Relocation & HR Trends

Even though businesses have historically made their headquarters in major cities around the globe, there has been a current trend of relocating their headquarters to suburbs rather than big cities.

In fact, the larger the company, the more likely that they will move further from the city center.

Belowe we've listed out five key reasons behind big businesses moving to the suburbs!

1. Affordable Rent

Rent is a major factor for company owners to consider in that it is the primary operating expense of their business. By having a large facility in the big city, a company is investing a substantial amount of capital that could even pay for two or three different suburban facilities. This is precisely why many companies are terminating their leases in the big cities. 

2. More Space

Given that the rent is affordable, companies can truly get the office space that they need and even potentially buy the space to add to the company’s assets. By being in the position to buy a space that is larger, companies will be cutting a major liability and adding a substantial asset to their overall corporate assets.

3. Easier Commute for Employees

Many employees do live in the suburbs and companies are realizing this. By keeping their headquarters out of the major cities they are enabling these employees to get to work easier and, as a result, are having higher employee retention rates.

4. Traffic

Traffic is a major influence on both commuters and potential clients to a business. By keeping the office outside of the city center, it is far easier to get there for many people. Additionally, with the expansive commuter rail networks that are popping up all over the world, it makes it far easier for both employees and potential business partners to get to the suburbs with little effort, cost, and no need for a vehicle.

5. Connectivity of Technology

Previously, a lot more in-person meetings were required. However, these days, this is surely not the case. With the increased use of telecommunications through video chats, there is less of a need to be situated in the city center and close to major meetings. This is yet another contributing factor to why corporations are closing their city doors and deciding to head out to the suburbs going forward.

In Conclusion

The traditional location of companies in the city centers is coming to a close. There are a plethora of factors that contribute to this; however, the primary factor relates to the investment of property in the suburbs that is both larger and allows some companies to actually purchase their own office space.

Additional factors to the corporate migration to the suburbs also involve commute issues for employees and business partners along with the increased development of video conferencing in the corporate world. Thus, it will not be surprising to see many more companies closing up their headquarters in city centers with the objective of saving a great deal of capital by moving to the suburbs.

It will be likely to see an increased use of remote employees and office downsizing in the future due to the effective nature of video conferencing and the ability of managers to more effectively manage their employees that are working remotely. In the next ten to twenty years, there will be a remarkable shift in the corporate world that will veer away from the traditional desk job from nine to five given the plethora of alternative options that employers can consider to both cut costs and have higher employee retention rates.

Susanne Loxton is a business enthusiast who combines her interest in career and personal development with a passion for writing. On a daily basis, Susanne works for Aubiz, a compendium of knowledge about companies in her native Australia. Follow her on Twitter @LoxtonSusanne 

Buying a home can be daunting for young, new employees looking to relocate. Many Millennials have had to shell out a lot of their own money for education, bills, rent, and the idea of adding a down payment on top seems overwhelming.

However, as they begin to move forward in the workforce, working themselves out of debt and settling into their cities, we just might find them making the shift from renting to owning.  

According to Trulia Economists in their recent article, Should Millennials Rent or Buy, buying a home is actually 23 percent cheaper for younger households than renting nationwide. In fact, now is the best time to buy since 2012.

While Millennials who are early in their careers may believe owning a home is less economical than renting, it can pay off in the longrun. That being said, sometimes there are issues that are difficult to overcome. Some of the most common struggles when contemplating owning a home versus renting are as shown below:

As you can see, for many, the biggest holdup on making the switch is the down payment. Just behind that is a poor credit history, leading to issues qualifying for a mortgage, and heavy debt. These issues will work themselves through in the next few years though, and alongside of that we'll see Millennials gain more traction and momentum, finally gaining the resources to own a home. 

Trulia explains that:

"Among the 18-34 year olds who plan to buy a home, just over 13% say they plan to buy a home within the next 12 months, but that number jumps to over 35% if the timeframe is expanded to within the next two years. But what would make more millennials take the leap from renting to homeownership? More money. When asked what would encourage them to buy a home rather than continue to rent, 51% of millennial renters say that a new job, promotion or raise would, followed by having enough or a down payment (50%) and improved credit history (36%)"

One of the biggest issues with renting is that the vost can go up and down at the will of the landlord and the housing market. A mortgage rate, on the other hand, stays the same. While there is less risk with renting because you’re not committed for 30-plus years, if an employee plans to stay for at least a five-year period, buying is more affordable in 98 of the nation’s top 100 markets. You can see below that the housing market is certainly on the rise:

The high cost of homes in certain metropolitan areas contributes to that misconception, and it is true that home prices have outpaced rent growth since 2012. However, interest rates on mortgages are, on average, near historic lows of 3.72 percent nationwide.

