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Baiting the hook

Commercial real estate analysts frequently measure a city's occupancy rate, often reporting the numbers down to the last decimal point. But in an increasingly competitive process - often with neighboring markets vying for the same corporate tenants - what does a 10-year corporate lease mean to the city itself? Further, what programs do municipalities employ to promote tenant retention?

In reality, city and state governments and marketing organizations, and public/private business improvement districts are leading the charge to attract and retain corporate real estate users in their markets. From Orlando to Portland, Ore.; Phoenix to Boston, programs that improve and expand upon available, qualified labor; provide Internet-ready buildings for growing information technology companies; combine excellent working conditions with great living and entertainment environments; and those that stress plain old relationship building are the strategies used to attract corporate users.

In Metro Orlando the Economic Development Commission of mid-Florida - a marketing organization and coordinator of state and local government-sponsored incentives - offers permitting support, export assistance and workforce training development, among other programs, to entice corporate users. The organization focuses on three targeted industry sectors: high-tech, film and television production, and international trade.

In the high-tech sector, the region is home to more than 3,000 companies that employ more than 78,000. The number of high-tech companies in the area grew by 44% from 1996 to 1998, with employment in this industry growing 27% during the same period.

In expediting the permitting process, the Economic Development Commission of mid-Florida has attained permits in two days, vs. 30 days when companies attempt the process alone. The commission also works to secure a selection of pre-permitted sites to help firms, particularly those in the high-tech arena, get product to market faster.

Export counseling and seminars provided by the organization have helped strengthen export sales from the region to $1.66 billion in 1997, a 36.4% increase that year, ranking Metro Orlando as the second-fastest-growing export market in Florida. In 1998, the area saw significant foreign investment, particularly from German and U.K. companies moving to the region, including W.O.M., a manufacturer of surgical medical devices; Nordbeton, which provides residential wastewater treatment; Kendall & Gent, a manufacturer of threaded bolts; and Product Innovation Value, which provides sugar packaging and distribution. Le Capital, a top German business publication, recognized Metro Orlando as one of the leading U.S. locations for foreign investment.

To help improve and expand the pool of qualified labor available to targeted industries, the Economic Development Commission of mid-Florida coordinates workforce studies that help identify the jobs of the future, then works with local educational institutions to develop training programs. For example, when Cirent Semiconductor, a subsidiary of Lucent Technologies in the area since the 1980s, had a specific training issue, the commission helped develop a two-year microelectronics degree at a local college, producing a more ready workforce for the company.

"One of the biggest benefits of the central Florida area is a highly cooperative, business-oriented local and state government, and, in particular, the government's determination to provide a highly skilled workforce to fill the needs of high-tech companies like ours," says Dr. Peter Panousis, president and CEO of Cirent Semiconductor. "The community colleges, technical centers and universities also work hard to provide qualified employees, as well as opportunities for our current staff to continue their education."

Retention of existing companies is key, says Darrell Kelley, president and CEO of the Economic Development Commission of mid-Florida. He adds that more high wage, high-value jobs come from existing industries - with retention providing 60% of new jobs nationwide - vs. recruitment or business development, he says.

Relationships, not transactions Robin Ronne, director of economic development for the Tampa Chamber of Commerce's "Committee of 100" (the city's economic development operation), says that relationship building is the primary allure to corporations in the area. "We have a strong fundamental belief that site selection is not based on transactions, but on relationships," says Ronne. "This may sound trite, but it is truly the way business is done here. Almost all of our major successes are results of established, long-term client/community relationships."

Ronne proclaims that, when firms are seeking a move, they typically look at areas where company operations already exist - in particular, where strong community relationships and a cooperative government attitude abide. The expansion of Citigroup (then Citicorp) in the area provides an excellent example of successful relationship building, he says.

After Citicorp moved its travelers check division to Tampa in 1983, Ronne's organization continually visited the company, making sure the highest-level corporate executives understood the county's ongoing objectives and their benefits. "It's a two-way street," Ronne says. "There's no reason for a major company to keep its investment here if we as a city are not committed to that organization."

So in 1993, when the bank began its search for more than 1 million sq. ft. of space for a prototype campus ready for occupancy by 2005, Tampa successfully competed against several other U.S. metro areas. "In addition to an already strong relationship with the company, we were able to present 16 key sites - known in Florida as 'Developments of Regional Impact' - locations with vested development rights already negotiated with local and state governments, and preapproved for 'x' amount of development," says Ronne.

He adds that Citigroup ultimately purchased 127 acres with full-vested entitlements for 1.5 million sq. ft. of space and more than 5,800 parking spaces. Ground broke for Citibank Center Tampa in March 1997, with the campus completed one year later.

"In our site selection, we look at areas in which we are already established," says Stephen Binder, vice president and director of global planning for Citigroup. "Also significant in our thinking are labor costs, not necessarily real estate costs. We look for strong labor markets which encompass a high educational level and qualified applicants, which will support a long-term move.

"Tampa is a good example," Binder adds. "The area has proven to be a strong market in terms of labor resources, as well as quality of life, transportation access and other benefits."

Down Silicon Alley In New York City, the Alliance for Downtown New York - the third-largest business improvement district in the United States - works to create and promote a safe, clean, live-work, totally-wired community in lower Manhattan. What distinguishes this organization are its efforts to transform Downtown New York City into the heart of Silicon Alley, the center of new information and media technology in New York, according to Carol Weisbrod, president of the Alliance for Downtown New York.

