Is the Suburban Corporate Office Campus Really Falling out of Favor?

by CoyDavidson on June 8, 2011

Not Everyone is Moving Downtown

I have read a couple of articles recently that suggests that the suburban corporate office campus is falling out of favor among major corporations. Most notably there was an article published in Crain’s Chicago which delved into this topic. I am not suggesting that this particular article is way off base particularly as it relates to the Chicago area but it appears to me for every example of the demise of the suburban corporate office campus there is an equal or greater example that the suburban office campus is far from going away.

While I don’t question that many companies are increasingly giving stronger consideration to the urban core as a headquarter location in order to attract talent particularly from a younger generation of employees entering the workforce, the fact remains some of the most high profile corporate real estate decisions as of late have involved a suburban corporate office campus. Just the week alone some  the top headlines from the corporate real estate world included ExxonMobil’s announcement of a new suburban corporate office campus in North Houston and Apple’s proposed plan for a new campus in Cupertino. Also, Google has announced plans for a new corporate campus in Mountainview, as has SalesForce in the Mission Bay District of San Francisco. Earlier this year Facebook opted for the former Sun Microsystems Campus in Menlo Park for their new corporate headquarters. Similar type decisions have been made outside the Silicon Valley region as well as were the case when Navistar purchased the former corporate campus of Lucent Technologies in the suburban Chicago area.

I would argue the number of vacant corporate campuses currently available has more to do with the impact of the most recent recession than a trend of migration to the urban core. Recently, Pilar Commercial purchased the former Nortel Campus in Richardson, Texas betting that as the economy recovers and corporate users resume expansion plans, the suburban office location will still be a popular choice. In Houston the suburban office market has outperformed the Central Business District in recent quarters in terms of absorption of office space.

The trend of corporate office users opting for downtown or urban core locations may very well escalate over time, but for now at least from my perspective the suburban office campus is still a viable choice for many corporate office tenants, just ask ExxonMobil.

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Jay Rickey June 9, 2011 at 12:38 am

I’m curious how/if transportation to and from suburban corporate campuses has evolved. Clearly this was not a consideration of ExxonMobil … and I’m not familiar with the infrastructure in place for the sites you mention in California. But oil prices, the decline in housing values and workforce recruitment would certainly seem to portend a future where the suburban corporate campus is less desirable.

Coy Davidson June 9, 2011 at 2:25 am

Jay, the thing about the Exxon Mobil Decisions is that there is a perception from many not familiar with their office locations in Houston that they will be moving all of these people from downtown Houston. The bulk of their office space is in the Greenspoint submarket where they lease (2 million SF)  which is about 8-10 miles from the new campus site. So its not that drastic of a move for a significant portion of their employees and The Woodlands is arguably if not the top, one of the most successful suburban master planned communities in the country and Anadarko already has their campus there. Its not really a groundbreaking move as some make it out to be.

I think every major market is different in terms of infrastructure and market dynamics in regards to suburban vs urban core locations. In Houston its very expensive to live in the Urban Core vs the suburbs, so even the bulk of employees who work at major corporations downtown are commuting from the outer suburbs

Anonymous July 12, 2011 at 8:18 pm

Interesting article Coy.  I think much of the discussion about the decline of the office campus is employee driven, not employer driven.  At the end of the day I don’t think it will ever happen that one grows to the detriment of the other.

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