Why more companies are choosing to call downtown - the heart of the American city - home again


“Hundreds of companies across the United States are moving to and investing in walkable downtown locations. As job migration shifts towards cities and as commercial real estate values climb in these places, a vanguard of American companies are building and expanding in walkable downtown neighborhoods”.  So says Smart Growth America (SGA), in its report issued this week called "Core Values: Why American Companies are Moving Downtown"

National studies from groups like City Observatory and the Brookings Institution have analyzed the net flow of jobs in metropolitan areas since the start of the 2000s.  The Brookings analysis shows that coming out of the Great Recession, the core of most of America’s largest cities gained in its share of the area’s overall jobs.  This was not however, the result of booming job growth, but a slower rate of post recession job loss than those areas beyond the core. Essentially, this period served to stall the decades long trend of job growth decline in the core.

The City Observatory’s analysis of recent census data is more bullish than Brookings on current job growth in the core, suggesting that “downtown employment centers of the nation’s largest metropolitan areas are recording faster job growth than areas located further from the city center.” Between 2007 to 2011, they concluded that city centers (areas within 3 miles of the central business district) grew jobs at a 0.5 percent annual rate, while over the same period, employment in the surrounding peripheral areas declined 0.1 percent per year. They conclude that city centers are out-performing the surrounding areas in over half of the metropolitan areas evaluated.  Representing our home state of Texas, capital city Austin’s city center enjoys the highest percentage of overall metropolitan employment than every other major American city (28.8%) and the highest rate of center city job growth between 2007-2011 (3.4%).  Of the other Texas Triangle cities: Houston, San Antonio, and Dallas, San Antonio was the only other city whose center city’s share of overall employment exceeded 10% (13.8).  However, Dallas was the only other major Texas city to experience actual positive job growth within the city center (.05%).

The Seaholm Power Plant in Downtown Austin - Athenahealth's new home

City Observatory suggests that the growing competitiveness of city centers as fertile ground for job creation and growth appears to be driven by a combination of the growing attractiveness and availability of urban living, and the more relatively robust performance of urban-centered industries (business and professional services, IT, Eds and Meds) relative to more decentralized industries (construction, manufacturing, retail trade) in this economic cycle.

SGA’s analysis offer’s deeper insight into why downtowns appear to be evolving into more than just a muted option for business relocation, expansion, and startup. They looked at over 500 companies that have either relocated or expanded into downtowns within the past 5 years. They used a broad range of companies and over 10% of them are on the Fortune 500.  Of these companies, 245 relocated to downtown from former suburban locations, 91 opened a brand new downtown location or branch, 76 relocated within the same downtown, 41 expanded their existing downtown space, 20 consolidated a suburban and downtown office, 10 moved from a downtown in a different city, and 9 were start-ups.

Biogen Headquarters in downtown Cambridge, MA

These new job investments occurred in the cores of small, medium and large cities in every corner of the country. One consistent similarity is that all of the relocations have ended up in more walkable locations. The average increases in WalkScore® for the companies was 69%, the average Transit Score® increase was 52% and the average Bike Score® increase was 18%.

SGA also looked at the reasons for these companies’ relocation decisions by interviewing the companies’ leadership. Six common themes emerged that explain why companies are increasingly choosing downtown. They want to be downtown in order to:

1.     Attract and retain talented workers

2.     Build brand identity and company culture

3.     Support creative collaboration

4.     Be closer to customers and business partners

5.     Centralize operations

6.     Support triple bottom line business outcomes

Other obvious common themes emerged relating the selection criteria that these companies used for their location decision-making.  They prioritized districts with vibrancy, walkability, and diverse transit, quality and unique office space inventory, cleanliness/safety and a strong sense of partnership and common cause with the local government.

Cities across America are competing to grow, attract, and retain the world’s best talent.  Among the many tools they are re-learning to utilize (an oldie but a goodie) is that of keeping the heart of their community – its downtown – strong and pulsing with energy, opportunity, and authenticity.  The leaders within some of these cities will be smart enough to invest more effort, ingenuity, and resources into this contest than others.  Some cities will vigorously design, properly resource and execute the strategies to keep, grow and cultivate new employment within the core that will add fuel the economy.  They will marry those strategies with a commitment to diverse and accessible downtown housing, abundant and culturally rich arts, great public spaces, and connectedness to the world around it via walkability and diverse transit.  These cities will emerge as the most successful in both attracting and retaining their fair share of the world’s greatest workforce talent, but in also better serving the entire community by ensuring that the heart continues to pump strong.

Read more on SGA’s interactive report, including maps here