Atlanta Most ‘Cost-Friendly’ Business Location Among Large U.S. Cities; Cincinnati, Orlando, Charlotte, San Antonio, Tampa, Cleveland, Pittsburgh, St. Louis and Phoenix Also Highly Competitive
Bolstered by the lowest transportation costs, industrial lease rates and effective corporate tax rate of any major U.S. city, Atlanta was recognized as the least-costly location to do business among the 31 largest U.S. metro areas in a new biennial study by KPMG LLP.
The 2014 Competitive Alternatives study measured 26 business cost factors in each market, including office and industrial lease rates, taxes, labor, transportation and utilities costs, in seven business services operations and 12 manufacturing sector operations.
Colliers International co-sponsored the study along with MMK Consulting, which provided the facilities cost information used to analyze each market.
Atlanta narrowly edged out last year's top market, Cincinnati.
"Cincinnati continues to have the lowest overall facility costs among the 31 large cities and boasts the lowest property tax costs," said Matt Davis, interim executive director of REDI Cincinnati, the regional economic development initiative directed by the Cincinnati USA Regional Chamber.
The study provides a benchmark for cities and provides insight for companies considering sites for their business operations, said Hartley Powell, national leader in KPMG's Global Location and Expansion Services practice. By comparing business operating cost factors, including labor, taxes, real estate and utilities, companies can determine which markets offer the most advantageous environment, Powell said.
Atlanta's CRE Comeback
Atlanta's low suburban and downtown office lease costs also contributed to its top ranking in the study by the audit, tax and advisory firm.
Orlando, FL, Charlotte, NC, and San Antonio rounded out the top five large-market metros in the survey. Other top 10 cities included Tampa, FL, Cleveland, Pittsburgh, St. Louis and Phoenix.
Among mid-sized metros with populations between 1 million and 2 million, New Orleans -- with its low property taxes and low labor, transportation, office leasing and natural gas costs, was the most cost-friendly. Nashville, Oklahoma City, Raleigh, NC; and Memphis, TN filled out the top five.
The study measured 26 key cost components in each market, including costs associated with taxes, labor, facilities, transportation and utilities, as they apply to seven different business-to-business service sector operations and 12 different manufacturing sector operations.
Atlanta had a cost index of 94.7, representing business costs 5.3% below the U.S. national baseline, followed closely by Cincinnati at 94.9, Orlando at 95.1, Charlotte at 95.2 and San Antonio at 95.6.
Even though it didn't rank first for any of the three types of facilities examined, Cincinnati, a later-recovering metro where vacancy rates skyrocketed and lease rates plunged during the downturn, had the lowest overall facility costs among the 31 large cities. It also had the lowest property tax costs, as well as relatively low wage-and-salary costs.
Orlando had the lowest overall labor costs, with low costs for statutory plans and benefits. Charlotte, a newcomer to the study this year, also benefitted from competitive labor costs and industrial lease rates.
Also new to the report this year is San Antonio, which had the lowest salary and wage costs, as well as very low costs for both natural gas and electricity. St. Louis had the lowest electricity costs among the 31 large cities.
Tampa, Cleveland and Pittsburgh ranked high in the study for lower labor costs and effective corporate and property tax rates.
Phoenix edged into the top 10 with its low lease rates for both suburban and downtown office properties, and relatively low statutory labor costs.
Multiple Factors Influence Site Selection
Business costs are a major component of the site-selection process for any company, yet they're far from the only factor, especially for highly skilled positions.
"Organizations should make sure that they also take into account non-cost factors such as labor availability and skills, economic conditions, infrastructure, innovation, regulatory environment, cost of living and quality of life," Powell noted.
Not surprisingly, New York City and San Francisco ranked as the most expensive large U.S. cities in which to do business, with cost indexes of 103.6 and 104.2, respectively, followed by the tech bastions of Boston and Seattle.
Despite many cost disadvantages, New York City did score well in transportation, with the second lowest costs among all 31 large cities. San Francisco had below-average costs for natural gas and property taxes.
Top 10 Cost-Friendly Cities
(Population more than 2 million)
Bottom 10 Cost-Friendly Cities
|St. Louis, MO
(Pop. more than 2 million)
|Northern VA, Metro DC
|New York City
SOURCE: KPMG LLP