CBJ broke the news on Aug. 16 that Fortune 50 health-care company Centene Corp. (NYSE: CNC) is dropping a planned East Coast headquarters in University City that would have brought 3,200 to 6,000 jobs and a minimum investment of $1 billion. When the agreement was announced in July 2020, the accompanying $450 million incentives packages from state and local government was the largest in North Carolina history.
About those incentives: None have been paid out and none will be.
St. Louis-based Centene cited a pandemic-spurred cultural change as the reason for the change in plans: 90% of the company’s employees work from home or in a virtual-office hybrid and Centene sees that as the standard arrangement going forward.
Gov. Roy Cooper told CBJ that he tried to persuade Centene to keep its Charlotte regional headquarters on track by urging executives to wait a year or so before determining whether virtual and hybrid work would remain at current levels. Centene declined.
And, while the Centene news surprised many here because of the scope of the planned investment, the reason behind the decision embodies the continuing adjustment to work life post-Covid — or, more accurately, life with Covid vaccines and treatments available.
Christopher Chung, head of the Economic Development Partnership of North Carolina, the public-private entity that recruits businesses in tandem with the state commerce department, told CBJ on Aug. 19 that this type of reckoning will be with us for at least the next couple of years as companies and their workers figure out what they want, what’s possible, and what’s most efficient.
He pointed to a decision last month by Advance Auto Parts (NYSE: AAP) to exit their incentives agreement in Raleigh tied to a headquarters agreement negotiated in 2018. The company’s reasons mirrored Centene’s: Remote work reduced the need for office space and, in many cases, the need for new hires or existing employees to be in the headquarters city.
Chung told CBJ that, prior to Covid, his group’s recruiting broke down like this: 70% of prospects were industrial, including manufacturing, food processing, distribution and data centers, while 30% were office-based projects such as Centene, Advance Auto Parts, Apple Inc. (NASDAQ: AAPL) and Honeywell International Inc. (NASDAQ: HON). Now, the ratio is 95% industrial and 5% office.
“Will it come back?” Chung asked. “That’s the question.”
And that shift means an overwhelming majority of prospects are looking for suburban, exurban and rural sites — not cities. Chung acknowledged the change as well as lingering uncertainty, noting that commercial real estate investors and developers as well as urban downtown leaders are grappling with such questions in a constant, visceral way. From commercial real estate to transit investments, the societal shifts under way will carry significant influence, he added.
Chung said that he and Commerce Secretary Machelle Baker Sanders, who participated in the governor’s meeting last week with Centene executives, told Cooper that they stand ready to help Centene and Charlotte city government look for potential replacements or alternative uses for Centene’s soon-to-be-completed 800,000-square-foot building here.
Chung said he has had discussions with Tracy Dodson, the city’s economic development director.
There are challenges, he allowed. “What will that next opportunity be? It’s not a settled question for most employers” on what the office of the near future will look like, Chung added.
State commerce department spokesman David Rhoades echoed the sentiment, telling CBJ, “Employers across the world rethinking their workforce footprints following the pandemic continue to look to locate and expand here because they know North Carolina is the best place to do business. Charlotte’s future is bright as one of our state’s most vibrant communities and the Department of Commerce will continue to work to bring world class jobs to the Queen City.”
Mayor Vi Lyles, who first learned of Centene’s abandoned East Coast headquarters during a call Aug. 16 with a company executive, said she became concerned when the CEO who negotiated the Charlotte project — Michael Neidorff — took a medical leave in February and was replaced a month later.
“He was such an iconic leader for them,” she told CBJ. “He was the person that drove a lot of the ideas and the growth of that business. And anytime you have a major change in leadership like that — I began to think, what does this mean for Charlotte?”
The mayor said Centene’s decision to hire 200 more people here, on top of the 700 the company employs locally, represents a smaller but significant commitment to the area.
Given the complexities of virtual work and other changes ushered in by the pandemic, Lyles believes that local government must boost its investment in job training programs and career education so that companies can find workers here no matter whether those workers have jobs that are virtual, in an office or at a job site.
And, she said, the fundamentals that led CNBC to rank North Carolina as the best state to do business remain very much in place.
Councilwoman Renée Perkins Johnson, whose district includes University City, acknowledged the setback of last week’s decision while striving to be optimistic about the site’s attractiveness.
“While I understand the decision of Centene’s leadership to cancel the plan for their East Coast headquarters in Charlotte, I am disappointed that those jobs won’t be coming to District 4,” Johnson said in a statement issued Aug. 19.
“However, Centene has committed to completing the facility, listing it, and working with our city’s leadership to market it and find other opportunities for our community. The facility will be a beneficial asset for the area’s future, and I am committed to working with city staff, University City Partners, the community and other stakeholders to ensure that we fulfill our potential.”
State and local leaders have so far said little about potential incentives to replace Centene. Given current conditions with remote work, even if incentives are on the table, it looks like a creative pitch — or, rather, creative uses of the space — may be necessary to recapture some of what has been lost.
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