived plan.
Mayor Bill McLeod, Village Manager Eric Palm and Economic Development Director Kevin Kramer say the time frame of even the first few steps of the process are difficult to predict. But for various reasons, they think it unlikely a final plan will be in place by year's end.
The size and location of the site make it a very different prospect from the redevelopment underway that's turning the former AT&T headquarters near Interstate 90 and Barrington Road into the Bell Works Chicagoland “metroburb” combining office, multifamily residential, restaurants, retail and entertainment.
The Sears site totals 273 acres, nearly twice as large as the 150-acre Bell Works property.
Kramer said anything short of an image on a map makes it difficult to convey the amount of land in play on the Sears campus. He thinks he probably won't get as many calls as he did for the AT&T property.
“With something this size, there's going to need to be more creativity involved,” he said.
How long it will take to find an interested buyer is one of the biggest questions about the property's future, said Jack Reardon, senior vice president of Oakbrook Terrace-based commercial real estate firm NAI Hiffman.
“We're in the middle of a pandemic,” Reardon said. “I couldn't think of a worse time to try to sell 2.4 million square feet of office.”
Having found tenants for some of the campus's vacant space in the past, Reardon said the facility's amenities are amazing outside and in.
But the site is several minutes further west on I-90 from Bell Works. The two former campuses once represented about a sixth of the Northwest suburbs' total office space, Reardon said. And the market wasn't absorbing office space quickly, even before the pandemic.
The site's next owner will inherit an estimated $7 per-square-foot annual cost for the facility's property taxes and upkeep — about $16.8 million a year, Reardon said. A buyer hoping to retain the current office use would have to lease at least a quarter of it — 600,000 square feet — just to break even, he added.
Reardon dubbed the marketing of the Sears site “any broker's biggest challenge.”
Colliers International is that broker, but it referred all requests for comment to Transformco, which did not respond.
What isn't known yet is exactly when the property will be listed and how much Transformco will ask for it.
Past speculation about other uses for the Sears campus have involved an educational facility or a mall, but the market wouldn't favor either one right now, Reardon said. He suggested — only half-jokingly — that the site is more likely to become an organic farm than a mall.
The industrial market is hot right now, but Reardon said he didn't know how open village officials would be to it. An architect would know better than he whether it might be possible to retain any of the existing structures for industrial use, he said.
The proximity of the Prairie Stone Business Park and Now Arena to the east made residential development unlikely, according to Reardon.
Palm said the village would be open to a residential component of the property, as it has been in the past, but he agrees that it is likely not the predominant future use of the Sears site.
He also said the village would be much more open to light industrial uses than something that would make the site a center of intensive trucking activity as currently seen along the Interstate 55 corridor.
McLeod emphasized that he sees the prospect of new interest in the site as an opportunity for the village.
“Let's see what ideas people have,” he said.