Five Attributes of Attractive Anchor Cities in the US

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1 A Knowledge Leader Publication. CITIES OF OPPORTUNITY Accelerating success.

2 MILWAUKEE CITIES OF OPPORTUNITY CHICAGO TORONTO HAMILTON The overall size and increasing growth of the metropolitan Toronto, Vancouver, and Montreal areas has been discussed for many years. The dialogue has recently gravitated towards the shift of people and businesses within the metro to the downtown neighbourhoods of these cities. With rising costs and infrastructure strains such as long commute times associated with locating in large cities such as Toronto, firms have an opportunity to locate in a medium-sized anchor city. This report analyzes five attributes Colliers has identified that make Hamilton and Milwaukee attractive anchor cities. Night time light emissions detected by NASA s Suomi NPP satellite Night time light has been used as a proxy for urban development. These maps visually outline the connectivity of the Chicago and Milwaukee regions, along with the Toronto and Hamilton regions. Both Hamilton and Milwaukee are positioned at opposite ends of much larger primary anchor cities, beyond the Chicago and Toronto suburbs. Image courtesy of the NASA Earth Observatory. Image created by Robert Simmon, using Suomi NPP VIIRS data provided courtesy of Chris Elvidge. (NOAA National Geophysical Data Center) Companies on the move should consider secondary medium-sized anchor cities with the following five attributes to improve their balance sheet and attract/retain the best employees: low costs, highly skilled labour, redevelopment opportunities, commute times, and amenities. This mix of attributes have recently made it attractive for Northwestern Mutual to build a new, larger downtown HQ in the medium sized anchor city of Milwaukee, migrating away from their old suburban location. 1. Low Commercial & Residential Costs Competitive average rents, commercial taxes, and development charges are all costrelated factors that are important for midsized anchor cities to attract companies. Other cost factors such as residential affordability are becoming increasingly valuable locational determinants. In a megalopolis or metroplex, anchor cities are often referenced as the principal cities within the region. For example the Chicago and Milwaukee metropolitan areas combine to make a metroplex, in which the two anchor cities are Chicago as the large, primary anchor city and Milwaukee as the medium sized, secondary anchor. 1 A medium sized city consists of a population between 100,000 and 999,999 people. 2

3 5 Attributes of ATTRACTIVE ANCHOR CITIES 3. Redevelopment Opportunities In most medium-sized anchor cities, especially those that are deindustrialized, attractive redevelopment inducements are needed to upgrade the current office stock, along with relocation incentives through government programs to help attract certain businesses. POPULATION: 2,718,782 WITH A BA+: 34% Public infrastructure, primarily commuter infrastructure impacts business location decisions as access to roadways, highways, public transit, and bikeways can give a particular location a competitive advantage. Commuting times and transportation availability are crucial attributes when choosing to locate in a medium-sized city. TOTAL POPULATION: 3.3 MILLION With these five attributes, medium-sized cities that are anchored to a megalopolis or metroplex have an opportunity to become increasingly attractive to a wide range of businesses. POPULATION: 2,576,025 DRIVE DISTANCE: 1 HOUR PUBLIC TRANSIT DISTANCE: 1 HOUR 10 MINUTES RATE: 6.9% 5. Amenities In this report, Colliers also recognizes the importance of local amenities. Companies have been putting increasing value on local amenities when choosing a location, as amenities are deemed important by the type of employees that many firms are trying to attract.4 As referenced by Livability.com, being part of a livable city means more than just having a nice house and hanging out on your deck. It s about having things to do, places to do them and a decent climate to do them in. In other words, in a great community, people engage with that community. PUBLIC TRANSIT DISTANCE: 1 HOUR 45 MINUTES WITH A BA+: 33% DISTANCE TO HAMILTON: 70 KM 4. Commuting RATE (PSF): $40.30 < TORONTO DRIVE DISTANCE: 1 HOUR 30 MINUTES < CHICAGO Proximity to educated individuals, talented professionals, and skilled workers within similar industries has become more essential as a locational imperative.3 DISTANCE TO MILWAUKEE: 148 KM 2. Educated Labour Force WITH A BA+: 22% RATE: 5.6% TOTAL POPULATION: 3.0 MILLION RATE: 7.6% MILWAUKEE POPULATION: 599,164 RATE (PSF): $53.78 HAMILTON POPULATION: 509,635 RATE (PSF): $27.17 WITH A BA+: 22% RATE (PSF): $15 RATE: 5.6% Sources: 2013 US Census Bureau State and County QuickFacts and the 2011 Statistics Canada National Household Survey. City level data is used throughout the exhibit except for the unemployment rate, which uses 2015 Metropolitan area data.

