Richard Gatto
April 25, 2017

Caterpillar’s move, although significant, does not really change the direction of the suburban market

CHICAGO—Officials of Peoria, IL-based Caterpillar Inc. made a big splash last week by announcing they would soon relocate to suburban Deerfield. Instead of leasing a new office in the CBD, Caterpillar reached a multi-year leasing agreement with Corporate 500 office park, and expects about 100 employees to relocate this year, with about 300 people in the new headquarters by mid-2018.

The move is a bit against the grain, as so many suburban firms have recently decided to shift their operations downtown. But it is probably a mistake to read too much into the decision, or to believe it’s the start of anything like a trend.

“It is an old line, industrial manufacturing company, and its millennial population is probably limited,” Richard Gatto, Oak Brook, IL-based executive vice president of Alter, tells Many companies base their real estate decisions on whatever will best attract and retain employees, and unlike for Caterpillar, usually that means millennials. “They also probably have a lot of executives who want to live on the North Shore.”

Therefore, he is not surprised that the company chose a suburban location. “I would love to say it’s a trend, but in all fairness, the choice is probably an anomaly.”

And Caterpillar’s move, although significant, does not really change the direction of the suburban market. “I was hoping that they would take over McDonald’s space,” he adds, referring to the fast food giant’s Oak Brook campus, a landmark that was considered cutting edge 30 years ago. That company has decided to leave its longtime home and join the migration of firm’s such as Google and settle in Chicago’s hot West Loop neighborhood.

“What’s hurting the suburban office market is that large companies are not absorbing spaces left vacant,” Gatto says. Instead, the ones still committed to the suburban market, such as Schaumburg, IL-based Zurich North America, simply build new spaces, “leaving it to small- and medium-sized firms to absorb vacancies.”

It’s not as if Caterpillar and other suburban firms are ignoring downtown. In fact, like many others, Caterpillar recently opened up a satellite CBD office that handles high-tech analytics. Located in Chicago’s Merchandise Mart, a tech-heavy community, it can draw in the younger workers that Caterpillar needs.

Gatto says this is a good example of how today’s corporations are in some ways creating two separate labor forces. People between the ages of 40 and 55 have spent much of their working lives with their own dedicated spaces, and “it’s hard to take that person and co-mingle them with some 25-year-old who wants to bring their dog to work.” And if that older person works in a suburban campus, “the last thing they’re going to want to do is schlep downtown.”

To blend the two, suburban firms will need a way to get younger folks that live in the city to commute. But even though it’s easy enough for a young person living in Bucktown to get out to Downers Grove by train, many outlying offices also require a bus transfer. A one-seat commute is probably necessary. “Until you can do that, you’re going to be working with an aging workforce.”

Gatto still believes that the penchant among the young for urban living will change with time, and ease the ability of suburban firms to attract talent. City life has definite advantages, of course, especially the many cultural and nightlife options. “That’s great until you have three kids,” he says. This age cohort may be on the same track their parents took, but aftereffects of the economic crisis, along with other factors such as student debt, have placed obstacles in their path. “They’re just getting started later.”

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