Many corporate real estate optimization strategies focus on the property. If you can find a space that does more with fewer square feet, low rent and low operating expenses, you'll come out ahead. There's a lot of truth to this strategy. However, it isn't the only part of corporate real estate optimization. Frequently, the key to optimizing a corporate relocation has nothing to do with real estate metrics. Sometimes, the incentives that you can get from a community provides the best deal.
The Basics of Incentives
Incentives come in two broad forms. Some are automatic incentives that are on a given area's lawbooks. For instance, South Carolina allows counties to abate property taxes for five years to new facilities costing $50,000 or more. Others are negotiated. When a community really wants to attract (or retain) a company, it can take executive action or, pass a law to allow it to grant a special incentive package. Since getting a company to move into a given community can result in new jobs and tax revenues from employees, shoppers and vendors, governments can be very aggressive in recruiting new businesses.
Typical Incentives
Incentives come in all shapes and sizes. Some of the incentives that a state, county, city or region may offer to help you with corporate real estate optimization include:
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Property Tax Abatements: A business either pays reduced or no property taxes for a period of time, lowering its operating expenses.
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Income Tax Credits: Income tax credits reduce the amount of state tax that a company pays on local profits.
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Withholding Credits: Some states allow companies to keep a portion of the tax that they withhold from their employees as a way of compensating the company for employing people there.
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Sales Tax Exemptions: Companies can be exempt from having to pay sales taxes on corporate purchases or receive a portion of the sales tax they generate on their sales rebated to them.
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Tax Increment Financing: Some communities can issue bonds from future property taxes to provide immediate low-rate financing for new developments.
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Distressed Property Financing and Grants: Money is also available to incentivize companies to develop in areas that need environmental remediation or areas that are blighted or in need of new jobs, both in the form of loans and grants.
Achieving Relocation Benefits
Getting relocation benefits can be a very complicated process. Here are some ways to simplify it:
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Get a national coordinator that will look at multiple locations to see which offer the best incentives. Being limited to only one location in the beginning of your process will limit you.
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Keep an open mind. The best locations might have high rents or higher construction costs, but your bottom line cost is the most important factor.
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Go to state economic development or business development offices. While the names vary, every state has an office that can help you cut through red tape and identify both state and local programs to help lower the cost of your relocation.
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Hire boots on the ground. Once you've chosen a location or two, find a local representative (or have your national coordinator find someone) that can help you deal with community requirements.
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Don't forget about home. Unless you're relocating for corporate real estate optimization purposes that go beyond simple cost, you might be pleasantly surprised by what your current community will do to keep you.
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