Exciting Thinking Patterns

Companies Trade Suburbs for City Life

April 21, 2015 4:33 p.m. ET

Earlier this month, online travel agency Expedia Inc. EXPE -0.56 % said it plans to relocate its headquarters from a Seattle suburb that it has called home for nearly 20 years to the city's downtown. That announcement was the latest in a string of high-profile companies making moves from the suburbs back to the city.

Last year, Motorola Mobility LLC unveiled its new 600,000-square-foot global headquarters in downtown Chicago, a return to the city after nearly 40 years in the suburbs. Archer Daniels Midland Co. ADM 0.35 % also moved to downtown Chicago from Decatur, Ill.

The trend illustrates how decisions companies are making about relocations have come full circle. "In the late 60s and early 70s, CEOs in places like New York City fled the city and moved to the suburbs, leading to the growth of Westchester County, [N.Y.] Stamford and Greenwich, Connecticut," said Ed McMahon, a senior resident fellow for the Urban Land Institute. "In those days, the determining factor was where the CEO of the company wanted to live."

Now, large companies are moving back into the city in an attempt to attract and retain workers--particularly younger workers who are postponing homeownership and favor renting in walkable neighborhoods with easy access to restaurants, shopping and cultural opportunities.

Walkable locations aren't just good for employee recruitment; they also can be good for the bottom line. According to Real Capital Analytics Inc., a commercial real estate data and analytics firm, prices for commercial properties in highly walkable locations show significantly greater appreciation than car-dependent locations.

Over the past decade, values for such properties located in central business districts have risen 125%, while values for suburban properties that are also considered highly walkable were up 43%. Prices were up only 21% to 22% for suburban properties that were either "somewhat walkable" or car-dependent. The data suggests that while demographic changes and tenant preferences are shifting back to urban locations, even in the suburbs, live/work/play environments with high walk scores also are drawing higher prices.

In Expedia's case, the company plans to move its 3,100 employees from Bellevue, Wash., where it occupies 500,000 square feet, into 750,000 square feet of space in existing downtown Seattle buildings it is purchasing for $228.9 million.

"It's about having an iconic waterfront campus headquarters that we think will help attract a very high-tech employee base and retain that high-tech base," said Sarah Gavin, an Expedia spokeswoman.

The new location, which the company plans to renovate and occupy by 2018, will be a state-of-the-art workplace, with bright open spaces and amenities such as on-site dining, a fitness center and hiking and running trails. Rather than having to drive to lunch, Expedia employees will be able to bike to restaurants, Ms. Gavin said, something the company thinks "is really appealing."

One company that recently announced a move to a more dense location after being in the suburbs since 1986 is Pepsi Beverages Co., the bottling division of PepsiCo Inc. PEP -1.59 % Currently based in a 540,000-square-foot building in Somers, N.Y., the company plans to move its employees to other offices in Purchase and White Plains, N.Y. by the first quarter of 2016. "The exit from Somers was not an easy decision," the company said in a written statement. "However, as we seek to build levels of internal collaboration and improve the ease of access across our Westchester locations and to Manhattan, Somers was no longer the most effective location for us to realize this vision."

Companies are relocating to not only be closer to skilled workers but also to keep those workers happy. "They need to be where the brain trust wants to be," said Rick Lechtman, eastern U.S. director of the National Office and Industrial Properties Group at Marcus Millichap in New York. "Employees work 10- or 12-hour days at their desk and don't want to be in the middle of nowhere."

But the trend isn't limited to large companies. Autodesk Inc., ADSK 1.00 % which occupies a 65,000-square-foot office building in suburban Waltham, Mass. as the headquarters for its architecture, engineering and construction division, plans to move its 200 employees this fall to a new location in Boston, where it has the opportunity to expand to 120,000 square feet.

"By going to an urban environment like Boston we get to interact with the community a lot more, especially the educational institutions and all the scientific and artistic thinkers that are part of that community," said Amar Hanspal, a senior vice president at Autodesk.

