By Leigh Howe
What features and environmental factors do corporate headquarters consider and need in a business location? To answer this question, we look at the location factors important to any headquarters, and current trends in relocation. Then you can evaluate how your community stacks up in the areas that are important to corporate headquarters operations.
Location Importance Factors
Both quantitative and qualitative factors are considered in headquarters locations–the cost of doing business and the quality of life. Overall operating costs for corporations will be a factor in the location decision, but the greater concern will be whether the business can function well in a given environment.
A skilled and available labor pool and reasonable labor costs are likely the top concerns of most corporations. Recruiting and retaining the needed top talent depend on cost of living and quality of life factors. The location’s image, amenities, and access to recreational, cultural, and educational opportunities become increasingly important for executive employees. The availability of suitable executive housing is also a consideration. Access to world-class, highly connected commercial airline services will be important to executives, who may spend a substantial amount of their time on the road.
Another increasingly important site location factor is telecommunications services and infrastructure. Corporations will continue to move their businesses to online business models, taking advantage of the speed and automation of information technology. The globalization of business and the need to connect to divisions, offices, and customers around the world will mean that communities with a base of international corporations may look more attractive.
Headquarters locations span all industries – manufacturing, distribution, and service. Attracting a headquarters is a challenging pursuit, but offers substantial rewards. Evidence suggests that Fortune 500 corporations tend to grow and stay in place, while smaller companies are more likely to make a headquarters move. But every year, a few major companies make the news with a headquarters announcement such as Boeing’s move to Chicago.
The statistics below, from Conway Data, describe the location or expansion of corporate headquarters in 2002 by state. Conway Data is not an all-inclusive source of location and expansion information, but represents general trends in new and expanded announcements. While Conway Data reports a total of 6,782 new or expanded locations in 2002, just 4.7% or 298 of those new or expanded locations were categorized as headquarters. If we consider only new locations, headquarters account for 215 out of 3,395 or 6.3% of new facility announcements in 2002. It’s not clear from the data below whether the companies moved their headquarters away from the city of origin or simply relocated within the same city. Research on each company would be required to determine that information. But numbering headquarter facility announcements by state gives us a useful breakdown.
|STATE||New or Expanded Headquarter Facility Announcements in 2002|
Source: Whittaker Associates, Inc & Conway Data
The benefits of securing a company’s headquarters make headquarters-attraction a wise economic development strategy. Headquarters operations employ a highly skilled white-collar workforce and salaries for these executive positions are far above the average wage. Headquarters generate demand for numerous specialized business services, increasing the local multiplier effect as headquarters spending trickles down through the local economy. Also, headquarters tend to be very charitable and involved in the community. Best of all, once headquarters are established in an area they are less likely to move than division, subsidiary, and branch operations.
When headquarter moves do occur, they are usually strategic. A change in top management may precipitate a change in culture or strategy for the company, prompting a move. Consolidation has also been sited for relocations. Consolidating several offices gives the company the opportunity to consolidate real estate costs, share support services across departments, and improve communications within the firm. A corporate relocation may also be precipitated by the need to gain access to new ideas and talent. Other reasons for corporate headquarter relocations may include mergers or acquisitions activity, cost reductions, or the need to move closer to customers or suppliers.
According to Thomas Klier, an economist with The Federal Reserve Bank of Chicago, the Southern United States is winning more headquarters locations than the North and Midwest. Atlanta, Dallas, Houston, and Tampa gained 108 new headquarters in the 1990s, while New York, Chicago, Philadelphia, Boston and St. Louis gained only 68. This trend is likely to continue as the economy shifts from capital-intensive production to service. Also, companies will continue to look to second- tier metropolitan areas with less congested airports and lower business costs. Corporations increasingly compare operating costs from one location to another in order to show the shareholders a greater return on investment. While quantitative factors will grow in importance in choosing a location, qualitative factors such as quality of life will always remain in play.