My latest post is online over at New Geography and is called “The Rise of the Executive Headquarters” in which I take another look at the emerging trend of putting the top executives of majors corporations back in global cities (often downtowns). Here’s an excerpt:
Headquarters were once a defining characteristic of urban economic power, and indeed today cities that can still brag of the number of entries they boast on the Fortune 500 list of largest American firms. Yet as urban centers increasingly lost headquarters, boosters started to downplay them as a metric, particularly with the rise of the so-called “global city” concept. Today the HQ is back into the urban mix, but increasingly as what I would call the “executive headquarters” which brings bragging rights to a city but not much in terms of middle class jobs.
By the way, Tom Wolfe’s description of the CEO’s dining options now seems positively quaint little more than a decade later in an era of molecular gastronomy and such. But he nailed called it in advance: people in global cities like to do lunch.
The New York Times recently ran a piece on how upscale suburbs around New York are seeing an exodus of the young. This is similar to what we’ve seen with corporations, such as Connecticut turning into a suburban corporate wasteland.
I see this as part of the bifurcation trend:
The executive headquarters is one more example of the increasing bifurcation of America’s elite cities. A handful of top executives gather in America’s capitals of capitalism while the good paying core of the old headquarters — including many upper middle class positions — remain in more workaday cities. This but one example of the “growth without growth” model in which cities dispense with “old fashioned” notions like population and job growth in favor of higher per capita GDP and income in which parts of cities thrive by becoming downtown versions of the exclusive gated subdivision.
In this world global city centers like Manhattan, London, Chicago’s Loop, San Francisco will boom as the suck in the highest value functions in pursuit of a quality over quantity “vertical” strategy. Meanwhile cities like Salt Lake City (home to 1,600 Goldman Sachs employees) and Austin (with a massive Apple presence) are focusing on more middle and lower-tier growth in a more “horizontal” model without much in the way of standard of living gains. Austin’s per capita income actually dropped from 108.1% of the US average in 2000 to 98.1% in 2012. The recent announcement of ADMs move of about 100 top executives from Decatur, IL to Chicago fits in with this.
I think what these trends show is that the suburban areas around major global cities may end up being the odd man out. Places like Connecticut, New Jersey, etc. They are very expensive and have crushing taxes and regulations, but without the compensating advantages of Manhattan. I’m sure places like Westchester County will continue to have their appeal for the wealthy middle-aged types, but if you’re a business or a young person starting your career, moving either to the city or to a place like Nashville is a much better option than sticking around in a place with just about the nation’s highest property taxes.
The other set of losers are in downtowns in second and third tier cities. These are often seeing a lot of investment in residential and entertainment/tourism type items, but private sector employment is in decline in them pretty much everywhere I look. The tech sector gets a lot of hype, but it’s the exception that proves the rule.
If a suburban environment is what you want, places like Carmel, IN; Dublin, OH; and Franklin/Brentwood, TN offer unbeatable value for the money. For an urban environment, the DCs, New Yorks, and Chicagos have you covered. Places not falling into those categories have it tougher.