JLL: 7 motivators to consider when locating a business
Deciding where to locate a business has never been more important. Location plays a huge role in attracting and retaining the best employees, many of who are keeping a close eye on where they're based in order to optimise work-life-balance.
Good location decisions can significantly boost a company's long-term performance. Poor ones can cost millions in lost talent, productivity and capital.
We frequently come across companies whose location decision-making strategies, or lack of, have longstanding consequences. In one case, a company decided to decentralise to cut costs. Real estate spend was indeed lowered but the move led to a loss of talent and clients, costing the company millions. Leaving an important strategic location turned out to be a disaster.
It's in stark contrast to another global corporate who decided to consolidate its back office support functions into fewer, bigger locations. This resulted in £150 million of cost savings and boosted its ability to secure software development talent.
The seven motivators
So why might a company want to be more strategic about location decision-making? In my mind there are seven key drivers.
1. Attracting and retaining talent. In most cases this will mean a city centre location. Cities draw in increasing numbers of young and international people. They're also becoming easier places to get around.
2. Real estate costs. It’s the second largest expense after labour costs, so ensuring real estate is efficient is essential.
3. Clusters. Having a network of connected businesses could give companies access to a better and bigger talent pool, regulatory bodies, investors and economies of scale. But it can be expensive – companies must weigh up the pros and cons.
4. Regulation and tax. Many firms must decide between the two: do they want to be based in a country with lower tax rates or fewer regulations? Bear in mind regulations can change.
5. Growth or a change in corporate strategy, technology or leadership. Some companies are opting for a central hub with meeting spaces, supported by multiple smaller spokes elsewhere. Meanwhile, others are maintaining large, centrally located corporate headquarters.
6. City dynamism. In Europe, some governments are transferring power to regions and cities, who might offer grants and stimulus to businesses. Being aware of up and coming urban centres that incentivise businesses could prove advantageous.
7. Accessibility. It sounds simple but, whether it's accessing new markets, customers or resources, transportation is crucial for your suppliers, manufacturers and retailers to get around effectively.
Location decisions can be lengthy. It involves identifying corporate requirements, consulting with stakeholders, assessing potential locations, conducting site visits and negotiating the best deal.
But it can be done seamlessly…with a little help.
Planning in action
JLL recently assisted an international financial services company who was considering setting up a service centre for 1,000 staff in Central and Eastern Europe. It's a popular base for offshore centres, but increasing competition means companies without a strong HR function could experience high talent turnover.
From a long list of 16 potential cities the company accepted Warsaw in Poland as the best location and we secured a 7,500 sqm grade A office space.
Redesigning a firms’ footprint and consolidating high cost functions into lower cost hubs, can result in significant cost savings.
Look to the future
Location planning allows businesses to future-proof their operations based on current trends, but this isn't the end of the story; new ways of working and rapidly evolving technology is putting pressure on companies of all sizes to review their real estate spend.
Companies must keep on top of these trends and regularly review their portfolios to face whatever tomorrow brings.
By Matthijs Weeink, director and head of business location consulting at JLL
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