The corporate office landscape is different than it was prior to the pandemic, yet headquarters remain relevant as they are a fundamental component of doing business. Companies will continue to maintain physical office locations for their headquarters – even if at a smaller scale than previous decades, and despite the fact that hybrid work arrangements and/or remote positions have become standard practice for some companies. While the key drivers for headquarters relocation projects have been largely the same over the past two decades, the composition of headquarters functions and physical space is continually evolving.
The most common motives for headquarters relocation projects include business costs, airport characteristics, access to talent and regulatory climate. The decision often involves a combination of two or more of these factors. Since changes in comparative ratings on these factors happen gradually, many of the metro areas that have been able to successfully recruit headquarters projects over the past 10 years are continuing to do so today – and are well-positioned for additional growth in the future.
Savings from lower ongoing operating costs are a potential benefit of headquarters relocations. Once achieved, these cost savings can be significant – but the payback period for the move itself must be taken into consideration. Human resources costs are substantial for headquarters projects and often go beyond relocation and severance costs. Strategies such as temporary duplication of positions in the old and new locations, as well as stay-on bonuses in the existing location, help to facilitate a smooth transition, but increase the overall project cost. Additionally, the real estate facility cost calculations must account for preparation of the new facility, disposition of the current facility and, in some cases, a temporary facility in the new location. While state and local incentives for headquarters relocation do exist, incentives typically offset only a small portion of the overall project cost.
Connectivity for in-person meetings, both domestically and internationally, is essential. Therefore, evaluation of air service is typically a component of headquarters relocation analysis. While lower costs can attract headquarters relocations from large urban areas to mid-sized or smaller markets, many companies have moved their headquarters into more costly markets and cited access to better flight service as a key reason. However, lower costs and improved air service are not mutually exclusive, and regions that can demonstrate both have a distinct competitive advantage. Two metro areas that have successfully recruited multiple headquarters projects over the past decade – Atlanta, Georgia and Dallas, Texas – are specific examples of this winning combination.
Hiring the right people is key to success, regardless of the industry or company. The dynamics of the current labor market and the ever-increasing mobility of workers make it difficult to quantify access to talent. Thorough evaluation of the potential workforce in locations under consideration must extend beyond demographic data to better understand the factors behind migration trends, programs for building a talent pipeline and initiatives to address challenges around housing and childcare.
State regulations on businesses and individuals have gained more attention in recent years. Stringent laws for corporations have historically been a catalyst in relocation decisions and remain a factor today.
One example of this is the exodus of California companies seeking more business-friendly conditions. However, companies are now also giving greater consideration to the personal implications of state policies in the locations where they choose to locate facilities.
Headquarters relocation is a substantial undertaking with significant implications. Careful consideration should be given to all aspects of the decision to best position the company for future success. T&ID
Kim Williams Davis brings more than 20 years of site selection and economic development experience to Quest Site Solutions. A member of the Site Selector’s Guild, she joined Quest as a Director in 2020, bringing expertise from her years as a Principal with McCallum Sweeney Consulting. Kim provides specialized services in the areas of site and infrastructure evaluation, economic development strategic planning, geographic information systems (GIS) analysis, demographics and labor analysis, financial evaluations and incentive negotiations. info@questsitesolutions.com