A Tale of Six Cities

As Borland's decision illustrates, a highly skilled workforce is the top attraction. That's especially true in high-tech and financial services, says Terence Spielman, head of PayPal's new Austin operations. Spielman plans to hire 220 people in the next two years. The biggest challenge, says Dave Porter, senior vice president of the Greater Austin Chamber of Commerce, is that the population is relatively young and lacks a strong pool of top-level management. Zilliant Inc., a local software company, freely admits that it poaches such talent from bigger companies (which often have the means to relocate executives), even to the extent that "there's a good possibility we'll find [a CFO candidate] here" when the company is ready to hire one, says chief talent officer Laura Hauck.

Austin's real estate market has not been immune to the private-equity effect. In fact, Blackstone flipped its portfolio of buildings there to Thomas Properties in June for $1.15 billion, a price that assumes rents will rise. Year to date, the cost of Austin's Class A rentals has increased 7.6 percent, significantly higher than the national average of 5.2 percent, according to research firm Reis. And while "new companies coming in still find it a bargain," says Porter of CresaPartners, some, such as Oracle and ArthroCare, are expanding outside the central business district, in part to save costs and make housing more affordable for employees.

On the positive side, Austin will rank among the top three cities in the nation for new commercial construction as a percentage of existing stock, according to PPR. That means rent increases should slow — in fact, PPR projects they will even drop slightly in 2009 as supply catches up with demand. And the city is strong on incentives, tapping the state's sizable "deal-closing" fund to land Samsung's new semiconductor plant and two Hewlett-Packard data centers.

Austin, TX

• Avg. rent per sq. ft., Class A: $28.21

• Avg. rent per sq. ft., other classes: $19.73

• Large employers: City of Austin, Dell, IBM, Seton Healthcare Network, UTx Austin

• Percent of population over 25 with bachelor's degree or higher: 38.8%

• Percent with advanced degree: 13.2%

• Median home value: $164,100

• Venture capital invested in 2007 (through Q3): $418 million

Sources: Reis Inc., U.S. Census Bureau, Greater Austin Chamber of Commerce, PwC/NVCA MoneyTree Report

Las Vegas
With one of the fastest growing populations in the country, no corporate or personal income tax, and an international airport, Las Vegas seems an ideal shelter. Some 263 companies have located in southern Nevada since 2002, including computer maker CDW Corp., which opened a distribution facility in the area last year, and many alternative-energy companies, which have a ready-made market thanks to a state mandate that 20 percent of Nevada Power's resources must come from nontraditional sources by 2015.

Still, "Sin City" has yet to become a corporate-headquarters haven for brand-name companies. One factor working against it is that office space is not exactly cheap, averaging $25.52 per square foot — more expensive than such cities as Austin and Charlotte. The mountains surrounding the city constrain the supply of developable land, and although construction is booming, office projects must compete with multi-billion-dollar resort projects for construction workers, driving up expenses, according to Matthew Kreft, an adviser at Grubb & Ellis Las Vegas. For bargains, Kreft steers companies toward the downtown central east submarket, where space in older buildings can be had for $24 per square foot. Go to a new building along the recently opened Central Las Vegas Beltway and rents approach $40 per square foot for top-tier space.

The lack of a stable and educated labor pool is another drawback. While the population is growing rapidly, only about half of the city's 2 million residents are considered part of the labor force. Building a finance team there "would take some time," says Lori Layton, who heads Ajilon Finance's Las Vegas office. Salaries for accounting staff (and even CFOs) at gaming and hospitality companies tend to be lower than in other industries, she says, and the lack of other corporate options in Las Vegas makes nearby Phoenix and Southern California look more attractive to many job seekers, including mid- to high-level finance professionals.

Locals are doing their best to change the city's image, though. "I think the stigma that we had at one time is for all intents and purposes gone; we're seeing companies consider coming here that five years ago wouldn't have talked to us," says Somer Hollingsworth, president and CEO of the Nevada Development Authority. He points to the three-year-old Nevada Cancer Institute, which managed to recruit top-tier doctors from around the country, as "shatter[ing] the myth that smart people won't move to Las Vegas." Further positioning it as an area for medical research is the planned Lou Ruvo Brain Center, scheduled to move into its Frank Gehry–designed headquarters late next year. Las Vegas "has the capability to be a headquarters town," provided that buildings get taller and nascent efforts to provide workforce training take off, says Kreft. "The only thing that could hinder future development is the availability of water."

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