I

nside the lobby of every major Wells Fargo office building, a stagecoach stands as a reminder of the company's historic roots in bringing commerce to the American West.
   The four- wheeled carriage also serves as a metaphor for the company's corporate real estate strategy.
   Just as the pioneers of the 1800s set out to find fortune and a better life by leaving the East Coast, Wells Fargo has struck gold by expanding its financial services operations in many second- and third- tier markets west of the Mississippi.

Downtown Des Moines is home to the gleaming new $90-million corporate headquarters of Wells Fargo Financial, which, like many Wells Fargo office buildings, contains a gleaming stagecoach in the lobby.

   Des Moines, Iowa, is a case in point. Wells Fargo Financial is set to complete construction this fall on a nine- story, 360,000- sq.- ft. (33,444- sq.- m.) expansion of its corporate headquarters in downtown Des Moines. The new facility will accommodate up to 1,500 employees and is just two blocks away from the 1 million- sq.- ft. (92,900- sq.- m.) headquarters of Wells Fargo Financial, the Wells Fargo subsidiary that has more than 20,000 employees.
   Just outside the city in West Des Moines, Wells Fargo Home Mortgage is building a 960,000- sq.- ft. (89,184- sq.- m.) campus that will eventually house 4,500 workers.
   What makes Iowa so attractive to these companies? "Wells Fargo is very committed to this community," said Cheryl Howard, senior vice president of Wells Fargo Home Mortgage. "We recognize the very hard- working ethic in the Midwest. Expanding in Des Moines has been very productive for Wells Fargo — both the bank and the mortgage company."
   Jon Kurth, vice president of the Corporate Properties Group of Wells Fargo Financial, told Site Selection that "before we decide to build, we always do an extensive site search. We investigated all options, from lease options and acquiring a facility to developing a new building."
   Kurth said that Wells Fargo Financial considered locations in other American cities for the expanded corporate headquarters, "but Des Moines has proven to be a very good place to find very strong and well- qualified employees and a good work force. Wells Fargo has made a commitment to downtown Des Moines."
   When the Wells Fargo Financial project is finished, it will be the largest office building to be completed in downtown Des Moines since the last Wells Fargo Financial home office addition — a 370,000- sq.- ft. (34,373- sq.- m.) building at 800 Walnut St. — which opened in October of 2003. The Federal Home Loan Bank will lease portions of the second floor and the entire third floor of the new facility.
   Wells Fargo Financial's total capital investment in the new project is about $90 million including land, building costs, site development, furniture, fixtures and equipment. Building features include an energy- efficient design, special exterior lighting and exterior landscaping along Walnut Street, and a first- floor lobby area that features a reflecting pool, bamboo trees, employee lounge and, of course, the stagecoach.
   Robust company growth prompted the decision to expand, said Kurth. "Even though we had just expanded our headquarters in 2003, we filled up that space quickly and needed more space. It has been difficult to accurately predict the growth of our company."
   Kurth noted that his company likes Des Moines for a variety of reasons. "The company was founded here. Iowans have a strong work ethic. Several universities within the state provide a good source of employees," he said. "Also, the labor variables — quality, availability and cost — all work very well for Wells Fargo Financial. Des Moines ranks second or third in the world behind London and Hartford as a destination for insurance companies."
   A key incentive program, the Iowa Values Fund, helped seal the deal. Administered through the Iowa Department of Economic Development, a $10 million grant was awarded to the two area expansion projects: Wells Fargo Financial in downtown Des Moines and Wells Fargo Home Mortgage in West Des Moines. Combined with other state and local incentive programs, the total amount awarded to Wells Fargo reached $70 million.
   Both entities of Wells Fargo agreed to provide 1,000 additional jobs per company as part of the deal reached in 2003. Kurth said that benchmark was surpassed 16 months ago, and his firm is on pace to add 2,000 jobs by 2007.
   Wells Fargo Financial continues to expand in other Western markets as well. Kurth said his firm added 90,000 sq. ft. (8,361 sq. m.) in Sioux Falls, S.D., in 2005 and recently completed a three- facility consolidation project in Eden Prairie, Minn.
   Does Wells Fargo Financial deliberately pursue a strategy to locate facilities in non- major metro markets? No, says Kurth. But costs do play a key role in the company's site criteria.
   "It was never intended to be deliberate to stay away from major metro areas," Kurth said. "It just goes back to the growth and the employee base we had in those markets and the origins of where the business began. We look very closely at the costs of doing business. As a result, we are in very cost- friendly markets."
   Once the two Wells Fargo projects are completed in the Des Moines area, Wells Fargo entities will occupy more than 3.8 million sq. ft. (353,020 sq. m.) of space in the market.
   "That's more than the Empire State Building in New York and almost as much as the Sears Tower in Chicago," said Kurth.
   Like Kurth, Howard at Wells Fargo Home Mortgage is expanding across the country. Currently, she is overseeing projects of 230,000 sq. ft. (21,367 sq. m.) in San Bernardino, Calif., and 100,000 sq. ft. (9,290 sq. m.) in Baton Rouge, La.
   "The labor market strategy for Wells Fargo is to be the employer of choice in any market," said Howard. "There is a good labor pool in financial services and insurance here in Greater Des Moines. On the West Coast, there is a lot of focus on having a diverse labor force, particularly at our operation in San Bernardino in Southern California."
   Howard adds that she always plans to be in expansion mode. "Wells Fargo is growing very rapidly. Our buildings are planned for growth," she said. "We are in an expansion mode even before we plan to be in expansion mode. Our site selection criteria now include the ability to expand on the site itself."
   Howard added that Wells Fargo considered other sites in Fort Mill, S.C., Minneapolis, Minn., and Tempe, Ariz., before selecting the 175- acre (71- hectare) site in West Des Moines.

