United States
Environmental Protection
Agency
November::
www.epa.gov/smartgrowth
SMART GROWTH AND ECONOMIC SUCCESS
THE BUSINESS CASE
Office of Sustainable Communities
Smart Growth Program
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Acknowledgments
This report was prepared by the U.S. Environmental Protection Agency's Office of Sustainable
Communities with the assistance of Renaissance Planning Group under contract number EP-W-11-
009/010/11. Bill Fulton (Smart Growth America); Kathy Nothstine (National Association of Development
Organizations); Alex Barren (EPA Office of Policy); Robin Jenkins and Dennis Guignet (EPA National
Center for Environmental Economics); and Megan Susman, Kathleen Bailey, and Danielle Arigoni (EPA
Office of Sustainable Communities) provided editorial reviews.
EPA Project Leads: Melissa Kramer and Lee Sobel
Mention of trade names, products, or services does not convey official EPA approval, endorsement, or
recommendation.
This paper is part of a series of documents on smart growth and economic success. Other papers in the
series can be found at www.epa.Qov/smartcirowth/economic success.htm.
Cover photos and credits (top to bottom, left to right): Quicken Loans in Detroit, Michigan, courtesy of
Scott Smithson via flickr.com; Light rail in Charlotte, North Carolina, courtesy of David Wilson via
flickr.com; Home Depot in Chicago courtesy of Payton Chung via flickr.com; and Washington, D.C.,
courtesy of Ted Eytan via flickr.com.
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Table of Contents
Executive Summary i
I. Introduction 1
II. Smart Growth Places Can Increase Productivity and Innovation 4
III. Smart Growth Places Can Better Com pete for Labor 8
IV. Smart Growth Places Can Improve Retail Sales 11
V. Many Companies Are Making the Move to Downtown Locations 14
VI. Conclusion 16
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Executive Summary
Many companies representing a diversity of business types have recognized that compact, walkable
downtowns are good for business and are choosing their operating locations accordingly. Locations with
housing and transportation options, a mix of uses close together, and a high quality of life can improve
environmental outcomes while providing economic advantages for businesses, including:
• Increased productivity and innovation. Easier access to labor, suppliers, and supporting
businesses improves productivity. An environment that enables and encourages social
interaction both within and among firms leads to more idea exchange, innovation, and
collaboration. Making it easy for employees to incorporate physical activity into their daily
commutes improves their health and well-being, reducing absenteeism and health care costs.
• Improved ability to compete for labor. Many professionals and recent college graduates prefer
to live near where they work and to be able to walk to shops, restaurants, and entertainment.
Low-wage workers need access to affordable housing near jobs and transportation options.
Businesses in walkable central business districts near transit can meet the needs of both these
groups, making it easier to recruit employees.
• Stronger retail sales. Stores find it easier to attract customers when they are in locations that
can be reached in multiple ways and provide a diverse, vibrant environment.
A strong indicator of the business advantages of centrally located, compact, walkable places is the trend
of corporations moving to these locations from outlying suburbs. A number of companies have
recognized that central business districts in cities and small towns can provide an atmosphere that
stimulates innovation and attracts the workers they need.
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I. Introduction
Downtown Raleigh, North Carolina, had been booming with growth for several years when, in 2011, two
of its corporate anchors were purchased by rival firms with headquarters far from Raleigh. Although
both anchor companies had recently built new offices and were major players in the downtown's
revitalization, suddenly their future in the city was in doubt. Indeed, one of the companies decided to
vacate its large office building downtown as jobs were cut following its acquisition. Concern grew among
city leaders and residents about the loss of jobs and empty office space. But downtown Raleigh is still
growing today in part because of technology companies that see benefits to being downtown.
For example, Red Hat Software moved to downtown Raleigh after growing up in the technology hotbed
of North Carolina's Research Triangle region. The region's office parks, with buildings in isolated clusters
separated from homes, stores, and restaurants, nurtured many computer and medical technology firms
to national prominence, so it was surprising to some when Red Hat announced it would relocate. The
chief executive officer recognized that offering an attractive workplace can help a firm compete for
talented people, saying, "Combining the Triangle's renowned educational resources with the energy and
culture of downtown Raleigh made this location ideal for both Red Hat and our associates."1 Red Hat is
responding in part to Raleigh's efforts to cultivate an environment where innovative companies and
their employees would feel welcome. As part of an economic development plan to attract and retain
businesses in the city's older commercial districts and corridors, Raleigh officials are encouraging mixed-
use development,
improving streetscapes to
encourage walking, and
investing in better transit
in the downtown.2
Revitalized town centers
and Main Streets also
attract businesses in small
towns and rural areas.
Silver City, New Mexico,
whose economy was
tethered to the mining
industry's boom-and-bust
cycles, knew all too well
that the supplies of silver
and copper that attracted
people and services to the
Exhibit 1. Downtown Raleigh, North Carolina. Raleigh hosts festivals and events that
attract people to downtown. Restaurants, shops, services, and cultural institutions
make it an attractive place to live, work, and visit.
Photo source: orionpozo via flickr.com.
1 WNCN. "Red Hat Announces Finalized Plans to Move Headquarters to Raleigh." January 6, 2012.
http://www.wncn.com/story/20917292/red-hat-announces-finalized-plans-to-move-headquarters-to-raleigh.
2 City of Raleigh. The 2030 Comprehensive Plan for the City of Raleigh. 2009.
http://www.raleighnc.gov/business/content/PlanLongRange/Articles/2030ComprehensivePlan.html.
