The Real Deal New York

The Long View: Hudson Yards, Quayside and the return of the company town

Firms like Related and WeWork are morphing into neighborhood managers. Is that a good thing?
By Konrad Putzier | August 09, 2018 07:00AM

Adam Neumann (Credit: Pixabay)

UPDATED, Aug. 9, 11:47 a.m.: In October 1966, Walt Disney recorded a video to unveil his plan for the city of the future. EPCOT — or Experimental Prototype Community of Tomorrow — would be a master-planned city built on company-owned land near Orlando, Florida. It would include elevated high-speed trains, a wheel-shaped street layout and a city center covered in a giant, climate-controlled dome. “I don’t believe there’s a challenge anywhere in the world that’s more important to people everywhere than finding solutions to the problems of our cities,” Disney said in the 25-minute clip.

A few weeks after he recorded the video, Disney died of lung cancer. His company ended up abandoning the project and built a theme park instead. But half a century later, his vision of a futuristic city built and managed by a private company is finding new disciples.

In Toronto, Alphabet-owned Sidewalk Labs is planning Quayside, a “smart city” in which sensors reportedly track people’s movements. On Manhattan’s far west side, Related Companies is building Hudson Yards, a 26-acre city within a city spanning 17 million square feet of apartments, office space, retail and a school. The company started working on a similar project, dubbed The 78, in Chicago. And Adam Neumann recently said his co-working company WeWork wants to start managing entire neighborhoods by 2019. Welcome to the new age of company towns.

There have been company towns before, of course. In the early 20th century 3 percent of the U.S. population lived in factory or mining towns owned and managed by private companies, according to The Economist. Most of these towns, built to house and keep tabs on employees, eventually disappeared or became normal cities. But the model lives on in remote places, and Silicon Valley companies like Facebook recently started building apartments for their workers.

Projects like Disney’s original EPCOT, Hudson Yards and Quayside are fundamentally different because they’re not primarily designed for one company’s employees. They’re also far more ambitious than giant real estate developments of decades past — think World Financial Center or Starrett City. Those projects generally focused on either housing or office space, along with a little retail. Today’s futuristic megaprojects offer both, along with all the services of a self-contained city.

Hudson Yards is “like taking Rockefeller Center and StuyTown and all combining it,” said Margaret Crawford, a professor of architecture at the University of California, Berkeley, and author of the book Building the Workingman’s Paradise: The Design of American Company Towns. “It’s something that’s really new and actually a little bit scary.”

If today’s company towns are nothing like Hersheys and Pullmans of yore, the rationale behind them is similar. “The reasons a lot of these company towns came into being had to do with scarcity,” said Hardy Green, author of the book The Company Town: The Industrial Edens and Satanic Mills that Shaped the American Economy. As firms opened factories and mines in remote locations, they had to offer their workers places to sleep and buy food. So they built them. Eventually the spread of the automobile meant workers didn’t have to live close to work anymore and rising prosperity meant more could buy their own homes, making company towns redundant.

Hudson Yards isn’t exactly remote, but its existence still has a lot to do with scarcity. Against a backdrop of record-low unemployment and fierce competition for educated, white-collar workers, Related Companies markets its development as a way for firms to retain key employees by offering them a pretty place to work. And in a gradual reversal of the early 20th century’s transportation revolution, crumbling subways, congested streets and a millenial aversion to cars mean it’s increasingly unappealing for some people to live far away from work. Suddenly, there’s a growing demand for mixed-use neighborhoods where workers can sleep, work, shop, go to the gym and listen to concerts all within walking distance.

Unlike Related Companies, Sidewalk Labs (which happens to be headquartered in Hudson Yards) doesn’t invest in land. Instead, it will come up with a master plan for the Quayside neighborhood and eventually serve as its “co-master developer” along with a government-controlled local development group, according to Politico.

WeWork’s foray into neighborhood management, meanwhile, is still in its infancy and it’s unclear what shape it will take. In a May interview with Fast Company, CEO Adam Neumann said he wants to build “campuses” — small neighborhoods spanning a few blocks in which WeWork presumably manages office space, apartments, hotels, a gym, a school and perhaps retail, too. Since WeWork also offers services like insurance, payroll management and social events, residents of these future campuses can, in theory, get almost anything they need through the company. WeWork also has vague plans to “touch cities” by offering governments software to track the wellbeing of citizens.

Echoing the utopian vision behind EPCOT and some 19th century company towns, WeWork’s Neumann often talks about his desire to “change the world” and rear a “WeGeneration” of happier, more fulfilled workers. Sidewalk Labs markets Quayside, with its planned smart traffic signals, self-driving cars and snow-melting sidewalks, as a prototype for the city of the future. “There’s chaos out there,” the company’s CEO Dan Doctoroff reportedly said of his plans to collect data on Quayside’s residents. “Together we can bring order.” But these projects are hardly altruistic. For Sidewalk Labs’ (and Google’s) parent company Alphabet, managing an entire city and tracking the movements of its inhabitants could yield an immensely valuable trove of data. And for WeWork and its co-working peers, managing neighborhoods is the logical next step in their evolution.

WeWork started off by managing small spaces. Eventually it started also managing entire buildings, which offers economies of scale: WeWork can multiply its revenues, but by managing bigger spaces it likely spends less money per member on things like design, staff and common amenities. But if managing a building is more profitable than managing a single floor, would that mean that managing an entire block is potentially more profitable than managing a single building, and that managing an entire town is more profitable than managing a single block? The likely answer is yes.

Economies of scale also play a big role in ground-up development, as The Real Deal previously reported. There are a lot of fixed costs developers have to pay more or less regardless of the size of the project: hiring architects, lawyers and lobbyists, managing common amenities, etc. The bigger the project, the smaller these fixed costs are per square foot built. “It takes the same amount of time and effort for a building that’s 200,000 square feet as one that’s 400,000 square feet,” developer Christopher Albanese told TRD back in 2007.

In theory, some of these economies of scale should be passed on to consumers, leading to cheaper, better apartments and office space. But there’s also a downside to the new generation of company towns. Elected officials might be reluctant to confront a company that controls the supply of virtually everything, leaving residents at the mercy of a local monopoly. “It probably disempowers the tenants and other potential commercial clients,’ Crawford said of Hudson Yards. “It’s a really problematic development in every respect.”

Correction: an earlier version of this post incorrectly claimed that the terms of Sidewalk Labs’ deal with Waterfront Toronto aren’t public. In fact, they were published on July 31.