The Flight to Downtown


By Ken Robertson

The Flight to Downtown

McDonald’s is one of the world’s most celebrated brands with some 36,000-plus restaurants in more than 115 countries. While we may be talking hamburgers, Happy Meals and McFlurries here, this fast food mammoth and the commercial real estate market are intimately connected.

McDonald’s earlier announced plans to move its 88-acre Oak Brook, IL headquarters where it’s been since 1971 to Chicago’s vibrant West Loop neighborhood. This announcement comes on the heels of a recent emerging trend of companies relocating their operations from the suburbs to bustling live, work and play city cores. In addition to McDonald’s, General Electric plans to trek to Boston from Fairfield, CT, while others like Biogen Idec already ventured to Cambridge, MA from Weston, MA.

Office relocations are nothing new, but the decisions behind the moves are what’s important.

McDonald’s cites business momentum, innovation and better customer engagement as drivers, while GE claims the business ecosystem, long-term costs, employee quality of life, connections with the world and proximity to other important company assets. However, perhaps the most-commonly shared factor among most relocating companies is access to and recruitment of talent.

“The employment market is fiercely competitive for young talent, especially in today’s hyper-connected world…”

The employment market is fiercely competitive for young talent, especially in today’s hyper-connected world where booming tech companies with creative work environments and live-work flexibility are scooping up the best of the best new hires. Classic brands with decades’ long histories are forced to rethink their business models and employee structures to stay competitive and relevant.

Recent Smart Growth America research revealed six common factors explaining why companies chose to locate downtown:

  1. To attract and retain talented workers
  2. To build brand identity and company culture
  3. To support creative collaboration
  4. To be closer to customers and business partners
  5. To centralize operations
  6. To support triple-bottom line business outcomes

There are literally hundreds of downtown locations to choose from, and what Smart Growth America has also uncovered is what companies are looking for when choosing a new location:

  • Walkable neighborhoods
  • Access to several transportation options
  • Renovated office/warehouse space
  • Unique building and city architecture
  • Welcoming city, such as outreach, permit assistance or financial assistance
  • Safe and clean locations

Whether it’s a high-energy downtown or leafy suburb, all markets are connected to one another in some fashion, and are sensitive to fluctuations occurring in neighboring markets. This means that while the actions of McDonald’s, GE and others alike are spurring activity in downtown hubs, surrounding secondary markets are also impacted as many smaller and medium-sized companies are following suit in an effort to stay proximate to their larger business partners.

It’s clear to see that the urban core relocation shift is a domino effect—especially in today’s slow growth economy where “shifting demand” can move the needle more than “new” demand. Keeping an eye on this emerging trend is critical to the commercial real estate space and anticipating what might be on the horizon.

 

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Ken Robertson is the Central Regional President for KBS, overseeing over 12 million square feet of office, industrial and retail space.
www.linkedin.com/in/kennethrobertsson