1
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Introduction
area could not last forever. In the early 1980s, city leaders and residents recognized the need to
diversify the economy but realized that attracting large manufacturers would be challenging because of
the area's relative isolation. In 1985, Silver City formed its Main Street program to capitalize on its
primary assets: historic buildings and a beautiful natural setting. From 1985 to 2011, 151 buildings were
rehabilitated, the town gained 49 new businesses, and the office vacancy rate declined from 40 percent
to 13 percent.3 Improvements to the town's infrastructure and historic buildings made it a destination
for arts- and culture-based tourism as well as small-scale manufacturing. For example, Syzygy Tileworks,
a handmade tile manufacturer, employs more than 30 people at the site of a former car dealership
across the street from city hall. Custom Steelworks, in the warehouse district at the south end of
downtown, fabricates heavy structural
steel and specialized parts for local mining
operations as well as home accessories
made of iron, steel, and other metals.4
These companies have something in
common: They chose their operating
locations because they recognized that
compact, walkable, downtown centers
would be good for their business.5
Locations with housing and transportation
options, a mix of uses close together, and
a high quality of life follow the principles
of smart growth development (see Exhibit
2). Places with these characteristics can be
found in rural environments, cities,
suburbs, and small towns. This paper uses
the term smart growth places to capture
the diversity of communities that follow
smart growth principles.
Businesses that locate in smart growth
places can help protect environmental
resources—for example, by reducing air
pollution from vehicles by encouraging
walking, bicycling, or taking transit;
building more compactly to protect
Exhibit 2: Smart Growth Principles
In 1996, the Smart Growth Network, made up of
organizations representing diverse interests including real
estate, the environment, development, affordable
housing, government, and others, developed 10 smart
growth principles based on experiences of communities
around the country:
• Mix land uses.
• Take advantage of compact building design.
• Create a range of housing opportunities and choices.
• Create walkable neighborhoods.
• Foster distinctive, attractive communities with a
strong sense of place.
• Preserve open space, farmland, natural beauty, and
critical environmental areas.
• Strengthen and direct development towards existing
communities.
• Provide a variety of transportation choices.
• Make development decisions predictable, fair, and
cost effective.
• Encourage community and stakeholder collaboration
in development decisions.
Smart Growth Network. "Why Smart Growth?"
http://www.smartgrowth.org/why.php. Accessed October 12, 2012.
National Trust for Historic Preservation. "Silver City MainStreet Project." http://www.preservationnation.org/main-
street/awards/gamsa/2011-gamsa/silver-city-mainstreet.html. Accessed October 12, 2012.
4 Personal communication with Nicholas Seibel, Manager, Silver City MainStreet Project, on March 11, 2013.
5 Smart growth strategies deal with the physical characteristics and location of specific places. This paper addresses the
potential benefits to a business of choosing a specific location within a region. Regional or state differences such as corporate
income tax rates, worker's compensation insurance rates, and right to work rules are not considered here. While such factors
can be important influences for some industries and companies, this paper assumes that they are consistent across the region
being considered.
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Introduction
ecologically sensitive land; or incorporating natural ways of collecting and filtering stormwater runoff.6
However, locating in compact, walkable, mixed-use business districts that are centrally located within
the larger region can also bring economic advantages for businesses, including:
• Increased productivity and innovation. Easier access to labor, suppliers, and supporting
businesses improves productivity. An environment that enables and encourages social
interaction both within and among firms leads to more idea exchange, innovation, and
collaboration.7 Making it easy for employees to incorporate physical activity into their daily
commutes improves their health and well-being, reducing absenteeism and health care costs.
• Improved ability to compete for labor. Many professionals and recent college graduates prefer
to live near where they work and to be able to walk to shops, restaurants, and entertainment.
Low-wage workers need access to affordable housing near jobs and transportation options.
Businesses in walkable central business districts near transit can meet the needs of both these
groups, making it easier to recruit employees.
• Stronger retail sales. Stores find it easier to attract customers when they are in locations that
can be reached in multiple ways and provide a diverse, vibrant environment.
Thus, for many types of businesses, the advantages of choosing a regional location with smart growth
features can increase profits. This document first discusses these advantages in greater depth and then
provides examples of companies that have recognized these advantages and made a locational decision
accordingly.
6 For more information on the environmental benefits of smart growth strategies see: EPA. "Environmental Benefits of Smart
Growth." http://www.epa.gov/smartgrowth/topics/eb.htm. Accessed October 12, 2012.
Webber, Chris, and Glenn Athey. The Route to Growth: Transport, Density and Productivity. Centre for Cities. 2007.
http://www.centreforcities.org/assets/files/pdfs/route to growth.pdf.
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II. Smart Growth Places Can Increase Productivity and Innovation
Smart growth strategies create environments that encourage the geographic concentration of people
and businesses. Research on the economic benefits of geographic concentration (referred to as
agglomeration in the literature) has shown that it increases the productivity and innovation of
businesses by improving access to:
• Educated and skilled labor.
• Suppliers and supporting businesses.
• Outside knowledge gained by face-to-face interactions among workers at different firms.8'9
The basic driver of these benefits is increased density of people and businesses. A well-established body
of literature has demonstrated a link between metropolitan density and economic productivity.10'11 A
2012 study estimated the size of the effect to be 2 to 4 percent higher economic productivity in a
metropolitan area with twice the population density. This influence of density on productivity is stronger
in areas with higher educational levels—the productivity advantage in more highly educated regions is
about two times larger than the average—and for knowledge-based industry sectors such as
professional services, arts and entertainment, information, and finance.12
Metropolitan density appears to enhance innovation as well as productivity. An area with twice the
number of jobs as another that is similar in all other respects generates 20 percent more patents per
worker.13 Other research provides further evidence that greater population density is associated with
greater patent activity and that most U.S. cities have a density well below the optimal for maximum
patent production.14 In addition, the density of employees in creative professions such as engineering,
science, art, architecture, and athletics is correlated with the number of patents generated by a region.15
The success of central business districts16 around the world has shown the benefits of enhanced
productivity and innovation achieved through geographic concentration. However, since the middle of
the last century, suburban, single-use office parks have also developed to take advantage of the benefits
8 Ibid.
9 Rosenthal, Stuart S., and William C. Strange. "The Micro-Empirics of Agglomeration Economies." In A Companion to Urban
Economics, by Richard J. Arnott and Daniel P. McMillen (eds.) 7-23. Blackwell Publishing Ltd. 2006.
