Center on Urban & Metropolitan Policy Office Sprawl: The Evolving Geography of Business Robert E. Lang1 Fannie Mae Foundation “The suburbs, Findings An analysis of the location of office space in 13 of the nation’s largest metropolitan which began commercial real estate markets between 1979 and 1999 found that: ■ Between 1979 and 1999, cities’ share (Boston, San Francisco, and Los the post-war of metropolitan office space signifi- Angeles), there is roughly even cantly diminished. In 1979, 74 percent division. of office space was found in central cities years as clear and only 26 percent was found in sub- ■ Metropolitan commercial office space urbs. By 1999, the central city share of is no longer found within a few high office space dropped to 58 percent while density clusters. While 38 percent of all commercial the suburban share grew to 42 percent. office space in 1999 was located in a metropolitan area’s traditional downtown, ■ The distribution of urban and subur- nearly the same amount (37 percent) was subordinates ban office space varies greatly among found in highly dispersed, “edgeless” metropolitan areas. There are five met- locations lacking well-defined boundaries ropolitan areas where the majority of the and extending over tens if not hundreds to central metropolitan office space is found within of square miles of urban space. the core central city (Houston, Dallas, Chicago, New York, and Denver) and ■ In 1999, New York and Chicago were cities, ended five metropolitan areas with the majority the only metropolitan areas with the of space in the suburbs (Philadelphia, majority of office space located in Atlanta, Washington, DC, Miami, and their primary downtown. Philadelphia the century at Detroit). In three metropolitan areas and Miami already have more than half their office space in “edgeless” locations. near parity.” I. Introduction for suburban office areas—often in places that had little prior history of commercial he last two decades have witnessed development. remarkable change in the location of There are two primary reasons why office office employment. The suburbs, space trends are important. First, office space which began the post-war years as trends provide a good context for understand- Tclear commercial subordinates to central ing metropolitan change because offices are cities, ended the century at near parity. What the 1920s did for downtowns, the 1980s did continued on next page October 2000 • The Brookings Institution • Survey Series 1 where a large percentage of job growth II. Definitions and the figures for central business dis- occurs. In some metropolitan areas, Methodology tricts (CBDs) versus non-CBDs. That nearly half of all newly hired employ- means that the volume of downtown ees go to work in office buildings.2 A. Defining Central Cities and office space is weighed against the Office buildings were the last major Suburbs entire region. The result is usually a element of central cities to suburban- The terms “central city,” “suburbs,” two-thirds, one-third split in favor of ize, following people and retail. and “metropolitan area” are used the non-CBD market.6 This study Second, the location of office space throughout this report. These terms looks at all office space within central is critical to a number of public policy are technically defined by the U.S. cities against the amount found in questions. For example, the distribu- Bureau of the Census and are used as suburbs, hence the discrepancy tion of new office space can help categories in data gathering. Central between its figures and others.7 determine the extent to which there is cities and suburbs form subsets of a jobs/housing mismatch in a region. It metropolitan areas. There remains no B. Data and Methods can also influence the spatial mis- standard, universal criterion for what Office market statistics are not col- match between economic opportunity constitutes a suburb.3 Instead, a sub- lected by government agencies, but by and minority households. Office loca- urb is defined only in relation to a a variety of real estate brokers, con- tion also impacts urban sprawl. If most central city. Suburbs are those parts of sulting firms, realty and building new office space is constructed at the metropolitan areas that are “outside associations, and office guide publish- regional edge, it may extend commuter central cities.” Most major metropoli- ers.8 The two major sources for office sheds for many miles into undeveloped tan areas contain several central cities, data are Black’s Guide to Office rural areas and thereby fuel sprawl. with all remaining municipalities Leasing, a directory of office space Finally, the geography of office grouped as suburban.4 published in Gaithersburg, Maryland, location figures prominently in trans- The U.S. Census Bureau designates and Cushman and Wakefield, the portation analysis. If most new space suburbs with growing concentrations nation’s largest multi-service commer- is