PRINCETON, NJ-A study of major cities in the 50 states done by the Boyd Co. Inc. finds that New York City is the most expensive place in which to locate a corporate headquarters office. Cities in California and Northern New Jersey also ranked high on the list.
According to the study, the annual cost to operate a corporate headquarters in New York City was $30.7 million. Second place was taken by San Francisco at $29.3 million. Rounding out the top five were: Stamford--$29 million; San Jose, CA--$28.6 million; and Newark--$27.9 million. The cheapest place to house a corporate HQ was Sioux Falls, SD at $21.1 million.
John Boyd Jr., vice president at Boyd, a corporate site selection specialist based here, tells GlobeSt.com that the firm surveyed all states that are home to a Fortune 1000 company, and then took an in-depth look at the largest city in that state. "Essentially, we wanted to appeal to a broader white-collar office audience," Boyd explains. "We didn't want to limit it to just a Fortune 500 study. These are all cities, even the small markets, capable of accommodating such a project."
Labor costs were the dominate factor in assessing the expense of a running corporate headquarters. Utility, real estate and construction costs as well as taxes and corporate travel were also taken into account. "We look at all costs critical to the site-selection process," Boyd says.
What this means for high-cost states like New York, New Jersey and California is increased competition from smaller markets in the Midwest, which are more business friendly and have lower tax structures. "The corporate headquarters arena is the next frontier of corporate cost cutting," Boyd says. "Companies have already re-engineered their warehouses, back offices and customer support centers out of New Jersey, New York and Massachusetts. The aim now is to restructure the headquarters office. It's because of all these new enormous cost pressures" on corporations.
In response, Boyd says states should lower taxes. "Governments and politicians must realize the catastrophic consequences of raising taxes," he explains.
In conjunction with the study, Boyd also polled CEOs, CFOs and COOs at Fortune 1000 companies. Excluding operating costs, they were asked what were the most important drivers in the corporate headquarters site-selection process. A business-friendly tort system came in first with 26% of the vote, followed by low or lack of corporate income tax--24%; low or lack of personal income tax--21%; business-friendly labor laws--11%; low property tax rates--10%; and availability of HQ-specific incentives--8%.
"Companies are afraid of being sued," Boyd says. "That is a big deal, especially in these high-cost markets like New Jersey, New York and Massachusetts that are very litigious."
States that have Right to Work laws, which permit employees to decide whether they want to join or financially support a union, are also viewed favorably by corporations. "The Midwest is attracting these projects because they are Right to Work states, they have more favorable tax structures and real estate is much cheaper," Boyd asserts.