10 Puga, Diego. "The Magnitude and Causes of Agglomeration Economies." Journal of Regional Science 50(1): 203-219. 2010.
11 For a discussion of how to estimate the benefits of firms' locating in already-developed city centers, see EPA. Handbook on
the Benefits, Costs, and Impacts of Land Cleanup and Reuse. 2012.
http://vosemite.epa.gov/ee/epa/eed.nsf/pages/LandHandbook.html.
12 Abel, Jaison R., Ishita Dey, and Todd M. Gabe. "Productivity and the Density of Human Capital." Journal of Regional Science.
52(4):562-586. 2012.
13 Carlino, Gerald A., Satyajit Chatterjee, and Robert M. Hunt. "Urban Density and the Rate of Invention." Journal of Urban
Economics. 61(3):389-419. 2007.
14 Sedgley, Norman and Bruce Elmslie. "Do we Still Need Cities? Evidence on Rates of Innovation from Count Data Models of
Metropolitan Statistical Area Patents." American Journal of Economics and Sociology 70(1): 86-108. 2011.
15 Knudsen, Brian, Richard Florida, Kevin Stolarick, and Gary Gates. "Density and Creativity in US Regions." Annals of the
Association of American Geographers 98(2): 461-478. 2008.
A central business district is the part of a city or town where retail and office buildings congregate. It typically is centrally
located and contains the highest density and tallest buildings in the city or town. It is usually referred to as "downtown."
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Smart Growth Places Can Increase Productivity and Innovation
of geographic concentration of jobs within an
industry, typified by developments like those
housing high-tech businesses in Silicon Valley,
California, and Tysons Corner, Virginia.
Relatively little research has been done on
how the economic benefits of geographic
concentration vary with differences
commonly seen between single-use office
parks outside of central business districts and
traditional, mixed-use downtowns. One study
in King County, Washington, found that the
most important factors for determining the
assessed property value17 of office
developments were, in order of importance,
the intensity of development (measured by
the floor area ratio), a central location within
the region (measured by distance to
downtown Seattle), and the size of the office
cluster. Notably, location within a central
business district was more important than
clustering. Within the city of Seattle, office
rents in the central business district were
96 percent greater than in office clusters
outside the central business district. Within
King County (but outside the city limits), office
rents in the central business district of
Bellevue were 40 percent greater than in
office clusters outside Bellevue.18
The location of geographic concentrations of businesses is thus important. Although office rents and
sales prices might be higher, companies choosing central business districts can expect to reap greater
economic benefits from co-locating with other businesses than they would in single-use office parks on
the outskirts of cities. In addition, locating within a dense metropolitan region is not sufficient to ensure
access to the region's employees if travel distances, congestion, and lack of alternatives to cars limit
people's ability to reach a particular location. Centrally located, compact places served by public transit
are easier for people from across an entire region to reach. The central location minimizes the distance
to the company for the greatest number of people across the region, and transit systems can efficiently
Exhibit 3: Harbor Steps in downtown Seattle. The steps
leading from the Central Waterfront to the Seattle Art
Museum host a lively atmosphere that supports the
businesses located along it and provides amenities for office
employees.
Photo source: Payton Chung via flickr.com.
In Washington state, property value assessments are based on the expected full market value of the land and improvements.
18 Sohn, Dong-Wook, and Anne V. Moudon. "The Economic Value of Office Clusters: An Analysis of Assessed Property Values,
Regional Form, and Land Use Mix in King County, Washington." Journal of Planning Education and Research 28(1): 86-99. 2008.
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Smart Growth Places Can Increase Productivity and Innovation
transport people from outlying neighborhoods and suburbs into a central employment district.19 Across
the 100 largest metropolitan areas, 95 percent of jobs within cities are accessible by public transit, while
in suburbs, only 64 percent are (Exhibit 4). The difference is greatest in the south and midwest.
Geography
All 100 metro areas
Midwest
Northeast
South
West
City Suburb
Total Jobs 1 Covered Jobs 1 Rate Total Jobs 1 Covered Jobs 1 Rate
38,344,050
7,046,221
7,684,947
13,055,197
10,557,685
36,308,908
6,817,863
7,672,237
11,756,520
10,062,288
94.7%
96.8%
99.8%
90.1%
95.3%
64,634,129
13,911,008
16,237,992
20,265,413
14,219,716
41,392,044
7,864,253
11,582,642
10,552,775
11,392,374
64.0%
56.5%
71.3%
52.1%
80.1%
Exhibit 4. Share of jobs covered by fixed-route transit service.
Source: Tomer, Adie. Where the Jobs Are: Employer Access to Labor by Transit. Brookings. 2012.
Companies can reap other productivity benefits from centrally located, compact, and walkable places
that are not available in areas where a car is the only way to reach the business. Not only do companies
get better access to employees from across the entire region, but those employees have commuting
options that can improve their health, which can reduce absenteeism and lower health care costs. A
review of research on physical activity, absenteeism, and productivity found that an increase in physical
activity of more than one hour per week is associated with lower rates of absenteeism.20 If businesses
locate in smart growth places, many employees could achieve this level of physical activity through
walking or bicycling to their jobs or to a local transit station on their daily commute. A survey of more
than 1,200 employees at three Dutch companies found that those who regularly bicycled to work had
significantly lower rates of sickness-related absenteeism than non-cyclists even after controlling for
personal, health, and lifestyle factors that influence whether people bike to work. Rates were lower the
more often and the longer the distance traveled by bike.21 Access to a variety of transportation options
also can reduce absenteeism by providing employees alternatives to get to work on time when weather,
traffic delays, or car breakdowns make travel by one mode difficult or impossible.