4 Case Study - Milwaukee, Wisconsin Milwaukee, a medium-sized city located on the northern periphery of the Chicago metropolitan area and within the Milwaukee-Chicago metroplex, provides a case study of a successful mid-sized secondary office market. The city has historically struggled with high office vacancy rates after deindustrialization. Milwaukee has recently become appealing for companies due to numerous factors, including the five attributes this report identified. 1. Costs Lower costs for high quality office space is one factor that makes Milwaukee attractive. The average Class A space in Milwaukee is about $27.17 USD per square foot (SF), compared to $40.30 USD in Chicago. 5 Milwaukee is also attractive to firms that place importance on affordability for their workforce. The median sale price for a home in Milwaukee is about $117,300 USD, compared to $249,600 USD in Chicago Labour Milwaukee has a high quality labour force thanks in part to Marquette University and the Milwaukee School of Engineering being located within the City. Many individuals in Milwaukee s labour force are also currently working in management, business, science, and arts occupations. This deep talent pool was mentioned as a contributing factor for Gardner Denver s global headquarters recent move to downtown Milwaukee, according to their CEO Redevelopment Milwaukee s large amount of brownfield land resulting from deindustrialization required redevelopment policies and incentives to meet the demands of today s office leasing businesses. The Menomonee Valley redevelopment plan, converting land into light industrial and flex office space, is an example of brownfield redevelopment success. With Solaris and Rishi Tea recently developing their production, office, and startup space in the Menomonee Valley, all of the Valley s space is almost fully leased. 8 With the positive outcome of this project, subsequently more land is being redeveloped into office space in neighbouring communities through the Global Water Center and Reed Street Yards Commuting Residents within Milwaukee also have a short mean travel time to work (22 minutes), especially when compared to other medium and large-sized cities. 10 Chicago residents, for example, have a mean travel time of 33 minutes. With the combination of adequate urban transit and an increase in the demand and availability to work and live in downtown Milwaukee, residents should continue to benefit from short commute times. 5. Amenities The city of Milwaukee, especially its downtown communities are appealing, as the built and natural amenities such as the downtown lakefront, canal redevelopment, and museums contribute to the City s strength in available amenities. Milwaukee s attractiveness is evident by the declining office vacancy rate reported in 2014, along with an increase of overall office supply by an expected 1 million square feet within the downtown core. 11 The decision of Northwestern Mutual to construct its new headquarters in downtown Milwaukee, along with construction of the 833 East Michigan St. office tower is a testament to the attractiveness of and demand to locate in the city. Milwaukee s appeal is likely to continue, evident by Johnson Controls possibly building a 50-storey corporate headquarters near Milwaukee s lakefront. 12 There are many reasons for Milwaukee s attractiveness, but the five attributes that Colliers has identified have surely contributed to making the city more competitive in office leasing.

