After decades of the commercial real estate world seeing big businesses leave the cities for the suburbs, a new trend has begun to emerge: companies are beginning to move their offices out of their suburban locations and back into urban areas.
In the United States alone, nearly 200 Fortune 500 companies have chosen to place their headquarters in the country's top 50 cities. The same is happening here in Canada, with more new offices popping up in cities like Winnipeg, Toronto, Vancouver and Calgary.
While there are several likely reasons for this shift, the primary motivation seems to be an attempt to recruit more young professionals, who are much more likely to seek jobs that allow them to live in an urban environment. By setting up shop in cities, businesses hope to send the clear message that they prioritize innovation and vitality in an attempt to attract the highly educated workers who have begun to cluster in metropolitan areas.
The appeal of suburban locations — including cheaper rent, lower taxes and ample parking — still remain, especially for older, longtime employees. However, these factors alone are often not enough to entice young professionals. Increasingly, prospective employees are turning down job offers due to companies' undesirable locations, choosing instead to live in locations that offer more opportunities for networking, social interactions, entertainment and mass transit. In addition, younger professionals are marrying and starting families later than previous generations, making life in the city a more appealing option.
Workers of all ages also appear to be tiring of the longer commutes associated with suburban offices. And companies love to tout the fact that they're offices are "green," especially if many of their employees can walk, bike or ride public transportation to work.
In addition, companies have reported that moving to urban locations allows them to interact more frequently with other businesses, even their competitors, making urban industry clusters an appealing destination. As the real estate market has begun to recover in recent years, vacancy rates in urban areas have steadily declined at much faster rates than those in the suburbs, indicating a broad trend amongst large and mid-size companies that are choosing to move to the city.
It is possible that as younger workers gradually marry and start families, their priorities may shift, prompting them to seek the safety and affordability of suburban living. However, it's unlikely that their employers will be willing to once again relocate their headquarters to suburban spots due to factors like energy prices and traffic conditions. For now, the myriad advantages of placing a business in an urban environment indicate that this trend will continue through the next decade, if not beyond that.