Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Monday, October 24, 2016

Choosing urbanized places vs. choosing DC as a place to locate significant headquarters business operations: Marriott and CoStar

This is more of an aside.  I've written a number of pieces about how corporations are moving from suburban locations back to the city.  One of the biggest examples of this is how GE is moving from Stamford, Connecticut to Boston.

But DC (and Philadelphia) seem to be immune to the trend.  I am not familiar with the dynamics in Philadelphia, but in DC it has to do most likely with high costs of commercial office space, coupled with high cost of housing and high prevailing salaries.

-- "Businesses moving back to the center: not a universal trend," 2015
-- "A lesson that seeing is believing: Panasonic's new building in Newark, NJ as an example, positive and negative, in businesses coming back to the city center," 2015
-- "Smart Growth America report on businesses moving back to center cities (and suburban core business districts)," 2015

Marriott, based in Montgomery County (but originally based in DC), is moving from a suburban disconnected office park location to Downtown Bethesda ("Marriott to move headquarters to downtown Bethesda with $62 Million in incentives," Washington Post), within a couple blocks of the Red Line Metrorail Station.

I don't know if DC tried to land them, but given that more than 60% of the firm's employees live in Montgomery County, getting them to move into DC was a stretch.

The firm received incentives about 20 years ago to stay in Maryland, but didn't earn the complete amount because it didn't grow its employee count.  Partly this was because the company sold off the hotels it actually owned to a related company, Host, which is now an REIT ("Host Marriott Plans to Become REIT, Purchase Luxury Hotels," 1998, Wall Street Journal).   This reduced its employee growth rate.

CoStar, a real estate information firm which received tax incentives to locate their corporate headquarters in DC in 2010 ("D.C. Council OKs $6.1M in tax breaks for CoStar Group," Washington Business Journal") announced that they will be locating their research division in Richmond, Virginia ("CoStar picks Richmond for major research center; hiring 730 people here," Richmond Times-Dispatch), likely because the cost of space and salaries are much lower than in the DMV. From the article:
"We want to provide our people with competitive compensation," said Andrew C. Florance, CEO and founder of CoStar, adding that most of the research and analytic jobs - the bulk of its operations - will pay in the $60,000 range. ...

"We are thrilled to be in Richmond and we look forward to being an engaged corporate citizen," Florance said. "This will be our single biggest operations and global research center."

The company started its search about a year ago, narrowing its list from 20 cities to Atlanta; Kansas City; Charlotte, N.C.; and Richmond. Factors under consideration were a high quality of life, culture, cost of living and a highly educated workforce. ...

The company is expected to infuse a quarter of a billion dollars into the Richmond economy over the next several years in leases, payroll taxes and capital expenditures.
DC needs to study why it seems to be exempt from the trend of corporations relocating to the city from the suburbs, which is particularly pronounced in Chicago ("Companies moving to Chicago from the suburbs," Chicago Tribune) although yes, CoStar moved its headquarters to DC from the suburbs, but rather than to continue to grow its business footprint in the city, it chose to locate in Richmond. Even so, CoStar is a rare example of a somewhat large firm locating in the city from the area suburbs.

It is another example, IMO, of how the height limit drives up the cost of office space (and housing) therefore encouraging businesses to locate outside of the city.

But note also the companies also use the relocation process as an element of rightsizing, moving "headquarters workers" Downtown, while keeping support staff in lower cost locations in the suburbs and elsewhere. This isn't a new phenomenon, and was pioneered by Wall Street firms in the 1980s, which began moving support staff to nearby locations in Brooklyn and Jersey City.

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At 9:49 AM, Blogger Richard Layman said...

On law firm systematic reduction of real estate

At 8:39 AM, Anonymous charlie said...

I had sent in a good comment yesterday on this but the internet ate it up.

ON law firms, yes "hoteling" a desk is not a popular option. Given that consultants tend to travel more than lawyers not a surprise, also that lawyers have a lot more paper to deal with.

ON Co-Star:

This is what the economy as a whole is supposed to do. It may not be "efficient" in that economists want more jobs in "transit" places like DC. But if we go back to an anti-trust understanding, which means keeping things small, then this is a desirable outcome.

I'd rather than 600 cyber security or biotech jobs in the DC area.

Looks as if they got about $8M to go to Richmond, which was about the size of the DC package to have a HQ here.

This is the new national biotech center in London:

Imagine if that was being built at Walter Reed. Instead we'll get 600 diplomats.

At 1:55 PM, Blogger Richard Layman said...

wrt CoStar, yep, sure. But at the same time it's also an indicator of how the height restriction can make the city less competitive. "Studying that" and drawing conclusions and communicating them is important.

But yes, the biggest metros have no monopoly on jobs and new jobs and knowledge jobs. Places like Richmond, Raleigh, Greensboro offer lower cost of living. Sure lower salaries. But great places, great neighborhoods, etc.

2. wrt biotech. yes, sadly. I wrote a multithousand word proposal on that, trying to get DC to reconsider how it approached Walter Reed, even giving them an out ("that the previous administration's priorities were focused elsewhere").

But the momentum is too strong for the approved project.

Overall it is a massive failure in vision and planning. Casebook. The outcome though is the rule that proves the rule.

There are some incredible counter examples like with Brooks City Base in San Antonio, March Base in Riverside County, CA, etc.

Didn't know about the Brooks project when I wrote the first draft. They are doing exactly what we proposed. New medical and other advanced health sciences schools, biotech seeding, etc. Get orgs. like United Therapeutics on board. Link the schools in the corridor (HU with hospital and medical school and engineering; CUA with great engineering program). Etc. Leverage proximity to NIH, NIST, biotech in MoCo, and ag. research in PGC.

And cities like Phoenix, KC, and Toronto have other examples comparable to your London one. NYC too. Of course, outside of the west coast, Cambridge is the leader, being able to leverage MIT and Harvard.

Instead the Gray Admin. Ec. Dev. report posited that building three medical buildings on the McMillan site would make DC a world leader in medicine.

At 1:58 PM, Blogger Richard Layman said...

... when doing research on Greensboro for a piece, I learned about their exemplary efforts in better coordinating, collaborating, and working with their higher education resources. The foundation guy I talked to said they learned a lot from a similar effort in Spokane.

Think of how (e.g., Costar type examples) we're falling behind places like Spokane, because of our failures in vision and planning.

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