World’s Biggest Pinball Machine Maker Expands
From “World’s Biggest Pinball Machine Maker Expands After Bump in Demand” – CoStar.
The world’s largest maker of pinball machines is more than doubling its size, expanding into two buildings near Chicago’s O’Hare International Airport as the vintage game finds new players across the world.
Stern Pinball signed new leases for research and development, office and manufacturing space in Elk Grove Village, Illinois, Vice Chairman Dave Peterson told CoStar News. He owns the company along with Gary Stern, the company’s founder and chairman.
Although pinball may seem like a piece of American nostalgia, the business has been boosted by technological advances and newfound customers in Canada, Australia, Europe and Asia, Peterson said.
Domestically, businesses such as microbreweries have helped drive the game’s popularity, he added. And many customers are putting machines in their homes.
“The business has been growing at 20% to 30% per year, and we expect that growth to continue for the foreseeable future,” said Peterson, declining to provide revenue figures. “Right now, our space is really, really tight.”
The added demand is playing out as Stern employees try to come up with newer themes, as well as those with enduring appeal, for its games, including Stranger Things, James Bond, The Beatles, Spider-Man, Led Zeppelin, Godzilla, AC/DC, Teenage Mutant Ninja Turtles, Ghostbusters and Star Wars.
While the games incorporate new technology, manufacturing is labor intensive, with parts provided from more than 100 suppliers before the pinball machines are assembled by hand, Peterson said. Though today’s pinball games still include the traditional steel ball being slapped around by button-activated flippers, they’re more likely to incorporate an internal computer, a complex wiring system and a digital display.
Stern’s real estate deals come as the company, which has 450 employees, expects to add 40 to 50 workers annually to keep up with rising demand, Peterson said. The firm is one of the last major players in the pinball industry.
The company’s expansion in the Chicago suburb comes after it considered incentive packages to relocate to Indiana, Wisconsin or Tennessee, Peterson said.
“Those are attractive environments for doing business, and that’s why we considered them,” he said. “The modern pinball business was basically built in the Chicago area. We felt an allegiance to Chicago and to Illinois in general.”
Stern is expected to receive $2 million in tax increment financing from Elk Grove Village to help fund the move and expansion, the Arlington Heights, Illinois-based Daily Herald reported.
The company has been in Elk Grove Village since relocating to its 106,000-square-foot facility at 2001 Lunt Ave. from nearby Melrose Park, Illinois, in an expansion in 2015.
Stern said it will leave Lunt Avenue in the second or third quarter for its 163,875-square-foot block of space at 1001 Busse Road. That will serve as the company’s headquarters, with space for product development, manufacturing and distribution, Peterson said. FedEx leases the rest of that 268,494-square-foot warehouse, according to CoStar data.
Also in Elk Grove Village, Stern leased the entire 65,340-square-foot building at 1275 Touhy Ave. for manufacturing, Peterson said.
Tight Industrial Market
Stern is expanding at a time when overall industrial vacancy in the Chicago area is at 4%, one of the lowest levels in two decades, according to CoStar data. That has led overall rents to increase 8.2% over the past year.
With options limited, Stern explored build-to-suit developments, said Cushman & Wakefield broker Keith Puritz, who represented the tenant.
Because there is little development land available near O’Hare, a custom-built facility probably would have required moving to a different part of the Chicago area or outside the state, he said.
Stern chose to stay nearby when it found enough manufacturing and office space, as well as adequate parking.
The Busse Road space is being vacated by logistics firm Kuehne+Nagel USA in a relocation. The building includes about 55,000 square feet of offices on two levels, Puritz said.
The labor-intensive nature of making pinball machines also made it trickier to find the right building: “They needed about 350-car parking, which is not easy to come by for 165,000 square feet,” he said.
For the Record
Stern Pinball was represented in the leases by Cushman & Wakefield brokers Puritz, Brett Kroner and Eric Fischer. Prologis, which owns the 1001 Busse building, was represented by Cushman & Wakefield’s Britt Casey, Al Caruana and Michael Labek. Steiner Electric, which owns 1275 Touhy, was represented by NAI Hiffman’s Bruce Granger.
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