Sears to Move Core Group to Chicago Suburb
Sears, Roebuck & Co., whose name has been synonymous with Chicago for more than a century, said Monday that it is moving its giant merchandising division--the retailer’s heart and soul--to the suburbs 30 miles northwest of its landmark 110-story tower.
Long the cornerstone of Chicago’s powerful mercantile establishment, Sears’ decision to leave downtown for suburban Hoffman Estates is an economic setback for the city. But it is a major victory for Illinois, which waged a months-long war of incentives with several Sun Belt cities and states eager to be home to the biggest division of the nation’s largest retailer.
For the record:
12:00 AM, Jun. 28, 1989 FOR THE RECORD
Los Angeles Times Wednesday June 28, 1989 Home Edition Business Part 4 Page 2 Column 5 Financial Desk 1 inches; 35 words Type of Material: Correction
A chart in Tuesday’s editions on Sears, Roebuck & Co. incorrectly suggested that the information it carried was for the company’s entire merchandise group. In fact, the information reflected the merchandise group’s operations in Illinois only.
The competition was triggered last October when Sears unveiled a major overhaul that included selling its landmark Sears Tower in Chicago--the world’s tallest building--to fend off a possible takeover attempt.
Illinois guaranteed Sears more than $61 million in state-financed incentives to keep the division, which currently has 6,000 employees in the state. Incentives from Hoffman Estates are worth an estimated $178 million more. The incentives range from new highways and state-financed sewers to tax exemptions and a $1-million loan for Sears to construct a day-care center.
“It is the largest (job) retention offer ever put forward by the state,” said Gov. James R. Thompson. “In the end, Sears concluded that Illinois has as much or more to offer than its competitors.”
Plans for Site
Picking a site for the move “was the most difficult decision that I’ve been faced with in my life,” said Edward A. Brennan, Sears chairman and chief executive, who was consistently vague on details about the move, the plans for the site and the number of employees the merchandising group eventually will have.
The field of possible locations previously was narrowed to a handful that included Dallas-Ft. Worth, Charlotte and Raleigh-Durham, N.C., and Chicago. Negotiations for the Hoffman Estates location were concluded Sunday.
Sears plans a 1.6-million-square-foot, campus-style office complex on 200 acres of the more than 700 acres it has optioned in Hoffman Estates. It plans to offer the remainder of the site to other companies for regional and headquarters offices. Sears expects to develop the site over the next 25 to 30 years, Brennan said.
“It will be a very efficient and very economical facility and completely in keeping with our announced intent to (be) very cost efficient,” Brennan said of the planned office complex. While the Hoffman Estates site will be the merchandising group’s sixth headquarters since Richard Sears and Alvah C. Roebuck formed a partnership in 1887 and pioneered catalogue retailing, it is the first to be outside Chicago proper.
Hoffman Estates is a bedroom community of middle- and upper-middle-income housing. It has a population of 45,000. A third of the 18.5-square-mile city is county-owned forest preserve.
The Sears move is certain to provide additional fuel to the already booming corporate office development that is transforming the area northwest of Chicago into a major satellite business center.
The move, beginning in 1992, eventually will leave 1.8 million square feet of office space vacant in downtown Chicago--enough to equal a 50- to 60-story skyscraper. The relocation of the merchandising group also will have a ripple effect expected to hurt the downtown Chicago economy at least temporarily.
Among the sectors likely to feel effects of the move is the highly competitive hotel market. Business generated by the merchandise group fills 26,000 hotel rooms a year.
Smaller Offices to Stay
“In the long run this city will survive,” said a disappointed Chicago Mayor Richard M. Daley, who expects the impact to be temporary with additional development and higher property taxes generated by the sale of Sears Tower making up for the loss of the merchandising group.
Sears will keep its smaller corporate offices in Chicago and maintain about 600 of its 1,300 corporate jobs in the Sears Tower.
Brennan refused to project how many of the current 6,000 jobs in the merchandise division in Chicago would survive “organizational adjustments.”
“We will take the entire merchandise group,” Brennan said, “But I wouldn’t want to comment on numbers. . . . We are in the process of studying our organization . . . and we will have organizational adjustments.”
Sears’ agreement with Illinois contains no employee numbers, according to Jay R. Hedges, director of the state’s economic development agency. “Sears is uneasy about projecting exactly what their employment will be in three years when they end up moving. We don’t want to tie their hands.”
Illinois is preserving jobs that, alone, are estimated to generate $5 billion in taxes in a decade.
“As they say at Sears, ‘We’re getting our money’s worth and a whole lot more,’ ” said Hedges.
MERCHANDISE GROUP AT A GLANCE
Annual merchandise purchases (based on retail prices): $1.082 billion
Merchandise suppliers: 606
Retail Stores: 37
Total facilities: 261
Catalogue and direct marketing
Specialty Stores (Eye Care Centers of America, Pinstripes Petites, Inc., Western Auto Supply, Sears Business Systems Centers)
Home Improvement Products and Services
Sears Roebuck de Mexico
Joint ventures (With Walt Disney Co. for Sears/Disney merchandise line and with McDonald’s for McKids line)
*National employment figure
The Sears Tower may be a landmark, but selling the crown jewel of Chicago’s skyline could prove complex. Part I, Page 1.