EDITOR’S NOTE: When Tesla and SpaceX founder Elon Musk bought Twitter last week for $44 billion, observers wondered how long it would be before the billionaire entrepreneur uproots the social media behemoth from its Northern California birthplace. To gain insight into what such a site search might look like, we turned to the experts: The Boyd Company Inc., run by John H. Boyd Sr. and his son John H. Boyd Jr. They have a history of leading high-profile headquarters relocations and handicapping them. What follows is their analysis. — Ron Starner, Executive Vice President, Site Selection and Conway Data Inc.
As soon as the pending Elon Musk acquisition of Twitter was announced, we tweeted that there is “no way the Twitter HQ remains in San Francisco.” It will be a different kind of headquarters search, though, and landing spots won’t be the usual downtown urban centers. The search will be the first high-profile, trophy head-office relocation in the quickly emerging “new normal” corporate office world of the post-pandemic era.
Twitter is not a client, but we have new research that should be useful to this conversation. In our report, “2022 Comparative Corporate Headquarters Operating Costs,” there are sections that stand out and relate to how we see the inevitable Twitter move out of San Francisco playing out. Long story short, we see small market locations in states with superior tax climates (Florida, Nevada, Texas and Ohio) being squarely in the mix.
Trends and Comparative HQ Locations
Disappearing are the days of one large, downtown corporate headquarters office. Today, many companies are moving toward a hub-and-spoke model with one central head office hub and additional smaller spokes — or satellite offices for administrative support. Millions of office employees are still working from home because of the pandemic. They will continue to do so long into the future due to remote work’s popularity among workers and the fact that, for most companies, productivity is maintained and savings in real estate costs can be significant. The option to work remotely is also being used as a compelling HR recruiting tool in this era of severe worker shortages and the impact of the so-called “great resignation.”
We see opportunities for corporations to build on these new real estate and work-life dynamics and gain other economic advantages by including a corporate headquarters realignment as part of their post-pandemic real estate restructuring. Historically off the table in most corporate restructuring programs, the headquarters office is in play like never before.
Included in this new, post-pandemic realignment will be designating one of the new “satellite” offices as the company’s formal corporate headquarters. Such a move will enable the company to take advantage of superior business and tax climates and lifestyle amenities for the company, its C-suite executives and downsized support staff.
Moreover, with a reduced head office staff and with other satellite offices performing many of the administrative functions historically carried out at the headquarters site, companies will be increasingly relocating to attractive, smaller market suburbs offering lower operating costs and superior state business climates to house their new downsized corporate headquarters, saving millions in annual operating costs and taxes.
The question then becomes: Where should these new, downsized corporate headquarters be located? Major drivers behind the selection of these new headquarters locations will include:
(1) States with superior corporate income tax climates for companies;
(2) States with superior personal income tax climates for C-suite executives and staffs;
(3) Locations with attractive lifestyle amenities;
(4) Locations with favorable operating cost structures;
(5) Locations with excellent travel and hospitality support services for periodic staff meetings, employee training and enrichment sessions, and client-servicing functions;
(6) Locations showing positive demographic and business attraction trends; and
(7) Locations with attractive housing markets for C-suite executives.
We identified 15 top U.S. locations meeting these new headquarters relocation drivers. They are listed below alphabetically by state:
- Lake Nona, Florida (Orlando metro)
- Punta Gorda, Florida
- St. Petersburg, Florida (Tampa metro)
- Westlake, Florida (West Palm Beach metro)
- Minden, Nevada
- Cary, North Carolina (Raleigh metro)
- Kannapolis, North Carolina (Charlotte metro)
- Blue Ash, Ohio (Cincinnati metro)
- Dublin, Ohio (Columbus metro)
- Mount Juliet, Tennessee (Nashville metro)
- Leander, Texas (Austin metro)
- Plano, Texas (DFW metro)
- Round Rock, Texas (Austin metro)
- The Woodlands, Texas (Houston metro)
- Bellevue, Washington (Seattle metro)
We periodically chart costs in high-growth relocation sectors like head offices. Our new report is a 2022 analysis that is scaled to a “new normal” — a downsized corporate headquarters of 75,000 sq. ft. and 200 administrative support workers.
In the West, the northern Nevada city of Minden shows especially well. Nevada has neither a personal nor a corporate income tax. Moreover, it is not far from Tesla’s gigafactory and the amenities associated with Lake Tahoe. It is the second-lowest-cost location in the analysis and is also drivable from the Bay Area. The lowest cost location of the 15 cities surveyed is Punta Gorda in the booming Southwest Florida market, where Allegiant Airlines is building its expansive new Sunseeker Resort complex.
