“Clients are looking to their brokers to perform more of a consultant role and to not just be transaction oriented,” notes Paul Hoge, principal of Signature Associates-ONCOR International in Southfield, Mich. “We have to bring more expertise to the party to help clients analyze whether or not a given transaction makes the most sense for them.”
Rick Leighton, vice president, corporate services at NAI, sees two major trends in how the site selection process is changing, centered first on technology, then on the need for outsourcing the site selection function because of a lack of full-time in-house employees dedicated to the process. Companies frequently cannot devote scarce resources to the complex and time-consuming job of finding the optimal location. So, the result is a bigger role for consultants, coupled with a greater dependence on electronic information.
The proliferation of information available via the Internet – although a tremendous assistance – also presents a challenge to corporate America. “How does a limited staff sift through all of that information on their own? How much should they outsource?” asks Leighton of NAI, a global real estate services company whose major clients include International Paper, Airborne, Gillette, Air Products and Chemicals, and Alcoa.
Leighton says that even though the number of employees in a firm’s real estate department may be down, there is a whole new line of involvement where corporations are putting together teams to handle certain areas of a relocation.
Leighton explains that the Internet allows a company to get a scan of some areas for possible relocation or expansion. However, relocation or real estate professionals are the best guides in terms of understanding the industry, work force needs, the incentives certain areas will provide, and what the firm’s corporate leadership is seeking. This information is then brought to the employee task force to evaluate.
Hoge of Signature Associates notes that the Internet has been a huge step forward in mass marketing and in the broadcasting of availability of properties. “Our Web site gets over 600,000 hits each month,” he remarks. “Some of these hits are from local brokers checking our inventory, but we also get many calls from out-of-state companies looking for metro Detroit locations, and we will eventually get a transaction.”
“What’s most important, and what we do very well, is know the customer’s needs and wants and strategies,” remarks Jim Dieter, national director of industrial services for CB Richard Ellis, Chicago. Dieter has worked with such clients as Pactiv, Ford, GM, Molex, and Tel Labs.
“First and foremost, we spend many hours with the customer learning their business, he says. “Some of our clients will have a need based on consolidation, or their lease is up and they must go out to the marketplace to find additional space. We will work closely with them to understand their real estate goals and objectives. We’ll next look at their existing portfolio of facilities across the country and will work to develop alternative strategies about where to locate.”
“Once we have all that information,” Dieter continues, “we then mobilize the strategies for them. If the customer requires a national search for a site, I can access market information from our field people throughout the United States, and provide our customers with detailed, market information on available facilities and/or land sites in a fast, efficient, and comprehensive way.”
NAI’s Leighton concurs with Dieter, and says that any good site search needs to start with acquiring detailed information from the client. “The client must have some initial thought processes. If they don’t, then we come in and ask a lot of questions,” he says. ” For example, in a previous position I had, I was responsible for the space planning activities for 2 million square feet on a corporate campus. Each corporate manager had a different idea on how to best utilize the space, but it was my job to get a consensus from all parties. There is a lot of dialogue that needs to take place to fully understand each client’s needs, wants, and strategies.”
Once the site selection process begins, NAI’s Leighton says he uses REAL Trac? Online, NAI’s proprietary system that allows the client team to access information in one place, capture all documents, set up meetings, and invite specific providers to collaborate on the process, then drop out when not needed. For players around the globe, the information is stored, retrievable, and accessible off the Internet. Leighton describes REAL Trac as a “great collaboration tool, and a great historical memorandum of what takes place at each step in the process.”
Another way to start the site selection process is to make one call and have Global Direct Investment Solutions, Inc. put you in touch with the right people. Global Direct Investment Solutions, Inc., based in Fox River Grove, Ill., provides free and independent support to executives who are facing strategic choices about where to do business and where to plan capital investment projects as they establish, acquire, expand, move, or restructure operations.
“We do the independent marketing work to find and introduce executives to the people who can help them develop their investment projects anywhere in the world – whether professional service providers or economic development people,” says Bruce Donnelly of GDI Solutions, Inc. “We have an established network of contacts which can help clients develop their relocation plans faster and better. We also maintain timely area profiles through ongoing working relationships with participating areas to share local knowledge and contacts in a globally consistent way.”
GDI Solutions, Inc. helps clients with business location decisions and other investment planning issues, including labor market analysis, cost comparisons, logistics, taxes, investment incentives, and various services related to pre-merger planning or post-merger integration of company operations. Donnelly introduces clients to location consultants, economic development firms, corporate real estate companies, design and construction firms, and project management experts, to name a few.
“Through our extensive list of contacts, we guide our clients to what is a good fit for what they need,” he says.
Hoge of Signature Associates remarks that the biggest relocation considerations are labor costs, functionality of the building or the land, and the client’s corporate identity. “However, to most, it’s a dollars and cents issue,” he affirms.
The experts agree that cost is the predominant driver in any relocation or expansion decisions.
“Everyone within a corporate environment – from production to advertising to human resources to security – is under pressure to keep costs down because of the Wall Street pressure to make money,” explains NAI’s Leighton. “Once a client is comfortable with the costs, that’s where all the subtleties come in – what the campus will look like, what kind of furniture, wireless network vs. everyone being hardwired, and so on.”
Bob Chapman, senior executive vice president, real estate operations for Duke Realty Corp. in Atlanta, agrees that the site selection process is very much cost driven.
“Distribution clients are trying to get the right clear heights, for example, to be able to use every available cubic foot of space, so the ceilings are going up and up,” he says. “The offset, however, is how to get the items stored in such high places. That’s where technology comes into play.”
Dieter from CB Richard Ellis says smaller buildings in higher cost areas are usually indicative of a client who wants to deliver product to market faster, generally within a 24-hour period. Conversely, buildings that are further away from the main stream are located there for pricing efficiencies.
Duke Realty’s Chapman agrees with Dieter’s observation. “We work with Ford and Lowe’s. Ford has transitioned from bigger to faster distribution, while Lowe’s has changed to be more cost-effective.”
Dieter also notes that much of the distribution space being absorbed today is not from expansion or the need for additional space due to growth, but because of consolidation.
According to CB Richard Ellis’ Dieter, the top six industrial markets in North America are the Los Angeles region, Chicago, central and northern New Jersey, Toronto, Atlanta, and Dallas. Another trend Dieter has observed first-hand is the growing popularity of port city areas, such as northeastern New Jersey, Miami, Seattle, Houston, Los Angeles, and Long Beach. “We believe that globalization is here forever and that these port cities will play critical roles in the world of industry,” he says. “So you will see more and more companies targeting these port cities for their investments, acquisitions, and development plans.”
Signature Associates’ Hoge agrees with Dieter’s take on the top markets, saying, “Anyone who considers themselves to be a national or international player is likely to want to have a presence in those cities. However, certain industries, such as automotive, do end up in areas like Detroit because if they are not, they can be outside the loop.”
Hoge also says that in his markets around Michigan, the build-to-suit and construction deals that have transpired have disproportionately gone to brownfield and renaissance zones due to the incentives, which change the economics on deals considerably, and work to the client’s financial advantage. In-fill sites are becoming more and more popular with industrial clients.
“We are seeing more relocations to in-fill sites – vacant lots that are available within a mature suburb, Hoge says. “Often, a retailer may have a vacant lot near their store location that they decide to sell. In today’s market, these large lots go very quickly and command much attention.”