Corporate Survey Analysis by Thomas J. Stringer
Thomas J. Stringer, Esq., Managing Director & Practice Leader, Site Selection and Business Incentives Group, BDO USA (Dec/Jan 08)
The survey results are a reaffirmation of recent trends in the market and not at all surprising.
Of the top 10 site selection factors identified this year, it is very interesting to note that eight are cost-drivers that have a direct impact on the bottom line. Corporate real estate departments are increasingly judged upon the total financial return on the investment for a project and not merely the acquisition of space for operations. This fiscal accountability began to surface through the oversight implemented under the Sarbanes-Oxley accounting regulations in 2002-2003 and has intensified through the recent credit crunch that will dominate the economy through the next several quarters.
Market accountability and responsiveness to shareholders are placing ever-increasing demands on corporate real estate professionals to bring projects online to full operational capacity, while maximizing speed to market, monetizing the real estate value, containing costs through incentives negotiations, and managing return on project investment. These trends are reflective in the cost-drivers emerging as the leading site selection factors.
The corporate location process is increasingly a study in complexity and speed. This has lead corporate real estate directors to create and rely upon "on call" project teams of professionals with dedicated specialties such as incentives, brokerage, logistics, project management, and public relations in order to maximize value at each step of a project's evaluation.
Globalization is also playing a role in transforming real estate into more of a commodity - thus the focus on the cost-drivers emerging as the key site selection factors. Once considered an independent factor, the real estate acquisition is now truly a second-tier criterion with the ultimate location decision determined by striking a balance between labor/quality (the specific skill sets required for the project) and total project costs.
This is an increasing trend among our clients for whom bottom-line factors - rather than quality of life - are truly driving the process. To a large degree, this is indicative of the commoditization of production, goods, and services generally in the U.S. economy across all markets.