Research Park growing, but UI tenants help fill the space

Research Park growing, but UI tenants help fill the space

As the University of Illinois prepares to expand its 10-year-old research park onto university land east of First Street, The News-Gazette has spent several months examining how the park has fared in its first decade.

N-G reporters Julie Wurth and Christine des Garennes sought to answer basic questions – just who works in the research park? – as well as broader ones. Has the park fulfilled its promise? What could its future entail? The reporters worked with Marissa Monson and Stephanie Lulay in a UI Department of Journalism partnership. The four spoke with dozens of people and examined hundreds of pages of public documents, some obtained through the state Freedom of Information Act.

The documents included the UI's development agreement with Fox/Atkins and several of its amendments, lease and operations agreements, copies of UI payments to Fox/Atkins, board meeting items, Champaign County tax records and city ordinances.

CHAMPAIGN – At the University of Illinois Research Park, State Farm Insurance runs a consumer research center, Caterpillar operates a simulation center and Archer Daniels Midland has a mathematical modeling center.

Over the years, park tenants have come to include large companies with satellite research operations or local startup companies like R Systems, which built a supercomputer in the park.

One of the more noticeable tenants, however, is not a software firm, engineering company or even a private company.

It's the university itself.

Starting with the Illinois Natural History Survey and the Illinois State Geological Survey, which make up the Forbes Natural History building, and the business incubator EnterpriseWorks, which is home to about 30 different start-ups established by UI faculty, staff or students, the university has always had a presence in the research park.

Since the park's beginning in 2000, the percentage of UI tenants versus private companies in the park has fluctuated, with more UI tenants in the early years.

"Although the university occupies a portion of it, most of the research park, the day-to-day business operations, is being used by the private sector," said Laura Frerichs, the university's associate director of the research park. Before being hired by the UI, Frerichs was a vice president of business development and marketing for Fox Development Corp.

The UI owns all the land in the park, but according to its ground lease with Fox/Atkins, the developer rents the land from the UI for 50 years. The developer builds and manages the buildings.

The park today consists of seven office buildings built by the developer Fox/Atkins: SAIC, Strata, iCyt, Technology Development Fabrication Centers I and II, Z3, and the former Motorola facility, now called the Gateway building. The park also includes the Forbes building and EnterpriseWorks, both owned by the UI; the I Hotel and Conference Center, developed jointly by the UI and Fox/Atkins; and the Fox/Atkins-owned Child Development Center, which contains Chesterbrook Academy and the UI's speech and language pathology clinic.

So how much of the park does the university occupy? The answer depends on how you define it.

Ten university units are now renting about 54,000 square feet of office space in the park's buildings at an annual cost of about $1 million. In addition, the UI takes up all of the 64,620-square-foot Forbes building. UI leases make up 20 percent of park tenants, or 24 percent if the Forbes building is included. However, if you account for private companies within the UI-owned EnterpriseWorks – which houses 32 startup businesses founded by UI faculty, staff, students or alumni – the university presence in the park is closer to 12 percent of tenants. (Four of the companies in EnterpriseWorks are considered affiliates, meaning they have a mailbox and access to shared conference rooms, but they don't actually have an office.)

According to a 2007 survey of North American research parks by the Association of University Research Parks and the Ohio company Battelle Technology Partnership Practice, the typical research park contains 72 percent for-profit companies, 14 percent university facilities, 5 percent government agencies, 4.5 percent retail or service amenities, and the remaining tenants falling into an "other or "park operations" category.

As the UI park was being developed there was no formal arrangement or percentage discussed for the university's presence there, according to Frerichs.

"It's a delicate balancing act, accommodating the needs that the university has but at the same time making sure that we do not restrict or inhibit the initial vision of the park – that's the commercialization of technology," said Ed McMillan, a UI trustee and chairman of the research park's board of managers, which oversees the park.

Filling space

One of the reasons the university selected the local firm of Fox/Atkins as the research park developer in 2001 was that university officials believed the firm could build the park, and build it quickly.

Other Big Ten schools, including Wisconsin and Purdue, for years had been working to attract startups to their research parks. Illinois had some catching up to do.

Perhaps it was no surprise, then, that shortly after the university awarded the contract to Fox/Atkins the developer started breaking ground.

The park's debut was marked by the opening of the Motorola building, which until 2007 was entirely occupied by the company, which relocated there from its design center in Urbana. That was followed by the opening of the Science Applications International Corp., or SAIC building.

Since 2003, a new building has opened in the research park every year. And the UI has offices in a majority of those buildings.

Unlike some other university research parks – such as the Research Triangle Park in North Carolina, which was created in the late 1950s and took several years to start growing – the UI park "didn't lie fallow" for years, said former University of Illinois Chancellor Richard Herman. Herman, who resigned in October, oversaw much of the park's development.

