"The corporate headquarters arena is the next big frontier for corporate cost cutting"

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“The corporate headquarters arena is the next big frontier for corporate cost cutting,” said Boyd [vice president, The Boyd Co. Inc.]

..

In the past, he said, “companies were very reluctant to relocate their corporate headquarters because their brand would be so synonymous with a particular city.”

But that’s changing as costs increase for cities at the top of the list and companies squeezed by the downturn look to cut expenses, he said. As a result, companies are more willing to move to areas that were previously less attractive, such as the Midwest, he said.

The Boyd Co. calculated the cost of operating a 70,000-square-foot headquarters, with 325 employees, in 50 locations around the U.S. The study amortized land and construction costs over 25 years.

...

The Boyd Co. also polled chief executive officers, chief financial officers and chief operating officers of Fortune 1000 companies to find what factors – aside from costs – they consider important in deciding where to put a corporate HQ.

The poll found a business-friendly legal system topped the list, followed by a low or non-existent corporate income tax and low or non-existent personal income tax.

...

In some places, the high cost is acceptable because they offer a uniquely skilled labor pool, he said. San Francisco, for example, has Silicon Valley’s workforce and New York and Stamford have plenty of financial services professionals.

But the skills required for many positions in a corporate headquarters, such as mid-level managers, accountants and human resources representatives, are more readily found elsewhere around the country, which makes it easier for a company to relocate, Hughes said.

“We have also found out labor forces are highly mobile,” he said.

http://www.northjersey.com/news/113009_Nor..._highest__.html

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bump

[scandal 951]

Boeing very famously moved from Seattle to Chicago a few years ago.

Among the reasons cited were: housing is cheaper, O'Hare makes every point in the continent reachable by one or at most two flight segments within a few hours, and there's a cadre of talented professional IT and business managers to hire from.

Nothing wrong with Seattle (and much manufacturing is still done there), but it's simply not a major business center.

FedEx looked at the map and wisely chose Memphis.

I personally made a similar calculation when I chose Chicago as my new home last year. I wanted a major urban area with a diverse economy but I didn't want to deal with the housing markets on the coasts. I think cities such as Atlanta, Dallas, Chicago are a great alternative to those stressed out by the ratrace of NY, Boston, DC or LA, the Bay area. It's a sound individual choice to make, and I think increasingly it's a sound corporate move too.

[w¡n9Nµ7 §£@¥€r 123]

Boeing very famously moved from Seattle to Chicago a few years ago.

Among the reasons cited were: housing is cheaper, O'Hare makes every point in the continent reachable by one or at most two flight segments within a few hours, and there's a cadre of talented professional IT and business managers to hire from.

Nothing wrong with Seattle (and much manufacturing is still done there), but it's simply not a major business center.

FedEx looked at the map and wisely chose Memphis.

I personally made a similar calculation when I chose Chicago as my new home last year. I wanted a major urban area with a diverse economy but I didn't want to deal with the housing markets on the coasts. I think cities such as Atlanta, Dallas, Chicago are a great alternative to those stressed out by the ratrace of NY, Boston, DC or LA, the Bay area. It's a sound individual choice to make, and I think increasingly it's a sound corporate move too.

A companion trend to hq relos that I can see is that of corporations doing less and less within their hq facility and moving functions to locations in lower cost states. MetLife, for example, has moved a lot of their IT manhattan hq to locations in the queens, south carolina, upstate ny, georgia, northeastern penn. My current employer is now in the planning stages to move function out of our jersey hq as well. We've already relocated our data center to Texas.

[scandal 951]

Boeing very famously moved from Seattle to Chicago a few years ago.

Among the reasons cited were: housing is cheaper, O'Hare makes every point in the continent reachable by one or at most two flight segments within a few hours, and there's a cadre of talented professional IT and business managers to hire from.

Nothing wrong with Seattle (and much manufacturing is still done there), but it's simply not a major business center.

FedEx looked at the map and wisely chose Memphis.

I personally made a similar calculation when I chose Chicago as my new home last year. I wanted a major urban area with a diverse economy but I didn't want to deal with the housing markets on the coasts. I think cities such as Atlanta, Dallas, Chicago are a great alternative to those stressed out by the ratrace of NY, Boston, DC or LA, the Bay area. It's a sound individual choice to make, and I think increasingly it's a sound corporate move too.

A companion trend to hq relos that I can see is that of corporations doing less and less within their hq facility and moving functions to locations in lower cost states. MetLife, for example, has moved a lot of their IT manhattan hq to locations in the queens, south carolina, upstate ny, georgia, northeastern penn. My current employer is now in the planning stages to move function out of our jersey hq as well. We've already relocated our data center to Texas.

I hear that Dunder Mifflin is outsourcing from Scranton to Altoona. Just a rumor, of course.

[scandal 951]

And in a related story.....

World’s Most Expensive Office Markets Get Cheaper

By David M. Levitt and Simon Packard

Dec. 1 (Bloomberg) -- The world’s most expensive office markets got a little cheaper this year.

