"There is no perfect location. There are always tradeoffs," says John Boyd, founder of The Boyd Company, a site selection consultancy with over 30 years of experience helping firms make location decisions.
In a "flat" world, with so much buzz about the "creative class," what is behind the decision by Yahoo to open a $150 million data center in the Buffalo, New York, metropolitan area? Why would McQuay International decide to open a 49,000-square-foot facility for research and development of advanced heating, ventilation, and air conditioning in Minnesota's high-tax Twin Cities? For either company, why not choose Oregon, or the Sun Belt, or India?
The cost of doing business is always important, but is not the only factor in a company's decision to locate an office, warehouse, or manufacturing facility. In addition to the bottom-line considerations - cost of labor, cost of real estate, and taxes, as well as incentives - there is also availability of qualified labor, and finding that labor is often tied into less tangible "quality of life" issues. "Incentives last five or 10 years," says Boyd, "and then you'd better be in the right location."
Talent Follows Quality of Life
"Talent does gravitate to certain markets, particularly in the Sunbelt region," says Boyd, citing places like Phoenix, Arizona; Orlando, Florida; Charlotte, North Carolina; and Atlanta, Georgia, as examples. "Let's be honest here, climate has much to do with it and the transient element needs to be watched."
Denver, Colorado, is another example of a city to which talent is drawn, for its climate and access to the Rocky Mountains and the recreational opportunities they provide. Forbes ranked three Colorado cities - Denver, Boulder, and Fort Collins - in the top 20 for business and careers, taking into consideration the cost of living, cost of doing business, crime rates, and cultural attributes. Denver also appeared on Forbes' list of the top 10 cities to which people are relocating.
Some companies choose to locate in places where they know they'll find the talent they need. DaVita, a Fortune 500 kidney care provider, recently announced that it is relocating its headquarters from El Segundo, California, to Denver. The primary reasons given by the company are Denver's high quality of life, as well as a geographic location that provides good access to all 50 states and relatively lower costs for companies and families.
Holland & Hart, a law firm based in downtown Denver, announced earlier this year that it would move a suburban Denver office to a more accessible location at a light rail transit station, and that the new office there would be built in an environmentally friendly manner. The managing partner told the Denver Business Journal that among the reasons for the move is the company's belief that using green building practices and being near a transit station will better help attract the best and brightest talent.
Joe Cortright, president of Impresa Economics, a Portland, Oregon-based consulting firm, believes that chambers of commerce and economic development agencies often overlook quality of life because, he says, when a company chooses to move or expand, it is because it has already achieved success, not the other way around. Therefore, the key is to find the right entrepreneurial environment that supports new growth, not necessarily the one with the lowest taxes or best incentives.
Companies Go Where Talent Grows
Some industries, such as information technology and biotechnology, rely on the proximity of universities and research institutions, so they tend to cluster in specific geographic locations near those institutions, which provide a steady stream of educated workers and potential workers. Cortright says the Silicon Valley grew in part because of strong relationships with educational institutions that cultivate talent and are able to move a product from research to market. That is one reason why Buffalo, New York; and Madison, Wisconsin, could join such established bioscience markets as Boston, Massachusetts; San Diego, California; and the Research Triangle in North Carolina, and why Austin, Texas, has become a magnet for video game creators and other sectors of the technology industry.
AndroBioSys, a spinoff company of the Roswell Park Cancer Institute in Buffalo, develops drugs to fight prostate cancer. Michael Zwick, the company's president, says his firm could have chosen any number of other locations, but went with Buffalo because of the collaborative institutions and support for research at the Buffalo Niagara Medical Campus, located just outside of downtown. Zwick's colleague, Trevor Twose, selected Madison, Wisconsin, as a location for his firm to conduct research and development of Alzheimer's drugs. He says Madison offers very good access to venture capital, and strong support from the University of Wisconsin and its Alumni Research Foundation, which is very efficient at transferring technology to the marketplace.
As for McQuay International in the Twin Cities, Takenori Miyamoto, general manager of the McQuay facility, quoted in the Minneapolis Star Tribune, said that the significant pool of talented engineers in the Twin Cities was a primary reason for choosing that location. "Labor tends to dominate," says Boyd, "labor availability, labor cost, and labor management and relations."