CONFERENCE SUMMARIES

Panel: Why Companies Elect to Locate to Urbanized Areas

• Gerald L. Gordon, Moderator
• Terrance Bilbo, Corporate Vice President, CSC
• David Geanacopoulos, Executive Vice President for Public Affairs and General Counsel of Volkswagen Group of America, Inc.
• Kevin J. Jacobs, Senior Vice President, Corporate Strategy, Hilton Hotels Corporation

Jerry Gordon introduced the panelists and asked them what factors led their companies to relocate to Fairfax County. What other communities or kinds of communities did you consider?

David Geanacopoulos: VW considered a large number of factors. The company’s U.S. operations had been located in Auburn Hills, Mich., for 25 years. The impetus for the move was the desire to be closer to its customer base, which meant a coastal community where VW has a much higher market penetration. There is a particularly high density in the mid-Atlantic region that includes the Washington area.

Among the factors in the decision to relocate to Fairfax County was the county’s diverse and educated talent pool. VW believed it would be an attractive place to its current employees as well as a location where they could attract a new talent pool. The state and the county rate highly in that respect. The company also believed the county offers a high quality of life and is an attractive place to live. He also noted that congestion was a factor in the decision but had the sense that the county was addressing that issue. As for other cities, VW considered virtually every major market on the East Coast. He noted that the interest expressed by Fairfax County and the Commonwealth of Virginia was important as was the consistent commitment to a business-friendly environment.

Terry Bilbo: The company considered three primary factors: first, the fact that the company’s customer base is here, both the federal government and the commercial sector. Second, the base of operations that already existed here, including 10 percent of its 92,000 employees. The company also saw Fairfax as having a strong labor pool from which to draw. And third, CSC has a long history in Virginia. The company began building 20 years ago in Virginia with the idea that its presence here would grow.

Kevin Jacobs: The process that they undertook was similar to the other two companies. After the company was purchased by the Blackstone Group, based in New York, in late 2007, it began considering a move from its Beverly Hills, Calif., headquarters. It became clearer that a move to the East Coast would be desirable, given the company’s global stature.

Also, other lodging companies are located in the area (Marriott, Host and Choice Hotels), and the D.C. area has a high quality of life. Fairfax County rose to the top of the list. The company also considered relocating to the District of Columbia, Montgomery and Loudoun counties.

Gordon: What was the receptivity of people who have had to move here?

Jacobs: This was a big move for a lot of people. Some employees opted out for various reasons. But many others are looking forward to moving here. The cost of living is better here than in Beverly Hills, and commutes and quality of life are better in Fairfax as well.

Bilbo: Our company also moved from southern California. Many of our employees live in Redondo Beach, Manhattan Beach, Palos Verdes, those areas. There is a better quality of life here. He noted that his two sons now have a back yard in which they can run. And he said that Fairfax County’s school system was a significant appeal to employees with school-aged children.

Geanacopoulos: Our experience was similar. We had a high acceptance rates from those who were offered relocation. The biggest challenge for those who did relocate was the cost of housing – about twice as expensive in northern Virginia as in Michigan. That was a significant challenge and the company took steps to make it easier. Those that moved here have been tremendously happy and excited. He has had a chance to serve as tour guide and colleagues are excited by the sense of energy inside the company as well as the energy in northern Virginia.

Gordon: Two of you represent new industry segments in Fairfax (hotels and automobiles). Did you think that this was a good place because you would be unique within the county?

Geanacopoulos: Our headquarters has been near Detroit for 25 years, surrounded by the Big Three, and so we wanted to make a statement about the company’s commitment in the United States. So, yes, being unique was important.

Jacobs: As I mentioned, the Washington metro area is now the lodging capital of the country, if not the world, and so we were looking for access to lodging industry talent. So that was a big factor. We did not feel the need to differentiate.

Bilbo: We had a large presence here already. We are not the only IT company around but we are the largest independent IT services company. Our new location allows us to partner with supplier industries. There really is a two way benefit – providing the right solutions for the client while enabling our various business lines to do business through their own respective business channels.

Gordon: We obviously have an interest in seeing you be successful. Let me ask you to look forward a decade. What does Fairfax County need to look like to be successful and for your employees to be happy here?

