Why Location Still Matters

by Knotel: Aug 08, 2018

Culture. Perks. Pay. Product. Work-life balance. They all matter when it comes to finding talented hires. But don’t forget one more important asset a company can leverage: location.

 

Unless you’re a virtual company, office location matters more now than ever before, because by planting your roots in the right spot, you’ll get far better access to talent, clients and suppliers. And let’s face it, your company is only as good as your employees.

 

Affordable rent certainly matters, but so does moving to where your workers are. No company moves to New York City or Silicon Valley for cheap rent; they do it for the labor force. Hong Kong, for instance, boasts the most expensive office rents, averaging $306 per square foot per year— 30 percent higher than London’s West End, according to a 2018 report by commercial real estate investment firm CBRE. Planting roots in Manhattan might cost you $183 per square foot, while downtown San Francisco leases run $115 per square foot.  Yet, even in spite of these costs, other externalities make these pricey cities strategic locations.

 

Young and educated workers demand nearby amenities, including services, shops, concerts, live music, restaurants and bars and museums. They also want to live near people like themselves. Those companies seeking young and educated workers should plant roots in places like New York, San Francisco, Los Angeles and Portland, which are increasingly popular among the 25-to-44 set.

 

Another smart strategy? Pick an office near competitors. Yes, research shows that settling down the street from competitors can be good for business. Call it clustering; and it’s been proven successful in banking, the Silicon Valley tech sector, California’s wine industry and the flower industry in the Netherlands. Harvard Business School’s renowned professor Michael Porter said the Netherlands has become an ideal place for new flower businesses only because so many other companies are already located there. The startup can benefit from Dutch flower auctions, a powerful growers’ association and nearby floral research centers.

 

Office space within an industry cluster may be more expensive than a far-flung suburban spot or urban development location supported by economic development grants. But by sticking with like-minded companies, fast-growing companies may find more benefits down the road. That means economies of scale, access to experienced workers, better access to suppliers, partners and investors and industry-focused vendors, including attorneys and PR firms. Plus, by being in a community, you’re naturally plugged in to what’s happening in your sector and networking happens naturally.

 

Office disruptor Knotel makes that networking even more natural: it’s expanding into some of the fastest-growing cities in the world, including New York, San Francisco, London and Berlin. That means Knotel tenants can easily do business in those cities and hire the best talent — without getting priced out of these markets by locking themselves into onerous leases. Knotels’ flexible model makes it far more reasonable. Think: flexible lease terms and the ability to grow or downsize on demand without costly penalties or the hassle of sub-leasing empty space.  

 

Some startups consider even more unusual factors when choosing a location: office mojo. For instance, tech startups clamor to rent Google’s first Palo Alto, Calif., headquarters, which has been dubbed “the lucky office.” When Google outgrew the space, it became home to a number of other successful startups, including PayPal. Rumor has it, too, that it’s good luck to drink from the algae-covered fountain in the courtyard.

 

For the rest of the business world, simply picking the right location may be just as lucky.