What motivates a business to move to a new location?

April 10, 2017

Traditional thinking would lead you to believe that a move is about finding affordable labor and real estate. However, new trends are shifting the focus from savings to value.

Social and demographic factors – as well as tech-driven needs – are leading the way to new locations. The search for skilled labor and updated facilities may override the need for lower costs. In addition, educational resources and transportation considerations are important to the workforce, making these determinants more important to business owners as well.

So what really drives a relocation? While the specific decisions can vary, we can track trends surrounding a few particular cases. The first is a consolidation, which often happens as a result of mergers and acquisitions.

A consolidation involves several offices moving to a location where some corporate facilities are already in place. Here, the real estate savings may take a back seat to efficiency, as businesses want shared service operations and tech infrastructure to ease communication between multiple linked locations. Companies in this position will try to target areas not only with good labor quality, but also lower salary levels, nearby affordable housing and manageable operating expenses.

Another motivator for office relocation involves the expansion of an existing business to a new area. These types of moves require fresh labor, which used to send companies hunting for low-cost workers in unskilled jobs. However, automation and offshoring mean businesses have to establish a footing in an area with skilled, educated workers – often near a direct competitor. While low-cost, high-quality labor pools do exist, they’re often at a distance from major metropolitan hubs.

The final option is far less common, but does make headlines on occasion: a total corporate relocation. This type of move is often a result of a significant repositioning and usually involves economic incentivisation, but the strongest force behind the move is usually access to future talent and strategic resources.

No matter the impetus behind a business relocation, such a move requires a thorough evaluation of potential opportunities and costs. Talk to the professionals at Intelica Commercial Real Estate to properly align and execute your corporate location strategy.