The economy has taken a toll on many companies across the country, and many businesses are responding by trying to trim costs in several areas. While most businesses start cutting operating budgets and scaling down marketing and advertising services first when faced with a cash crunch, others often relocate to a more affordable commercial facility to cut mortgage or rental costs. For companies that are relocating to cut costs or expand, finding facilities in the future may be a difficult feat, new data shows.

A new report issued by the National Association of Realtors shows that commercial real estate vacancies are starting to decline. In addition to fewer vacancies, rental rates are rising, making it more costly for companies to take on a facility relocation or group move.

Vacancy rates for the next four years are expected to decline 1 percentage point in the office market, 0.6 point in industrial and 0.2 point for retail markets. For the office sector specifically, vacancy rates are expected to drop from 16.7 percent to 15.7 percent in the fourth quarter of 2013, with commercial spaces shrinking primarily in Washington, D.C., New York City and New Orleans. Further rental rates are expected to increase 2 percent this year and 2.5 percent in 2013. These increases include leasing new spaces as well as existing office spaces.

“Job creation is the key to increasing demand in the commercial real estate sectors,” said Lawrence Yun, chief economist for NAR. “The economy is expected to grow 2.5 percent next year, and with modest job creation, assuming there is no fiscal cliff, the demand for commercial space will gradually rise. The greatest friction that remains is a tight credit environment, notably for smaller properties.”

Curbing the costs of an office relocation and employee group move

There are some actions businesses can take to eliminate costly issues and scale back overall costs when making a move, such as utilizing a the services of a relocation management company. Professionals will walk companies and their workers through every aspect of a group move, which can lead to more organization and assimilation, both of which reduce company costs. In addition, service providers may help companies curb overpaying for associated moving costs, all of which can total thousands of dollars for a large-sized company and their employees.

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Multinational companies sometimes face regulatory, tax and labor challenges in foreign countries when relocating employees or opening new facilities. These can often lead to complications that can be potentially costly or disrupt operations. A new study shows that many countries have tackled these issues, and continue to make strides in improving business regulations to attract more investments.

A new report, entitled “Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises,” issued by the World Bank and International Finance Corporation, demonstrates the various ways in which countries are adjusting their current laws and regulations. The analysis notes that over the past 10 years, 180 economies have implemented roughly 2,000 reforms, making the business environment more fluid and opening opportunities up businesses of all sizes, in all locations. The report outlined three ways in particular that recent reforms have led to a more simplified and efficient business environment:

• Since 2005, the average time to start business operations has fallen to 30 days from its previous average of 50 days.
• In the past eight years, the average time to transfer property holdings fell to 55 days compared to 90 days a decade earlier.
• During that same timeframe, more simplified tax codes regarding profit, labor and consumption taxes have reduced the average amount of time required to comply with tax mandates by 54 hours on an annual basis.

The report noted that in the past year alone, 108 economies have implemented 201 rules to simplify their rule and regulations, and make compliance and business assimilation easier for companies and transferees.

“Over the years, governments have made important strides to improve their business regulatory environment and to narrow the gap with global best practices,” said Augusto Lopez-Claros, director of global indicators and analysis at the World Bank Group. “While the reforms we measure provide only a partial picture of an economy’s business climate, they are crucial for key economic outcomes such as faster job growth and new business creation.”

Understanding foreign countries’ business regulations

Several studies have pointed to tax compliance and business regulations as key challenges companies face when opening a new office in a foreign location or sending out transferees for assignments. Incorporating these subject areas as part of a comprehensive relocation management strategy can make transitions into new markets simpler and more effective. In addition, paying close attention to changes in the market, laws and regulations enables companies to plan ahead during all phases of business operations to protect their bottom lines.

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A group move can be a complex and costly endeavor for corporations, and there are a myriad of factors to take into consideration when relocating an entire office.

When companies develop their relocation management plan, the specifics typically revolve around financial and logistical factors, ranging from purchasing or leasing a new office building to informing employees about housing options. As a result of these complexities, many companies often overlook the need to safeguard their networks from potential hackers and data leaks, according to industry resource Re:locate. These oversights can be particularly damaging to companies and their clients, making it crucial pay closer attention to accounts and technologies that carry sensitive information.

The involves consulting with IT services to ensure that all anti-virus programs and firewalls are up-to-date, and encrypting all data prior to shipment. These simple steps can patch security vulnerabilities that may exist while companies are transitioning to a new location or operating system.

Potential for smartphone hacking increases

While many companies that hold sensitive data have full IT departments to manage computer threats, the growing use of smartphones for business purposes is another form of technology that can pose dangers to companies, the source noted. Currently, only 13,000 potential malware threats have been identified that could threaten smartphone security, as opposed to the 90 million security issues that may impact a PC, the magazine reports. However, experts argue that hackers may soon focus more attention on these portals, especially as employees utilize them for work purposes.