The fact that the university leases offices in the park is "really in response to needing space," Herman said.

Campus Recreation offices relocated to the park during the renovation and expansion of the Activities and Recreation Center. Global Campus also leased space in the park for a time.

The only major UI presence in the park, according to Craig Rost, Champaign's deputy city manager for economic development, are the scientific surveys. And "it makes some sense" for them to be there because of their research function, he said.

"We don't think there's a disproportionate amount of university space in the park. It hasn't been a problem," Rost said.

The park has plenty of big-name private sector tenants, such as Yahoo, Caterpillar, State Farm and John Deere, he said.

"You want those names on the buildings in the park. It helps reinforce that this is more than just a research arm of the university. It's private enterprise."

University offices take up from 9 percent to 27 percent of the total square footage of space in the park (593,000 square feet), depending on how the space is defined. When considering just office leases in research park buildings, the UI has leased about 9 percent of the square footage of space in the park.

Add in the Forbes building and the number rises to 20 percent; add in the conference center and the UI presence almost reaches 27 percent of space in the park. (Square footage percentages do not include the 13,500-square-foot Littelfuse building, which is under construction and expected to be completed next spring.)

Fox/Atkins can build out the shell and core of a new building quickly, but it takes time and money to customize the space for a company's office, Frerichs said. Companies may not want to incur those costs, especially if they're startups. As the university moves out of space that's already been customized, startups can move in with much lower upfront costs, she said.

Several offices formerly occupied by the university are now being filled by businesses, she pointed out. For example, the space formerly leased by the College of Business in the Strata building is now home to consulting firm Waterborne Environmental.

"Over time, you'll see the nonresearch functions out here move back to campus," and that will mean more space available to lease, Frerichs said.

As a temporary measure, it's OK for the university to lease space in the park, "but we're higher than I'd like to be ... for standard offices," Herman said. "I'd rather see a lower percentage" university space, he said.

"I don't see it ever going away," Frerichs said about the university presence in the park. "I would hope over time it would have a greater research focus," compared with office or administrative functions.

The idea that the research park has become a de facto campus expansion is, in Fox's opinion, a fallacy.

"I've never really bought that argument," he said. "The more I can get the academic horsepower of the university out there," the better off the park will be, Fox said.

Keeping tenants

It was, in a sense, the university's academic horsepower that attracted several tenants to the research park in the first place.

University officials and staff members of Fox Development spoke with Abbott Laboratories for years before the company decided earlier this year to open a small research center in the iCyt building, Fox said. The company has long been a sponsor of research projects at the UI.

If a tenant does not have a close relationship with the university, it's easier for someone at corporate headquarters to say "'well, do I need that little piece in Champaign?'" said Ravi Iyer, the UI's interim vice chancellor of research.

Companies that moved to the park have already thought through the negatives of relocating to the so-called Silicon Prairie rather than Silicon Valley on the West Coast, according to Iyer. Challenges such as geographic location are minor compared with the benefits the university offers, he said.

The degree to which research park tenants are connected to the university can vary. State Farm, for example, hires UI students as interns. Other companies, such as Bytemobile, were started by UI faculty or staff.

In addition to having potential access to students and faculty, companies that rent space in the research park have "allied agency" status at the university. That means, for example, they have access to the libraries and athletic facilities and can receive service from CITES, the Campus Information Technology and Educational Services division, which provides data and networking services.

Champaign-Urbana has several different location options for technology or research companies, according to John Dimit, executive director of the Champaign County Economic Development Corp. Those include downtown Urbana, home to OJC Technologies; downtown Champaign, home to gaming company Volition; the Interstate Research Park in northwest Champaign; and the Apollo industrial park in northern Champaign, where chemical research company Obiter, a former UI research park tenant, moved in 2007.

"If you want to stay close to the university ... or be surrounded by other technology companies, the (UI) research park is your place. But each company needs to pursue its own strategy," Dimit said.

Eden Park Illumination, a lighting company that recently graduated from EnterpriseWorks, decided not to remain in the research park. The New Jersey-headquartered company instead moved to a space on Country Fair Drive in Champaign. The research park's available space didn't meet the specifications the company needed, due in part to its large pre-production equipment, said John Vericella, an engineer at Eden Park.

One of the largest employers in the park, until 2007 at least, was Motorola. Neither Motorola nor its employees were newcomers to the area, however. Motorola came from across town.

The Schaumburg-based technology company moved its software design center from East University Avenue in Urbana, where it had been for decades, to the park. As many as 275 employees, many of them software developers, worked in the building from 2001 until August 2007 when Motorola, in the midst of a companywide downsizing, closed the center.

