Putting the Location Decision into a Business Context
Find the right place to do business first and the best site will follow.
Linda G. Tresslar, Managing Director, Strategic Consulting Group, Grubb & Ellis Co. (Nov 06)
(page 2 of 2)
Make a qualitative-quantitative trade-off.
many companies refer to the process they seek as site selection, most
consider the same qualitative/quantitative give and take when
ultimately selecting the "right site." However, many site selection
efforts fall short of delivering the "best place to do business"
because they do not appropriately consider and weight the total
long-term operating costs of selecting one site over another.
estate service providers, developers, and economic development
professionals often find themselves confused by the final location
decisions made by companies. The consternation often stems from not
being privy to the complete view of the company or the "prism" through
which it ultimately views a location or a site. Companies are sometimes
accused of not making the best deal or leaving money on the table.
However, it is not uncommon for our business location clients to spend
more time discussing labor and regulatory environments, demographic
trends, and competitive pressures when comparing one market against
another. It is also not uncommon for companies to select a higher-cost
real estate deal based on the potential lower operating cost in another
business area, or the need to preserve flexibility of occupancy in a
market or region. Other factors such as community support and long-term
prospects of an area for business growth rarely get communicated back
to local market professionals when final decisions are made.
that rely heavily on specific resources, commodities, or site-specific
attributes like port access rightly factor these necessities into their
location decisions. Businesses considering how to maximize retail
exposure have different locational considerations. Successful call
center locations are highly reliant upon a relatively low-cost labor
force in the immediate area. And determining the best place for a
headquarters location presents other considerations including community
assimilation, impact on corporate brand, etc.
While each type of
business may have very different considerations, they all must
ultimately weigh the benefits of qualitative attributes against those
more easily quantifiable cost-related attributes tied to overall cost
structures of operating in a particular business location. The chart on
page 36 illustrates the decision options in a comparative matrix that
allows a company to visually consider the differences presented by
various location options, providing a framework for discussion by a
company and its various stakeholders.
Form follows function.
sine qua non view of the architect states that form should follow
function, and thus it is with selecting the best site for a business
activity. An optimal physical site, in the absence of a compelling
business case, will rightfully get short shrift during the location
analysis process. But when satisfactory business locations or markets
have been determined, physical sites should be scrutinized for their
ability to support the business requirements as effectively and
efficiently as possible. Site selection implies identifying the best
physical spot for the conduct of a specific business function. A
disconnect exists between characteristics of the optimal site, or the
best deal, and the holistic mindset that may decline the most efficient
real estate deal in favor of a site that will provide either a lower
cost operating structure or one that will minimize the occupancy or
When approaching the process of business location
selection, companies that spend time at the beginning of their search
determining and prioritizing those business attributes that are most
aligned with their own key business success factors will use an
appropriate frame of reference in which to evaluate the appropriateness
of one location or market versus another. When the place or market has
been identified, that is when true site selection begins. As the saying
goes, "There is more than one way to skin a cat." So too there is
generally more than one location option in a market(s) that will
deliver the specific locational and physical site attributes sought.
Each of these alternatives will usually come at slightly differing deal
terms. It is at this point that "selecting the best site" appropriately
becomes the task at hand.
Remember why you're there in the first place.
ultimate decision of which site will best fill a company's specific
requirements must be the result of first considering the best place for
the company to perform a specific function. Unless the strategic
context for why the company chooses to be there in the first place is
incorporated into the site selection process, the final decision cannot
effectively satisfy the location attributes that will lead to business
success. Understanding this view, a company will find itself in a
position to approach site selection from the business location
perspective first; then the best physical site for the job will follow.