Are you looking to improve your commercial real estate portfolio? How about slashing your overhead and increasing your employees’ quality of life?

It may be easier than you think.

To successfully operate your company’s CRE portfolio, you have to know the market. As it alternates, you can benefit from jumping on any opportunities that present themselves. If you don’t know what’s out there and what has changed since you entered your current building, you could be missing out.

There is currently a corporate migration away from cities and into the suburbs. It’s happening for a reason. As tenant representatives, we have watched our clients frustrated with the metropolitan real estate market. Our expertise has helped them make the decisions that best benefit their CRE, which may mean packing up and moving out of the city.

If you are wondering if you could benefit from the same move, read on. Moving may not be the solution for everyone, but this article is for you if you are tired of your current space and looking to save. We will explain why cities are not favorable to commercial performance, what you can do about it, and why now is the best time to act.

Why Should I Move Out of The City?

After you understand the reasons, the real question will be why I am still in a city?

Expenses

It is no secret that everything is traditionally more expensive in cities. From taxes to rent to really anything- you could be looking at dramatically elevated costs compared to having commercial space in a suburban location. So let’s break it down.

Cost of Living Map - 100 is the National Average

Higher Taxes

When operating in a city, you are subject to additional corporate taxes, income taxes, sales tax, etc.

These costs quickly add up, significantly increasing your overhead expenditure. Such high taxation rates also increase the general cost of living. This means your dollar does not go as far.

Moving to a suburb will reset these additional costs, leaving you in an advantageous position to save money in multiple areas.

Expensive Rent

Properties in the suburbs are more affordable. It’s as simple as that. You will find more desirable rent with better features outside of major metropolitan areas.

Due to the work from home revolution, many companies located in cities have also sent most of their employees home. If this sounds familiar, you must assess your space utilization and where there is room to right-size your space for your current needs.

Wasted space is expensive. Even more so in regions like cities where the cost per square foot to operate is much higher. With new social distancing mandates, you may also find that you need more square feet than you originally planned. The average demanded space per employee has increased as coworkers remain six feet apart.

If you are looking to bring everyone back into the office, you may need more square footage to keep up with these new safety measures. Unfortunately, it may be too expensive to branch out into new city properties to match this demand.

Looking to the suburbs will give you the financial freedom to expand safely. In addition, less expensive occupancy costs will allow you to save money while maintaining the health and wellness of your employees. Cheaper rent also gives you more options to be selective when searching for properties.

Let's look at a hub of industry, New York City, and some surrounding suburbs to understand the difference in commercial rental rates. 

Rent Costs: New York City Office Class A & B 20Q4  

Moving 25 miles to 65 miles out of the city can save 45% - 60% in rent savings. The talent pool may be slightly smaller, but there are significant savings in rent, taxes, and labor costs, compared to the big cities.

Overall Quality of Life

Suburbs are consistently safer than cities. This is true in two specific respects. Moving your business out of the city will better safeguard the health of your employees, while also protecting them from skyrocketing crime rates.

COVID Safety

As discussed, it is more challenging to stick to COVID safety guidelines within densely packed cities. Exposure to more people raises the potential of contracting an infectious contagion like the new Omicron or Delta strain. Crowded, congested office spaces, elevators, waiting rooms, etc., are accidents waiting to happen.

Properties in the suburbs are more isolated. This could be the defining feature that lets you return to physical working spaces in today's age.

Crime Rates

Crime rates are rising in cities across the country. As a result, living and working within metropolitan areas is becoming increasingly dangerous.

Compared to suburbs, cities have higher rates of dangerous crimes, including homicide, assault, and gun violence. There is also a higher risk for drug and property-based offenses. With no end in sight to these climbing rates, it may be wise to cut and run now. Seeking refuge in the suburbs may not only save you money but significantly increase the safety of your employees and business.

New Talent Pools

Moving your business to any new location will allow you to tap into new potential talent. If you are looking to expand your size and have been situated to a single area, you may have simply exhausted your hiring options.

Expanding your horizons will give you the freedom to find new potential candidates equipped with the specialties you are looking for.

Operating in a suburb will also likely contribute to the overall quality of life of any new or existing employees. The shorter commutes of a suburb have dramatically increased morale and productivity while decreasing stress.

Due to the lower cost of living, the salary requirements of suburban regions are usually lower than in cities. As a result, your payroll overhead costs could potentially be slashed. New talent at better rates represents a win-win scenario!

Suburbs Offer More Options

The demand for real estate in cities is incredibly high. Unfortunately, this makes properties more expensive and harder to find.

It could be nearly impossible to pin down all the features your company wants in a building within city limits. As a result, you have fewer viable options, especially operating within a budget.

If a property does not have everything you need, your potential to renovate may not be as expansive. Since spaces and labor are more expensive, you will have less financial freedom to conduct tenant improvements. Any build-outs you wish to complete to fix your property will be at elevated rates.

So even if you do find a city commercial space at a reasonable price, you may not be able to mold it to your company’s culture to your preferred extent.

Why Move to a Suburb Now?

Now more than ever, businesses are taking a step back and reevaluating their real estate needs. The working world is far more flexible. Remote working has forced companies to consider whether they even need their space and where this space needs to be.

It may no longer be worth it to occupy crowded and expensive city regions. We are witnessing a mass-corporate migration away from business-unfriendly areas. Companies are switching their commercial spaces away from blue states and cities in particular. There is no better time than now to get a jump on these circumstances and benefit your bottom line.

Unprecedented times bring unprecedented opportunities. You have countless options to work with should you decide a move is necessary. If you are not ready to move your entire business, you could still advance through moving your headquarters or satellite locations. That way, you can benefit from regions of better life and business quality without the full commitment.

Tenant Reps Can Help 

No matter what you decide, remember that you have choices. You do not need to remain in a space that doesn’t fit your organization's needs. If you decide you want to move or are still weighing the factors, tenant representatives can help you.

As real estate experts, they assist corporate clients in making decisions that benefit their CRE portfolio and their organization’s bottom-line performance. Tenant reps’ market intelligence gives you the freedom to weigh the best options for your tenancy.

Want to Learn More About Tenant Representation? Check Out This Article!