By Matt DeVeau, Senior Project Associate.
In October 2013, news began to emerge that insurance giant State Farm planned to locate a large operations center in Dunwoody, Georgia, a near north suburb of Atlanta. It was welcome news for the region and an especially big deal for Dunwoody, a city of about 48,000 where Market Street is currently engaged as part of a team of consultants working on a comprehensive plan update. State Farm and its development partner KDC Real Estate Development and Investments will build a 2.2-million-square-foot mixed-use project – by some estimates the largest such development in the region’s history – that could eventually be home to 8,000 company employees. The city provided no incentives to the project.
In addition to being an interesting local economic development story, the move also is part of a larger trend with broad implications for suburban communities. The Dunwoody project is part of State Farm’s move to consolidate its customer service operations into three large centers – the other two will be in Dallas suburb Richardson, Texas and Tempe, Arizona near Phoenix. These locations have many things in common: Sunbelt metros, great highway access, in areas with very high educational attainment rates.
But there is another common thread – all three sites are located in mixed-use, transit-accessible areas. The Dunwoody site is proximate to a MARTA light rail stop in Atlanta’s Central Perimeter – a formerly auto-oriented office and shopping mall complex that is rapidly urbanizing. In Arizona, State Farm’s offices will be at the mixed-use Tempe Town Lake development less than a half mile away from a Valley Metro light rail stop. And in Texas, the company will anchor KDC’s massive CityLine development that is just steps away from a DART light rail stop. This is no accident. In marketing materials KDC prepared for CityLine, State Farm Spokesman Gary Stephenson said:
“There’s a lot of competition for quality employees, not only within the insurance industry but across various sectors, and attracting and retaining those employees is critically important to the future success of State Farm. The physical environment is an important element of what a company has to offer.”
According to KDC, State Farm’s top factors in selecting the Richardson site were location and the quality of the facility. Access to transit and amenities such as restaurants, retail, and hotels were also priorities. Specifically, the hub was designed to recruit and retain Millennials, who prefer workplaces that are convenient, located near quality housing, and located in mixed use environments. Said KDC CEO Steve Van Ambaugh:
“Millennials prefer a live-work-play environment. They want to be in a work environment that is happy and energized. They don’t want to be in a remote location, disconnected from everything.”
Much has been made in economic development circles of firms abandoning suburban office parks to re-enter central business districts and other close-in office submarkets. But not all ongoing trends are bad news for suburban communities. According to the CoStar Group, insurers like State Farm are increasingly open to leaving high-rent districts for suburban markets. And State Farm’s big bet on its three operations centers suggests that the suburbs in the best position to capitalize on this phenomenon will be those that can complement their traditional advantages – workforce, housing stock, schools, highway access – with transit-oriented and mixed-use developments that appeal to the emerging Millennial workforce.
Suburbs without transit and mixed-use environments should work to develop these amenities, while communities that do have these assets can leverage them right away. Of course, not all communities with transit will have large, undeveloped sites adjacent to transit stops like those in Richardson or Tempe. But the area around the Dunwoody site is largely built out, and its initial design included large surface parking lots, superblocks, and wide, fast roads that are poorly suited for walking, biking, and transit use. These existing conditions were significant impediments to the area achieving its full potential in today’s market.
Local officials have therefor been hard at work to retrofit and re-cast the area as a more walkable, urban place. The Perimeter Community Improvement Districts (PCIDs), self-taxing districts of commercial property owners, developed a Commuter Trail System Master Plan and has installed wide sidewalks, and illuminated, landscaped medians and improved traffic signaling to allow for safer road crossings. For its efforts, PCIDs in 2014 received an award from a local pedestrian advocacy organization for the third consecutive year. These improvements have helped further tap into the Central Perimeter’s excellent transit and highway accessibility, and its 11.0 percent Class A direct vacancy rate as of the fourth quarter of 2014 was at least four percentage points lower than every other major office submarket in the region. Communities and districts around the country with similar assets can and should emulate its success.