built in areas with no public transit of employment as central cites and cial realtor. Black’s Guide is the main access, then reliance on automobiles this definition adds a good deal of source of data used in this report, will continue to grow. In sum, the spa- office space to the central city total.5 while Cushman and Wakefield’s office tial structure of metropolitan office Planned suburbs, such as Irvine, CA, reports are used for Manhattan’s space is a key regional indicator. south of Los Angeles, are identified as inventory (which Black’s Guide does This study looks at the evolving central cities, which complicates the not track) and for some national time- geography of office space in 13 of the comparison between city and subur- series comparisons. These sources nation’s largest commercial real estate ban office development. Were it not were selected because of their compat- markets, with emphasis placed on for this definition shift, the central city ibility with one another and their trends occurring since 1979. The share of the metropolitan market suitability to the analysis. Black’s metropolitan areas that are analyzed would have slipped even more dramat- Guide is the only national office data are found throughout the United ically. Yet when places such as Irvine, source where central city space can be States: six are in the Northeast and CA, and Irving, TX, become “central separated from suburban space. No Midwest, and seven are in the South cities,” the category loses some of its other national office survey lists build- and the West. The study concludes meaning. ings by address.9 with a discussion on the policy If one adds up all the office space in Although most high-tech employ- relevance of these findings. America that exists in traditional high- ment takes place in “traditional” office density settings, it is clearly a minority space, in a few markets with signifi- of the total. Sunbelt cities are essen- cant concentrations of high tially suburban in character (Atlanta, technology manufacturing (such as Dallas, Houston), as are even more of San Francisco), “flex space” captures a the non-core (or satellite) central share of the commercial real estate cities. Counting them as cities gives a market. Flex buildings contain a distorted impression of the significant hybrid of office and manufacturing trend in the nation’s office economy, space. Because Black’s Guide does not which seems to be a relentless march fully track flex space, much of San towards decentralization. Francisco’s and some of Los Angeles’ Most reports that compare office data between cities and suburbs use continued on next page October 2000 • The Brookings Institution • Survey Series 2 Table 1: Growth in Metropolitan Office Space, 1979-1999* Total Square Total Square % Growth Total Square % Growth % Growth Footage Footage Total SF Footage Total SF Total SF Pre-1979 1989 1980–1989 1999 1990–1999 1979–1999 Central City 676,371,828 1,285,879,942 90% 1,565,718,590 22% 112% Primary Central Cities 606,822,137 1,047,224,173 73% 1,268,172,093 21% 94% Other Central Cities 69,549,691 238,655,769 243% 297,546,497 25% 268% Suburbs 234,564,508 888,813,494 279% 1,123,766,268 26% 305% TOTAL 910,936,336 2,174,693,436 139% 2,689,484,858 24% 163% * The thirteen metropolitan office markets are: Atlanta, Boston, Chicago, Dallas, Denver, Detroit, Houston, Los Angeles, Miami, New York, Philadelphia, San Francisco, Washington, DC. high-tech boom might not be captured In the 1980s alone, almost half (47 in office statistics. percent) of the nation’s current office Figure 1: 1999 Suburban Office The data used in this study covers space and over half (58 percent) of the Space Inventory only existing inventory as of 1999. By suburban office space that exists today (Percent of Square Feet Built by Decade) tracking the year that each building was built (see Figure 1). was completed, we can get a rough About two-thirds of the nation’s cur- Since estimate for the size of the commercial rent office stock in the largest office 1990s 1980 79% real estate market at any given time. markets was built since 1980. Almost 21% However, buildings that existed before four-fifths (79 percent) of the current 1999 may have subsequently been con- suburban stock was added in the same verted to other use or been designated period. After the 1980s, the pace of for demolition. In the case of most sub- overall office construction fell 59 urban office markets this is not really a percent, while the pace of suburban problem because they are so new that building dropped 64 percent. few buildings have fallen out of the During the 1990s, central cities inventory. By contrast, much of the gained more total office space than Pre- 1980s urban stock that was present in 1970, suburbs, picking up 280 million 1980 58% or even 1980, has become so dilapi- square feet of office space, compared 21% dated that rehabilitation has become with 234 million square feet in the infeasible.