Traditionally, a 30-year fixed rate mortgage with a 20 percent down payment is assumed for households moving every seven years. Based on September home prices, buying is 36 percent cheaper than renting given these parameters. Conversely, Millennials tend to move every five years, and typically can only afford a 10 percent down payment. With an assumed mortgage rate of 3.85 percent on a 30-year fixed-rate loan, buying is 23 percent cheaper than renting.

Even in two of the nation’s most expensive markets, San Francisco and Orange County, California, it is more cost-effective to buy. There are only two locations where it is cheaper to rent than buy: Hawaii and the Silicon Valley. However, those areas are more expensive by only by 2-5 percent of the renting cost. 

Taking these factors into account, young home buyers in the nation’s top 100 markets will find that buying a home ranges from 5 percent more expensive than renting in Honolulu to 46 percent less expensive than renting in Houston, Texas. If you are relocating employees to a more affordable area, such as Syracuse, NY and Fort Lauderdale, Florida, your employees will benefit from over 40 percent savings on their home purchase.

This information is not to say that we should disregard renters, as many Millennials are still in that stage of their life. However, it will be important in the near future to also pay attention to the shift we may be seeing towards homeownership. Where you may have offered many rental-heavy relocation policies, it might make sense to begin integrating homeownership factors into those policies as well—the tide may be turning soon! 

We're going to take a little trip down memory lane. 

Think back to your early 20s. What was the first thing you did when you got a paycheck?

Did you go out to dinner? Stock up on groceries? Plan an outing with friends? Go on a little shopping spree? (Or, if you're anything like me, pay off that shopping spree...) Regardless, you probably let out a little sigh of relief when that check got into your hands. You finally had some breathing room. At least for a few days. 

Okay, back to reality now. 

Do you know what kids in their 20s are spending their paychecks on now? (I'll give you a hint: It's probably not an extravagant meal at Anthony Bourdain's newest restaurant.)

The answer? Rent.

Rent, rent, and more rent. 

Newsweek explains that "By 2025, nearly 15 million U.S. households will devote more than half of their income to rent." 

As someone who is in the thick of their renting days, this is terrifying...to say the least.

Newsweek goes on to say that:

"From 2015 to 2025, the U.S. adult population will increase some 24.6 million—or 10 percent—to 272 million, the report, citing Census Bureau data, says. The number of renter households is expected to increase by between four and six million. This increase, combined with wan income growth and rising rents, creates the potential for a dramatic upswing in rent-burdened households."

Those dreams of fancy dinners and shopping sprees? Most renters can kiss those goodbye and welcome a new reality: Rent. Now, we're not saying that Baby-Boomers didn't give their fair share towards rent. They paid their dues just like the rest, but rent is rising at an astronomical rate, almost at a rate that's too hard to keep up with in some cities.

The question is, when did rent become so unaffordable? 

It started with the bigger cities. Eager new graduates and Millennials came flocking to popular cities, and there simply weren't enough units to support the demand. The solution? Raise rent. In fact, this is the exact moment when some of the big cities became unaffordable:

Try moving to Los Angeles on an entry-level salary. It probably won't be fun. However, this is the reality that many of our Millennials are currently dealing with. They want to live in these big, thriving cities that are exploding with opportunities for employment, but they can't quite survive on the salaries their qualifications grant them. 

Let's add some hefty student debt payments onto their high rent payments, and we can pretty much call it a day. Millennials have to be extremely responsible with their budgeting if they want to take a stab at living in one of these cities. The best thing you can do is to keep this in mind as you relocate talent.

So what exactly is "affordable rent?" 

Newsweek explains affordable rent as 30% or less of one’s income.

Those who are moderately rent-burdened spend between 30% and 50% of their income on rent.

And lastly, those who are severely-rent burdened spend more than 50% of their income on rent.

Unfortunately, many of us are creeping our way towards that third bucket. 

We aren't saying don't recruit and relocate Millennials—Millennials are excellent candidates for a relocation and typically are your group that wants to move. Just make sure they know what they're getting themselves into, and help them as they navigate their way to their new city. 

Do your research and make sure you are placing transferees in places where they can thrive on the salary you've provided. You have better insight into areas where rent might be a little cheaper, resources where transferees can find roommates, or just tips on how to save some money in your city. Try to get your hands on resources and data like the graph pictured (source: tech.co), as it can be helpful to use numbers as you guide transferees through their relocation (or, through the decision if this relocation is the right step for them). 

It's also important to understand not just where you stand nationally, but internationally as well. For example, Chicago was recently ranked the #7 most expensive city in the world. That's right, the world. It's cheaper to live in Tokyo than it is to live in Chicago.

Understanding where your city ranks on an international level is important as you relocate expatriates and begin to broaden your reach and expand globally. 

Renting is simply a truth that many of us have to come to terms with. Until Millennials are at a point where they can start making investments in homes and longer-term housing options, this is the reality. All we can do is stay up to date with where the current market is at and adjust accordingly as certain cities go through spikes and dips. 

Give all your renters a hug today, they need it.