Jacobs: The county should simply keep doing what it’s doing. Make sure to keep thinking about the way the county grows in a strategic way.

Bilbo: The strategic plan that the county has been working on is important, and the pro-business environment is important. The best way to attract and retain business is to keep taxes down. Suburb-to-suburb transportation also will be important. The education system also is very important to us.

Geanacopoulos: Focusing on long-term issues in the areas of growth is important. You should continue to encourage companies and employers to focus on the same challenges. Tackling the transportation problem is important.

Gordon: Part of our focus is keeping companies here. You just moved right into the middle of construction. Why?

Jacobs: The decision to relocate was one for the long term. Metro construction is a four- to five-year project, which will benefit the area for a long time. So, the company took the long view.

Audience Question: The cost of housing in southern California and the distance between housing and employment centers represent a bargain for employees that have moved to Fairfax.

Bilbo: That is absolutely right. The average cost per square feet in Redondo Beach is about $540 per square foot versus about $300 here. That is part of the quality-of-life equation.

Audience Question: Which suburbs are the most important to link up to? And should that happen by way of roads or mass transit?

Bilbo: The company has a presence throughout the region, and so outer rings of a metro system that would enable people to keep from getting in cars would be important to them. Fairfax County has a strong digital infrastructure and the company is looking at alternative work places that don’t require people to come into CSC hubs, but focus on client hubs.

Audience Question: Was the federal government a factor in the decision to relocate here, and why Fairfax versus another local jurisdiction?

Bilbo: The government represents a large part of our revenue base. But remember that we already had made a substantial investment in real estate in the area.

Geanacopoulos: The proximity to the government was important but not decisive. The auto industry is a highly regulated industry and so the company has a lot of interaction with the government.

Jacobs: The proximity was not an explicit factor, but implicitly it’s a benefit. There also is the fact that hotel lobbying organizations, such as the real estate roundtable, are here.

Audience Question: What were the negative factors about moving here?

Bilbo: The biggest potentially negative factor was the potential institutional loss of talent. CSC was founded 50 years ago in southern California, and a lot of employees have been with the company for 20 to 30 years. Not everyone was willing to move, so that was perhaps the most negative aspect.

Geanacopoulos: The most negative factor for VW was the cost of relocation and cost-of-living for employees.

Jacobs: Hilton had a great history in Beverly Hills, and not everyone was willing to move, so the company lost some great people. Even so, he believes the move was best for the company.

Audience Question: The more companies that can relocate near transit hubs the better off we’ll be. Meantime, what can you do? What kind of transportation demand management solutions can you employ?

Bilbo: One thing the company has done was to provide shuttle buses for employees between transportation centers.

Geanacopoulos: VW has undertaken several measures at new its building. There is a bike rack, which a growing number of employees are using. Employees are looking forward to having a new Metro stop nearby in perhaps 2013.

Jacobs: Because Hilton’s move is really just beginning, the company really won’t know the answer until it knows where employees will live. But as a sustainability leader, it will be an important priority.

Audience question: What can we do to help each of your companies incentivize each of your suppliers to relocate to Fairfax County?

Geanacopoulos: The supplier question is not a lot different than with other businesses. VW doesn’t have any manufacturing here, and so they are relying mostly on general business services. The existence of a strong venture community is important as well as professional services in the area of IT.

Bilbo: Fairfax County has a leadership position with respect to its business friendly environment. What attracts companies is that continued commitment as well as high-quality schools, low taxes and an efficient infrastructure. Doing all that will increase interest in the area.

Audience question: How important is the connection between Fairfax County and D.C., and how important is it for the county to promote its proximity to D.C.?

Geanacopoulos: Originally, VW’s leadership did not think of the D.C. area as a business center, but more of a government town. The presence of the government wasn’t sufficient on its own, and actually could have been a negative with respect to relocating.

Audience question: Can you quantify the cost to relocate for each of your companies?

Bilbo: The costs were high on a per-employee basis, but in the aggregate, it was more economical, given the existing investment base.

Jacobs: Hilton is undergoing a restructuring of the entire company, so the relocation costs really can’t be segregated. The company has publicly commented about its $17 million investment in real estate here.

Geanacopoulos: VW made a significant investment, not as big as building a new factory, but the company looks at it as an investment over decades.

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