Who Picks the Place?

by Beth Leibson Hawkins

Corporations value market access over basic cost savings in selecting a location for corporate real estate, according to a recent CoreNet Global study.  Corporations also look at how many other businesses are in the area when choosing a site.
 
In addition, corporations increasingly link their location decisions to portfolios that are managed on a holistic level, another approach that economic developers seem to fail to appreciate.

Critical factors

Access to talent is another important factor, both experienced and skilled workers as well as entry-level employees. Indeed, corporations ranked this as the second most important factor in selecting a location, both for relocation and expansion. Interestingly, most new facilities are branch operations where the bulk of new hires are drawn from local labor. Corporations are particularly concerned with local school quality (cited by 42% of survey respondents) and reputation for economic development (cited by 32%).

The third most important factors are twofold: quality of life for employees and quality of the local infrastructure. Interestingly, economic developers often emphasize culture, sports, and other lifestyle amenities more than corporations do, according to the study. Facilities managers are particularly concerned about union activity and labor issues.

North America remains the primary choice for corporate locations among service providers (cited by 54%) but many are finding areas in Eastern (23.3%) and Western (22.5%) Europe where they can find inexpensive labor. Not surprisingly, there is almost no interest in developing projects in Africa.

The survey found wide gaps in how corporations and service providers regard the importance of the quality of labor versus the cost of labor. Business continuity and a critical mass of other companies are important to corporations, according to the study. Currencies are less critical, probably because of the globally networked nature of the enterprises and the built-in hedge against currency exchange losses.

Transportation – particularly access to major highways and airports – remains important, the study found. Companies place less importance on logistics companies, perhaps because of the ubiquity of such providers. Supply chain considerations are most critical to firms where customer or vendor proximity is essential.

Ease of zoning and permitting is now considered standard, not an enhancement. Interestingly, two thirds of corporate respondents are unaware of the availability of public-private partnerships. Corporations prioritize brownfields redevelopment more so than do economic developers.

Once a company has compiled a short list of locations, then local incentives take greater priority, the study found. Such incentives include state and local development zones, economic development zones, and project facility financing, in that order. All three factors, though, are of middling importance overall.

Making decisions

Corporations often gather their information on the internet. Data available include demographics, work force, wages, economic profiles, site inventories, commuting patterns, workforce readiness, and skill and education levels. Since all of this information is so readily available, most corporations start their site location research without use of state or local economic development experts or site consultants.

This report is available to members of CoreNet exclusively, via its Web site and a specific level of log-in. For CoreNet members, the link is: www2.corenetglobal.org/dotCMS/kcoAsset?assetInode=1152096