Jon Kurth, vice president of the Corporate Properties Group of Wells Fargo Financial

   Wells Fargo's site selection strategy mirrors that of other large financial services firms in the U.S. since Sept. 11, 2001. While New York and Chicago remain the two largest financial centers in the world, they are no longer necessarily the best places to locate an expanding financial services operation.
   Since the terrorist attacks that toppled the World Trade Center towers in Manhattan, financial services companies have tended to geographically diversify their operations to protect their employees and their assets and to spread the share of risk.
   It also makes good business sense, particularly from a labor and costs standpoint, to locate in multiple markets, say several site selection experts who counsel financial services firms.
   "My overall perspective from having worked with Wall Street groups is that there has been a concerted but very quiet effort by all the Wall Street powerhouses to have a very robust infrastructure and full geographic diversity well outside the tri- state region (of New York, New Jersey and Connecticut), and perhaps even further out of the entire Northeast region," said Michael Rareshide, executive vice president of Partners National Real Estate Group Inc. in Dallas. "In fact, for some firms, 9/11 gave them the chance to relocate some back- office operations out of New York City in favor of less expensive office space and labor rates."
   Rareshide, who has handled large financial services facility deals in Texas and Florida, as well as other locations, adds that "prior to 9/11, just about every Wall Street house had some operations center already located in some other area of the country. ... What had been fairly autonomous operations centers are now being fully beefed up — both in personnel and infrastructure — for disaster recovery and business continuity purposes. These companies continuously evaluate these plans and have been committing more capital to this effort."
   Rareshide particularly likes the markets of Orlando, Nashville, Birmingham, Louisville and Kansas City as alternative locations for back- office support operations that can serve as fully redundant centers for the big Wall Street firms.
   "Birmingham, with the recent Regions Bank- AmSouth merger and the impact of the Wachovia- SouthTrust merger in 2004, has a large, financial- savvy community with additional employees likely coming as a result of the mergers," Rareshide noted. "As such, it would be worthwhile for many financial services groups to investigate. Birmingham has over 40,000 employees in the financial services sector, concentrated in the southern half of the city. This area's overall demographics are well above the national average in terms of overall education base, too."
   Birmingham may be the harbinger of a significant trend. Of the 14 largest facility investments made in the financial services industry this year, all but three have landed in either the Central or Southern U.S. region.
   Leading the way is Wachovia's $400 million investment in a new data center in Birmingham, followed by two $100 million investments in the Carolinas. Fidelity Investments is bringing 2,000 financial services jobs to Wake County, N.C., while South Financial Group will employ 600 in Greenville, S.C.
   Other domestic locations recording strong growth in financial services projects, according to the Conway Data New Plant Database, are Florida, Texas and Oklahoma. Internationally, large investments have been announced this year in Poland, Wales, Botswana, Australia, England, Czech Republic, Philippines and Barbados.
   The consensus of the experts interviewed for this story was that these site criteria are the most important for financial services firms: labor force, available buildings, education, telecommunications infrastructure, electric utility costs and reliability, transportation network, quality of life, government cooperation and the ability to provide business continuity.
   Former Tampa Committee of One Hundred economic development chief Robin Ronne, who earned the nickname "Mayor of Wall Street South" for luring so many New York companies to the Tampa Bay Area, says, "The single most important site selection criterion for financial services companies is the labor force — the ability to attract, retain and retrain the most highly qualified personnel from entry level to executives. An existing labor force that understands and is versed in the basics of financial transactions and vocabulary, along with having a high level of customer service focus for national and global clients, is a key and critical area of specific required skill sets for the financial services industry."
   Ronne notes that Texas and Florida are facing increasing competition from Ohio, Kentucky and North Carolina for these prized jobs. These states are "aggressively courting financial services expansions and relocations, and they have all increased their incentive war chests to secure those projects," he said.


   Tammy Propst, principal of Greenville, S.C.- based Tax Advantage Group, a consulting firm that helps financial services firms negotiate and secure tax incentive packages from local and state governments, says that the Northeast still offers the most creative programs when it comes to luring financial services projects.
   "New York has the largest number of programs specifically targeted to the financial services industry, including the Financial Services Investment Tax Credit, the International Banking Deduction, and the Mortgage Servicing and Recording Tax Credits," she said.
   Propst also cited Connecticut, Delaware, Vermont, California, Mississippi, North Carolina and South Carolina as having excellent incentive programs for banks and other financial institutions.
   One reason the states are increasingly competitive with one another is the simple fact that demand for financial services is growing so rapidly in the U.S. and around the world.
   According to the U.S. Bureau of Labor Statistics, the financial industry's annual growth rate of 1.2 percent from 2002 to 2012 represents 964,000 new jobs created by 2012. The 2003 gross domestic product generated by the financial industry was over $2.5 trillion in current dollars, 20.4 percent of total U.S. GDP.
   The financial services occupations expected to grow the fastest from 2002 to 2012 are personal financial advisors (expected to grow 34.6 percent), financial analysts (18.7 percent) and credit analysts (18.7 percent).
   Employment growth is expected in management and professional jobs in banking, customer service representatives, and securities and financial services sales representatives. The demand for health insurance services will also create more jobs.
   Harvard Professor Michael Porter, in his International Cluster Competitiveness Project, reported that financial services represented $22 billion in export value in 2003, or 15.9 percent of the world market, and were up 1.46 percent from 1997 to 2003.
   Globally, the site consulting practice of IBM- PLI reports that the hottest world markets for financial services right now are, in order, the U.S., the U.K., China, India and Russia.