Tomorrow's Headquarters City

"The Covid-19 pandemic has caused corporate America to rethink what it wants in a headquarters. Millions of people are productively working from home and may never again spend five days a week in the office. Some have moved from places like New York to cheaper, smaller cities. The first corporate offices are joining the newest migration wave, and more will likely follow. But as they pick the site of their future headquarters, companies aren't just thinking about what their employees want today. "They think about something that might be 30 years from now," says Robert Hess, vice chairman at real-estate services firm Newmark.

Some things are unlikely to change. Companies will probably always want low taxes, an educated workforce and a big airport. But other factors are likely to become far more important in the future. As global warming worsens storms, wildfires and heat waves, more companies will likely look for cities that are prepared for natural disasters and offer green energy, site-selection consultants say. The rise of e-bikes, e-scooters and self-driving cars means cities looking to appeal to companies will need a new transportation infrastructure. Cheap housing, nightlife and access to nature are also bound to become more important.

Here are 10 key factors for cities looking to attract corporate headquarters in coming years.

Company Apartments

It may not be enough for cities to offer companies land and tax breaks to build an office. They may also need to offer apartments. Surging housing costs are contributing to rising wages, making it more expensive for companies to hire. They are also making it harder to retain employees, as people leave jobs to move to cheaper cities. Cities will either need to build plenty of affordable housing, or offer tax breaks and lands to companies to do it themselves. "If there's something you can do to make the cost of living cheaper, you're going to have a leg up on every single competitor," says Colin Behring, CEO of real-estate developer Behring Co.

Nightlife

In a tight labor market, companies are fighting harder than ever to keep their employees from leaving and to attract new recruits. That means they are increasingly eager to be in cities where their workers enjoy living, site-selection consultants say. Austin, Texas, is attracting more big companies than some other Sunbelt cities in part because of its restaurant and music scene. "People want more than just a place to work," says Chris Lloyd, chairman of the trade association Site Selectors Guild and senior vice president at McGuireWoods Consulting.

Disaster Protections

Worsening storms, wildfires and heat waves pose a challenge to companies looking to keep their offices open and employees safe. That means firms will increasingly look to be in cities with strong protections against natural disasters, says Mahesh Ramanujam, the former head of the U.S. Green Building Council. Disaster-proofing the electricity grid is the first task, he said. Widespread power outages such as in Manhattan after superstorm Sandy in 2012 can cripple corporations for days. Protecting offices from flooding and employees' suburban homes from fires is also important. And in places like Arizona, cities need to make sure buildings and infrastructure can withstand extreme heat as climate change heats up the globe.

Urban Resorts

As more people work remotely, some companies are bringing employees together once a quarter from their far-flung home offices. The goal: developing the kind of company culture and personal relationships that are hard to maintain over video calls. That means companies need space for employees to stay and socialize. Urban resorts could help fill that need, some property developers say. Unlike today's conference hotels, which usually offer little beyond meeting space and catering, these resorts may include outdoor pools, nightclubs, water parks, casinos and other amenities where workers can have fun during off-hours. (In Lithuania, Druskininkai could take on such a role, at least by working with small and medium-sized companies localized in the region. (K.))

Lanes for E-bikes and E-scooters

The pandemic has changed the way many urban residents get to work. A growing number are switching from buses and subways to electric bikes and scooters, which are proliferating across the U.S. as a fast, easy and cheap way to bridge short distances. Offering a network of protected bike lanes could make cities more appealing to big companies, says Rohit Aggarwala, senior urban tech fellow at Cornell Tech. "If you're keeping people out of automobiles, you're making the streets safer and more pleasant," he says. As food delivery becomes a bigger part of office life, these lanes could also offer space for smaller self-driving vehicles transporting food from restaurants.

Self-Driving Cars Welcome

Self-driving, electric cars are set to become a key mode of transportation for people and goods. They could also help boost corporate productivity, allowing more people to work while they commute. Mr. Lloyd says some of his corporate clients are increasingly interested in cities that are looking to create a friendly environment for self-driving cars. Offering plenty of charging stations is just the start. In the future, cities should create networks of sensors and systems that can feed these cars information on traffic lights, road closures and traffic jams, he says. "If you're going to have an effective system of autonomous vehicles, it's going to move much more efficiently if the vehicle is communicating back and forth with the city system."