Making it easy for employees to incorporate physical activity into their daily commutes can reduce
health care costs by improving their health. An analysis of eight medical studies involving over 173,000
participants found that commuting that incorporates walking and bicycling was associated with an
overall 11 percent reduction in cardiovascular risk.22 Another study found that the benefits of increased
physical activity from bicycling were nine times greater than the risks from accidents and increased
inhalation of air pollution compared to driving a car.23 A literature review of the health effects of
Belzer, Dena, Sujata Srivastava, and Mason Austin. Transit and Regional Economic Development. Center for Transit-Oriented
Development. 2011. http://www.reconnectingamerica.org/resource-center/browse-research/2011/transit-and-regional-
economic-development.
20 Davis, Adrian, and Marcus Jones. Physical Activity, Absenteeism and Productivity: An Evidence Review. TRL Limited and JMP
Consulting for Transport for London. 2007. http://www.tfl.gov.uk/assets/downloads/Phvsical-activitv-absenteeism-and-
productivitv-evidence-review.pdf.
21 Hendriksen, Ingrid J.M., Monique Simons, Francisca Galindo Garre, and Vincent H. Hildebrandt. "The Association Between
Commuter Cycling and Sickness Absence." Preventive Medicine 51(2): 132-135. 2010.
22 Hamer, Mark, and Yoichi Chida. "Active Commuting and Cardiovascular Risk: A Meta-Analytic Review." Preventive Medicine.
46(1):9-13. 2008.
23 De Hartog, Jeroen Johan, Hanna Boogaard, Hans Nijland, and Gerard Hoek. "Do the Health Benefits of Cycling Outweigh the
Risks?" Environmental Health Perspectives 118(8): 1109-1116. 2010.
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Smart Growth Places Can Increase Productivity and Innovation
Exhibit 5: Light rail in Charlotte, North Carolina. Riders on the LYNX light rail system in
Charlotte can help maintain a healthy body weight by walking or biking to stations.
Businesses can benefit from being close to stations because employees are healthier and
enjoy having the option of getting to work without a car.
Photo source: David Wilson via flickr.com.
commuting to work
(or to public transit)
by walking or
bicycling found that
it is associated with
better health, lower
levels of obesity,
and improved social
cohesion.24 For
example, a study in
Charlotte, North
Carolina, found that
people who
commuted by light
rail had a reduced
body mass index and reduced odds of becoming obese over time, likely from physical activity involved in
walking or biking to and from stations.25 Another study estimated public health care savings from the
light rail system over nine years at $12.6 million.26 Statewide studies in Wisconsin27 and Iowa28 have
documented the substantial savings in health care costs that increased levels of bicycle commuting
could produce. In addition, when walking and bicycling trips replace car trips, air pollution drops, which
reduces respiratory and other illnesses in the region as a whole. A study of 11 Midwestern metropolitan
areas found that replacing 50 percent of short automobile trips with bicycling would produce nearly $9
billion in net benefits, including $4.9 billion from reductions in adverse health impacts from ozone and
fine particulate matter pollution and $3.8 billion from health benefits due to increased physical activity.
In addition, improved air quality would lead to 608 fewer deaths in the region per year, and increased
exercise would lead to 687 fewer deaths per year.29 Companies can share in these benefits through
reduced employee health care costs and lower rates of absenteeism.
24 Newman, Peter, and Anne Matan. "Human Mobility and Human Health." Current Opinion in EnvironmentalSustainability.
4:420-426. 2012.
25 MacDonald, John M., Robert J. Stokes, Deborah A. Cohen, Aaron Kofner, and Greg K. Ridgeway. "The Effect of Light Rail
Transit on Body Mass Index and Physical Activity." American Journal of Preventive Medicine 39(2): 105-112. 2010.
26 Stokes, Robert J., John MacDonald, and Greg Ridgeway. "Estimating the Effects of Light Rail Transit on Health Care Costs."
Health & Place 14(l):45-58. 2008.
27 Grabow, Maggie, Micah Hahn, and Melissa Whited. Valuing Bicycling's Economic and Health Impacts in Wisconsin. The
Nelson Institute for Environmental Studies, Center for Sustainability and the Global Environment, University of Wisconsin-
Madison. 2010. http://www.sage.wisc.edu/igert/download/bicvcling final report.pdf.
28 Bowles, Brian, et al. Economic and Health Benefits of Bicycling in Iowa. Sustainable Tourism and Environment Program,
University of Northern Iowa. 2011. http://www.uni.edu/step/reports/economic health benefits of bicvcling.pdf.
29 Grabow, Maggie L., Scott N. Spak, Tracey Holloway, Brian Stone Jr., Adam C. Mednick, and Jonathan A. Patz.
"Air Quality and Exercise-Related Health Benefits from Reduced Car Travel in the Midwestern United States." Environmental
Health Perspectives. 120(l):68-76. 2012.
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III. Smart Growth Places Can Better Compete for Labor
Compact central business districts and town centers typically offer a variety of goods and services,
convenience, exposure to new and different experiences, and a wide range of opportunities for
professional pursuits and personal interests.30 These amenities can help attract talented workers, which
can provide a competitive advantage to businesses.
Businesses in areas with little to no affordable housing and few transportation options can find it
difficult to attract low-wage workers. Across the country's largest metropolitan areas, 10 percent of
households do not own a car. Even for those that do, congestion can limit the geographical area from
which workers are willing to commute and require employers to pay higher wages.31 Some companies in
suburban campuses even take on the expense of providing private transportation options to attract and
keep employees—expenses that reduce the value of any rent savings. For example, for employees
commuting to its Silicon Valley campus, Google provides bus service that covers more miles than the San
Francisco Bay Area Transit System.32
Attracting skilled labor can also be challenging for businesses. As the baby boom generation retires from
the labor force, global competition continues to intensify, and new technologies emerge in the
workplace, companies will increasingly need educated workers.33 Research shows that someone with a
bachelor's or master's degree is 10 percent more likely to work in a central city than a suburban area.