What happens to the suburban spaces vacated when companies relocate? "Communities are turning them into everything from health clinics to city halls to community colleges," Mr. McMahon said. "One of the biggest trends of the next generation is going to be the repurposing of an incredible amount of existing suburban development."

In other words, it isn't all bad for the suburbs. While the recovery of the urban core is widely known, "less heralded is the contribution that suburban office markets have been making to the office market's recovery," said Ryan Severino, senior economist and director of research for Reis, a provider of commercial real-estate market data.

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Great Stock Market Guidelines From Experienced People

It matters not whether you are a seasoned professional or a complete novice; brushing up on the fundamentals of investing is sure to benefit you. Selling high and buying low are just but a part of the things you can know about how to increase your profits. Make more money on the stock market by using the tips in the following article.

Keeping things simple can really be effective in life, and this applies very well to the stock market. Simplify activities like making predictions, trading, examining data, etc. so that you don't take any unnecessary risks without market security.

If you are seeking ways to maximize your investment potential, it is important that you set long-term goals and have a plan. You will also have more success if you set realistic goals, instead of trying to forecast something that is unpredictable. Keep your stocks until you make a profit.

Take your time to understand your rights before signing on with a broker or investment manager. You will have variable fees for entry and exit. These fees can add up surprisingly quickly.

If you own shares in a company, you have the chance to vote for a company's board of directors. You might be able to elect people to the board or vote on major changes like selling the company. Normally, voting takes place each year at the shareholders' meeting or through proxy voting if necessary.

If you are a beginner at investing in stocks, be aware that success does not always happen overnight. More times than not it takes a considerable amount of time for a stock to increase significantly in value and you need to avoid selling and hold it for the long term. In order to become a successful investor, you need to have patience.

Know what your circle of competence is and stay within it. If you are using an online or discount brokerage yourself, be sure you are looking only at companies you are familiar with. You may have excellent insight about a landlord business's future, but do you know anything about oil rig businesses? If you want to invest in an industry you are not familiar with, seek the assistance of an adviser.

Steer away from stock advice and recommendations that are unsolicited. Certainly listen to your own financial advisor, especially if they hold what they recommend and are personally doing well for themselves. Don't listen to anyone else. Do your own stock market research and avoid taking advice from untrustworthy individuals.

While investing in risky stocks can offer outsized rewards, you should balance your portfolio with safer stocks as well. Stocks with long-term safety offer the power of compound interest. Growth is an important factor when choosing a stock, yet you should CIOFUND still round out your portfolio with some larger companies as well. The stocks of these major companies tend to deliver consistent positive results because of the long record of growth they have established.

Remember that cash is not always profit. Cash flow is the lifeblood of all financial operations, including your investing activities. While reinvesting is a good idea, you must also always be sure to keep your bank account balance in the positive so that you can pay bills and handle your daily expenses. It is a good idea to save enough to cover six months of bills if you have some sort of financial problems.

The general rule of thumb for novice stock traders is they should begin with only a cash account and not trade on margin. Cash accounts aren't as risky as margin ones since you can control the amount you lose more carefully.

Start investing with stocks that are proven and trustworthy before branching out into riskier and potentially more profitable options. The larger, established companies provide a lower risk and higher comfort level for the beginning stock trader. Once you have more experience, it's ok to branch out more. Smaller companies may grow quickly, but these investments are more risky.

Be sure you're following the dividend history of companies you own stock in. This is critical for more elderly investors who want more stability and consistent dividend streams. Companies with large profit tend to reinvest in their company or pay dividends to stockholders. Understanding a dividend's yield is very important, which is simply annual dividends divided by the price of the stock.

You must review your entire stock market portfolio on a regular basis. Keep a close watch on your portfolio, ensure that all stocks are doing well, and there are favorable conditions in the market. Don't take this too far, however; remember that stocks are often very volatile, and obsessing and panicking unnecessarily can cause you to lose money.

The more research you do before you invest, the better you will do on the stock market. Rather than listening to what you hear, try to keep up with stock market information. Make this article's advice a part of your investment strategy and you may be able to increase the profit you receive from your efforts.

