Given the recessionary state of the economy and the current decline in both white-and blue-collar jobs, it might seem inappropriate to consider constructing a new facility or relocating an existing one. Nothing could be further from the truth. In fact, for companies primarily housed in office buildings, this is an excellent time since there is such an excess of office space that truly incredible deals can be negotiated. It is not unusual for large space users to negotiate very low long-term rentals with owner's of low occupancy new buildings. This can result in part ownership of a building or complex, along with numerous other concessions and considerations that several years ago were unheard of.
During the disaster days in Dallas, major firms negotiated long-term deals with major building at under $8.00 per square foot on a gross basis (including real estate taxes, maintenance, and insurance). For a manufacturing enterprise, the development of a new facility bears a similar type of interest.
Today, almost every community is attempting to attract new industry. Unfortunately, there are only so many to go around. Nevertheless, smart companies are investigating both the normal factors that are necessary in good site selection, as well as community incentives such as tax exemptions, financing incentives, subsidized land values, free land, government-financed employee training programs, specialized financing and other programs which over the long run can represent considerable savings to a company. Hard bargaining can provide substantial benefits to a company regardless of whether a company is relocating or developing new facilities.
Before commencing the planning stage of new facilities development or relocation of a corporate office or plant, the importance of secrecy must be established. Depending upon the size of the company, the number of people who might be relocated, management levels, degree of labor skills, unions, and other factors, will determine the level of secrecy necessary. In many projects in which we have been involved as consultants, secrecy has been a profound issue. For protection, the projects were given a special code names or numbers; never to be referred to near their existing building. Initially, only a few people were involved in the planning stage. We were paid by our client's accountants or attorneys so that our name was unknown to company personnel. Moreover, all meetings were held in another city away from curious people and possible loose tongues. I cannot over emphasize the need for secrecy. Rumors can run rampant, creating confusion, distrust, uncertainty, employee turnover, and possibly more costly land.
At the onset, it is essential to spell out a clear and concise set of objectives. This is true whether a company is located in a downtown area and is considering relocating its offices to another downtown building, or relocating or developing a new facility in a different city. Executive privilege often gets in the way of clear cut and concise objectives. Ironically, the most important consideration in office and plant relocation often depends upon where the president or chief operating officer lives or plans to live. As consultants, we always ask, sometimes to the embarrassment of the CEO. A list of considerations for both the office and plant relocation or development are presented below. All may not be relevant to each situation.
CORPORATE OFFICE RELOCATION CONSIDERATIONS
- Market Evaluation. The market evaluation is somewhat different for a office relocation, as opposed to a manufacturing operation. A list of important ingredients for a corporate office relocation is presented below.
- Preparation of a map indicating the location of employees' residences, color coded by importance to the company • An analysis of employee locations, a decision on who is critrical, and an estimate of low, medium and high employees losses.
- A list of management's market or locational criteria, as defined by senior management or the CEO
- Space needs: immediate and long range
- Identification of any special needs or requirements
- Highway access for employees and visitors.
- Driving times from alternative locations
- Airport proximity (If important)
- Existing labor pool
- Salary levels
- Real estate broker or no broker
- Existing office inventory of available buildings
- Existing office vacancy and occupancy rates
- Office rental rates
- Current concessions
- Land costs (if a new building is needed)
- Telephone, data, fiber optics, digital switching and other communication considerations
- Acceptable rental rates/land costs/construction costs
- Real estate taxes and assessed valuation
- Utility costs • Driving times to often visited areas
- Public transportation importance and alternatives
- Proximity to other office and hotel concentrations
B. The preparation of a Relocation Policy, if necessary;
- Mail delivery and proximity to the post office
- Location of suppliers and service people
- Local environments
- Housing availability and costs
- School quality
- Safety and security (is crime going up or down?)
- Recreational facilities
- Cultural facilities
- Higher education
- Posture of local governments
- Others paticular to each individual business
- Site Selection
- Identification of desirable market opportunities
- Architectural considerations and consultation
- Zoning and building requirements
- Parking needs versus requirements
- Environmental issues
- Price and concession possibilities
- Land and development cost versus renting or buying existing facilities
- Financial analysis of specific location alternatives
- The need for negotiation representation
- Preliminary site and building plans
- Soil tests
- Environmental tests
- Site Survey
- Acquisition or lease consummation
- Preparation of detailed site plans
- Architectural plans and detailed work drawings
- Engineering - site and building
- Cost estimates
- Financing of the project
- Construction bids
- Contractor selection
- Construction of building or space
- Punch list completion