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Beyond Sprawl: Gambling On Downtown Las Vegas

CEO Tony Hsieh is betting that moving Zappos out of the suburbs will pay off in an urban revival.

Slideshow

Scenes From A Changing Downtown

Above: Travel to downtown Las Vegas, where one CEO wants to transform it into a vibrant, urban center.

Audio

Aired 11/28/11

Like most sunbelt cities, the Las Vegas growth model was to expand out, creating sprawling suburbs and quiet gated communities. But one trendsetting local company--the online shoe company, Zappos--thinks an urban setting would be a better fit for its employees and its industry in general.

— Like most Southwest cities, the Las Vegas growth model was to expand out, creating sprawling suburbs and quiet gated communities.

But one trendsetting local business – the online shoe company, Zappos – thinks an urban setting would be a better fit for its employees and industry.

Zappos is currently based in Henderson, Nevada, a suburb outside of Las Vegas. The company was drawn to the area from San Francisco in 2004 by the friendly business climate and an experienced call center work force.

The current Zappos campus looks like any other suburban office park. It is a palm-tree lined complex of rectangular tan buildings surrounded by a sea of parked cars.

Inside the office there is a surprising, almost a party-like atmosphere. Whimsical decorations hang from the ceilings, and there is a constant hum of chatter. Employees are close enough to reach across their cluttered desks and give their neighbors a high-five.

“You’ll see that the vast majority of our employees don’t have offices,” said Tony Hsieh, the company CEO, in an interview in the office café.

In fact, Hsieh believes in a high impact work environment…literally.

“So that we can increase the number of collisions amongst employees,” Hsieh said. “And that is when the ideas happen, when employees bump into each other from different departments.”

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Hsieh is just 37. Among a long list of his accomplishments is a best-selling book on the importance of happy employees for success (and having his company ranked #6 on Fortune Magazine’s latest list of the top 100 companies to work for). He believes good things happen when people bump into each other and have what he calls “serendipitous” interactions.

But outside the work place, the suburban office park doesn’t lend itself to a lot of spontaneous mingling. If employees want to go out to lunch or grab a drink after work, they have to get in their cars. The nearest shopping center is about a half-mile away and across six lanes of traffic.

So these days, Hsieh is no longer just thinking about cubicle density. He is thinking about urban density.

“It turns out that the same principles that work for improving company culture actually work for driving productivity and innovation in a city,” Hsieh said.

In 2013, Hsieh is leaving the suburbs and moving everything downtown. He is taking over the city hall building in historic downtown Las Vegas, a quirky, gritty neighborhood north of the Las Vegas strip. Right now, the area is mostly known for its aging casinos, government buildings and a smattering of pawnshops.

But downtown is also home to the city’s arts district and a few hipster friendly hangouts. The neighborhood is one of the only pedestrian-friendly parts of Las Vegas, and has been a focus of the city government’s revitalization efforts. It will welcome a new performance arts space and a few new museums next year.

Hsieh is hoping to continue to build on that energy and help make downtown Las Vegas a vibrant, urban hub. The idea is to build a community for the 2,000 Zappos employees who will be working downtown, as well as other hi-tech and Internet-based companies he hopes to draw to the area.

“In an urban environment, suddenly every cafe and bar and restaurant becomes an extended conference room,” Hsieh said. He hopes new eateries and sidewalks will serve as the backdrop for serendipitous interactions among the new downtowners.

The vision is on his kitchen wall: Dozens of multicolored post-it notes with ideas from friends, employees, and neighbors about what the community needs. A blue post-it in the middle says “yoga” in big letters. Others say community garden, tea lounge, technology co-working space and a school.

“Creating an interesting place to live and making this a fun place to be is obviously very good for our talent pipeline,” said Zach Ware, the Zappos employee who is heading the move downtown. “If this is a great place to live you don't have trouble attracting people to live here.”

Tony Hsieh, CEO, Zappos.

Photo courtesy U.S. Department of State.

Above: Tony Hsieh, CEO, Zappos.

Hsieh has pledged to personally invest around $300 million dollars to realize this vision, which he has dubbed the “Downtown Project.” He’s also supporting tech start-ups to relocate here and wants more high rise housing so there will be a whole community of people who live, work and play downtown.

Is it doable?

“You don’t change a neighborhood with a snap of a finger,” said Steven Pedigo, the director of research for the Creative Class Group, a consultancy that advised Zappos on the Downtown Project. “It’s challenging and there are some up and downs, and it will take some time.”

Still, most urban revitalization projects don’t enjoy the support of a big company and an investor with deep pockets like Hsieh.

“Because of the commitment from Zappos and Tony (Hsieh) himself, you have a real fighting chance to make this neighborhood transformation happen much faster,” Pedigo said.

There is little tangible progress yet. But occasionally, there are glimpses of the idea coming to life.

Every other Thursday night, self described “tech geeks” from all over the city gather in a funky downtown coffee house called The Beat.

The café is on a lively block of Fremont Street with wide sidewalks and a string of hip bars that are locals’ hangouts.

On one recent Thursday, a young tech entrepreneur named Keller Rinaudo visited to show off his iPhone-operated robot. He’s looking for a place to base his new start-up, so the Zappos team invited him to Las Vegas to consider moving here.

“Right now we are going to be in Palo Alto or Las Vegas,” Rinaudo said. “And I think that would have been a much easier decision had we not come out here.”

After learning about the Downtown Project, he is intrigued with being a pioneer company at the forefront of changing a Las Vegas neighborhood and building a tech scene.

When asked if he ever imagined moving to Las Vegas as a location for his start up, he laughed.

“No,” Rinaudo said. “It’s not what Vegas is known for.”

And that might be one of the project’s biggest challenges. Convincing people on the outside that Las Vegas can be something more than the casinos on the Strip or sprawling suburbs.

Yet the goal of this unlikely endeavor goes beyond just Las Vegas.

"We hope that other cities will be inspired to continue to invest in their downtown cores to help connect creative people, to help inspire entrepreneurs," said Zappos' Zach Ware. "To help create a sense of community that gated suburbs really killed."

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