Conner Wisdorf runs point on strategic planning and location strategy for T3 Advisors. Here’s what he had to say in an interview on office relocation.
Companies keep moving from sprawling campuses in the suburbs of major cities to smaller and smaller footprints in the hot spots downtown. And I don’t blame them if they’re going after millennial talent. I, for one, prefer my 550 sq ft apartment in Boston to a sprawling home a 1+ hour commute outside of the city.Millennials are thriving in urban city centers across the U.S. Considering this generation craves experiences and rich cultural offerings, there’s no better place to get that than in the downtown areas.
So why wouldn’t companies post up job offerings in the same locales? But like a lot of office space decisions, urban relocation isn’t a one size fits all solution. Consider what kind of talent you currently have and how your employees would react to an office relocation announcement. What kind of talent do you want to go after in the future?
We gathered helpful perspectives and tips from real estate advisor Conner Wisdorf of T3 Advisors to help you make the right decision.
Gabrielle: What are the top 3 reasons companies have when considering office relocation?
Conner: Right off the bat, the top two reasons in office relocation decisions are cost and talent. Culture is number three, although it’s wrapped up in the talent factor as well. A classic example of this is taking a company that has scaled to a certain point in a major city. Let’s say they’re located in Boston or San Francisco, and the company is up to 100, 200, 300 people there. They start to realize that scaling their company in a really expensive market is cost-prohibitive at a certain point. You don't need to be hiring every individual in a very expensive metro area. There are lots of other great pockets of talent domestically and internationally in other markets, to either open a second office or relocate to a new city entirely.On the talent side, sometimes companies have a hard time hiring enough individuals in certain markets, depending on the role. I’d add that there are a lot of opportunities in certain cities to partner with local universities who offer a particular field of studies and then pipeline those grads to a certain company.
G: What’s the ideal timeframe for companies to begin considering an office relocation? Is there a sweet spot where it’s not too early and not too late?
C: In a full relocation scenario from one city or state to another, it’s definitely a more time-intensive process. Especially if you’re seeking state or city government incentives. Incentives alone can take three to six months to negotiate a package. In an ideal world, if you're trying to maximize incentives, you want to have a couple of options that you're equally interested in and then consider the best incentive deal. Once you sort of negotiate all of those packages and terms, it’s at that point that you launch into the actual real estate and facility search. That timeframe can take at least six months, although nine to twelve months is probably a more realistic estimate, especially in the case of a full HQ relocation.I would also add that you see companies relocating at any point in their life cycle so no company is too young or too old to consider relocation if they are facing challenges growing or operating their business in their current market.
G: Tell me more about these office relocation incentives.
C: Well, the more jobs that a company is moving to a certain city, the more enticing that is to the city and state government. The types of jobs can impact incentives, too. Outsourcing a call center isn’t going to be as attractive as a tech company moving from San Francisco to Salt Lake City with five hundred new tech jobs. Size wise, offices as small as fifty people are encouraged to go through the process of seeking out incentives. On top of that, niche industries, high tech companies, and business spending large amounts of capital to get up and running in a new market can get tons of incentive dollars for expanding or moving. Lastly, if you’re talking about relocating an entire headquarters, the second you start attaching, “We’re moving our HQ to your city,” you open up an entirely new pocket of funding. That’s much more exciting, and the press surrounds that.
G: What data do you like to consider when helping companies evaluate an office relocation? What sources do you use?
C: On the data side, we look at real estate costs, talent expense, and depth. Depth meaning, we want to compare the total number of jobs needed for important functions and the concentration of that talent in a certain market. When looking at real estate costs, we drill all the way down to the tax implications of being in California vs Washington vs Texas. Our data is made up of subscriptions to various sources and what we collect along the way from past projects and research.
G: Suburban vs urban office locations: What is your general perspective on the two solutions and biggest piece of advice to companies considering one or the other?
C: It really comes down to the culture that you want to have and the type of company you foresee your entity being in the future. There are a lot of companies who can do just fine in the suburban environment. That’s their brand. They’ve got a lot of their key talent around there. They’re not going to see a whole lot of benefit moving into a really expensive market. That said, there can definitely be a benefit in an urban market location from both the angle of how the company wants to present itself as well as how the company wants to attract talent. At the end of the day, it really comes down to how you want to portray your brand. It’s important not to ignore the fact that sometimes the suburban market can work really well for a company’s culture; it all just depends on the company.
G: What’s the biggest mistake you see companies making in their office relocations?
C: One of the most important things to focus on is making sure that the market that you end up moving into has the talent base to support your company into the future. A lot of times that’s really challenging for companies to forecast where they see themselves going. But obviously, the last thing you would want to do is move to a new city, state, or country and realize in two years that you’re missing this core piece of talent that you either thought would be available in this new market or that you didn't necessarily know you would need. Companies need clearly thought out roadmaps going into the future and then need to make sure talent in a market can support that trajectory. This is a lot easier to say than do and is one of the core pieces that goes into office location strategy.
G: Data vs gut instincts: How do you help companies decide using the two?
C: This is really a case-by-case scenario. Our mantra on the location strategy team is that the decision really needs to be founded in data. Because you can have a company whose executives have had great success with an office in Orlando, as an example. But just because they’ve had that great success with a prior company’s office doesn't mean they’re going to have it again with this new company office.
The other challenge is when you have really high-value individuals who have large say in where their company is going to relocate and they try to influence a move based on where their family lives or where their second or third home may be. But these are purely emotional draws to these locations. It makes perfect sense as a human being and it's understandable, but it's not the best for the business.
Oftentimes, we have to try to educate and show why that gut reaction is either right or wrong. When it’s wrong, you have to tread lightly in those waters as you don't want to offend those key decision makers. You have to present the data in a thoughtful and insightful manner. And for the most part, when these executives see a thorough analysis that you walk them through step-by-step and explain why you're looking at certain metrics or values in a particular way, then they're much more open to hearing about why their initial gut reaction may not have been the best fit for the company. Neutral parties let the data speak for itself. Qualitative factors that you can’t present in a black and white manner filter into the decision process later.
Office relocation is a loaded topic and oftentimes one of the biggest decisions a company makes in its lifetime. Executives and office move committee members should not take the decision lightly, which they often do not. But mistakes are easily made in such a massive process with a lot of opinions and influencing factors thrown into the mix.
Hopefully, at the end of the day, the ultimate decision maker(s) understand the core culture of the company and can make the right call that will help take their company even further into the future.