McDonald's May Leave Suburb for Oprah's Old Chicago Studio

Golden Arches Moves Forward With Plan to Relocate as More Companies Head Downtown for Talent

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Less than a year after pulling the plug on a potential move to downtown Chicago, fast-food giant McDonald's is near a deal to shift its headquarters to the former Harpo Studios campus in the city's Fulton Market district.

McDonald's is in advanced negotiations with Sterling Bay to move its headquarters to well over 300,000 square feet in a structure the Chicago developer plans to build on Randolph Street, according to people familiar with the deal.

The office development is planned on Oprah Winfrey's former Harpo Studios campus, which Sterling Bay bought for $30.5 million in 2014.

If the lease is completed as expected, it will continue a trend of well-known suburban companies such as Kraft Heinz, Motorola Mobility and Motorola Solutions moving headquarters downtown. Yet perhaps no company is more synonymous with a particular suburb than McDonald's is with Oak Brook.

McDonald's has some 2,000 corporate employees spread throughout the western suburb, including at its U.S. headquarters building just off Interstate 88 and its global corporate offices and training center on its campus tucked away in a wooded preserve-like area.

"We're not going to speculate, and when we have information to share it will be with our employees first," McDonald's spokeswoman Becca Hary said.

A Sterling Bay spokeswoman did not respond to requests for comment.

The deal comes about nine months after McDonald's backed out in the final stages of a deal for more than 350,000 square feet at One Prudential Plaza near Millennium Park.

McDonald's is believed to have considered several existing office buildings as well as potential new projects before settling on Sterling Bay's redevelopment west of the Loop and the Kennedy Expressway in the northwestern edge of the West Loop.

After former Harpo buildings are demolished, construction of the new office building McDonald's will occupy is expected to be completed by 2018.

In the Fulton Market neighborhood, the company known for hamburgers will move to an area long associated with meatpackers and food distributors. The area has been changing rapidly in recent years, with newcomers including Google's new Midwest headquarters two streets north of the Harpo campus at 1KFulton—another Sterling Bay development, in which it converted the former Fulton Market Cold Storage building at 1000 W. Fulton Market to office space—and the Soho House hotel and private club.

After putting plans for a headquarters move on hold for a while and evaluating its real estate options, McDonald's earlier this year interviewed office brokers to represent the company as it launched another downtown search.

Office tenant broker Todd Lippman, a CBRE vice chairman who is representing McDonald's, did not return calls.

McDonald's long-running search has sparked unending rounds of speculation among the city's real estate community and the rank-and-file in Oak Brook.

CEO Steve Easterbrook was asked about the rumors at the company's annual shareholder meeting last week. He said the company "is committed to leaving no stone unturned" in its effort to improve its business, which includes evaluating its facilities.

He also told employees in a February meeting that its sprawling Oak Brook campus is showing its age and becoming more difficult and expensive to maintain, with some buildings in need of repair.

It's unclear whether McDonald's intends to retain any of its structures or land in Oak Brook, or how many employees it plans to move downtown.

The company opened a 12,000-square-foot office in River North for digital employees in 2015.

Mr. Easterbrook, who took the reins just over a year ago, has focused on injecting more life and energy into the wobbling burger giant, which had struggled to keep pace with a wave of nimbler competitors.

So far he's cut costs, announced a plan to sell off more restaurants to franchisees and taken on billions in new debt to fund share buybacks and shareholder dividends. On top of that, he's enhanced the company's focus on a digital strategy and embraced a corporate reorganization focused on cutting fat.

But most of his focus has been on the restaurants themselves. McDonald's has cut menu items, simplified drive-thrus, overhauled packaging and started offering breakfast all day. It has simplified recipes and vowed to clean up its food by removing artificial ingredients and fillers.

Sterling Bay has landed suburban relocations in the past, converting a former industrial building at 400 S. Jefferson St. for the headquarters of Sara Lee spinoff Hillshire Brands when it left Downers Grove and landing in-flight wireless provider Gogo at 111 N. Canal St. in a move from Itasca.

The McDonald's deal is contingent on Sterling Bay gaining zoning approval from the city for the office development on the site, bounded by Randolph, Aberdeen and Carpenter streets and Washington Boulevard.

Sterling Bay has been planning an eight-story, 550,000-square-foot building at 1045 W. Randolph St., branded as Randolph West, according to real estate data provider CoStar Group. But Sterling Bay is believed to be seeking zoning to build a larger structure on the site.

Ryan Ori and Peter Frost write for Ad Age's sibling publication Crain's Chicago Business.

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