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24th Annual Corporate Survey Analysis by Daniel Levine

Daniel H. Levine, Principal, MetroCompare (Dec/Jan 10)

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One surprise in this year’s survey was that an equal number of respondents opened facilities as shut them down during the past year. On the other hand, not unexpected was that two-thirds of respondents ranked availability of long-term financing as an important consideration. Overall, however, the minimal year-over-year change reported in most categories masks key changes that have occurred in corporate real estate during the recession, particularly with respect to surplus property and surplus labor now flooding most markets.

Commercial real estate financing is always one of the last credit functions to return to normal after a recession, and this time around is no exception. As a result, many companies that are interested in making new investments cannot get third-party financing. Similarly, renters are locked into existing lease commitments and face an unattractive sub-lease market, thus preventing them from consolidating space. Because most of the increased profit reported by S&P companies during the past year has resulted from cost-cutting (especially reducing employment), companies are sitting on vast quantities of surplus property. Unless top-line revenue growth resumes in earnest (and new hires start filling vacant space), tight commercial real estate financing will remain a top concern throughout 2010.

It was no surprise that 21 percent of respondents reported closing facilities during the past year, but it was unexpected that an equal number reported the addition of new locations. I suspect that this reflects growth through acquisition rather than true facility expansion. Moreover, the survey confirmed the importance of labor costs and availability. However, had respondents been asked if their company is facing labor constraints (or rising labor costs) at any of its current locations, I suspect the answer would have been a resounding no.

Surplus corporate real estate, weak labor markets, and limited commercial real estate financing should keep corporate real estate activity anemic throughout most of 2010.

24th Annual Corporate Survey & 6th Annual Consultants Survey Sponsor Directory

Arkansas

Metro Little Rock Alliance

California

Sacramento Municipal Utility District

Georgia

Indiana

Indiana

Kansas

Kansas

Greater Topeka C. of C.

Missouri

Joplin Area Chamber of Commerce

New Jersey

New Jersey EDA

New Jersey

Jersey City EDC

New York

Broome County IDA

Ohio

Greater Akron Chamber

Texas

Texas Economic Development Corporation

Texas

Greater Houston Partnership

Virginia

Martinsville-Henry County EDC

Washington

Tri-City IDC

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About the Author

Daniel H. Levine, Principal, MetroCompare
Daniel Levine is principal, MetroCompare LLC, a business strategy consulting company in Scotch Plains, N.J., specializing in corporate relocation and economic development. Prior to founding MetroCompare, Dan led ADP’s national location and incentive practice and served as assistant state treasurer of New Jersey. Earlier in his career he held senior positions at Coopers & Lybrand (NYC) and the New York City Department of Finance. His clients have included Citigroup, Novartis, Continental Airlines, the Regional Business Partnership of Newark, and the American Culinary Federation. He holds a bachelor’s degree from the University of Chicago and a master’s degree from Harvard’s Kennedy School of Government. He teaches business communication at the Rutgers Graduate School of Business.

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24th Annual Corporate Survey & 6th Annual Consultants Survey Sponsor Directory

About the Author

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