Suburbs vs. The City: Two Factors for Picking Office Locations
Choosing where to house a business can be extremely difficult – especially when deciding between the city or the suburbs. There are the obvious factors to take into account; financials, space, client locations, commute and employees. However, there are two lesser-known pulling factors that you need to take into account: Tax credits and split-office locations. These two aspects may not be as simple as you think.
Most people know that certain states are considered more business-friendly to major companies than others. South Carolina is now a well-known manufacturing hub with companies like Jacobs Engineering, Boeing and BMW all housing American operations in the Palmetto State. It should not come as a surprise that local economies do this as well. In fact, just last year Vernon Hills extended a tax incentivised deal to keep CDW in the Chicago suburb. Some may argue that it is ridiculous to offer a multi-billion dollar company tax breaks to stay. However, look at the flip side – by keeping their headquarters in Vernon Hills, thousands of residents continue to be employed by CDW, which stimulates the local economy.
This should not be confused as a suburb-only tax break. In fact, seeing as the Chicago mayoral runoff is coming up, Rahm Emanuel has been both criticized and praised for trying to bring major businesses back home. One of the major incentive programs is the Economic Development for a Growing Economy (EDGE), which lowers payroll taxes for newly relocated businesses. According to CNBC, Illinois is middle-of-the-road when it comes to business friendliness – ranking as the 27th most business friendly state. By offering tax incentives to move to the city, Chicago politicians are hoping to attract more long-term investments.
Split-office locations seem to be a growing trend for offices who want to have a presence in a downtown city, yet want to avoid paying the full costs for a large office. This can be incredibly beneficial – say you are an enormous manufacturing firm who has clients downtown or that visit Chicago often. By splitting your location, you can have your sales, account managers and C-suites downtown in an easily accessible location for meetings. You are also saving money by keeping the bulk of your company in the suburbs where space is far cheaper per square foot.
However, companies that choose to go this route need to be wary of potential resentment amongst employees over the location at which they will be working. This argument works in both directions. Many times, people located in the suburbs would far prefer to have a location near them, and commuting an hour into the city is far from ideal. The other primary concern with splitting your office is reducing contact between departments. If you look at many company surveys, inter-department communication always seems to be an aspect that employees complain about the most. If your company is already facing issues communicating between departments, then splitting the office locations between downtown and a suburb may serve to widen this gap.
Granted, the majority of your suburb versus city decision should probably be weighed on finances, clientele and employees. However, if those aspects do not solve your dilemma, then these secondary factors can end up playing a major role. Taxes or tax breaks can cost or save a company millions per year, and splitting office locations can be beneficial, as long as your business fits the right mold.