When American Airlines moved its corporate headquarters to Ft. Worth in 1979, it did so with an eye on the Dallas/Ft. Worth International Airport and its potential to become the No. 1 air hub in the country.
Ten years later, when Sigma Xi, the Scientific Research Society, was looking for a new home, it said it was leaving New Haven, Conn., in part because the declining number of flights at the local airport was making it difficult to hold meetings of the 520 chapters there.
Sigma Xi moved not to Dallas/Ft. Worth, however, but to Raleigh/Durham, N.C., itself a favored site for corporate relocation these days.
But that should not miff American Airlines: Sigma Xi, like several other organizations, moved to Raleigh/Durham in part because American`s new hub there makes traveling to and from the area relatively easy.
Access to a good airport is just one of the common denominators shared by the Dallas and Raleigh areas, one to which real estate experts and economic development officials are quick to point.
But there are other reasons why corporations have chosen to leave operations in one part of the country and to set up shop in another, most of which are shared by Dallas and Raleigh and several other cities that are attracting new business.
Those reasons include the cost of real estate, the cost of operations, the productivity of the workforce and quality of life issues such as cultural opportunities on the positive side, and on the negative, commuting time.
”Historically, headquarters have been located up and down the Eastern seaboard, and only one, two or maybe three moved a year,” said John E. Walsh, president of Friendswood Development Co. in Houston, which competes with Dallas for such prizes.
”But corporations don`t move because they see another area as more desirable. They move because their current location becomes undesirable.”
That was the case for Sigma Xi, said Mary Gracyalny, director of administration for the organization that has 520 chapters at major educational institutions around the country.
”New Haven is not a big city, but it has big-city problems both economically and socially,” she told a recent gathering of the National Association of Real Estate Editors in Raleigh. ”We have high labor costs and cost of living and crime rate and a shrinking number of flights at the airport.”
Gracyalny said Sigma Xi looked at Atlanta, Dallas, Houston, Philadephia, Ann Arbor, Mich., and Palo Alto, Calif., before deciding on the move to the Research Triangle Park outside Durham.
”The park provides a unique combination of academic, government and educational institutions in one area,” she said. ”The cost of living here is significantly less, and the price of housing is particularly attractive, especially to those of us from Connecticut.”
American Airlines had similar feelings in leaving New York City in 1979, said Robert Crandall, chairman of AMR Corp., the parent of American Airlines. American moved to Ft. Worth in 1979 with 800 employees and today has 23,000 on the payroll.
”American Airlines came here because the metroplex is centrally located, real estate was a good buy, the climate is kind to airline operations and because the community really wanted us,” Crandall said.
American Airlines was one of the first major corporations to relocate in the Dallas/Ft. Worth area. Exxon, which announced last November that it was leaving New York City for suburban Irving, Tex., is the latest.
”And in between, there were 16 other corporations involving 15,000 jobs,” Walsh said.
”While New York City lost 37 of the Fortune 500 company headquarters from 1978 to 1988, Texas gained 12.”
The Dallas/Ft. Worth area, with 15, ranks third in the number of Fortune 500 corporate headquarters. New York City, with 48, remains No. 1, and Chicago is third with 22, Walsh told members of the Urban Land Institute at its spring meeting in Dallas.
”Most people in this city do not think that the real work of economic development is marketing and sales,” said John R. Johnson, managing partner of Johnson & Gibbs, a law firm, and a leader in Dallas` efforts to attract corporations. ”They realize that long-term infrastructure and quality of life amenities are where you win these battles.
”The economic development challenges are moving to another plateau in the region,” Johnson said. ”We need a geographic expansion of our efforts. It`s only after selecting the region as a whole that companies look at a specific site. It`s not just Dallas or Ft. Worth or any particular suburb.
”This region has some clear-cut advantages, but there are other areas that share them as well, the geographic location and the quality of the workforce.”
In addition to Dallas and Raleigh, other cities doing a good job enticing new businesses include Atlanta, Charlotte, Denver, Houston, Orlando, Jacksonville, Fla., and Tampa, Fla., according to Nancy Brinkerhoff, a group- move-and-relocation consultant with Runzheimer International, a business consulting firm.
”These are the hot spots, the cities that are getting looked at a lot,” Brinkerhoff said.
