The Leader - September 2007 - (Page 24) real e stat e maNaGemeNt Location Velocity: Good Today, But What About Tomorrow? by deNNIs J. doNovaN thIs artIcle examINes the dyNamIc referred to as “locatIoN velocIty.” sImply descrIbed, locatIoN velocIty embraces the coNcept that aN appareNtly excelleNt area for a NeW facIlIty could turN INto a markedly dIsadvaNtaGeous locatIoN due to a sIGNIfIcaNt INflux of comparable busINesses. thIs INflux could straIN aN area’s resources – especIally labor market aNd INfrastructure. the eNd result ofteN features overheated demaNd for requIsIte labor, dWINdlING supply of qualIfIed Workers, escalatIoN of WaGes/salarIes, rIsING turNover, traffIc coNGestIoN, loNGer commutes, INcreasING taxes, aNd hIGher real estate costs. N o location is immune from the ill effects of velocity. But through shrewd site selection, maximum protection from such an eventuality can be achieved. At the very least, a longer time span for favorable operating conditions can be attained. This requires careful attention to emerging labor market conditions and a judgment as to whether a potential location seems headed in the direction that could ultimately create operational difficulties for the subject business unit. Of course, some businesses prefer to locate in a hotbed of locational activity for their respective industries. Such business operations tend to have a greater appetite for paying a premium (mainly labor cost) to locate in an industry epicenter. Employee churn (i.e., turnover) is viewed as positive to regenerate the work force’s knowledge base. Examples of these velocity tolerant businesses include research and development centers, high-tech manufacturing and corporate headquarters. This helps to explain why certain areas continue to attract a spate of similar businesses (e.g., biotech in Boston, IT in Raleigh/Durham, and microelectronics in Austin). However, for the majority of business th e le ade r entities too much of a “good thing” is deleterious. Negative consequences (e.g., rapid cost increases and turnover) can lead companies to: (a) close and move; (b) downsize; (c) cap employment; or (d) establish a second operation to accommodate growth. Such actions can be both disruptive and costly. In the remainder of this article we address the steps that can be taken to choose locations wherein velocity is less likely to emerge as a threat to successful operation of a new facility. Proper steps need to be followed in both phases of a traditional site search. These phases are: (a) Location Screening to generate a shortlist 24 september / october 2007
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