For a complete copy of the Boyd HQ competitive costs comparison report, click here: 2022 Corporate Headquarters Operating Costs.pdf The Boyd Company Inc. has offices in Princeton, New Jersey, and Boca Raton, Florida. For more information, email Boyd directly at: sites@theboydcompany.com.
Return to Office? Here are the Factors Driving It
By RON STARNER
Ever wonder what’s driving the decision-making process of other companies when it comes to determining who should return to the office and when?
The folks at CBRE did, and they set out to find the answers. In a new and groundbreaking report titled the “Spring 2022 Office Occupier Sentiment Survey,” the global commercial real estate giant lays out what it calls the top 10 office trends taking shape this year. You can read the entire report at the link above. But we’ll save you the trouble of digesting the whole thing by revealing the bottom line: A return to the office is taking hold, but it is happening at a painfully slow pace.
Coming out of a pandemic that prompted many large tech firms to adopt a permanent work-from-anywhere policy (see Twitter and Facebook/Meta, among others), researchers at CBRE wanted to find out how widespread the sentiment was against a return to office.
CBRE surveyed 185 corporate real estate executives around the country and found that a return to office “is happening at a glacial pace,” says Julie Whelan, global head of occupier thought leadership at CBRE. Key findings include the following:
- 36% of respondents say their employees have already returned to office under a “new normal” scenario.
- Another 22% say that will happen by mid-2022.
- 31% are requiring a return to office.
- 73% expect a return to office under a new hybrid work policy.
- 85% of organizations want employees to be in the office at least half the time or more.
- Only 15% favor mostly remote work.
- 75% support a required frequency of office visits.
- 52% say that their office space portfolio will undergo contraction.
- 39% say that their office space portfolio will expand.
Georgia Collins, Executive Managing Director, Americas Consulting, CBRE
CBRE photos courtesy of CBRE
Georgia Collins, executive managing director, Americas Consulting, for CBRE says that “there is not a one-size-fits-all solution. If employees are to return to the office, they must place more value on being in the office than on working remotely. The question is, how can organizations make that happen?”
Researchers also found that “the greatest amenity in the office right now is other people,” says Collins. “How people are tackling that differs. How can you create the fear of missing out? Companies are trying to create a voluntary return to office. Some of this may require employees to recalibrate their work routines.”
Stefan Weiss, Senior Economist, Econometric Advisors, CBRE
Stefan Weiss, senior economist for Econometric Advisors at CBRE, notes that “the average office worker will spend 24% less time in the office in the new normal; and the new normal will result in net reduction of office space of 9% per employee.”
Even as largely empty office buildings continue to dominate many CBDs around the country, Austin, Raleigh and San Antonio are the top three performers in the top 20 office markets for office-using job growth forecast from 2019 to 2024, says Weiss. “We expect a return to pre-COVID rent levels by 3Q of 2024,” he adds.
How can you motivate employees to return to office?
Collins notes that food and beverage have always been a draw to return to office. “People may schedule meetings that are in-person only,” she says. “But then, what are the right meetings to have in person, and what are the right meetings to have virtually?”
Whelan says there is another trend driving some folks back to the office. “Zoom fatigue is real,” she says. “People have a desire to see other people in an energetic work environment. Really nailing the ‘why’ is important. Events and activities drive people back to the office. Team meetings each week at the same time allow you to structure your day around that.”
“Zoom fatigue is real. People have a desire to see other people in an energetic work environment.”
– Julie Whelan, Global Head of Occupier Thought Leadership, CBRE
She adds that overall, “we have seen a faster return to office in less dense markets. Less dense markets have seen population migration and better weather. Places that offer shorter commute times and are less dependent on mass transit have been ahead of the curve. Suburban markets have held up better than urban markets.”
Some property types are faring better than others too, she notes. “The lower end of the market is just unmarketable now,” says Whelan. “There are also sustainability challenges. A lot of the office market will have to be repurposed. Live-work-play is popular now.”
Flight to quality is another driver, adds Weiss. “The top end of the office market is recovering at the fastest rate, in both occupancy and rent,” he says.
Along with Raleigh, North Carolina, and its fellow Texas metro of Austin, San Antonio is forecast to be among the top three performers in the top 20 office markets for office-using job growth between 2019 and 2024.
Photo by Shay La’Vee