When companies choose their headquarters, the process often boils down to client access, the local labor pool, and access to suppliers. As an article from the Wharton School notes, location is more often not driven by labor. Some companies need to attract white-collar skills, while semi-skilled or even unskilled workers are most desirable for other businesses.
In this article, we’ll look at how companies choose their corporate headquarters, taking a look at the site selection process that Apple and Amazon use.
Important Questions to Ask Before Choosing a Headquarters Location
The choice of a headquarters location is one of the most critical decisions a company will make. The growth of e-commerce and working from home minimizes the importance of being located in an urban area.
While having office space in the business district of New York, Los Angeles, or Chicago is important for some businesses, big cities aren’t always the best location for a corporate headquarters. In places such as Kansas City, Dayton, and Louisville, the quality of life is high, and the cost of leasing a commercial office is low.
Here are some of the most important questions to ask when choosing a location for your headquarters:
1. Is the city an affordable place to do business? The cost of office space or a commercial office for sale, residential housing, and payroll are three key factors that impact city affordability.
2. Do you need a physical presence? If you’re in the banking or fashion industries, arguably New York or Miami are the places to be. Even if you can’t afford to rent office space in the Financial District or the Brickell Waterfront, you’ll still need to be close to the action.
3. Can you attract top talent? Pre-pandemic, employees were willing to tolerate long commutes and hour-long traffic delays to work for the right company. Now the tables have turned, and companies are migrating to find top talent. According to WalletHub, small cities such as Fort Myers, Bend, Oregon, and Meridian, Idaho are among the fastest-growing cities in the US.
While it can be tempting to choose a headquarters location because everyone else is there, some big-name companies such as ADP, IBM, and PepsiCo are located in cities with less than 10,000 residents.
Key Factors to Consider in Choosing Your Headquarters
If you work in the high-tech industry, it’s easy to think you need to be as close as possible to the Google headquarters in Mountain View or Amazon headquarters in Seattle. While there are some benefits to being in the San Francisco Bay Area, a growing number of companies are opting for Silicon Valley alternatives such as Austin, Miami, Las Vegas, Houston, and Denver.
As you think through your site selection criteria for a corporate headquarters, be sure to keep these key factors in mind:
How often do you meet clients face-to-face?
If meeting prospective customers in person drives your company revenue, it makes sense to locate where your current and prospective clients are. On the other hand, if your company operates online, you’ve got many more options for choosing corporate headquarters.
Where is your prospective talent?
If employees work from home at least part of the time, locating your headquarters in a suburban office park or secondary city might be a good choice. Your industry and compensation levels also affect where your corporate offices go. For example, you’ll find plenty of prospective talent in Boston, Seattle, and Atlanta if you employ STEM professionals.
Is the location suitable for the company and its employees?
The city you select for your corporate headquarters should be cost-effective for your business and offer an attractive lifestyle for your employees. As Harvard Business Review recently noted, many workers with families have pulled out of larger cities, putting a premium on home office space and working online. Younger workers in the early stages of their careers will continue to be drawn to urban areas and view corporate office space as a key amenity.
Does the city match your corporate culture?
Culture is what makes a corporation unique. Things like ethics, values, vision, work environment, and behaviors significantly impact a company’s public image and ability to attract top talent.
Cities have their own cultures, encouraging new businesses or clean energy jobs. Smaller metros such as Laredo, Durham, and Lubbock rank among the best places to start a business. Alternatively, Phoenix, Philadelphia, and San Diego are among the top 15 cities where clean energy jobs are booming.
How Apple and Amazon Choose Their City Headquarters
A recent article from Bloomberg lists tax incentives, an educated workforce, and accessible transportation as three of the top incentives Apple and Amazon look for in a city.
Many major companies looking for a place to call home ask for incentives from the local government in exchange for investment. Businesses can have a significant impact on the housing market, retail and restaurants, schools, and the local economy.
Workforce education and human capital makes some cities a better match for Apple and Amazon than others. For example, universities emphasizing bachelor’s degrees over advanced engineering degrees may be a better fit, depending on a company’s overall needs and business goals.
As the pandemic continues to run its course and more people become vaccinated, commuting options for employees will continue to be an important site selection criteria when choosing a company headquarters. For example, Apple needs a major airport nearby to serve employees flying to and from client locations nationally and internationally.
When companies choose their headquarters, one of the most important questions to ask is why. As more companies offer working from home as a permanent employment perk, cities with lower office rents and an affordable cost of living will continue to attract new residents and business expansion.