More than 130 cities worldwide had declines in rent expenses in the year ended Sept. 30, CB Richard Ellis Group Inc. said in a report today. Almost 50 cities reported declines of more than 10 percent. Rental costs fell about 30 percent in Midtown Manhattan, 53 percent in Singapore and 41 percent in central Hong Kong. Overall, rents fell an average 7.7 percent across 179 markets worldwide.

“The places that went up the fastest and highest also came down the fastest and at greater depth,” said Raymond Torto, Boston-based chief economist for CB Richard Ellis, the largest publicly traded broker. “You party Saturday night and you pay for it on Sunday morning. That’s true across the globe.”

The global recession and credit crisis are pushing down office rents as companies pare jobs. About 1.93 million job cuts have been announced worldwide this year, data compiled by Bloomberg show. In the U.S., the unemployment rate jumped to 10.2 percent in October, the highest level since 1983.

Singapore and Hong Kong are struggling to pull themselves up from recession, according to CB Richard Ellis. The pace of rent declines in Singapore eased in the third quarter, suggesting “an improvement in business confidence,” the report said. In Hong Kong, rents for top-quality space ended a yearlong decline in the third quarter for similar reasons, according to the survey.

West End Costs

London’s West End district retained its position as the world’s most expensive office location, Los Angeles-based CB Richard Ellis said. Offices there cost $184.85 a square foot. That’s down 26 percent from a year ago in U.S. dollars or 18 percent in pounds.

With the exception of CB Richard Ellis’s May survey, when London was passed by inner central Tokyo, the broker estimates that the West End has held the title of the world’s most expensive office site since 2001.

West End rents have been pushed higher by the Mayfair and St. James’s neighborhoods, home to Europe’s largest concentration of hedge funds. The cost of leasing space in the two locations may rise as the municipality lifts business property taxes by at least 70 percent over the next five years, CB Richard Ellis researcher Gary Martin said.

Tokyo Rates

“None of the other main global office markets will have such an uplift,” said the London-based analyst.

Inner central Tokyo came in second in the CB Richard Ellis survey, while outer central Tokyo came in third. Central Hong Kong was fourth and Moscow was fifth. A year ago the order was the West End, Moscow, central Hong Kong, inner central Tokyo and Mumbai.

London and many Asian markets are showing signs of economic stability, Torto said. Most of the rent declines in those markets have probably already happened, he said.

“I would think that a year from now those markets will have sobered up,” he said.

New York City’s Midtown Manhattan came in 24th in the CB Richard Ellis survey, down from 15th last year. It remains the most expensive U.S. office market.

In the Americas, Sao Paulo and Rio de Janeiro displaced Midtown as the most expensive markets for offices. Rio rose to 12th in the semi-annual survey from 37th a year ago, while Sao Paulo rose to 16th from 26th.

‘Changing World’

The rise in the two Brazilian cities is “part of the changing world,” with the country’s oil and sugar cane ethanol industries helping to push demand, Torto said. New York’s decline paralleled a drop in financial services employment, he said.

Offices in New York averaged $68.93 a square foot at the end of September, compared with $87.47 in Rio and $81.81 in Sao Paulo, South America’s biggest city.

Rio office costs increased 12.1 percent, the second biggest increase in the survey. Sao Paulo has about 115 million square feet of offices, about the size of Chicago’s office market, according to Torto.

Offices in Rio will likely get more expensive as the country begins preparing for the 2016 Olympic Games, the report said.

“With the emerging economies, their office markets are much more volatile, and they have a much more limited supply of grade-A office space,” said Dan Fasulo, managing director of Real Capital Analytics Inc., a New York-based firm that tracks commercial property sales. “So when there’s an economic boom, there’s always a violent increase in occupancy costs due to constrained supply.”

Tishman Projects

Tishman Speyer Properties LP, the global real estate company whose office buildings include Manhattan’s Rockefeller Center and the MetLife Building, entered the Brazil market 13 years ago and has built or is building 21 office projects there. Eighteen are in Sao Paulo and three are in Rio, said Katherine Farley, a senior managing director who oversees the New York firm’s Brazilian operations.

The company has had success providing “international- quality” Class A offices in Brazilian cities where even the highest-quality buildings are mostly not air conditioned, she said.

“Because historically there has been no commercial lending, most of the projects that are built are built with equity,” she said. “What you saw happening in Brazil, they were one of the last economies hit by the global liquidity crisis, and one of the first to come back. We’re back to the levels before the crisis; you see a kind of V-shaped reaction.”

Brazil may grow 5 percent in 2010 after an expected 0.2 percent growth this year, according to the median forecast in a Nov. 27 central bank survey of about 100 economists.

Rio was among 41 cities in the survey where costs rose. The biggest increase was in Aberdeen, Scotland, where office costs jumped 12.3 percent. Sao Paulo office costs were little changed.

CB Richard Ellis defines occupancy costs as a rental charges including taxes and service fees.