While headquarters operations usually do not provide the number of jobs that manufacturing or research and development facilities do, the prestige they bring to area can mean as much or more for the economic health of a region.
Walsh estimated that in the last five years the headquarters moves to the Dallas area, including Exxon Corp., J.C. Penney Co. Inc., GTE Corp. and Fujitsu, have meant an extra $3 billion a year in economic activity.
”And the people who move in headquarters relocations are well educated, highly compensated and committed to a community,” Walsh said. ”Their leadership, (along with) positive contributions to a city, is one of the biggest benefits you can get.”
In the Raleigh/Durham area, educational institutions play a major role in luring corporations. Each of the three major cities in the triangle has a major university: Duke University in Durham, the University of North Carolina in Chapel Hill and North Carolina State University in Raleigh.
”The relationships to the universities cannot be emphasized enough, and the interaction is growing every day,” said William Martin, executive director of the American Association of Textile Chemists and Colorists. He noted that the North Carolina State`s School of Chemistry is a big drawing card.
The association was one of the earliest groups to locate in the research park, moving 900 people from Lowell, Mass., in 1963. Now there are more than 32,000 employees in all in the park.
The newest resident of the Research Triangle Park is Reichhold Chemicals. The privately held company, which produces resins and coatings, is building its research and development headquarters in the park. It previously had five division headquarters scattered along the East Coast.
”It`s not as much as we`re leaving someplace as that we`re consolidating someplace,” said Richard Fisher, vice president of human resources for Reichhold.
”Our decision (to come to Raleigh), however, wasn`t where the chairman wanted to go.”
Reichhold commissioned a study of 64 cities east of the Mississippi River to assess its relocation options. The list was to be narrowed to three finalists, but Reichhold`s consultants proposed Raleigh/Durham as the ideal spot, and the recommendation was followed.
”Being in the Research Triangle Park sends out a strong message to our competitors and our customers that we are serious about research and development for the long haul,” Fisher said.
”This area has a very good reputation and it has been a friendly environment to the chemical research field. Chemicals is becoming a four-letter word in a lot of places, but North Carolina and the research park were positive about it,” Fisher said.
”But all of those criteria don`t really reflect the welcome you get as a new corporate neighbor. Most places you go and say you`re from New York you have to duck. But not here. They`re friendly to outsiders.”
The Raleigh/Durham Airport, now an American Airlines hub, was integral in Reichhold`s decision.
”We traced all of our flights over two years and had them projected on the schedules at the Raleigh/Durham Airport,” Fisher said. ”We found it was easier to get in and out of here than New York. So we changed all of our meetings to here.”
Not surprisingly, Crandall, of American Airlines, also said that the Dallas/Ft. Worth International Airport has had a lot to do with success of that metro area in attracting corporations. The airport pumps about $6 billion a year into the local economy.
In the 10 years since American placed its primary hub there, passenger departures have grown to 24 million from 10 million. Six runways are in operation, and there is room to add two more.
”As the hub grows, Dallas/Ft. Worth becomes an even more logical place to relocate,” Crandall said. ”Nowhere else in the United States has the capacity, ability and drive that we do here.”
In addition to the international airport, the Alliance Airport is being developed 12 miles north of Ft. Worth in a public/private partnership led by the Perot Group and Ross Perot Jr.
The 15,000-acre project is a prototype industrial airport; parts are flown in, assembled in operations surrounding the field and flown out again without firms` paying additional import and export duties.
While economic incentives provided by state and local governments are one of the most headline-grabbing components of corporate location decisions, they do not show up on the list of top reasons why companies chose one location over another, according to a Runzheimer study.
Fisher said at least one state was willing to offer Reichhold a $1 million incentive package to locate within its borders but the firm chose North Carolina, which by law cannot offer such inducements.
More important than state incentives in Reichhold`s case is the basic cost of renting space. In New York City, the firm`s offices cost about $50 a square foot, including all operating costs. In Raleigh, that figure will be closer to $10.
For a user of 100,000 square feet, not large by corporate office standards, the savings in a year on rent alone for Reichhold would be $4 million.
Walsh said the move to Dallas cost Penneys about $100 million but has resulted in an estimated annual savings of $60 million in overall costs.