The Silicon Alley venture was initiated in 1995 by the conversion of an older commercial building, 55 Broad Street, into a "smart" building offering satellite accessibility, single- and multi-mode fiber optics, video conferencing facilities, and high-speed Internet access. Dubbed the New York Information Technology Center, this building has become the symbol and nucleus of the growing high-tech industry in New York.

Today, the long-vacant building attracts high-profile tenants such as IBM, Sun Microsystems and Ernst & Young - all willing to pay a premium for high-bandwidth connectivity.

"To ensure the New York Information Technology Center did not become an island, we then developed our next strategy - the Plug'n'Go program - which features six other downtown buildings with thousands of square feet of pre-built, Internet-ready office space designed specifically for growing IT companies," explains Weisbrod, adding that the program offers affordable, quality office space, high-speed Internet bandwidth and a networked community environment. During 1998, more than 230,000 sq. ft. of Plug'n'Go space was leased to 92 high-tech companies.

The Silicon Alley area - now called the Information Technology District (ITD) - houses more than 650 information technology companies, which are quickly emerging as the city's prime economic generators. To further strengthen the ITD, the Alliance also sponsors business development seminars; an annual ITD company directory; electronic posting services for events, technology questions and internship opportunities; and other networking programs.

Operating further uptown, the Grand Central Partnership (GCP) is one of the largest business improvement districts in the United States, comprising 76 million sq. ft. of commercial space in a 68-block area. The GCP has reversed some "unhappy trends" and drawn new corporate users with a new capital plant; ambitious social services program; privately-managed maintenance, sanitation and security measures; and renovated streetscapes, among other initiatives.

"When the GCP began in 1988, the area around 42nd Street was in decline with many office vacancies," says Dan Pisark, a director of the private, non-profit group. "We have since restored the area and infused a new vitality," says Pisark. "One barometer of success is retail. Shoppers are back, new stores have opened, and existing ones are investing in expansions, with vacancies as low as 2%."

Booming on both coasts Much like the strong infrastructure of Manhattan, Boston and Portland, Ore., report similar success, with slightly different factors pushing each city's growth. Boston's talent base, unique residential character, strong institutions and attractive tax structure are the major draws, says Tom O'Brien, director of the Boston Redevelopment Authority (BRA).

"The Boston area's many colleges produce a number of young, trained individuals attractive to many corporate users," he says. "This young, educated market is also drawn here by the colleges as well as the unique residential character of Boston's neighborhoods. From a governmental perspective, we have tried hard to be a great place to do business, with an appealing tax structure, and the BRA's ability to get things done for corporations in government agencies."

Thomson Financial, an information services firm for the financial industry, employs about 2,000 people in Boston. CEO David Flaschen says he relocated the company's headquarters to Boston about three years ago for several reasons.

"We were looking for employees with financial industry expertise, a technical conversancy and an entrepreneurial spirit," he says. "Boston is a home for this kind of talent. We also wanted a location that combines the best working conditions with a great living environment and entertainment. Boston does a world-class job of achieving this balance."

O'Brien reports that, based on job growth projections, Boston must build 800,000 sq. ft. of Class-A office space each year until 2006 to keep up with the strong economy. In April 1999, ground was broken for a new 36-story office tower in Boston, which will include 808,000 sq. ft. of office space and 61,000 sq. ft. of retail space. "The new building will help ensure that Boston keeps up with the growing demand by area businesses that want to stay, grow and thrive in our downtown," O'Brien adds.

In Oregon, Larry Pederson, manager of business development for the Portland Development Commission, says Oregon generally does not financially influence corporate decisions. "The main reason corporations choose Portland is its good reputation in the semi-conductor and silicon-based industries," he says. He adds that the city enjoys "strong ocean, rail and highway transportation systems, including a massive capital campaign to upgrade the airport; and a pedestrian-friendly environment, attractive amenities and good quality of life."

Pederson also points out that Portland has one of the most vital central cores of any city in the country. Portland's CBD is not only a job magnet, but an entertainment and retail magnet, with many people living in and around the central city, he reports.

The 'Valley of the Sun' also rises The Community and Economic Development Department of the City of Phoenix targets key economic clusters including high-tech, aerospace, and financial, business and insurance services. "Although we are not known for providing substantial financial incentives, we have a strong, diverse economy, good quality of life and available real estate at competitive prices, which is ideal for companies with quick timelines," says John Chan, Phoenix's business development manager. "Only about half of our land is developed, so there is plenty of opportunity in real estate. Over the past several years, Phoenix has ranked as one of top areas in the nation in terms of job creation and population growth."

Regardless of the incentives and advantages a city or region might offer, economic development is still a people business. Know thyself, sure, but without a keen awareness of what a potential new or expanding corporation and its executives want and need, that company will surely end up in a competing city or submarket.

"If you are supremely client driven - if you completely understand your clients' businesses and the ability of your community and services to effect a cost savings and other benefits that help those companies meet or exceed their corporate objectives - you will be successful in attracting and expanding companies in your backyard," says Ronne.

However, going forward, a major emphasis must also be on establishing locally-based business.

"Economic development of the future will focus on the creation of local industry, with venture capital as a key ingredient," says Kelly."About two-thirds of the companies are expansions, spin-offs and subsidiaries of local firms. Venture capital will be vital to nurturing tomorrow's new companies."

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