Large firms weigh benefits of urban, rural headquarters
Within the tiny patch of real estate that is Rhode Island, it’s hard to imagine two more contrasting locales than West Greenwich and Providence.
West Greenwich, blanketed by forest and crisscrossed by bridle paths, is one of the state’s most rural communities, with a population of barely 5,000. The latter is the cultural and commercial hub for more than 1 million people in the state and has one of the highest population densities on the East Coast.
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So it will be a study in contrasts when GTECH Holdings Corp. moves from its sleepy South County headquarters to the capital city in 2006, when it is expected to add to the Providence skyline by becoming an anchor tenant in Capital Center.
The company’s other top choices, though, hardly carried as much cachet as the renaissance city. Norton, Mass., and Smithfield both would have been much more akin to GTECH’s present digs in West Greenwich.
It begs the question: How does a company go about choosing between a bustling, dynamic downtown and a manicured suburban campus, with easy highway access and oceans of parking?
The decision for GTECH, of course, was made easier by a sweet tax-stabilization deal from the city of Providence. But officials from the other municipalities also were said to have been courting the lottery company hard.
One factor that held sway, GTECH officials say, was recruitment: being able to use a showy, urban headquarters to target the bevy of technology talent to the north and top-level management from around the world.
“We’re a people business … and we need something that will help attract the population we’re recruiting,” said Robert Vincent, a GTECH spokesman.
“The renaissance in Providence is very real. Being in that environment, with the proximity to the (routes) 128 and 495 technology corridors in Massachusetts, is very important.”
It also helped, Vincent said, that the city already had the Capital Center, a section of downtown tailor-made for corporate headquarters.
And the company’s international culture was a factor. With 84 offices spread across 44 countries, GTECH has hundreds of employees constantly streaming in and out of town for meetings.
The company long has mulled the chance to participate in a hotel project – a prospect it now is discussing with downtown developers.
“Being downtown, we’re surrounded by great opportunities for hospitality projects,” Vincent said. “We could have tried to do something in a suburban location, but I don’t think the opportunities would have been as dynamic.”
GTECH expects to break ground early next year on a $65 million, 265,000-square-foot headquarters on Parcel 9, across from Providence Place mall. Officials expect the 10- or 11-story building to be completed in 2006.
With the proposed construction of Providence’s first corporate office building since construction of the Citizens Bank building in 1991, real estate observers say GTECH is bucking a trend in southern New England toward suburban corporate campuses.
“Regionally the pattern has been toward suburban-type sites in recent years, so GTECH coming into the city of Providence is an unusual move,” said Daniel P. McConaghy, senior vice president, New England regional manager for Gilbane Building Co.
Fidelity Investments, for example, opted to build an office building in Smithfield in 1995 to accommodate 1,600 employees. Amica Mutual Insurance Co. in 1994 moved its headquarters from Providence to Lincoln.
The pattern has been even more pronounced in Massachusetts, where young technology companies that were growing by leaps and bounds in the 1990s needed a lot of inexpensive space – fast.
“If you look at a company like EMC, it was much less expensive and quicker to build along I-495 (in Hopkinton, Mass.) than it would have been to move closer to (Boston),” McConaghy said.
While the cost of construction is just one factor companies consider when choosing a site, McConaghy said, the differences between building on a greenfield and shoehorning a building into a tight urban area are significant.
One example: Construction crews at urban sites often are forced to pick steel girders off delivery trucks piece by piece, instead of laying them out in a staging area, as is often the practice at a suburban site, McConaghy said.
Aside from the cost advantages, suburban corporate campuses also offer their own soothing niceties.
In the 1970s, FM Global (then Allendale Mutual Insurance Co.) consolidated from nine office buildings scattered across Providence to a corporate campus in Johnston. The sprawling 246-acre parcel of woods and well-manicured lawns remained the company’s world headquarters when it merged with three other firms in 1999.
“It’s an enticing, beautiful environment for people to work in,” said Steven Zenofsky, a company spokesman. “On top of that, the parking is free.”
Zenofsky said many of the company’s 600 employees in Johnston walk the scenic grounds on their lunch hour. And if they tire of the company cafeteria, no problem: Johnston’s Atwood Avenue, crowded with Italian restaurants and other eateries, is right around the corner.
Often, though, the decision on where to locate has more to do with corporate culture than anything else. And the chief executive generally sets the tone, industry insiders say.
“A lot of times it really depends on where the CEO sees the company fitting,” said Charlie Francis, president/partner of CB Richard Ellis in Providence. “If a CEO says, ‘I wouldn’t be in a downtown to save my soul,’ then that company is not going to be in a downtown.”
But fewer executives may have that aversion when it comes to downtown Providence. Francis, whose firm helped broker the GTECH deal, says there are other companies now considering locations downtown – an interest that was nearly nonexistent just a few years ago.
“Providence is such a manageable city, yet it is such a dynamic urban setting, with good public transportation, entertainment venues, shopping and restaurants,” Francis said. “If we can solve the parking problem, you’d have a home run downtown.”