Someone with a professional degree is 20 percent more likely. Evidence suggests that central cities tend
to have more highly educated workforces in part because such workers prefer living in central cities over
suburbs.34 In the Washington, D.C., metropolitan region, the most walkable neighborhoods have close
to twice the percentage of people with advanced graduate or professional degrees (27.8 percent) as the
region as a whole (14.8 percent), while the least walkable neighborhoods fall well below the regional
average (2.3 percent).35 A 2013 real estate report notes the trend of biotech and pharmaceutical
companies moving from suburban campuses to cities to better attract top Ph.D. job applicants.36
Several studies have documented the appeal of smart growth developments. A 2002 survey of 2,010
adults in California and a 2007 survey of 1,013 adults in the Southwest (Texas, Arizona, New Mexico, and
Nevada) asked respondents to choose between living in a small home with a small backyard and a short
30 Cortwright, Joseph. City Advantage. CEOs for Cities. 2007. http://www.ceosforcities.org/work/city advantage.
31 Tomer, Adie. Where the Jobs Are: Employer Access to Labor by Transit. Brookings. 2012.
http://www.brookings.edu/research/papers/2012/07/ll-transit-iobs-tomer.
32 Bernard, Murrye. "Reverse Corporate Creep." Architect. September 26, 2012.
http://www.architectmagazine.com/architecture/reverse-corporate-creep l.aspx.
33 Cortwright, Joseph. The Young and Restless in a Knowledge Economy. 2005.
http://documents.scribd. com. s3. amazonaws.com/docs/5laf npazr41ieglo.pdf?t=1334675676.
34 Sander, William, and William A. Testa. "Education and the Location of Work: A Continued Economic Role for Central Cities?"
The Annals of Regional Science. 2012. DOI 10.1007/s00168-012-0506-4.
35 Leinberger, Christopher B., and Mariela Alfonzo. Walk this Way: The Economic Promise of Walkable Places in Metropolitan
Washington, D.C. Brookings Institution. 2012. http://www.brookings.edu/research/papers/2012/05/25-walkable-places-
leinberger.
36 Urban Land Institute. "Emerging Trends in Real Estate 2013." 2012.
http://www.uli.org/emerging-trends/emerging-trends-in-real-estate-2013.
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Smart Growth Places Can Better Compete for Labor
commute to work or a large home with a large backyard and a long commute to work. In both surveys,
more respondents chose the small home with a short commute. About half of the respondents in both
cases chose a mixed-use neighborhood where they could walk to stores, schools, and services over a
residential-only neighborhood where they would have to drive to stores, schools, and services. One-
third of the respondents in both surveys favored a high-density neighborhood with public transit over a
low-density neighborhood where they would have to drive a car.37 A national survey representative of
U.S. households conducted in 2003 and 2005 found that in 2003, 44 percent of people wanted to live in
a traditional neighborhood with a mix of residential and commercial uses where they could easily walk
or bike to destinations. By 2005, that had grown to 50 percent, with college graduates showing more
support than those who had not graduated from college.38
Educated young adults in particular often prefer to live and work in compact, centrally located
neighborhoods with a diverse range of shopping, dining, and entertainment experiences close at hand.39
Analysis of U.S. Census Bureau data found that in aggregate, between 2000 and 2009, the number of
college-educated 25- to 34-year-olds increased twice as fast in the close-in neighborhoods of the
nation's 51 largest metropolitan areas as in the other parts of these metropolitan areas.40 These
preferences have increased sharply over just a single decade. In 2000, college-educated 25- to 34-year-
olds were about 61 percent more likely than their peers with less education to prefer close-in
neighborhoods. In 2009, they were 94 percent more likely.
Quicken Loans' founder and chairman moved thousands of employees to a new headquarters in
downtown Detroit saying, "People in their 20s and 30s, the best and brightest coming out of our
universities, the vast majority of them want to be in a cool urban core in a hip city. Period. So, if we're
going to retain and maintain talent in our companies and have innovative creative people, we've got to
make sure that we're in the right locations that are going to generate the interest of those people"
(Exhibits).41
Real estate trends reflect these preferences. Infill locations in walkable places with good transit access
continue to attract tenants, driving apartment vacancy rates below their 10-year average.42 In numerous
and varied regions across the United States, central business districts and popular urban corridors have
fared better than suburbs in recovering from the real estate downturn that began in 2007.43 Some
property owners in those suburbs are now trying to retrofit their properties to offer some of the
amenities readily available in central business districts. For example, in response to vacancy rates
37 Lewis, Paul G., and Mark Baldassare. "The Complexity of Public Attitudes Toward Compact Development." Journal of the
American Planning Association 76(2): 219-237. 2010.
38 Handy, Susan, James F. Sallis, Deanne Weber, Ed Maibach, and Maria Hollander. "Is Support for Traditionally Designed
Communities Growing? Evidence from Two National Surveys." Journal of the American Planning Association 74(2): 209-221.
2008.
39 Urban Land Institute, op cit.
40 Cortwright, Joseph. Young and Restless 2011. CEOs for Cities. 2011.
http://www.ceosforcities.org/work/voung and the restless.
41 Berg, Nate. "Downtown Detroit's Big Booster." The Atlantic Cities. January 12, 2012. http://www.theatlanticcities.com/jobs-
and-economy/2012/01/downtown-detroits-big-booster/932.
42 Urban Land Institute, op cit.
43 Spivak, Jeffrey. "Urban Office Momentum." Urban Land. Urban Land Institute. September 14, 2011.
http://urbanland.uli.org/Articles/2011/September/SpivakUrbanOffice.
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Smart Growth Places Can Better Compete for Labor
nearing 25 percent, the owner
of a 630-acre suburban office
park in Henrico County,
Virginia, noted, "People want
to spend less on transportation,
they want more time, they
want a different lifestyle. And
they are voting with their
pocketbooks... Companies want
the choice for their employees
to live close to their jobs, or
they will go somewhere else."44
The owners association for the
office park has developed a
plan to convert the area into a
mixed-use town center that will
enable people to live close by and
Exhibit 6. Quicken Loans in Detroit, Michigan. Quicken Loans is located in the
commercial hub of downtown Detroit next to Campus Martius Park, a public
square and year-round destination for residents and visitors. The district around
the park has 20,000 employees, 750 residents, and a diverse collection of shops
and restaurants.
