The narrative of urban decline, decay and crime that rose during the 1980s seems like a million years ago.
Urbanization, once seen as a trend only in the developing world, has now exploded across the U.S. as both young professionals and empty nesters seek the lifestyle and convenience of living in “smart cities.” After decades of stagnant and even declining population growth, cities such as New York, San Francisco, Washington, D.C. and Denver are booming.
And while educated and highly skilled workers are returning to cities, the evidence suggests that large corporations are increasingly following them as well.
The trend arguably started a decade ago, when Quicken Loans’ Dan Gilbert announced the relocation of 4,000 employees from southeastern Michigan’s suburbs to refurbished buildings in downtown Detroit. Whether or not Detroit has pulled out of its doldrums merits debate, as the population of the city still falters. But companies and foundations have been lavishing attention on America’s automotive capital. As Quicken Loans continued to move more employees to Detroit’s center and more companies and professional services have followed, downtown Detroit reportedly now has one of the lowest residential vacancy rates in the U.S.
Such moves make sense, as companies can be in closer proximity to the types of workers they want to hire – and at a macro scale, it is more efficient to have more of your workforce concentrated in a central area.
Another example is McDonald’s, which has put its Oak Lawn, Illinois office park on the market and is relocating to Oprah Winfrey’s former Harpo Studios complex in Chicago’s West Loop neighborhood. Soon after that 2018 opening was announced last year, the Golden Arches said it would lease even more space as it departs the western Chicago suburbs. McDonald’s will join agricultural commodities ADM, which moved to Chicago in 2013 after forty years in Decatur, a three-hour drive from America’s third largest city.
Companies are not just moving to cities in order to appeal to the too-cool-for-school millennial generation. Another factor is that cities are also willing to flap the red carpet in order to attract marquee companies. “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, a professor at Harvard Business School in an interview last year with the New York Times.
Joining these giant corporations are start-up ventures, which for years tended to flourish in “nerdistans” such as the Silicon Valley office parks in towns like Cupertino. But the desire to “be where the action is” has caused tech hubs to flourish in old rust belt cities like Detroit and even Milwaukee.
But it is not just the suburbs who have been left in the cold by the return of companies and their workers to large cities. Decatur is just one example of smaller cities that have been left behind by top companies. Fairfield, CT, was jilted by General Electric, which moved to Boston; the company’s former campus was sold last year. Connecticut’s capital, Hartford, bid adieu to Aetna with the insurer’s announcement that it will be based in New York City starting next year.
Cities benefit from this shift as not only companies and their employees relocate, but so do suppliers, contractors and services as they seek to be closer to their biggest customers. City leaders, however, would be wise not to crow too loudly about these wins. This move of wealth to powerhouses such as the likes of New York City, Boston and Chicago comes at the expense of smaller and more remote communities, which are left struggling to find ways in which to diversify their economies.
The concentration of wealth and resources in America’s largest cities also threatens to deepen the rift between richer and poorer citizens, one factor in Donald Trump’ triumph in winning the White House. The shellshock felt by citizens, who thought their jobs would be with them forever, will result in resentment for a long time as local leaders attempt to sort out how their cities and towns can remain competitive. As Jennifer Daly, a former head of the Greater Peoria Economic Development Council, told the Washington Post, “There are definitely people in this region who don’t want to go to Chicago and are worried that their jobs are going there.”
Image credit: Leon Kaye