Spurred by urban population growth, companies and developers are renovating historic buildings, abandoned warehouses and industrial structures just outside of the downtowns of U.S. cities.
More than 54 percent of the world’s population lives in urban areas, according to JLL’s latest U.S. Fringe Markets report which reveals a massive shift worldwide, leading many companies to transfer from the suburbs or expand into downtown areas.
The growth in urban population has resulted in the revitalization of the dilapidated outskirts of many cities in the United States, the report says. Once considered liabilities, these so-called fringe locations of former “ghost towns” are gaining value through the development of innovative office buildings, walkable neighborhoods, residential communities and access to parks, transportation and other amenities.
Hundreds of companies have left the suburbs to either relocate, open new offices, or expand to walkable downtowns in the last five years and the trend is expected to continue.
Automotive seating manufacturer Adient plans to set up its global headquarters in Detroit and spend US$50 million on the renovation of the 10-story, 164,000-square-foot Marquette Building located in Detroit’s historic financial district.
General Electric also has plans to develop its future global headquarters in Fort Point, Boston. The company acquired a 2.5-acre property from Procter and Gamble that will house its headquarters campus. It will also begin rehabilitation of two historic brick buildings located in the area and bought by Massachusetts Development, a quasi-public finance and development agency.
Tenants are also returning to downtown Los Angeles, according to JLL. Industrial tenants are anchoring the area with well-known office tenants such as Warner Music Group, which will move to a redeveloped Ford Factory, where Model T’s once were assembled.
Major corporations are moving to the downtown areas because they need to attract millennials to their workforce – a segment of the population that is projected to account for around 50 percent of the total workforce in the United States by 2020. Currently, millennials comprise about 25 percent of the total labor force, according to a recent Price Waterhouse report.
To retain and attract talented workers, in particular millennials, companies are relocating to revitalized downtown areas that have become “vibrant, walkable neighborhoods where people want to both live and work.”
Anne R. Klee, head of Boston Development and Operations for GE, says the company’s new headquarters will tap talent in Boston.
“Our headquarters is designed to engage and leverage the talent, technology and work ethic of Fort Point and Greater Boston, while also giving back to the community through investment, rehabilitation and an inviting public space,” Klee said in a press statement.
JLL says the urban population growth has spurred development across the United States not only in major cities but in secondary cities as well.
In Charlotte, North Carolina, for example, the former industrial district of South End ‘has embraced the live-work-play concept,’ according to the JLL report.
South End now features restaurants, arts and culture for residents and employees. In the next 18 months, two creative office projects, 300 W. Summit and 2100 S. Tryon, will break ground. An old Pepsi bottling plant and the Sedgefield Shopping Center are also up for redevelopment.
In the formerly quiet commercial neighborhood of Uptown in Oakland, California, office rents have skyrocketed by more than 41 percent in the last 12 months, from $36.49 to $51.51 per square foot following a renewed emphasis on residential development.
It now has 105 residential units. Separately, a block of historical industrial structures now features coworking spaces, a microbrewery, restaurants, a bakery and a large event plaza. Uptown’s renaissance was fueled, in part, by companies fleeing San Francisco’s high-priced office market. Despite the recent rise in rents, prices are still really attractive when compared to San Francisco.
Rental rates in Portland’s redeveloped meatpacking district in Close-In-Eastside have also increased by 501 percent. With rising demand, Portland intends to identify key properties in Close-In-Eastside and nearby areas for development.
With the country-to-city trend picking up pace, investments will continue to pour into downtown areas as demand for all property types is expected to grow.