Source: Campus Martius Park. "Welcome." www.campusmartiuspark.org. Accessed April
11, 2013. Photo source: Scott Smithson via flickr.com.
walk to work.
Regardless of housing preferences, companies in a central location with multiple options for how
employees, customers, and clients can reach them have a competitive advantage over companies that
can be reached only by a relatively long drive. Long commutes or lengthy travel times to obtain goods or
services can be a drain on household finances. A 2006 study of 28 metro areas across the country found
that on average, working families spent 57 percent of their incomes on housing and transportation costs
and spent more on transportation than on housing.45 Long commutes can also have negative effects on
employees' health. A national Gallup poll conducted in 2009 and 2010 found that the longer a person's
commute, the more likely he or she was to experience both health problems and adverse emotional
conditions.46 Likewise, a 2012 study found that commuting distance was adversely associated with
physical activity, cardiorespiratory fitness, obesity, and risk factors such as high cholesterol levels and
high blood pressure.47 A comparison of commuters in metropolitan New York City found that after
controlling for income, education, race, and geographic location, people who drove to work experienced
significantly greater stress and had a more negative mood than people who took the train to work.48
Companies are likely to better retain employees who are happier, healthier, and can easily get to work.
Southern Environmental Law Center. Smart Growth is Smart Economics: Sustainable Development in the Greater Richmond
Region. 2010. http://psgrichmond.org/cms/content/smart-growth-smart-economics-sustainable-development-greater-
richmond-region-selc-2010.
45 Lipman, Barbara. A Heavy Load: The Combined Housing and Transportation Burdens of Working Families. Center for Housing
Policy. 2006. http://www.nhc.org/media/documents/pub heavy load 10 06.pdf.
46 Crabtree, Steve. "Wellbeing Lower Among Workers With Long Commutes." Gallup, Inc. August 13, 2010.
http://www.gallup.com/poll/142142/Wellbeing-Lower-Among-Workers-Long-Commutes.aspx.
47 Hoehner, Christine M., Carolyn E. Barlow, Peg Allen, and Mario Schootman. "Commuting Distance, Cardiorespiratory Fitness,
and Metabolic Risk." American Journal of Preventive Medicine. 42(6):571-578. 2012.
48 Wener, Richard E., and Gary W. Evans. "Comparing Stress of Car and Train Commuters." Transportation Research Part F:
Traffic Psychology and Behaviour 14(2): 111-116. 2011.
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IV. Smart Growth Places Can Improve Retail Sales
Retailers, restaurants, and other
businesses serving local customers can
benefit from being in compact, mixed-
use commercial districts thanks to
changing preferences in how and where
people want to shop. The continuing
growth of online retailing is changing
the ways that people buy things. Brick-
and-mortar stores tend to be strongest
in retail segments with products that
are not easily sold online and/or where
the experience of the shopping trip
rivals the importance of the product
itself.49 Many large retailers, including
Sears, Home Depot, Best Buy, Wal-
Mart, and Staples are shrinking their
store footprints in urban markets to
attract consumers with new shopping
habits and preferences.50 Densely
populated urban locations are
predicted to be the "sure thing" for
retail growth in 2013, in part because
these locations can serve large numbers
Exhibit 7. Home Depot in Chicago. Home Depot opened a two-story
store that fronts North Halstead Street in the Lincoln Park
neighborhood of Chicago. It not only changed the conventional layout
of its store to fit the setting, but it also carries a different mix of
merchandise designed to meet the needs of urban residents.
Photo source: Payton Chung via flickr.com.
of both residents and daytime employees.5
An analysis of demand for retail locations in central business districts relative to the metropolitan area
where they are located found that in eight out of 15 cities, annual rent growth in central business
districts outpaced growth in the metropolitan area over a five-year period. Averaged over all 15 cities,
the rental rate growth in central business districts was more than 250 percent greater than in
metropolitan areas as a whole.52 Central business districts tend to be walkable locations with a variety
of services and amenities within easy reach. These results are thus consistent with research showing
that walkability increases demand for retail and office property. A national analysis of office and retail
Gordon, Stephen. "In the Future Everything Will Be A Coffee Shop." The Speculist. December 26, 2011.
http://blog.speculist.com/scenarios/the-coffee-shop-take-over.html.
50 Bustillo, Miguel. "As Big Boxes Shrink, They Also Rethink." The Wall Street Journal. March 3, 2011.
http://online.wsi.com/article/SB10001424052748704728004576176601936377760.html.
51 Brown, Garrick H. and Matt Kircher. U.S. National Retail Report 2013 Forecast, n.d. Chainlinks Retail Advisors.
http://www.pentadproperties.com/chainlinks-and-pentad-properties-release-2013-national-retail-forecast.
52 Lynn, David J. "Renewed Urbanization Will Drive Change in Retail Strategies." National Real Estate Investor. April 6, 2011.
http://nreionline.com/retail/renewed-urbanization-will-drive-change-retail-strategies.
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Smart Growth Places Can Improve Retail Sales
properties found that on a 100-point scale, a 10-point increase in walkability was associated with a
9 percent increase in market value and a 7 percent higher net operating income.53
A walkable location can be a valuable marketing tool for businesses. More than 10,000 real estate
websites now use the Walk Score tool to help market their properties by highlighting the walkability and
transit accessibility of the surrounding neighborhood.54 Walk Score measures an address's walkability by
awarding points based on the variety of services and amenities located within one mile. The travel
websites Hipmunk and the AARP® Travel Center added Walk Score ratings to their hotel listings,
suggesting that the companies recognized that many travelers consider a hotel's walkability and
proximity to amenities when booking reservations.
