Big Apple polishes image to fight corporate exodus
NEW YORK has a dynamic cachet - a financial, cultural, and intellectual vigor that draws more Fortune 500 companies to set up headquarters here than to any other city in the country. But its very appeal has made the Big Apple one of the most expensive places to live and work. Lately, corporations are wondering: Is the prestigious address worth it?Skip to next paragraph
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Five major firms left in 1986. AT&T tried to skip town just three years after completing its showpiece skyscraper. But the city nixed the move by holding AT&T to a tax abatement agreement.
Still, a corporate exodus appears to be developing. Mobil Oil and J.C. Penney recently announced plans to leave - taking 6,000 employees (to Fairfax, Va., and Dallas, respectively) and vacating three million square feet of prime mid-town office space.
American Brands is departing. On June 10, TWA declared it might go, too. And last week, Deloitte, Haskins & Sells, the big eight accounting firm, announced it will move its national headquarters from New York to Fairfield County, Conn.
In the last 18 months, 28 companies have decided to move all or part of their operations out of Manhattan, says Cushman & Wakefield, a real estate research firm. The most visible affront to New York, however, is the uncertain fate of NBC.
``New York is the center of the broadcasting industry,'' says Arthur Delmhurst of Landauer Associates, a real estate consulting firm. ``You have NBC, ABC, and CBS all within a few blocks of one another. If NBC left, that would be a significant blow to the city - financially and psychologically.''
Three parties are courting NBC. Developer Donald Trump wants the network to anchor his huge Television City project on Manhattan's West Side. Rockefeller Plaza would dearly love to keep its high-profile tenant. But Hartz Mountain is offering low rent, low electric rates, and loads of space in nearby Secaucus, N.J.
General Electric's NBC subsidiary would not be the first to relocate to New Jersey. But New Yorkers are particularly galled by the idea of losing the network.
Mayor Edward Koch and Mr. Trump have battled over plans to try to keep NBC's 4,000 workers in the city. A decision on NBC's move is expected within two weeks. If it stays, talk about a corporate exodus will likely quiet. But either way, the publicity is a boon for New Jersey's economic development efforts.
``GO FOR BROKE, or go to New Jersey,'' challenged Hartz in a full page New York Times ad run last week touting the proximity of its development project and cost advantages.
Indeed, real estate consultants say northern New Jersey office space rents for $15 to $25 a square foot compared with midtown Manhattan costs of $40 to $50. New Jersey electric rates are about one-third of those in New York City. Taxes are generally lower in the Garden State and New York also charges a 6 percent occupancy tax.
But such costs are not the driving factor in a corporate relocation. ``Companies are more often moved because of internal politics and perceptions about quality of life,'' says Richard Kately of the Real Estate Research Corporation, a Chicago consulting firm.
In fact, Mobil chairman Allen E. Murray, cited a growing difficulty in attracting employees due to the high cost of living and commuting.
``Corporations don't move because they can't find upper level employees willing to move here,'' says Robert S. Nadel of the Hay Group. ``The compensation at that level covers the added costs. They move because they can't get middle and entry-level employees. Most middle-management compensation packages don't cover the added cost of living here.''
Mr. Nadel adds, ``This is not a popular city for someone with a family.'' Rents are high. Two-bedroom apartments in Manhattan start at about $1,400 (Story, Pg. 16.). And public schools are generally poor, while private schools are expensive.
A recent Cushman & Wakefield survey of chief executives ranked ``good public schools'' as the No. 1 factor in considering where to locate new offices. But corporate concern over the school system isn't limited to its ability to attract employees to locate here. Tax-paying companies would also like to rely on public schools for a pool of educated entry-level employees but have not been pleased with the quality of public school graduates.