Tunnels

In booming cities like Nashville, Tenn., and Austin, traffic jams cause many lost work hours. Part of the solution may lie underground. Subways as well as below-ground shopping and eating venues have been part of the success of cities like New York and London. "You physically can tunnel deeper than buildings are tall, meaning five to six overlapping or stacked tunnels can create a pretty dynamic navigation map," Mr. Behring says. Underground roads wouldn't just shorten commute times -- they could also free up space above for parks and pedestrians, he says.

Ultrafast Internet

Access to cheap, reliable and ultrafast internet is crucial to most companies. The spread of remote work means companies need to think not just about internet connections in their offices, but also in their employees' apartments, on streets and in local coffee shops. In cities where a single company controls the supply of ultrafast internet and overcharges for service, costs can become a problem. "That can become a drain on the local economy. It's basically a tax that people will have to pay," Mr. Aggarwala says. To ensure access to cheap, fast internet, major cities like New York should create public corporations to build out fiber networks, for example by issuing debt to pay for the cables and raising revenue from users, he says.

Nature Parks

Companies looking to keep their employees happy, healthy and productive could increasingly look for cities with access to greenery and natural outdoor spaces. Visits to national parks surged during the Covid-19 pandemic. Being able to take a lunch-break hike in the mountains is already a big reason why cities like Boulder, Colo., are attracting big companies. And some companies are even looking to include hiking trails in their office campuses. Amazon, for instance, is building a 350-foot office tower in Arlington, Va., that will feature two spiraling outdoor walkways with local plants and trees twisting to the building's top. Trees also help absorb carbon emissions and clean the air -- another priority for companies looking to be more environmentally friendly.

Clean Energy

One company after another is pledging to eventually reduce net carbon emissions to zero. That makes access to green energy at cheap prices increasingly important. Big tech firms, which are among the most sought-after office users, are particularly eager for carbon-neutral sources of electricity. Cities that can't offer nearby wind farms or hydroelectric power face a disadvantage when they compete for big corporate offices, site-selection consultants say. "ESG is not a fad anymore," says Mr. Hess of Newmark, referring to the acronym for environmental, social and governance. "Some of these larger cities would be smart to have offshore wind."

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. . . And What's No Longer in Vogue for HQ Cities

When industrialist Francis Cabot Lowell and his partners founded the Boston Manufacturing Company in 1813, they picked Waltham, Mass., as its headquarters. The reason: The Charles River ran through the town with enough speed to power a textile mill. Over the following two centuries, the things companies look for in cities changed dramatically. Many of the factors that once led firms to pick some cities over others for their headquarters no longer matter.

The rise of coal-powered steam engines in the 19th century meant towns on downward-rushing rivers like Waltham soon lost much of their appeal, according to Douglas W. Rae's book "City." Coal was easier to transport to port towns with calmer waters like Chicago, New York and Philadelphia, meaning they became more attractive to America's big industrial firms. Some companies settled near railway hubs, leading to the growth of cities like Atlanta.

By the middle of the 20th century, the spread of cars and trucks meant firms no longer had to be close to ports and railway lines to move their employees and goods. The spread of telephone lines was just as important. Thanks to cheap long-distance calls, "all of a sudden you don't actually have to be in New York in order to get the most up-to-date information about, say, how the London Stock Market is doing," says Mr. Aggarwala of Cornell Tech. Untethered from ports and rail, many companies began moving where their executives and employees wanted to live: the suburbs and sunny, low-tax Sunbelt cities.

Now, corporate preferences are once again changing. Housing costs and internet availability are a growing concern. Even rushing water is making a comeback: Big corporations like Microsoft increasingly seek out hydropower as a green-energy source." [1]

1. The Future of Everything: The Work Issue --- Tomorrow's Headquarters City
Putzier, Konrad. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 10 Feb 2022: R.4.