A pedestrian- and bicyclist-friendly
environment has had direct economic
advantages for merchants across the
country. A study that classified 66 places
within the Washington, D.C.,
metropolitan region based on their
walkability found that a 19-point
increase in walkability (out of 94
possible points) was associated with an
80 percent increase in retail sales and a
nearly $7 per square foot increase in
retail rents.55 Walkable places clustered
near others in larger walkable districts
performed better than more isolated
walkable places. Gross retail rents in
walkable districts were nearly 50
percent higher, and retail sales were
nearly 125 percent greater.
More evidence of the retail advantages
of more walkable and attractive
Exhibit 8. Walkable neighborhood in Washington, D.C. Areas like
this stretch of 18* Street NW, just north of Dupont Circle, are easy to
navigate on foot. Stores and restaurants in the neighborhood benefit
from having so many residents and visitors walk by.
Photo source: Ted Eytan via flickr.com.
Pivo, Gary, and Jeffrey D. Fisher. "The Walkability Premium in Commercial Real Estate Investments." Real Estate Economics
39(2): 185-219. 2011.
54 Walk Score. "10,000+ Sites Now Using Walk Score Professional." July 19, 2011. http://blog.walkscore.com/2011/07/10000-
sites-now-using-walk-score-professional.
55 Leinberger and Alfonzo, op. cit. The study's walkability metric was based on 10 characteristics: "aesthetics (attractiveness,
open views, outdoor dining, maintenance), connectivity (potential barriers such as wide thoroughfares), density (building
concentrations and height), form (streetscape discontinuity), pedestrian amenities (curbcuts, sidewalks, street furniture),
personal safety (graffiti, litter, windows with bars), physical activity facilities (recreational uses), proximity of uses (presence of
non-residential land uses), public spaces and parks (playgrounds, plazas, playing fields), and traffic measures (signals, traffic
calming)."
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Smart Growth Places Can Improve Retail Sales
environments comes from cities that have made improvements to neighborhoods and seen retail
businesses thrive. In places as varied as West Palm Beach, Florida;56 Lancaster, California;57 and Raleigh,
North Carolina,58 projects that widened sidewalks; calmed vehicle traffic; and added features such as
crosswalks, street trees, improved lighting, and signage helped increase business activity and attract
private investment. New York City found that after transforming an underused parking area on Pearl
Street in Brooklyn into a pedestrian plaza, retail sales at local businesses increased 172 percent. In
Manhattan, after a curb lane was converted to a seating area along Pearl Street, sales at businesses
along the street increased by 14 percent.59 In Livermore, California, a $12.5 million streetscape project
converted a four-lane highway to a two-lane pedestrian-oriented main street. In the three years
following completion of the project, downtown retail sales grew 15 percent.60
56 Rush, Natalie, Laurie Actman, Patrick McMahon, and Henry Renski. "Street Redesign for Revitalization." PEDSAFE-
Pedestrian Safety Guide and Countermeasure Selection System. U.S. Department of Transportation, Federal Highway
Administration. 2002. http://www.walkinginfo.org/pedsafe/casestudv.cfm7CS NUM=16.
57 National Complete Streets Coalition and Smart Growth America. Complete Streets Stimulate the Local Economy. 2012.
http://www.smartgrowthamerica.org/complete-streets/complete-streets-fundamentals/factsheets/economic-revitalization.
5SBurden, Dan, and Todd Litman. "America Needs Complete Streets." ITEJournal 81(4): 36-43. 2011.
59 New York City DOT. Measuring the Street: New Metrics for 21st Century Streets. 2012.
http://www.nyc.gov/html/dot/downloads/pdf/2012-10-measuring-the-street.pdf.
60 Dono, Andrea L. "Livermore, California: Celebrating Wine Country." Main Street Story of the Week. National Trust for Historic
Preservation. 2009. http://www.preservationnation.org/main-street/main-street-news/2009/02/livermore-california.html.
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V. Many Companies Are Making the Move to Downtown Locations
A strong indicator of the business advantages of centrally located, compact, walkable places is the trend
of corporations moving to these locations from outlying suburbs.61 After occupying single-use, isolated
complexes on the suburban fringe during the last quarter of the 20th century to take advantage of cheap
land and create self-contained environments, some companies are discovering the drawbacks. These
locations can isolate employees, weaken companies' ability to understand and respond to major shifts in
industries and markets, and limit the available talent pool.62 Retailers who have concentrated on
suburban locations are also making the move into downtown areas to better serve their customer base
and increase profits. Companies that have made the move to downtown locations include:
• Motorola Mobility announced in 2012 that it would move its headquarters and 3,000 employees
from a northern Chicago suburb it had occupied for 18 years to downtown, in part to increase
creativity and innovation among workers and to increase access to the talent pool of Chicago's
universities.63 Motorola Mobility's chief executive officer said of the move, "We're thrilled to
bring our employees to downtown Chicago and infuse our company with the vibrant energy of
the city."64
• Rather than pursue a suburban greenfield site, technology firm General Datatech refurbished a
downtown Dallas building originally built as a dairy in 1958 to create a place with character and
texture that also has a better environmental footprint. "That we were able to create such a
facility out of an old dairy factory and preserve a bit of Dallas history makes it all the more
satisfying," said the company's founder and chief executive officer.65'66
• Blue Cross/Blue Shield of Michigan moved over 3,000 workers from suburban Southfield,
Michigan, into a downtown Detroit office tower, consolidating its regional workforce. The
company saved $30 million in long-term real estate costs and reduced its office space use, and
over 90 percent of employees approve of the move.67
• Online retailer Zappos.com announced in 2010 that it would relocate its headquarters from
suburban Henderson, Nevada, to a renovated downtown Las Vegas building in 2013. The
company's plans include redeveloping the surrounding area with high-rise residences, stores,
61 Spivak, op. cit.
62 Baeb, Eddie. "Corporate Campuses in Twilight." Grain's Chicago Business. May 30, 2011.
http://www.chicagobusiness.com/article/20110528/ISSUE01/305289984/crains-special-report-corporate-campuses-in-twilight.
