By Robyn A. Friedman
Earlier this month, online travel agency Expedia Inc. said it
plans to relocate its headquarters from a Seattle suburb that it
has called home for nearly 20 years to the city's downtown. That
announcement was the latest in a string of high-profile companies
making moves from the suburbs back to the city.
Last year, Motorola Mobility LLC unveiled its new
600,000-square-foot global headquarters in downtown Chicago, a
return to the city after nearly 40 years in the suburbs. Archer
Daniels Midland Co. also moved to downtown Chicago from Decatur,
Ill.
The trend illustrates how decisions companies are making about
relocations have come full circle. "In the late 60s and early 70s,
CEOs in places like New York City fled the city and moved to the
suburbs, leading to the growth of Westchester County, [N.Y.]
Stamford and Greenwich, Connecticut," said Ed McMahon, a senior
resident fellow for the Urban Land Institute. "In those days, the
determining factor was where the CEO of the company wanted to
live."
Now, large companies are moving back into the city in an attempt
to attract and retain workers--particularly younger workers who are
postponing homeownership and favor renting in walkable
neighborhoods with easy access to restaurants, shopping and
cultural opportunities.
Walkable locations aren't just good for employee recruitment;
they also can be good for the bottom line. According to Real
Capital Analytics Inc., a commercial real estate data and analytics
firm, prices for commercial properties in highly walkable locations
show significantly greater appreciation than car-dependent
locations.
Over the past decade, values for such properties located in
central business districts have risen 125%, while values for
suburban properties that are also considered highly walkable were
up 43%. Prices were up only 21% to 22% for suburban properties that
were either "somewhat walkable" or car-dependent. The data suggests
that while demographic changes and tenant preferences are shifting
back to urban locations, even in the suburbs, live/work/play
environments with high walk scores also are drawing higher
prices.
In Expedia's case, the company plans to move its 3,100 employees
from Bellevue, Wash., where it occupies 500,000 square feet, into
750,000 square feet of space in existing downtown Seattle buildings
it is purchasing for $228.9 million.
"It's about having an iconic waterfront campus headquarters that
we think will help attract a very high-tech employee base and
retain that high-tech base," said Sarah Gavin, an Expedia
spokeswoman.
The new location, which the company plans to renovate and occupy
by 2018, will be a state-of-the-art workplace, with bright open
spaces and amenities such as on-site dining, a fitness center and
hiking and running trails. Rather than having to drive to lunch,
Expedia employees will be able to bike to restaurants, Ms. Gavin
said, something the company thinks "is really appealing."
One company that recently announced a move to a more dense
location after being in the suburbs since 1986 is Pepsi Beverages
Co., the bottling division of PepsiCo Inc. Currently based in a
540,000-square-foot building in Somers, N.Y., the company plans to
move its employees to other offices in Purchase and White Plains,
N.Y. by the first quarter of 2016. "The exit from Somers was not an
easy decision," the company said in a written statement. "However,
as we seek to build levels of internal collaboration and improve
the ease of access across our Westchester locations and to
Manhattan, Somers was no longer the most effective location for us
to realize this vision."
Companies are relocating to not only be closer to skilled
workers but also to keep those workers happy. "They need to be
where the brain trust wants to be," said Rick Lechtman, eastern
U.S. director of the National Office and Industrial Properties
Group at Marcus & Millichap in New York. "Employees work 10- or
12-hour days at their desk and don't want to be in the middle of
nowhere."
But the trend isn't limited to large companies. Autodesk Inc.,
which occupies a 65,000-square-foot office building in suburban
Waltham, Mass. as the headquarters for its architecture,
engineering and construction division, plans to move its 200
employees this fall to a new location in Boston, where it has the
opportunity to expand to 120,000 square feet.
"By going to an urban environment like Boston we get to interact
with the community a lot more, especially the educational
institutions and all the scientific and artistic thinkers that are
part of that community, " said Amar Hanspal, a senior vice
president at Autodesk.
What happens to the suburban spaces vacated when companies
relocate? "Communities are turning them into everything from health
clinics to city halls to community colleges," Mr. McMahon said.
"One of the biggest trends of the next generation is going to be
the repurposing of an incredible amount of existing suburban
development."
In other words, it isn't all bad for the suburbs. While the
recovery of the urban core is widely known, "less heralded is the
contribution that suburban office markets have been making to the
office market's recovery, " said Ryan Severino, senior economist
and director of research for Reis, a provider of commercial
real-estate market data.
Write to us at : dweek@wsj.com
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