5 Case Study - Hamilton, Ontario Hamilton s population, proximity to the large metropolitan region of Toronto, large number of local colleges and universities, and manufacturing past are some similar characteristics shared with Milwaukee. These similarities are some of the reasons why Hamilton is a good case study of a medium-sized, secondary anchor city along with Milwaukee. Framed within the five attributes, Hamilton further affirms its position as an opportune medium sized anchor city. 1. Cost Hamilton is well positioned to compete for businesses due to the relatively low commercial rental rates for A Class space and low commercial property taxes per SF. The commercial property tax per square feet in Hamilton is approximately 70 cents to a dollar less than the surrounding municipalities of Oakville, Mississauga, Burlington, and Brampton. 13 Housing and rental costs are also more affordable in Hamilton, where the median value of a home is about $269,000 CAD, compared to other nearby cities such as Toronto ($439,000 CAD), Mississauga ($438,000 CAD), Oakville ($554,000 CAD), and Burlington ($401,000 CAD). 14 With more employees requiring to live close to work, affordability becomes an issue within expensive municipalities, which is why Hamilton is appealing to companies looking for affordable live-work-play locations. 2. Labour Hamilton s labour force quality is another attribute that makes the region a competitive location for future office leasing businesses. Hamilton has a highly educated labor force thanks in part to the strength of the 3 universities and 12 colleges located within the Hamilton metropolitan area. Currently about 51 percent of Hamilton residents hold a postsecondary degree or above and 22 percent hold a BA or above. 15 Investment into the creation of the McMaster Innovation Park will help to further develop the highly skilled labour force within Hamilton. 3. Redevelopment The City of Hamilton has implemented numerous redevelopment incentives such as grants for downtown building improvements, tax increment financing, assistance with access to capital, and providing necessary infrastructure to support business growth. The City has also established numerous brownfield redevelopment strategies such as the Environmental Remediation and Site Enhancement (ERASE), and LEED programs, along with public-private partnerships such as the Going Green program. Some of these financial incentives have and will continue to encourage construction within Hamilton s downtown. Over the past four years, the annual construction value of the building permits issued within Hamilton has been more than $1 billion, with construction activity taking place in the commercial, residential, and industrial sectors Commuting Hamilton s average commute time for residents is quite low (20 minutes) as one third of Hamilton residents live within five kilometers of their workplace. 17 The City of Hamilton is actively investing in bike lanes along numerous roadways, to further ease local commute times. 18 The current downtown transit infrastructure, combined with new bike and car sharing programs will also help accommodate the more than 2000 completed, under progress, and planned downtown residential units. 19 With the highly publicized increasing commuter strains associated with locating within the Greater Toronto metropolitan area, Hamilton is appealing to businesses seeking shorter commutes for their employees. With the completion of the James North GO Station and connection to Toronto s Union station, Hamilton will also be easily connected with Toronto. 5. Amenities The city has many of the built and natural downtown amenities that neighbouring suburban communities lack. This is an attractive attribute for businesses that place a high value on available amenities within a short distance of their office. Companies might be further drawn to Hamilton s downtown with the proposed redevelopment of the city s downtown waterfront. 20 Demand for office space within Hamilton could increase within the coming years because of the availability of the five attributes listed within this report. Early signals of this growth are presented by the Conference Board of Canada s Autumn 2014 Hamilton Outlook. Despite modest overall growth, the Office sector within Hamilton saw employment increases of about 2.6 percent and an increase of GDP by about 2.2 percent in Forecasting ahead, total employment and GDP are expected to increase by 1.3 percent and 2.3 percent respectively within Hamilton s Office sector from (compounded annually). 22 Some of the particular industries within the Office sector that could demand more space in the future are: professional / scientific; finance, insurance and real estate; and creative industries In 2011, these industries accounted for about 15.3 percent of total employment in Hamilton. 23 When examining Hamilton s downtown alone, these industries attributed to 36 percent of all downtown employment in In 2014, this share grew slightly, to around 37 percent. 25 During the same period, employment within professional, scientific and technical services alone grew by about 11.3 percent in Hamilton s downtown, attributing to about 18 percent of total employment. 26 Employment within these highlighted industries have and are expected to continue to grow within Hamilton, particularly the downtown, as the city becomes increasingly attractive for reasons outlined in the five attributes of this report. With the continual growth and meshing of metropolitan areas, there is an opportunity to locate within medium-sized anchor cities. With a large amount of today s talented workforce wanting to live, work, and play within the same neighbourhoods, medium-sized anchor cities are competitive in offering this lifestyle at affordable prices. Colliers has identified five attributes that combined, have made and will continue to make certain anchor cities such as Hamilton and Milwaukee attractive choices.

6 REFERENCES 1. Milwaukee Journal Sentinel, Gov. Scott Walker Endorses Milwaukee-Chicago Metroplex Initiative (September 27,2013). 2. Government of Canada, Medium Sized Cities, 3. Michael Porter, On Competition October, (2008); Dennis Carlton, The Location and Employment Choices of new Firms (1983). 4. John Crompton and Lisa Love, The Role of Quality of Life in Business (Re) Location Decisions (1999). 5. Colliers International, North American Office Highlights (Q3, 2014). 6. Zillow, Zillow Home Value Index and Median Sale Price of Homes, (2014). 7. Metropolitan Milwaukee Association of Commerce, Garnder Denver Moving Global HQ to Milwaukee, metro-business-news/gardner-denver-moving-global-hq-to-milwaukee (January 7, 2015). 8. BizTimes Media, Solaris to Move to Menomonee Valley (July 30, 2013). 9. Public Policy Forum, Learning From the Menomonee Valley s Redevelopment Success (September 22, 2014); Reed Street Yards, United States Census Bureau, State and County QuickFacts. 11. Colliers International, North American Office Highlights (Q4, 2014); Milwaukee Downtown, Investment map. 12. ABC Wisconsin, Alderman: Johnson Controls Could Build 50-Stoy HQ Downtown, (January 22, 2015). 13. BMA Management Consulting Inc., Municipal Study (2013). 14. Ibid 15. Statistics Canada, 2011 National Household Survey (2011). 16. The City of Hamilton, Building Division Planning & Economic Development Department Monthly Permit Report (December, 2014). 17. City of Hamilton, Public Works Data (2014). 18. City of Hamilton, Building the Bike Network (2014). 19. Hamilton Economic Development, The Hamilton Spectator, Partnership Spurs Remedial Work Along City s Waterfront (March 20, 2014). 21. T he Conference Board of Canada, Economic Insights Into 13 Canadian Metropolitan Economies (2014). 22. Ibid 23. Statistics Canada, 2011 National Household Survey (2011). 24. Hamilton Economic Development, 2014 Downtown Urban Growth Centre Employment Survey and Vacancy Update (2014). 25. Ibid 26. Ibid

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