Twenty-one years after Boeing arrived in Chicago, the major defense contractor and airplane-maker is moving its global headquarters out of the city, the company said Thursday.
Boeing will relocate to Arlington, Va., where it will also create a research and technology hub. The move will bring company executives closer to federal officials, according to ChicagoTribute.
“The region makes strategic sense for our global headquarters given its proximity to our customers and stakeholders, and its access to world-class engineering and technical talent,” Boeing CEO Dave Calhoun said in a statement.
Boeing said it planned to “maintain a significant presence” in Chicago and the surrounding area, but that less office space would be needed in Chicago after two years of flexible and virtual work. The company did not immediately respond to questions about what its continuing presence would look like.
The move was first reported by the Wall Street Journal.
Boeing is the latest company to move employees out of Chicago, as the city’s downtown and office market reel from two years of the COVID-19 pandemic. In December, United Airlines announced it would move 900 employees — more than a quarter of its downtown workforce — from its Willis Tower headquarters to a new location in Arlington Heights.
Boeing’s headquarters have been at 100 N. Riverside Plaza since 2001, when Chicago beat Denver and Dallas in a high-profile contest to win the corporate office. Boeing employs more than 700 people in Illinois, according to company figures.
The move brought relatively few jobs, but a great deal of prestige for Chicago. It also came with a pricetag: both Illinois and Chicago offered incentive packages scheduled to last 20 years,the Tribune reported at the time.
Boeing’s move will now open another sizable hole in a downtown office market. The company occupies 285,000 square feet on 13 floors in the 36-story riverfront tower, which totals more than 1.1 million square feet, according to CoStar Group.
And even though thousands of office workers recently began streaming back to the Loop for at least several days a week, more empty spaces kept popping up in 2022, a sign that the market still hasn’t recovered from the two-year-old pandemic. The downtown vacancy rate jumped to 19.7% by the end of March, according to a report from commercial real estate firm Colliers International, up from 17.9% at year’s end.
But a Colliers’ office broker said Boeing’s exit doesn’t raise fears that a larger corporate exodus is starting.
“This isn’t really about Downtown Chicago as much as it’s about Boeing’s need to be near Washington D.C. where many of their contracts come from,” said David Burden, a Colliers’ principal.
Chicago’s high vacancy rate largely stems from a lot of empty spaces throughout older office buildings in places like the Central Loop, he added, but eager tenants keep moving into gleaming new towers along the Chicago River and to the west in Fulton Market, the city’s hottest market. 100 North Riverside was already 15 years old when Boeing bought it for $165 million in 2005, but it has qualities that should get office users in the door, especially if it undergoes a renovation, according to Burden.
“There are a lot of tenants that are now looking for 100,000 square feet or so in the next three years, and the Boeing building would be an attractive option,” said Burden. “Tenants want to be by the river and near the [Metra] trains, or in Fulton Market.”
Mayor Lori Lightfoot said the city expects announcements of “major corporate relocations and expansions” in the coming months. She said 173 corporations relocated or expanded in Chicago in the past year, and 67 had done so since the start of 2022.
“What remains to be true is that Chicago is a major hub for global corporations that recognize our diverse workforce, expansive infrastructure and thriving economy,” she said in a statement.”
Boeing’s move comes as the company has faced a slew of challenges in recent years. Boeing 737 Max airliners were grounded for 20 months beginning in 2019 after two crashes killed hundreds of people, and production flaws have halted delivery of 787 Dreamliners since 2021.
In late April, the company reported a first-quarter loss of $1.2 billion. It said it had increased production and deliveries of its 737, and submitted plans for FAA certification of the 787.
Boeing’s apparent move may make sense from the perspective of wanting to be closer to the government decision makers in Washington, D.C., as well as international customers, a production facility in South Carolina and NASA missions in Florida, travel industry analyst Henry Harteveldt said.
But the move would take company leaders further away from their large manufacturing facility outside Seattle, while the company’s production problems suggest executives should have greater oversight of the production process, said Harteveldt, principal at Atmosphere Research. Boeing also needs new airplanes to fill gaps in its lineup, while its main competitor Airbus continues to do well.
“What concerns me is that Boeing leadership needs to be closer to its employees,” Harteveldt said. “It’s clear that by not being on site things aren’t going as well at Boeing. The message it sends to people in Seattle is, you’re just not that important.”