Wednesday, November 08, 2006

Rumor: Only a rumor

Market conditions are creating interesting rumors at work


A rumor is going around work that should have been expected. Its a rumor in two parts. The first part is pretty factual. For our site, in the south bay area of LA, we need to double salaries within 5 years to keep attracting talent (not likely...) due to the unaffordability of housing.

The second part of the rumor raised the hairs on my neck. It is how my company plans to see off our main campus and relocate out of California. Unfortunately, this makes sense. Why?
1. The company is selling off buildings not attached to our main campuses.
2. The company is having trouble recruiting into LA; home prices are at fault.
3. The business case to expand in LA... isn't there. We're expanding pretty much every where else and contracting around greater LA.
4 . The company has sold warehouses.
5. One state in particular, Arkansas, has been trying really hard to recruit our company.
6. In southern California, we're spread out to about a half dozen major campuses. For over a decade they have wanted to consolodate but haven't been able to.

Could housing prices actually make it happen?
A coworker and I identified a dozen locations where the business case to relocate would make it happen.

What the company needs:
1. Land. Lots of it. We cannot expand in LA, need to expand, yet we're selling building. That says the ROI case doesn't justify expanding... in LA.
2. Consolodation. Two of the campuses constantly have traffic back and forth... its costing too much having them seperated. We might as well merge a few more together.
3. Lower housing costs for employees. Not a little. Nothing less than a 50% drop justifies the move. It probably needs to be more to "excite" the current work force to cash out and move. The 50% drop is required to attract new hires.
4. Reduced comute times for employees. Comute times are discouraging employees as much as home costs.
5. Airport access. There are different thoughts. We're talking about moving enough people that the company could justify buying a small business jet fleet to ferry people, but they wouldn't want to. We do international business, so we need to be at most one hop from a variety of hubs.
6. Industrial and office supplies. We actually make stuff, so we need a pre-estabilished vendor for tooling and all the normal stuff.
7. Pre-estabilished community services that could grow to meet the influx. In other words, an existing city that's big enough to handle the influx easy and has schools, police, fire, hospitals, and other community services. Not to mention hotels and workers to build the new campus, housing, etc.
8. No extended freezes. We have equipment we leave outside that if it truly freezes... its toast. It can take frost, just not well below freezing.
9. Dryness. Or more precisely, it cannot be too excessively humid. I'm talking no swamps; parts of Florida could work, but not right off the Mississippi, and ignore any area with more than morning fog. I'm not going to say why, except that it effects our product.
10. Road and rail access. But that's a given (along with water and electricity and other stuff I've forgotten about).
11. Something attractive about the area that would draw equity rich Californians there. Nearby skiing? Water sports? Something!


Anyway, this rumor is a little buzz around work. Does it mean anything? I don't know. The last time such a rumor went around work (at a different company) we moved 1,000 miles. But we were the satalite campus relocated back to the main campus. My father was threatened with a move to New Mexico, but the company couldn't sell the property in 1994... Will the decision be made too late?

Neil

4 comments:

pismobear said...

A good spot to relocate would be Oklahoma City area. Cheap land, cheap labor.Foxworthy land.

Rob Dawg said...

If you actually make something the only thing in SoCal to do is leave.

Remember a few things about corporate relocations. The top three reasons for the final choice are in order; where the CEO wants to live, where the CEO wants to live and where the CEO wants to live. There are no other reasons, ever. Study after study shows this. Now usually this also comes with tertiary business type reasons by accident so it isn't like it is a bad business move. So, you make stuff that sits outside but can be affected by environment.

Albuquerque or Wichita. Kingman? SLC too cold?

Anonymous said...

I live in the South Bay, but I work in Pasadena. We are renting even though our combined salaries are well over $200K. We sold our home in the IE in Oct. 2005. It's pretty sad making this much money and not being able to afford a home (that we want) in the South Bay.

Looks like if you company relocates, a lot of home will hit the market. Just curious, how many people will be affected?

wannabuy said...

I'm amused by the suggestions.

Locations:
Albuquerque is high on the list
Austin Texas
Arkansas and Alabama
Missisippi (due to great relocation funding, but the humidity would be an issue).
Pheonix too.

Heat is ok, up to a point.

As to the CEO: Doesn't matter. HQ isn't moving. Maybe the CEO wants to hunt there or something though... The main issue is inability to hire people in at current market salaries. The salaries required to attract are too high... :(

The number of people? A lot. If I told you, you would be able to guess the company and that I'm not allowed to do. :(

Its in the thousands. We aren't the largest employer in LA, but we're in the top 10. One of our competitors has already commited to moving a partial division out of state (IIRC 2,000).

If we move, it will rock South bay home prices a la 1991-1995. Big if...

Neil