From episode: A Brokers Perspective on Economic Development - Episode 6 With Ed Del Beccaro of TRI Commercial Real Estate
From a broker's perspective, what makes one city better than another? Talk specifically about that approval process. First, we should talk about regions. The most important thing in deciding a location is ensuring the employer will have a strong workforce. To ensure this, we use what we call the phrase 360 commute shed. The original migration to the East Bay from the San Francisco area was office tenants in the 80s and early 90s. During that time, you saw the development of all the buildings in San Ramon, Pleasanton, 680 Corridor, and places like that. They left the city for several reasons, one such reason they moved is their workforce was living in these towns. The companies followed the workforce in that case. It wasn't that they didn't like San Francisco. Chevron, Wells Fargo, Bank of America, Metropolitan Life Insurance, all the big users in that area. They actually followed the workforce.
There are studies that if you have a one-way commute of over an hour and 10 minutes or an hour and a half, you're going to lose 40 to 50 percent of your workforce. Therefore, I might love San Francisco or might love downtown L .A., but I have to go where I think I can get my workforce. Where's my workforce of the future? To begin, it's a regional decision before it's a city decision. Even if a business were to be located in a city as central as Walnut Creek, I might have some of my workforce coming from Fairfield, Benicia, Richmond, Oakland, South San Francisco, and Tri-Valley. Therefore, we help employers map out their current and future workforce. To answer the second question of where is my future workforce? I have a salary range that I can afford as a company. Currently, insurance and banks are usually in the $60 to $130 thousand range. You then work that backward. If I hire somebody for one hundred thousand, one hundred twenty thousand, will that person be able to pay rent or buy a house in a given region? If they can't, if their average rental, if the average apartment rents are forty thousand a year, if the average mortgage is five thousand a year, five thousand a month, rather, then I have to move further afield. So that's why you see companies now leaving the inner bay, going to Sacramento and Austin region.
Then within a region, once a decision is made that I can, my current workforce is in a given region, let's say East Bay. Then let's say the second thing is I know that I can afford my workforce over the next 10 years to live there and pay them the market rates. Then what city do I go to within a sub-region? There, every city is the best when you ask the cities, but then we make decisions based on location to transportation, locations relative to interchanges, and locations relative to available mass transit. Because again, if I have people coming in from 360 degrees, 20 miles, let's say 40 miles away from any given point, if I'm in Fairfield, how do I get to East County? If I'm in Fairfield, how do I get to San Ramon? If I'm in Tracy, how do I get to Walnut Creek? Or if I'm in Fremont, how do I get to Walnut Creek? So then we tried to centrally locate where most of those workers are.
Then within that region, what cities have the better approval process? Because the new kinds of tenants that are coming into the region are not the back office tenants. That was a pretty simple build-out. Cubes called them Dilbert Farms. That's what you saw in the original migration wave. Now we have laboratories, we are more involved in IT, more involved in investment in infrastructure, and more complicated uses. Then the question is, if we're going to grow and expand, what city next to a transportation center can best accommodate our strategy of expansion with approvals?
What's the business environment? Some cities, unfortunately, in our area have raised their business payroll tax to extraordinarily high. They're in effect, some companies won't go there. You go next door.