Dermody Properties has purchased the insurance giant's headquarters and plans to complete five warehouses totaling 1.2 million square feet within a year. Dermody Properties announced that it closed on its $232 million purchase on the 232-acre site at 2775 Sanders Road and is beginning the first phase of its massive redevelopment plan to demolish the insurance giant's longtime headquarters and develop a 10-building, 3.2 million-square-foot logistics park.
The purchase comes almost a year after Allstate announced its agreement to sell to Dermody and three months after the village of Glenview signed off on an incentive package for the developer. It called for taking on a project that stands to generate some $135 million in new tax revenue for the municipality.
Crain's Chicago Business states that the deal paved the way for Dermody to take on a huge amount of local industrial development at a time when there is booming demand for space to store and distribute products that people buy online. 37.5 million square feet of warehouse space was under construction in the Chicago area during the third quarter and broke the all-time record of 30.1 million square feet in the second quarter of 2021 according to Colliers International report.
The amount of new supply in the works does add some risk to the deal for Dermody, which is building the first projects on speculation and without any tenants signed up in advance. But, that is not unusual for industrial developers and 80% of the square footage under construction in the area today is built on speculation, according to Colliers, but warehouse demand has slowed a bit this year due to recession fears.
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The Chicago area is one of the largest industrial warehouse hubs in the country, with nearly 1.5 billion square feet of space, and the vacancy rate stands at more than 4.5% which is a record low.
Adding to this supply will be the 100 plus acre first phase of Dermody's project, which it plans to complete by the third quarter of 2023. They will reserve the remaining 125 acres on the Allstate campus along Interstate 294 for multiple build-to-suit projects or a single building of up to 2 million square feet.
"This redevelopment project stands at the intersection of two significant and durable trends - work from home and e-commerce. The conversion of the office campus - with buildings dating back to the 1960's and '70's - into modern logistics buildings offers many benefits to the community."
Dermody President | Doug Kiersey
RE Journals reports that the project design will incorporate highly attractive exteriors and will benefit from the repurposing of existing mature landscaping and ponds to ensure that the development integrates smoothly into the community visually. Dermody Properties plans to preserve 50 years of plant life and growth on the site with an effort to relocate hundreds of trees to complement the industrial buildings.