Attention Vancouver: hungry American states want your Canadian company headquarters.
A sluggish economy that has reduced U.S. real estate prices has prompted several state governors to redouble efforts to lure Canadian companies south with promises of cheaper overhead for their corporate headquarters.
"Much of the cost of a headquarters move is in terms of human capital – management who leave because they do not want to make the move," warned New Jersey-based John Boyd, principal at the Boyd Co., which helps companies determine where to locate their corporate headquarters and how to execute that move.
"But because corporate headquarters are so coveted, there are states that have very generous incentives which write down the financial cost of moving."
Boyd pointed to Indiana, where government subsidies cover the "lion's share" of relocation costs, including moving employees and machinery and even paying off an existing lease.
He added that Florida governor Rick Scott has held trade missions to encourage international companies to locate in his state.
Boyd is in Vancouver this week to release a study that details why Vancouver is the second most expensive city in Canada to operate a large business with 500 employees and 100,000 square feet of real estate. Boyd's survey assumes companies buy rather than lease real estate.
One advantage for Canada is its public health-care system.
Boyd estimated that employee benefits would cost a 500-employee company $5,542,100 in Vancouver, or about 33% less than the $8,242,790 that company would pay in Indianapolis.
U.S. governors' drive to attract Vancouver companies south of the border has met with mixed success, and, in many cases, corporate moves have more to do with corporate logistics than simple operating-cost savings.
Vancouver's six-employee Kadem Pharmaceuticals moved its head office to Arizona earlier this year, and spokeswoman Kelly Black told Business in Vancouver that cheap Arizona real estate was a prime driver.
But she added that the company also wanted to move its marketing division in-house and all of those people lived near Phoenix.
Last September, Intrawest ULC moved its 25-employee head office to Denver from Vancouver. However, the Fortress Investment Group-owned company made the move because it had just spun off 75% of its 100% ownership in Whistler Blackcomb as part of an initial public offering. Its executives wanted to be near the company's two largest resorts, which are both in Colorado.
Vancouver's advantages as a head office location include:
- a well-educated workforce;
- being close to Asia;
- a world-class airport;
- access to quality universities; and
- general livability.
Those perks were all selling points when, in 2009, Christopher Krywulak sought a new head office for his fast-growing Regina-based software company. iQMetrix, which had sales representatives in Denver and staff in Charlotte, North Carolina, now has 230 staff, including 80 in Vancouver.
Immediately upon locating in Vancouver, Krywulak filled a CFO post that he had long been unable to fill in Regina.
"We considered locating in the U.S., but we're attuned to Canadian values, so we wanted to stay in Canada," Krywulak said.
"Our largest office is still in Saskatchewan, and the majority of our work is done there, but we conduct the strategic side of our business out of Vancouver."
