When considering a move to a new community, a company’s leaders may be influenced by the desirability of residing in a certain locale, or choose a city based on having heard good things about it. But there are a number of factors to consider to ensure the move is the right one for the company, and that it is pursuing all possible incentives, says Linda Burns, a site location consultant at Burns Development Group in the Dallas metropolitan area.
“Key factors to consider include labor availability and the cost of that labor, real estate availability and the associated costs, a geographic area that coincides with a company’s customers, vendors and suppliers, and the tax environment and incentives that may be available,” says Burns.
Smart Business spoke with Burns about how to ensure a successful transition into a new community that is right for your business.
If a company is considering relocating, what is the first thing it should do?
If you don’t have the expertise in house to conduct an assessment, seek the outside assistance of a site location consultant. That will help you, in a very objective fashion, to evaluate potential real estate and work force and look at how your operational needs are going to impact your real estate needs.
A consultant will look at where your company does business and where its vendors and suppliers are located. The consultant will also consider your unique real estate requirements; for example, as a data center or a manufacturer, you may have very stringent infrastructure requirements that you need to factor in.
CEOs need to take into consideration the strategic, financial and operational implications of rationalizing a company’s facility location across multiple markets. A site consultant can help you collect that data and make recommendations on the best-suited sites to consider. Calling in the consultant early in the process is critical. Getting that advice and guidance up front is a huge help as you are looking at your total portfolio and deciding what to do.
What other factors does a company need to consider?
Labor is another important element, in terms of availability and wage rates. It’s very expensive for companies to relocate labor, and they can’t afford to deal with unsold homes like they used to. It is key when making decisions on location that companies assess labor availability and average wages in the area being considered and factor that into their operational plan. In many cases, suitability of the work force in terms of availability of workers with desired skill sets and wage rates supercedes the real estate.
Also look at where your vendors, suppliers and customers are located, where your markets are, and where it makes sense for you to be. And look not just at your needs but also at what the cost of those needs are, such as whether you’re considering a move into a state with very high electricity costs. Look at what your demand is going to be on those systems, and what the associated costs are.
Consultants approach the site search as a process of elimination. Your site consultant will assess other areas, such as quality of life and business climate; educational and training resources; health care offerings; recreational, cultural and retail amenities. All of these items potentially affect the bottom line — including the company’s ability to recruit and retain workers.
How can tax incentives play a role in deciding where to locate?
Companies don’t always think in terms of being desirable or being in a position to approach a community, county or state about tax relief. They may think that they will only get the attention of a community if they are moving hundreds of people, building a building or have millions of dollars in investments. What they don’t take into consideration, especially in a large metropolitan area, is that there are many surrounding communities that would be very happy and very supportive to receive a smaller project.
There are some very aggressive programs out there right now and they are getting more aggressive at all levels. There are deal-closing funds to provide gap financing that is needed to secure projects. There are communities that have cash grants that provide discretionary funds to pay for anything from relocation to putting in a rail spur to training employees.
A company would be remiss not to conduct due diligence and look at all possible location or expansion scenarios. It’s a numbers game. Jobs are really needed right now, and communities are very receptive and willing to work with projects that offer job creation.
Is now a good time to consider relocation opportunities?
With all the downsizing, or ‘right-sizing,’ of the past few years, companies are reassessing where their current locations are and whether it makes sense to continue there in the future. They are looking at whether they should consolidate multiple facilities into one they currently own or lease, or whether a different territory makes more sense in terms of logistics and costs.
There is still a conservative approach in terms of evaluating what the next step should be, but there’s a definite increase in companies evaluating their current situations and trying to forecast their future needs. And the real estate market is still very competitive in terms of what property owners are willing to do for companies, offering some very good tenant improvement allowances, free rent and helping to take people out of leases early in some cases by the savings that they’re able to offer.
Communities are looking for new tax revenue and need new job opportunities because many still have high unemployment rates. And that makes it a very good time for companies to be looking to relocate to a location that could improve their bottom line.
Linda Burns is a site location consultant with Burns Development Group in the Dallas metropolitan area, specializing in incentive negotiations and economic development recruiting. Reach her at (214) 402-1882 or [email protected]
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