Study examines trends in corporate relocation

Real Estate Weekly, August 12, 1998

These findings are from a report jointly released by Deloitte & Touche Fantus Consulting and Fortune magazine, in which CEO's of the Fortune 500 and Fortune Global 500 companies were surveyed on where companies are locating and how these decisions are being made. The CEOs were asked to personally complete the survey or distribute it to a colleague involved more directly with expansion and relocation decisions.

The goals of the report were threefold: to gauge the location activity of major corporations; to understand the motivations for expansion/relocation and the factors involved in site selection; and to develop a greater understanding of the corporate location decision process. The complete findings are detailed in the 1997 Business Location Study.

Among the major findings:

* The vast majority (83 percent) of companies surveyed planned new operations over the next three years, with over half of the companies expanding in the U.S. and two-thirds expecting to expand in other countries.

* Over 61 percent of U.S. companies are planning locations outside of the States today, compared to 48 percent in 1993.

* Outside of the U.S., the Asia/Pacific Rim region, followed by the Americas (excluding the U.S.) and Western Europe were the international regions most likely to be considered as new locations. Less developed countries, the majority in Asia, dominated the list of foreign destinations. Mexico ranked fourth.

* The South was cited as the most likely region within the U.S. for new operations being sited by U.S. companies. The Midwest and West followed closely, in a virtual tie as the next most popular region.

* Foreign-based firms indicated a preference for the West, with a tie between the South and the Northeast as the next most likely region for new operations.

* Access to markets/customers was cited as the most important factor taken into consideration in siting new operations. Labor and infrastructure issues followed.

* Likely reflecting the extremely tight labor markets they are facing, U.S. companies ranked labor issues, including availability, cost and skills, as more critical than their foreign counterparts.

* Foreign-based companies' focus was more on infrastructure, real estate and business climate issues. Foreign companies also rated stable political/social environment, access to suppliers/contractors and access to business as much more important than U.S. companies. U.S. companies, in turn, rated taxes, quality of life, and cost of living as more significant.

* Distribution and back-office (call centers, data centers and shared services centers) operations dominate U.S. companies' domestic expansion plans, with manufacturing a close third. For foreign-based companies, the focus is evenly split between distribution and manufacturing activities.

* Looking at international planning, manufacturing and distribution operations were far and away the greatest focus of location activity.

"Companies are on the move, using new operations as a means to enter new markets, reduce costs and improve productivity," said Mark Klender, a Deloitte & Touche Fantus partner and primary author of the study. "The process of site selection can be challenging for any company, especially when evaluating international options. This study, by providing insights into the corporate location decision process, including the timing of projects and the roles played by corporate and external participants in the site selection process, should assist even the most seasoned executive."

For copies of the report, call the Deloitte & Touche Publications Request Line at (404) 220-1745.