Many Municipal Bond Investors Overlook Climate Risk

A changing environment affects municipalities' finances, such as tax bases and debt levels. Water is a particular threat to bond ratings.

The effects of climate change could translate into losses for municipal bondholders. Yet not many muni bond investors include climate risk in their analysis.

Severe weather and rising sea levels pose a threat to thousands of U.S. cities and towns, as well as their utilities, water authorities and other issuers of municipal bonds. These risks are not purely environmental; they could affect investors' bottom lines, making climate risk an important criterion for bond analysis. Still, muni bond fund managers and analysts lag corporate stock and bond investors in considering how climate change might impact their portfolios. A municipal bond issuer's tax base, debt levels and management quality should all be considered in relation to climate risk, according to a recent white paper penned by CDP, a London-based nonprofit focused on sustainable business and investment, and Breckinridge Capital Advisors, a Boston-based fixed-income manager with an environmental, social responsibility and corporate governance (ESG) platform.

The thinking goes like this: A municipality's tax base could shrink if its businesses and citizens are forced to leave the area, and its debt level could rise as it funds projects to mitigate climate risk or cleans up after a severe weather event . And whether or not the powers that be are paying attention to these issues can serve as an accurate gauge of how capable they are in general.

"ESG analysis gives us a better understanding of those in management, their priorities as well as their effectiveness," says Robert Fernandez, vice president of credit research at Breckinridge. "There are certain key risks out there, such as climate, and if they're not paying attention to these risks, does that speak to how well they're managing the city overall?"

Whereas issues like how carbon emissions regulation will eventually affect utilities and other polluters do come into play, it is water -- either too much or too little -- that poses the biggest threat to municipal bond issuers. The three major ratings agencies don't explicitly cite climate change in their municipal bond ratings methodology, though there is consideration of severe weather effects in coastal areas. Standard Poor's is updating its methodology for water and sewage utilities, however, and did include climate risk in a recent request for comment.

"We need to recognize what's going on in the sector, and it's definitely a risk," says Ted Chapman, a senior credit analyst in SP's infrastructure group in Dallas. He cites the example of water supplies. If a municipality lacks ready access to safe drinking water, public health is the top issue. Losses to bond investors are another major issue.

Chapman says institutional investors in the water infrastructure sector are definitely paying more attention, especially in the Southwest, where water supply has become a perpetual concern; California is entering its fourth consecutive year of drought.

That awareness hasn't translated into climate risk analysis across the muni sector, however. Part of the reason for this could be the fact that climate risk as it relates to severe weather is difficult to measure without a crystal ball -- harder to measure than, say, a company's energy efficiency or whether carbon emissions regulation will affect its bottom line. Even in the case of California's drought, we won't know for sure whether it's a temporary condition or a permanent change brought on by increasing temperatures until later. Moreover, cities and towns that experience severe weather qualifying as a national emergency receive Federal Emergency Management Agency funding, so there is an expectation that the federal government, as well as insurance companies, will pick up the tab. But, some say, investors would be remiss in believing that will always be the case.

"There is a fair amount of thinking that insurance companies or FEMA will come in, but I doubt many muni bond investors always know what an issuer's full insurance coverage is or what the risk to cash flow would be in some of those cases," says R. Paul Herman, CEO and founder of HIP Investor, an impact investing advisory firm based in San Francisco. Herman created the HIP (human impact plus profit) ratings system in 2004, which the firm uses to analyze a variety of stocks and bonds, including muni bonds. In 2013 HIP collaborated with Seattle-based SNW Asset Management to offer clients impact-rated portfolios for municipal bonds and fixed income, now worth more than $240 million. He says that although issues like the effects of climate change haven't been built into investment education -- such as MBA studies -- that will change over time as the risks become more evident.

"Many people still consider climate change as a political issue rather than a scientific issue," Herman says. "They think that if you talk about the environment or climate change, that you're talking about hugging a tree rather than the risk and return of your portfolio, and the reality is, they connect."

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