For instance, smartphone GPS features that allow users to power mobile applications may use unprotected wi-fi, a vulnerability that may allow hackers to access information, the magazine reports. In addition, a recent BBC report noted that many hackers also have access to tools that can reroute near-field communications users to harmful websites that download viruses.

A recent CNN report noted that four in 10 mobile users will click on an unsafe link in 2012, and cyberattacks on mobile devices increased by a factor of six this year.

"Malware on mobile phones is going to be as prevalent as on the PC," Stu Sjouwerman, CEO of security training company KnowBe4, told CNN Money. "It's inevitable, unfortunately."

The current threat to smartphones still pales in comparison to that of PCs, but as hackers become more sophisticated, companies should make every effort to protect smartphone data during a group move or even an individual relocation. 

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The commercial real estate market has historically presented challenges to companies relocating or opening new facilities. During a period in which the government and lenders are waiting for a real estate market boost, companies seeking new office and commercial spaces may have more affordable options.

A recent article in the San Francisco Business Times highlighted the deeper implications that Visa's most recent relocation announcement has for multinational companies. The company has found a more cost-effective location – Foster City – for its company headquarters. The move is an example that more corporations are heavily weighing the growing availability of office spaces in several diverse areas throughout the country into their relocation management strategies.

As more institutions seek to unload empty properties from their portfolios, corporations with strong business profiles may be in a position to expand their operations into new markets without being heavily impacted by cost.

The analysis cited a separate report issued by Colliers International, which reveals that in San Francisco, new available sublease office space increased 35 percent in August alone and is expected to continue climbing as more companies transition to new markets. Companies that are considering a move should be mindful of the real estate opportunities that exist in metropolitan areas that are struggling to overcome the down economy. 

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Taking advantage of market opportunities may involve relocating corporate offices to more competitive and favorable geographic areas. Although the move may present more opportunities for a company, there are several challenges that must be taken into consideration and properly addressed when discussing relocation options. While an office relocation may carry its own set of risks and rewards, companies that fully evaluate the most pressing concerns of the business, and develop a plan centered around those concerns, may mitigate the most common obstacles associated with large-scale changes.

Dana Olson, president and CEO of economic development consulting firm Ecodev, described the obstacles companies typically face when moving a company, whether it involves domestic or global relocation, for an issue of Area Development magazine. For example, the financial implications of a relocation as well as how employees will react to the move are common factors in companies' decisions. Olson also listed primary areas of concern among executives and employees, the first of which is family.

Relocating an entire office will involve transferring employees and their families. Few individuals want to uproot their families, making it crucial that corporations provide information and services that will ease the transition and make the move worthwhile. This includes putting transferees in touch with the relocation management company that is handling the move so they can provide details about the new area, such as school districts, community amenities and housing prices.

In addition, providing incentivized pay or other forms of monetary compensation may be a feasible strategy, especially considering that some transferees' spouses may be required to seek out a new job. Further, providing quality of life incentives in the new location, ranging from telecommuting policies and subsidized gym memberships to day care services and stronger healthcare programs, may ease the transition. While these strategies may result in some additional costs, they may be instrumental in retaining top talent.

Secondary issues

Second to concerns over relocating employees and their families, companies must also weigh the high costs and potential production disruptions that a move may result in. Corporations should also conduct a cost analysis to determine whether the expenses incurred during the moving process, as well as the amount of time it may take to recoup these losses, warrant a relocation. Prior to making a final determination, corporations can estimate and potentially lower their moving costs by seeking out grants and other sources of financial assistance specifically devoted to cutting move costs.

In addition to the costs associated with the physical relocation itself, the threat of losing clients as a result of the move, coupled with potential disruptions to business operations, pose additional challenges to companies. Running simultaneous production schedules in both the previous location and the new location until the transfer is complete can help mitigate production and inventory issues. Further, corporations that develop detailed communication plans to keep clients fully notified of any changes may improve their retention figures.

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A large portion of workers may work online to interact with co-workers, but many are not properly trained for it, according to a report from RW3 CultureWizard.

Nearly nine in 10 companies use the internet to interact with one another and conduct business. However, fewer than one-fifth of workers have undergone some sort of training to deal with issues that can arise online, the report explained.

More than 40 percent of those polled noted they have never met their fellow employees face-to-face. Many respondents cited issues with virtual work such as a lack of participation, slow decision-making and a lack of time to build relationships.

"It is clear that the survey struck a nerve," said Charlene Solomon, president of RW3. "In fact, the huge response itself is one of the key findings. There is a pent-up demand for expressing the difficulty of working virtually across time zones, languages and cultures."

Due to the many hurdles attached to having workers living in remote areas, it may benefit companies to look into global relocation as an alternative, as this could cut down on the many issues tied to working virtually.

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