Vibrant Suburbs Versus CBD? It's a Toss Up

HERNDON, VA—If you are an office user, which is a better location: a CBD or the suburbs? Off the cuff, the answer would appear to be the CBD. Transportation is typically easier and there are plenty of nearby amenities—qualities that are almost essential if a company wants to attract quality employees.

But the debate is not that cut-and-dried. For starters, the suburbs are changing turning into work-live-play enclaves that are exciting places to live—and cheaper as well. NAIOP Research Foundation took a look at this question, analyzing 40 or so US markets, and published its findings in a report that it is releasing today.

For starters, it found that single-use suburban offices are indeed at the bottom of the list of preferences for employees. Office tenants vastly preferred the more vibrant suburban centers that had been built out, by a margin of 83% to 17%. The performance of these respective properties bore out these preferences.

And while office properties in CBDs were performing better in terms of rent levels and rent changes, there was no difference between them and suburban center-based offices in terms of vacancies and absorption.

Now for the $60,000 question: are suburban vibrant centers preferred to or performing better than CBDs in their market areas? NAIOP concluded that vibrant center performance is the same as or better than CBD performance.

Companies' decision on where to locate came down to specific factors. If the CBD in question was a strong one, then it usually was preferred over the suburban center – but if the CBD center was weak or had poor transportation then the suburbs won out.

"In conclusion, whether CBDs or suburban areas are preferred depends on specific company and metro area factors," writes study author Dr. Emil Malizia, a professor of city and regional planning and director of the Institute for Economic Development at the University of North Carolina-Chapel Hill and president of Malizia & Associates LLC. "Neither appears to be performing consistently better than the other location."