Fox and Atkins ended up buying the 74,000-square-foot Motorola building in 2008 for nearly $8.5 million. And Fox and Laura Frerichs, who worked for Fox until June of this year, courted new businesses to fill the space.

Now dubbed the Gateway building, the former Motorola space is almost half full and contains several companies, including Illini Computing – previously located in the One Main building in downtown Champaign – and wireless technology company Qualcomm.

Motorola's departure was an unexpected setback for the park, and it stalled construction for Fox's next project, the Signature building, a three-story building Fox envisioned in anticipation of Caterpillar expanding its space in the park. Despite the site being ready and the building design complete, Fox said the project is on hold until he can lease more space in the former Motorola building.

In 2006, Fox/Atkins sold two of its buildings in the park – the SAIC building at 1901 S. First St. and the Strata building at 2001 S. First St. – to Chicago real estate firm Romanek Properties for nearly $20.3 million.

Profits from the sale were invested back into the research park, such as the new I Hotel, according to Fox. Fox/Atkins continues to manage those research park buildings for Romanek.

A current challenge for companies is "having to reassess where they are investing their money and what their priorities are. This is a difficult time for everybody," McMillan said.

Startup activity has not been at its high point, and small startup companies have the most trouble moving forward during a recession, said Eileen Walker, chief executive officer for the Association of University Research Parks.

"There is less financing available from outside sources to help companies grow and most have been trying hard to minimize their burn rate by keeping expenses low," Frerichs said. "However, there are some growing areas of funding for startups in the areas of clean tech and biotechnology, and we are seeing more startups in these areas locally as well."

In McMillan's opinion, the research park has fulfilled its goal of allowing startup companies both in Champaign-Urbana as well as Chicago to come to the park and grow from an incubation stage into full-fledged companies.

In another 40 years, the research park buildings not owned by the UI will end up becoming university property unless the university extends the ground lease to Fox/Atkins for another 25 years, according to the development agreement between the UI and Fox/Atkins.

"We didn't expect to just build the buildings and not stick with it," Fox said. "I think for us to fully realize, we're just going to have to stick with it another 10 to 20 years."

Timeline: Major developments in the Research Park

Summer 1999
University of Illinois issues request for proposals from developers interested in building the first phases of the research park.

Fall 1999
The university chooses Fox/Atkins of Champaign as the development firm.

Spring 2000
UI trustees finalize 10-year development agreement with Fox/Atkins.

Late 2000, early 2001
Motorola moves from Urbana into new building near research park.

2001
SAIC building, 1901 S. First St., opens. Tenants now include Caterpillar and UI offices. I-Building, 1816 S. Oak St., opens and eventually houses the Illinois Natural History Survey and Illinois State Geological Survey.

2003
UI's EnterpriseWorks, the business incubator, opens.

Summer 2004
University buys the I-Building (now called Forbes Natural History Building) from Fox/Atkins for $8.2 million.

2004
Strata building, 2001 S. First St., debuts. Tenants include State Farm Research Center, PowerWorld and university offices.

2005
The iCyt building, 2100 S. Oak St., opens. Tenants include the cell-sorting firm iCyt, Bytemobile and CUAerospace.

2006
Information Technology Building, or Z3, opens at 2021 S. First St. Tenants include John Deere and university offices. Technology Development and Fabrication Center I, 2111 S. First St., opens. Tenants include Watchfire Signs, R Systems and university offices.

Summer 2006
Fox/Atkins sells two research park buildings (SAIC and Strata buildings) for almost $20.3 million. The buyer is Romanek Properties of Chicago. Fox/Atkins continues to manage the buildings.

Summer 2007
Motorola vacates its building; Yahoo enters the park.

Fall 2007
Archer Daniels Midland moves into the research park. Chesterbrook Academy, a day care, and the UI Department of Speech and Hearing Science clinic open.

Summer 2008
Fox/Atkins purchases Motorola building, renames it the Gateway building. I Hotel and Conference Center opens.

Late 2008, early 2009
Technology Development and Fabrication Center II, 2109 S. First St., opens.

Summer 2009
University issues a request for information from developers for the next phase of the research park, the area east of First Street, south of St. Mary's and north of Windsor Road.

Summer 2009
UI begins construction on a $6 million Natural History Survey building to be located at the northwest corner of Oak Street and Hazelwood Drive.

Fall 2009
University issues a request for formal proposals from developers interested in the next phase.

Winter 2009/2010
UI interviews potential developers for the next phase of the research park, land east of First Street and south of the I Hotel and Conference Center.

Spring 2010
Development agreement for the first phases of the park, between university and Fox/Atkins, is set to expire. UI Board of Trustees awards new development agreement to developer.

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