Companies Flock To Cities With Top Talent

The digital economy has reversed traditional notions of value. Tangible assets, like real estate, are fungible. There is a global market which sets standards and moderates comparable prices.

It is turning out to be a fact that it is the intangible assets like people and ideas that fill those building which create the differentiation from which competitive advantage can be derived. JL


Lauren Weber reports in the Wall Street Journal:

"You can find buildings anywhere.Today, people are the natural resources." Half of corporate real-estate executives rated talent availability as the leading consideration in moves and expansions. Metro areas with high shares of college graduates are emerging as winners in the new landscape.
Last year, Salesforce.com Inc. CRM 0.21 % handed its recruiters a near-impossible task: hire thousands of engineers and account executives in some of the tightest U.S. labor markets, including the software firm’s hometown of San Francisco.
Candidates were declining offers and recruiting costs were rising. “We got our asses handed to us,” said Ana Recio, Salesforce’s recruiting head. But business leaders resisted moving critical roles out of San Francisco.
So Ms. Recio asked an intern to create an algorithm using LinkedIn profiles to identify the true pool of potential candidates for its specialized technical jobs. Those candidates had to be expert in things like handling mammoth amounts of code and the billions of transactions that go through Salesforce daily.
The analysis identified 210,000 potential hires in the U.S. and 85,000 in the Bay Area—far fewer than she and other executives had assumed. And Salesforce recruiters already had been in contact with 23% of the Bay Area set.
“Suddenly we were in real estate discussions,” Ms. Recio said.
Fifty years ago, companies opened new locations to be near lumber, copper, or resources needed for their businesses. “Today, people are the natural resources,” said Meredith Amdur, an analytics expert at advisory firm CEB.
Facing a tight labor market and a shortage of skilled workers, many large companies say that a city or region’s population of desirable workers is now the top factor in location decisions.
Half of corporate real-estate executives rated talent availability as the leading consideration in moves and expansions, according to a survey of 229 executives released by real-estate services firm CBRE Group, CBG 0.13 % Inc. in March. More traditional considerations, such as the quality of a location’s infrastructure and real-estate costs, ranked lower.
“You can find buildings anywhere,” said Stephen Gozdan, chief financial officer of Cenlar FSB, a mortgage-servicing company. Harder to find, he said, is a pool of college-educated workers who can fill customer-service roles.
When Cenlar sought a western location to complement its New Jersey operations last year, executives spent more time analyzing labor-force data than any other factor.
Mr. Gozdan said Cenlar needs employees who can converse with homeowners about their mortgages and communicate clearly via phone, email, chat and text. The firm looked closely at feeder systems for that labor force, particularly four-year colleges with relevant majors. It also considered the share of graduates who stay in the area, and high-quality community colleges with students who could be induced to earn a bachelor’s degree, perhaps subsidized by Cenlar.
After considering cities in Arizona, Colorado, Oregon and Utah, Cenlar chose the Phoenix area. The company narrowed its decision further to Tempe after advisers helped Cenlar better understand the profile of the workers it sought to attract.
Companies now have an array of public data, such as job ads and professional profiles, to get a real-time read on supply and demand in the labor market. Some are using a LinkedIn Corp. LNKD -0.93 % tool called Economic Graph that maps open jobs, skills, employers and schools.
Year Up, a non-profit organization that trains inner-city young adults in technology and other professional skills, used it to help identify Phoenix and Jacksonville, Fla., for a recent expansion.
Metro areas with high shares of college graduates, such as Denver and Raleigh, N.C., are emerging as winners in the new landscape. After Ms. Recio shared candidate data with her bosses, Salesforce opened offices in, or moved roles to, Seattle, Vancouver, British Columbia, and Boulder, Colo.
Regions with fewer degree-holders could struggle to attract big corporations, interviews with employers suggest.
At Cisco Systems Inc., CSCO -1.24 % a team of data scientists began reviewing the company’s top technology priorities, such as data security and wireless networking, in 2014 to find the 10 cities with clusters of professionals who had relevant skills. Austin, Tex., and Cambridge, Mass., made the list.
“It was a game-changer in terms of how we started to recruit and look at investments,” said Francine Katsoudas, the networking giant’s human resources chief.
Cisco might have ended up in those locations even without that research, but Ms. Katsoudas believes the decisions wouldn’t have crystallized as quickly. The company says that retention in those cities increased and it is pleased with the quality of new hires.
Many firms still leave talent out of the real-estate equation.
“There are still plenty of companies that say, ‘I forgot to invite HR to this planning meeting about relocating our headquarters,’ ” said Robert Hess of real-estate firm Newmark Grubb Knight Frank, which advised Cenlar.
Some 44% of the respondents in the CBRE survey said their real-estate departments report to finance, operations or procurement leaders, while 17% answer to HR.
At CEB, analysts mash up information from job ads, graduation rates, patent applications, migration patterns and other records to help companies develop workforce strategies.
One aerospace client had a Seattle facility it had struggled to staff with the existing labor supply. So it asked CEB to identify cities where it would have the best chance of finding professionals who were willing to move.
Analyzing troves of resumes and other data, CEB created a heat map showing which metro areas had pools of potential hires who previously had relocated for jobs or would be open to doing so.
Traditional aerospace hubs Wichita, Kan., or Huntsville, Ala., didn’t look promising. Instead, researchers found more migration from cities such as Phoenix, Los Angeles and Fort Worth, Tex. The employer spent more of its recruiting budget in those places and ultimately filled its Seattle jobs.