Boston, Massachusetts viewed from Boston Harbor.
General Electric’s announcement last month that after 42 years, it will be selling its corporate headquarters in Fairfield and moving to Boston by 2018, made a big splash in the news – but economists say the move won’t rend the fabric of Fairfield County.
GE announced it plans to sell its 68-acre campus, which is assessed at $76.5 million and pays about $1.9 million in property taxes to the town, and represents about 0.7 percent of the total taxable grand list. The company plans to relocate 200 of its 800 Connecticut employees to Boston; the remainder will be relocated in-state.
The town of Fairfield set up a website to answer questions about the move.
Al Kleban, chairman of commercial real estate development and management firm Kleban Properties, announced in January he is interested in buying the property from GE and plans to develop it into a regional technology hub with an educational component.
In a letter on the website, Fairfield’s first selectman Mike Tetreau wrote:
“The 68-acre Fairfield campus was built for more than 800 employees. The long-term effect on the local economy could be positive, should a company with more employees occupy the site.”
Linda D’Amato, vice president of sales in William Raveis’ Fairfield office, said that moves like this frighten a lot of people, but she doesn’t see it as a negative and doesn’t think it will have a negative impact on the real estate market.
“From what I can see, our office can only count four GE executives who live in the town of Fairfield,” D’Amato said. “They really live all over Fairfield County and New Haven County. Some of them may decide they don’t want to uproot their families and will stay put.”
D’Amato said there is little developable land in town and the GE site is considered prime real estate that has long been underutilized. She said a plan like Kleban’s could net the town a lot more in property taxes than it currently receives.
Part Of A Larger Trend
Professor John Glascock, director of the University of Connecticut’s Center for Real Estate and Urban Economics, said that demand for high-end real estate in and around Fairfield may be dampened when those 200 executives pull up stakes – and that will likely spill over into the lower price range. However, Glascock expects those markets will recover over the next several years.
“This is a labor market problem,” Glascock said. “Connecticut got hit hard in the recession and we were virtually the last state to recover in terms of total jobs in the state, which we did just a few months ago.”
The problem is that the state has not recovered what Glascock calls the “high human capital” jobs that pay salaries over $100,000 per year. Most of the jobs that are being created in the state pay in the $30,000 to $60,000 per year range, he noted.
“Now GE announced they’re taking 200 of the best jobs out of state, which will make it harder for us to recover,” he said. “It will create a structural problem in the state budget. They’re going to have to either raise taxes or cut spending. High income spending has a bigger multiplier effect, and these people are not going to be replaced with people with similar incomes.”
Glascock said he thinks workers in the high human capital group will end up clustering in a few big, diverse, core cities with multiple industries, with great suburbs and good transportation.
“These core cities are going to be the winners in the next 20 to 30 years,” he said.
The move is part of a larger trend. High human capital earners increasingly want to work in cities where it’s relatively easy for them and their high human capital spouses to get high-paying jobs. They want nice places to live near work and nice suburbs nearby when they have families. Employers understand this and are positioning themselves in those cities in order to attract top talent.
“If that’s coming, other high human capital firms will face the same pressure,” Glascock said. “Hartford has that same problem. Will they likely lose high human capital jobs over time? I think the answer is yes.”
It’s a statewide issue. Connecticut used to be a high human capital state and still is in some industries, but there aren’t enough amenities in the state to keep high human capital couples there.
“The big firms in Hartford have been slowly reducing their workforce,” Glascock said. “The middle level jobs in those insurance firms are moving to Louisville and Indianapolis. It’s going to happen more over the next 10 years.
Glascock said Connecticut is not alone; New Jersey is facing the same problem.
“The way to win is to be a better suburb to New York,” Glascock said.
Why Boston?
Professor Albert Saiz, PhD, is the director of the Massachusetts Institute of Technology’s Center for Real Estate in Cambridge, just across the Charles River from GE’s future new headquarters. He said this particular move won’t have a terrific impact on Fairfield or Boston, where 600 employees from across the country will join the 200 from Connecticut. It’s just part of the trend of companies moving to cities like San Francisco, Seattle, Portland, Austin, San Diego, Chicago and New York City.
Saiz said now more than ever before, the presence of quality educational institutions is a very strong predictor of employment growth.
“People used to move to cities because that’s where the manufacturing jobs were,” Saiz said. “That’s what happened to Detroit between 1900 and 1960. Then, most of those jobs got relocated to China. The Boston-area strategy is more resilient. We’re in a period where talent and education is more important.”
Is Boston’s attractiveness an accident? Or was it planned?
“It’s a combination of policy and historical advantages,” Saiz said. In addition to educational institutions, it has coastal status, historical features, the presence of parks and amenities, good public schools – deliberate policy choices that focus on livability and green cultural amenities.”
Fairfield’s GE FAQ page can be found here: www.fairfieldct.org/ge.
Email: jmorrison@thewarrengroup.com
