Some 20 years after Boeing arrived in Chicago, the defense and aircraft manufacturer is relocating its global headquarters out of the city, the company announced on Thursday.
Boeing will move its headquarters to its campus in Arlington, Virginia will also create a research and technology center nearby. The move brings company executives closer to federal officials.
“The region makes strategic sense for our global headquarters due to its proximity to our customers and stakeholders and access to world-class engineering and technical talent,” Boeing CEO Dave Calhoun said in a statement.
The move will not result in any major job cuts or relocations in Chicago, and the company will continue to employ more than 400 people in the city, Boeing spokesman Paul Lewis said. Still, the company will shed office space as it needs less, as telecommuting has led to more flexible work options.
The move was first reported by the Wall Street Journal.
Boeing is the latest company to downsize in Chicago as the city’s downtown and office market has reeled from two years of the COVID-19 pandemic. In December, United Airlines announced it would relocate 900 employees — more than a quarter of its downtown workforce — from its Willis Tower headquarters to Arlington Heights.
Boeing’s headquarters have been at 100 N. Riverside Plaza since 2001, when Chicago beat Denver and Dallas in a high-profile competition for the company’s headquarters.
The move brought relatively few jobs but great prestige to Chicago. It also came with a price tag: both Illinois and Chicago offered controversial bids Incentive packages are said to last 20 years, the Tribune reported at the time.
Lewis said Boeing applied for the incentives annually and did not pursue any in the most recent fiscal year.
Boeing will not receive government incentives from Virginia. A spokeswoman for the Arlington County Economic Development Office did not immediately respond to questions about whether local incentives had been offered to Boeing, The Associated Press reported.
Boeing’s downsizing will now leave another hole in downtown Chicago office market. The company occupies 285,000 square feet over 13 floors in the 36-story riverfront tower totaling more than 1.1 million square feet, according to CoStar Group.
And though thousands of office workers have recently been flocking back to the Loop for at least several days a week, more and more vacant spaces are cropping up in 2022, a sign the market still hasn’t recovered from the two-year-old pandemic. According to a report by commercial real estate firm Colliers International, the downtown vacancy rate rose from 17.9% at the end of the year to 19.7% by the end of March.
However, a broker for Colliers’ office said Boeing’s exit does not raise fears that a major corporate exodus is beginning.
“This isn’t really about downtown Chicago, it’s about Boeing needing to be close to Washington, DC, where a lot of their contracts come from,” said David Burden, a director at Colliers.
Chicago’s high vacancy rate stems largely from lots of empty space in older office buildings in places like the Central Loop, he added, but eager tenants continue to move into shiny new towers along the Chicago River and to the west in Fulton Market, the city’s hottest market . 100 North Riverside was 15 years old when Boeing bought it for $165 million in 2005, but it has qualities that should open the door for office users, especially when renovated, Burden says.
“There are many tenants now looking for about 100,000 square feet over the next three years, and the Boeing Building would be an attractive option,” Burden said. “Renters want to be on the river and close to the (Metra) trains or Fulton Market.”
Mayor Lori Lightfoot said the city expects announcements of “major corporate moves and expansions” in the coming months. She said 173 companies moved or expanded to Chicago in the past year, and 67 have done so since early 2022.
“What remains true is that Chicago is an important hub for global businesses that recognize our diverse workforce, expansive infrastructure and thriving economy,” she said in a statement.
Still, Boeing’s move will be felt in Chicago. Such companies “help fuel Chicago’s economic engine and our iconic position in the global state,” Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, said in a statement.
“Although his absence will be felt, Boeing’s tenure in Chicago is a testament to our city’s civic awareness and the strength of the public-private partnerships that have brought them here,” he said. “We have many such strengths, and as long as we continue to invest in our competitiveness, our businesses and residents will thrive.”
Boeing’s move comes as the company has faced a number of challenges and a strained relationship with the Federal Aviation Administration in recent years. Boeing 737 Max planes were grounded for nearly two years from 2019 after two crashes killed hundreds and production defects halted deliveries of 787 Dreamliners.
In late April, the company reported a $1.2 billion loss for the first quarter. It said it has increased production and deliveries of its 737 and submitted plans for FAA certification of the 787.
When it moves, Boeing will join rival defense contractors already in the DC area, including General Dynamics, Lockheed Martin and Northrop Grumman.
Boeing’s move might make sense from the perspective of being closer to government decision-makers in Washington, as well as international customers, a manufacturing facility in South Carolina and NASA missions in Florida, said travel industry analyst Henry Harteveldt.
But the move would move company leaders further away from their large manufacturing facility outside of Seattle, while the company’s production problems suggest executives should better oversee the production process, said Harteveldt, director at Atmosphere Research. Boeing also needs new planes to fill gaps in its lineup, while its main competitor Airbus continues to do well.
“What worries me is that Boeing’s leadership needs to be closer to their employees,” Harteveldt said. “It’s clear that Boeing doesn’t do well when you’re not there. The message it sends to the people of Seattle is, you just don’t matter that much.”
The Associated Press contributed to this