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What Corporate Executives Need To Know When Making Location Decisions

Companies should look to their landlords or developers of their facilities for several attributes, key among them being reliability, flexibility, and a sense of partnership.

Q4 2017
Amazon’s consideration of locations for a second headquarters has set local and regional governmental entities, as well as private property owners, scrambling to develop proposals highlighting the attributes of their sites and everything they have to offer. While companies like Amazon don’t come along every day, in every region across the country, large and growing companies are always conducting searches for new locations. They’re looking for properties that meet their present and future needs and a variety of other attributes and enticements.

My experience with the Regional Industrial Development Corporation of Southwestern Pennsylvania (RIDC), a Pittsburgh-based, private, nonprofit developer, has been largely in transforming abandoned, obsolete industrial sites into the sorts of properties that attract companies that can create jobs and provide benefits to their communities and the region’s overall economy. Ever since the closing of the steel mills, the key to revitalizing southwestern Pennsylvania has lain in taking a mission-driven, community-oriented approach to redevelopment; such considerations are also vital to making good corporate expansion and relocation decisions.

From the conversations I’ve had with local and global executives, seeking space for everything from large manufacturing facilities to small robotics labs, there are a number of issues that arise time after time and should be on every CEO’s and real estate professional’s checklist:

Talent Magnets
A company as large and well known as Amazon creates its own center of gravity and can be its own magnet for talent. But for most companies, attracting talent is a constant issue. They want to know what the labor pool looks like —– now and in the future — and whether academic institutions in the region are producing a sufficient supply of the type of skilled employees they need. But they also want to know whether there are other, similar companies in close proximity. It may be difficult for any individual company to become a beacon for job seekers, but when there is a critical mass of companies in a particular field in a certain region, talented people around the country and around the world will take notice and gravitate toward it.

A company as large and well known as Amazon creates its own center of gravity and can be its own magnet for talent. Does the specific property or campus a company is looking at include other occupants in similar industries? Will they find synergies or other advantages in this proximity? We’ve had many tenants tell us how valuable they find it to be able to walk across the street or across the hall to conduct business meetings and how vital it is for employees to be able to feel the energy of others in their fields working on different, but equally exciting projects.

Community Buy-In
Is the community going to consider your location in this facility beneficial? Will they welcome you? Can the developer or property owner help you integrate into civic life? We’ve all seen examples of public announcements made with great fanfare, only to find out later that the proper groundwork hadn’t been laid, community members were caught off guard and, in fact, had serious reservations about the proposed plans.

Developer’s Reputation for Positive Community Relations
If the project involves land-use or zoning issues, how is the developer perceived by local government officials? Having a reputation for working well with the communities where they build better enables the developer to navigate the approval process as the project moves forward. Furthermore, local officials will know from the outset that the developer and the tenant company are going to consider community input seriously and address any concerns their constituents may have.

Ability to Deliver in the Face of Obstacles
If the project involves new construction and the substantial renovation of old buildings, can the developer deliver or will government, community relations, or financial issues pose obstacles? You want a developer who is able to deal with issues related to environmental remediation, transportation, and infrastructure. The history of real estate development is littered with projects that sounded great at the outset — breathing new life into old buildings, attracting new jobs, transforming a local economy — that stalled as soon as they began to hit obstacles. Real estate development and successful service to tenants requires commitment, fortitude, and the depth of resources to make it through any roadblocks.

Flexibility
Does the developer have flexibility across their entire portfolio of property? This is certainly important for early-stage companies that might multiply in size over the course of a standard lease, but it’s also valuable to larger, more established companies that may have expansion needs in the future or require additional space for spinoffs. If the developer has sufficient capacity to allow a tenant to relocate should their needs change midstream, you’ll want to keep them at the top of your list. Should you find yourself in a position of growth and a need to relocate three years into a five- or 10-year lease, you’ll want the property owner to be able to accommodate you within one of their own buildings.

Having a reputation for working well with the communities where they build better enables the developer to navigate the approval process as the project moves forward. Additionally, is the developer willing and able to make short-term compromises for long-term benefits? For example, can they accommodate a tenant that is a good fit for the property and for the community, but that requires a costly buildout and lacks the balance sheet or revenues to justify it? A developer can only make such decisions when risk is spread over a large portfolio and more speculative projects are balanced with more mature and successful ones. Oftentimes tenants may lack a financial track record, but fit well into the vision for a particular site.

Intangible Attribute
Many developers market their properties on the basis of attributes that are well known and that exist in all new construction — things like large floor areas, power and water supply, capacity for technology, access to transportation, etc. Others market on the basis of their communities’ assets: taxes and other occupancy costs, housing prices, cultural attraction, and quality of life. But intangible qualities can also be a major differentiator.

Essentially, once companies identify locations where they feel confident in their ability to attract sufficient talent, they should look to their landlords or developers of their facilities for several attributes, key among them being reliability, flexibility, and a sense of partnership. They need to know they can count on the space they need being delivered on time and according to specifications. They also need to know they’ll have flexibility as their businesses grow and evolve. And, perhaps most important, they need to know they’ll have a partner in dealing with both real estate and community issues as they move forward together.
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