63 Kukec, Anna Marie. "Motorola Mobility: Farewell Libertyville, Hello Chicago." Daily Herald. July 27, 2012.
http://www.dailyherald.com/article/20120726/news/707269751/7interstitiahl.
64 Presta, John. "Mayor Emanuel announces Motorola Mobility Moving to Merchandise Mart in Chicago." Examiner.com. July
28, 2012. http://www.examiner.com/article/mavor-emanuel-announces-motorola-mobilty-moving-to-merchandise-mart-
chicago.
65 Brown, Steve. "High-Tech Firm Moves to Refurbished Dallas Building." Dallas Morning News. April 14, 2011.
http://www.dallasnews.com/business/commercial-real-estate/20110414-high-tech-firm-moves-to-refurbished-dallas-
building.ece.
66 Perez, Christine. "General Datatech Unveils New HQ." RealPoints. April 19, 2011.
http://realpoints.dmagazine.com/2011/04/general-datatech-unveils-new-hq/.
67 Walsh, Tom. "Blue Cross to Celebrate Moving 3,400 workers to downtown Detroit." Detroit Free Press. June 6, 2012.
http://www.freep.com/article/20120606/COL06/206060407/Blue-Cross-to-celebrate-moving-3-400-workers-to-downtown-
Detroit.
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Many Companies Are Making the Move to Downtown Locations
entertainment, and technology business incubators. Zappos' founder wants a location where
spontaneous interactions leading to better ideas and stronger relationships can readily occur,
noting that, "When you're in a city, the bar or the restaurant becomes an extended conference
room."6S
• Colliers International, a real estate services company, moved from the suburbs to downtown
Reno in 2012. A senior vice president explaining the reasons for the move said, "It's central, it's
wonderful to walk everywhere. The office team walks to their meetings. You can walk to
restaurants. We had a Colliers event at the (Reno Aces) ballpark, and we walked to that."69
• Target Corporation launched a new urban format store called City Target to help boost company
profits by better meeting the needs of their urban customers. The neighborhood around their
new store in Chicago's downtown Loop supports 300,000 workers that spend more than $1
billion annually in local stores.70 Sales in the first six City Target stores have been strong,
especially over the important holiday season.71
• In historic downtown Los Angeles, a surge of new retail stores opened or announced plans to
open in 2013 including two grocery stores and national chains like Ross Dress for Less, Zara, and
Sport Chalet. The new businesses helped fill long-vacant storefronts and signal a new optimism
among retailers about the potential to profit in a downtown location.72
• Relocations to central business districts are occurring in small towns as well. Excelda
Manufacturing in Brighton, Michigan (population 7,475 in 2011), chose to locate its corporate
headquarters downtown at the end of 2012. The chief financial officer said that it chose
Brighton because it is "vibrant, dynamic, and energetic" and that being downtown will help it
attract younger employees.73
Real estate experts expect the corporate migration to downtowns and compact suburban nodes to
continue.74 The companies mentioned here have recognized that central business districts in cities and
small towns can provide an atmosphere that stimulates innovation and attracts the workers they need.
68 Gallagher, Leigh. "Tony Hsieh's New $350 Million Startup." CNN/Money. January 23, 2012.
http://tech.fortune.cnn.com/2012/01/23/tony-hsieh-las-vegas-zappos.
69 Robison, Mark. "Destination downtown: Businesses returning to more vibrant Reno core." RGJ.com. April 27, 2013.
http://blogs.rgi.com/renorebirth/2013/04/27/destination-downtown-businesses-returning-to-more-vibrant-reno-core.
70 Townsend, Matt. "Target's City Ambitions." BloombergBusinessweek. May 31, 2012.
http://www.businessweek.com/articles/2012-05-31/targets-city-ambitions.
71 The Motley Fool. "Target Corporation (TGT): Will Red Card and Canadian Expansion Help This Retailer Hit the Bulls-eye?"
Insider Monkey. June 14, 2014. http://www.insidermonkey.com/blog/target-corporation-tgt-will-red-card-and-canadian-
expansion-help-this-retailer-hit-the-bulls-eye-171400.
72 "Even More Retail Momentum." Los Angeles Downtown News. July 12, 2013.
http://www.ladowntownnews.com/opinion/even-more-retail-momentum/article 060f3346-eb4c-lle2-b9dd-
001a4bcf887a.html.
73 Totten, Jim. "City is Thriving Despite State's Trend." Livingston County Daily Press & Argus. August 5, 2011.
http://paasb.pqarchiver.com/livingstondailv/access/2417149131.html?FMT=ABS&date=Aug+05%2C+2011.
74Spivak, op. cit.
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VI. Conclusion
Businesses are constantly looking for a competitive advantage. A good location has been a longstanding
element of business success. As people's preferences for where they live, work, and shop change, many
businesses are now finding a competitive advantage to being in a central location that is walkable and
has access to transit and a mix of homes and businesses. Places like Raleigh, North Carolina, and Silver
City, New Mexico, have shown that companies recognize this trend. Soon after Red Hat's move, another
software firm, Citrix Systems, announced it would move from the suburbs and follow Red Hat's lead to
downtown Raleigh.75 Meanwhile, the suburban office park that nurtured Red Hat during its early years is
also changing. Research Triangle Park amended its master plan in 2012 to add homes, shops, and
amenities and increase public transit.76 As companies recognize the competitive advantages of smart
growth places, more communities are adapting to meet those needs.
Companies have many choices when deciding where to locate within a region or a community. Central
business districts and town centers can provide an environment that nurtures innovation and increases
productivity, helps employee recruitment efforts, and leads to stronger sales.
75 Ranii, David, and Matt Garfield. "Citrix Systems to Create 337 High-Paying Jobs in Downtown Raleigh Over Next Five Years."
newsobserver.com. June 7, 2012. http://www.newsobserver.com/2012/06/07/2119504/citrix-systems-to-create-337-high.html.
76 Goodtree, Hal. "RTP Unveils New Master Plan." November 12, 2012. http://carvcitizen.com/2012/ll/12/rtp-unveils-new-
master-plan.
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