Key Issues to Consider When Selecting a HQ Location

June 26, 2018

 

When Amazon issued an RFP last year for the location of their second headquarters, they created overwhelming excitement and a bidding war among municipalities. This is in large part because site selection has never been more critical for companies. Whether it’s an international company such as Amazon or a regional company with half a dozen offices, selecting a location for a corporate headquarters requires studying cost, talent and recruitment, and technology, among other issues.

 

Choosing the right corporate headquarters is an intensely individualized and crucial decision. Making this decision requires an extensive understanding of the company’s operations and both short and long-term business objectives: what they do, how they do it, strategic objectives and what the drivers and key issues are as they relate to their specific business and industry.

 

When considering different locations for your HQ, we can break it down into 4 main decision points: ability to recruit and retain top talent, the cost of doing business, local and state governments, and location. 

 

  1. Ability to Recruit and Retain Top Talent

The number one factor when choosing a headquarters location is talent and recruitment. Whether you’re a technology company looking for software engineers or a manufacturing and logistics company, the war for talent is paramount. The three criteria to keep in mind with respect to talent and location are the quality of the labor pool, the availability of that labor, and the cost associated with said labor. Cost used to be number one, but because of the intensity of finding the right talent, the quality of labor has jumped ahead of cost for many companies.

 

When evaluating talent pools, the quality of colleges and universities in the city is key and very often that issue of growth in the workforce is dependent on how many people are graduating each year and with what degrees. Large employers such as Amazon want to see a dynamic workforce that’s growing. If new people aren’t entering the workforce, it will be significantly more difficult and potentially more expensive to staff the operation.

 

2. The Cost of Doing Business

 

Companies need to seriously consider the cost of doing business, which involves real estate costs, labor, variable operating costs, taxes and utilities—all the things that go into operating a business. There are a lot of other components that will make one community more attractive than another: quality of life, infrastructure & transportation, schools, business friendliness, cost of living, and the local economy to name a few. 

 

3. Local and State Government

 

Incentives and inducements from state and local jurisdictions to entice companies can be extensive—income tax credits, abatements, free training resources, etc. Jurisdictions may subsidize rent or give free land. There’s no limit to what a particular jurisdiction may choose to do to entice companies to relocate to their city; however, companies must deliver first. For example, Wisconsin Governor Scott Walker approved a plan to give Foxconn $3 billion in incentives to locate there. Most of the $3 billion is in the form of income tax credits, so for the company to collect, they will have to have huge profits. 

 

4. Location

 

Your real estate practitioner needs to be able to talk intelligently about the positive things a community offers that go well beyond the building. You can never have too much information about all the things that impact the desirability of a community, such as the housing industry: how attractive is it going to be for a corporate user to relocate 50 of its senior-level people? No one person can be an expert on all these issues, so you need to tap into other resources such as the Chamber of Commerce, utility providers, and other resources to provide this information.

 

Not necessarily for everyone, but another factor is proximity to an international airport. Amazon won’t consider any city that doesn’t have an international airport, even if it connects to one. 

 

Before kicking off a site-selection project, my team has a “white board” session with all the corporate stakeholders in the room to discuss issues that are important to each of them and how my team can best educate and guide a company to make the right decision for their business.

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