In the past several years, small businesses and Fortune 500 companies alike have said goodbye to suburban office parks and moved their headquarters back to city centers. Attempting to cater to a new generation of Millennial urbanites, this trend represents a “marked shift in the preferences of American companies,” who are now choosing to invest in more walkable locations, according to Core Values: Why American Companies are Moving Downtown, a new study by Smart Growth America.
The study, which was accompanied by kickoff panel discussion at the Newseum in Washington D.C., examines the motives and preferences of companies that have moved to more walkable downtown locations between 2010-2015. The launch event supplemented the study, hosting business and planning experts from cities across the country who discussed both sides of the issue: Why are companies choosing downtown locations? And how can cities create the kinds of places these companies seek?
In the late 1960s and 70s, companies across the country began leaving downtown cores for suburban office campuses. By 1996, on average, less than 16 percent of jobs were located within three miles of a traditional city center. In recent years, however, this trend is showing signs of reversing. According to the study, “between 2007 and 2011, job growth in city centers grew 0.5 percent annually on average, while the city peripheries lost jobs, shrinking 0.1 percent annually.” By 2013, 23 percent of jobs were located within 3 miles of a city’s downtown. While the majority of American jobs are still located outside of central business districts, businesses are slowly moving back to cities.
Why? Many companies are finding that downtown locations can help them better recruit employees, particularly Millennials, which are defined as people between the ages of 18 and 34 in 2015. According to Vishaan Chakrabarti’s, A Country of Cities, 62 percent of Millennials prefer to live and work in the type of mixed-use neighborhoods found in urban centers where they are in close proximity to a mix of shopping, restaurants, and offices.
In the report, Adam Klein, the chief strategist of American Underground in Durham, North Carolina, said “we wanted to be in an amenity-rich environment where our employees could walk to get a cup of coffee and participate in arts, music, and the excitement of downtown. We’re able to show potential employees a cool office in the middle of downtown and that has definitely helped us recruit people.”
As Mike Deemer, the executive vice president of business development for the Downtown Cleveland Alliance, echoed at the launch event, “It’s not enough to create a great space and take a ‘if you build it, they will come approach.’ We need to activate spaces and draw people in.”
While great office spaces tend to be plentiful in downtown locations, the surrounding neighborhood mix is equally, if not more, important. The study found that providing live/work/play neighborhoods with places to see and things to do is important for attracting Millennials, “who are now the largest generational segment of the American workforce, with 53.5 million people making up 34 percent of all workers — more than either Gen Xers or Baby Boomers.”
According to the study, companies chose vibrant, walkable neighborhoods where people want to both live and work. “Our younger employees don’t want to go to a suburban office park. It’s boring as all get out out there. Here, they walk outside and see cool stuff and it’s fun. I wanted to be where they wanted to be,” said Reg Shiverick, President of Dakota Software in Cleveland, Ohio.
Millennials also behave differently when it comes to transportation and are generally more likely to commute by biking, walking, or public transportation. Thus, walkability and access to public transportation are also cornerstones of this shift to downtown locations. Matin Zargari, principal at Gensler’s Oakland, California office, explained that “being so close to the 19th Street BART and many other city bus lines gives our staff the opportunity to get to work easier from all over the East Bay. Our employees like our new location and, in addition, many of our clients and projects are within walking distance of our office. That’s been a game changer for us.”
According to Jim Reilly, vice president of corporate communications at Panasonic, when Panasonic moved its headquarters from a suburban corporate campus to urban Newark, New Jersey, “the percentage of employees commuting via public shifted transportation from 4 percent of employees to 57 percent of employees.” While the environmental impacts of such a shift generally fall outside the scope of the study, a decreasing reliance on automobiles is sure to mitigate some of the negative environmental effects of suburbanization.
A key takeaway from the study is that any city can learn from companies that have moved back to central business districts. While many cities already have the kinds of neighborhoods these companies are looking for, many do not. But taking the steps to draw companies into cities provides a mutually-reinforcing smart growth strategy: Companies will invest in walkable, safe downtown environments, allowing cities the opportunity to create great, quality neighborhoods that benefit businesses and residents alike.