NEW YORK CITY—As the office sector's recovery becomesbroader-based, some markets nonetheless are pulling ahead of therest. Those markets, says a report from SavillsStudley, fall into two camps: those that offer the mostspecialized talent and those that provide substantially lower costsof doing business. “In many ways, this is a re-emergence of afamiliar pattern, the segregation of site selection intoknowledge/talent centers and lower-cost back office operations,”the report says.

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The clear winners are neighborhoods such as SOMA in SanFrancisco and Silicon Alley in Manhattan, which have an edge inattracting millennials to urban cores. However, Savills Studleysays the suburban corporate campus is “far from dead.” Consider theexample of Google: while it has a significantpresence in Silicon Alley through its ownership of 111 Eighth Ave.,“the mothership is still in Mountain View, CA.”

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Many suburban locations have been pursuing high-densitydevelopment strategies as they compete for employers, developmentprojects and residents, and Savills Studley notes that there havebeen success stories. “Top employers such as StateFarm, ExxonMobil and CharlesSchwab are anchoring the next set of 'urban suburbs,' ”according to the firm's third-quarter national office marketreport. “They are signing massive build-to-suits in mixed-usecomplexes with extensive new residential and retail product” inareas such as Atlanta's Central Perimeter, the Woodlands inHouston, the Dallas/Fort Worth suburbs in North Texas andBroomfield in Suburban Denver.

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In the D/FW suburb of Richardson, for instance, State Farm willeventually have up to 8,000 employees at its1.5-million-square-foot office campus within KDC'sCityLine mixed-use project. “Campuses such asState Farm's will house and train thousands of company employees,many of whom will live, shop and play in the new neighborhoodsbeing built right around their offices,” the report states. Inparticular, CityLine will have a total of three million square feetof office space, 92,000 square feet of retail, 1,370 residentialunits and 150 hotel rooms.

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D/FW, along with Phoenix, Atlanta and Denver, can lay claim tomany of these campuses “because they have something most CBDs lack:a balance between talent and cost,” according to Savills Studley.“All of these markets have a deep and affordable labor pool that isincreasingly skilled and educated.”

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In Phoenix, for example, nearly 25% of the workforce over 25 hasone college degree or more, a higher rate than the 20% of over-25workers in Los Angeles, and twice that of Las Vegas. At the otherend of the cost spectrum, says Savills Studley, are secondary andtertiary markets such as Lexington, KY or Tulsa, OK, which havebeen luring back-office operations from other markets. “The size ofthese firms pales in comparison to State Farm or ExxonMobil, butthey have a big impact in smaller markets,” the report states.

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Now the sixth-largest employer in Lexington,Xerox could become the second-largest after itadds 1,200 positions to a customer service center, notes SavillsStudley. In Tulsa, Data Exchange is adding 250positions. “Areas such as suburban Chicago and New Jersey are stillstruggling, but as the recovery accelerates there may be enoughgrowth for a variety of markets, not just CBDs.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.