Why Corporate America Is Leaving the Suburbs for the City
August 3,2016
For decades, many of the nation’s biggest companies staked their futures far from the fraying downtowns of aging East Coast and Midwestern cities. One after another, they decamped for sprawling campuses in the suburbs and exurbs.
Now, corporate America is moving in the other direction.
In June, McDonald’s joined a long list of companies that are returning to downtown Chicago from suburbs like Oak Brook, Northfield and Schaumburg.
Later this month, the top executive team at General Electric — whose 70-acre wooded campus in Fairfield, Conn., has embodied the quintessential suburban corporate office park since it opened in 1974 — will move to downtown Boston. When the move is completed in 2018, the renovated red brick warehouses that will form part of G.E.’s new headquarters won’t even have a parking lot, let alone a spot reserved for the chief executive.
But even as they establish new urban beachheads, business giants like G.E. are also changing the nature of their headquarters, staffing them with a few top white-collar employees and a smattering of digital talent, rather than recreating the endless Dilbert-like pods they once built in the ’burbs.
“Part of it is that cities are more attractive places to live than they were 30 years ago and are more willing to provide tax incentives, and young people want to be there,” said David J. Collis, who teaches corporate strategy at Harvard Business School.
“But the trend also represents the deconstruction and disaggregation of the traditional corporate headquarters,” he explained. “The executive suite might be downtown, but you could have the back office and administrative functions in Colorado, the finance guys in Switzerland and the tax team in the U.K.”
Reinforcing the trend, Chemours plans to announce on Tuesday that it is staying here in Wilmington after considering suburban locations, most likely in the century-old headquarters it inherited from DuPont when the chemical giant spun out Chemours last year.
Unlike Chicago and Boston, Wilmington’s urban renaissance remains a work in progress, and Chemours was very close to moving to a new home in southern New Jersey or suburban Philadelphia, despite the DuPont family’s deep roots in Wilmington and the state of Delaware.
But the company’s chief executive, Mark Vergnano, ultimately came to the same conclusion that leaders of bigger and better-known firms did: To attract younger workers, it helps to be in the city.
“We are going through a change in our work force, and we wanted to be where we could attract millennials,” Mr. Vergnano said. “This is a group that likes to be in an urban setting, with access to public transportation. They don’t want to be confined to a building with a cafeteria or be next door to a shopping center.”
To be sure, cash from the State of Delaware and other incentives played an important role in the decision as well.
In addition to providing Chemours, which produces a range of industrial chemical products, with a $7.9 million package of grants, Delaware overhauled its corporate tax code, sacrificing revenue and easing the company’s tax burden as an added lure to stay put.
For Wilmington, where the unemployment rate of 5.7 percent is above both the national average and Delaware’s overall 4.2 percent level of joblessness, keeping Chemours’s 800 headquarters jobs in the city counts as a major win.
“In a more perfect world, states would be competing on the quality of schools, infrastructure, work force and so forth,” said Gov. Jack A. Markell of Delaware. “We live in a world that’s not perfect, so if other states are competing on the basis of these dollar incentives, we need to be in the same arena.”
In an era of relentless cost-cutting, many corporate moves these days coincide with downsizing. Kraft Heinz, for example, had 2,200 workers when the company was based in Northfield; it has 1,500 now in downtown Chicago.
With advanced communications tools making it easier than ever to separate headquarters from other corporate operations, location is increasingly being driven by function.