Time to move your business

Sylvia Porter

June 04, 1991|By Sylvia Porter | Sylvia Porter,1991 Los Angeles Times Syndicate

Now is a good time to think about relocating your business.

Commercial real estate vacancy rates are unusually high -- averaging about 20 percent -- in the nation's major cities. Suburban locations are especially hard hit. Making matters worse, large corporations are saddled with a glut of unwanted long-term leased space.

"Whether it's a move down the street or to a more advantageous geographic location, this is the time to make a deal with long-term benefits," says A.J. Christopher Wood, executive director of the Metropolitan Economic Development Council of Richmond, Va.

While the bargains will not last forever, they may be even better this year than last. Wood points to a recent survey by the Society Industrial and Office Realtors. For warehouse and distribution, manufacturing, advanced-technology research and development properties, it indicates sales prices in the Richmond area should decline another 10 percent in 1991.

Respondents to the survey said they expect sales prices for top-of-the-line and second-tier suburban office space to be down an additional 10 to 20 percent.

The Richmond real estate market is typical of the situation throughout the country. As landlords across the nation deal with the biggest glut of vacant commercial real estate in U.S. history, they are anxious to cut deals on square-foot costs and to boost allowances for interior design and build-outs.

"Today's buyer's market not only offers a way to realize immediate reductions in fixed overhead costs, but to upgrade facilities or to establish branch locations at bargain-basement prices," says Wood.

Other recession bargains available now include capital equipment, frequently available today at less than 50 cents on the dollars as companies downsize or liquidate entire operations. Suppliers are more aggressive in their pricing policies. Among the unemployed are talented workers, many with long service to former employers. They are apt to carry this loyalty, on a long-term basis, to a new employer who provided a good job now.

Other considerations:

* Cost and availability of labor. While the recession and related layoffs may provide a plentiful labor pool at present, is the labor pool at the new location large enough? Is it growing at a rate that will take care of future needs?

* Working environment. Will a new facility at a better location enhance employee moral and productivity? Will the new location's amenities -- those of the new facility as well as the community -- make it easier for you to retain the kind of employees you need, now or in the future?

* Costs of transportation. If it is a manufacturing or distributions facility, is it strategically located nearby interstate and rail to major markets and sources of components and raw materials?

* Local government. Is the local government well managed and is there a commitment to stabilize tax rates?

* Utilities. Do local utilities have a reputation for planning ahead for demand, or do customers face the risk of getting hit with bigger bills for catch-up costs?

* Cost of training. What opportunities are there for vocational, industrial training, higher education and continuing education in the community? Who pays for industrial training, you or the city?

* Cultural and recreational opportunities. Does the new location have ready access to cultural, outdoor, sports and special events activities? Is it an attractive mix for employees with families as well as singles?

* Quality public education. This is important not only immediately for children of your employees, but as an indicator of the potential employability of public-school graduates in years ahead.

It is smart business to analyze the options presented by the recession today. These options will be gone tomorrow.

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