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Study: Stamford costly for corporate HQs

By Peter Healy
Staff Writer

July 14, 2004

Stamford is the nation's fourth-most costly place to have a corporate headquarters, according to a recent study by a Princeton, N.J.-based corporate location consulting firm.

The Boyd Co. placed Stamford behind No. 1 San Francisco, where the consultant estimates the cost of operating a headquarters with 350 employees and 50,000 square feet of Class A office space at about $22.4 million a year.

New York was second at $22.3 million, followed by Santa Clara County, Calif., at $21.8 million and Stamford at $21.6 million.

The study measured costs such as executive salaries, clerical, secretarial and information technology labor, office rents, utilities and corporate travel.

Labor costs make up 70 percent to 80 percent of a typical company's annual operating costs, said John Boyd, a consultant with Boyd Co.

The total annual cost of wages and salaries ranges from $19.2 million in San Francisco to $18.7 million in Stamford to $15 million in Savannah, Ga. Boyd rated the Georgia coastal city No. 100 in its survey, with total annual operating costs of $17.3 million.

"One of the reasons Stamford's labor costs are so high is its recruiting base," said Boyd, who said the study covered only the city of Stamford and not neighboring towns. "You get what you pay for. The labor market here is world-class and the costs reflect that."

Many companies are willing to pay those high wages to attract talented workers, said Jim Fagan, senior managing director with the Stamford office of Cushman & Wakefield Inc. commercial real estate.

"The (Boyd) study points to our strengths, not our weakness," Fagan said. "We have a highly talented labor pool that deserves to be compensated in an above-average manner."

Fagan said operations that need top-level talent, such as headquarters of large corporations and financial-services firms such as hedge funds, would not migrate from Stamford to lower-cost states.

Boyd said, however, that Stamford needs to recognize that it has to compete with smaller, low-cost labor areas. He said companies might keep their top executives here, but could transfer the lower administrative functions to other states.

He mentioned General Electric's transfer of workers from Manhattan to Fort Myers, Fla., and Time Warner's moving of employees from Chicago and Manhattan to Virginia as examples.

"The rules have really changed today," Boyd said. "There is unprecedented preoccupation with reducing costs at all levels of the corporate structure."

Companies could be attracted to smaller-market cities because of lower housing and living costs, he said.

Many companies have left Stamford and nearby towns to be in places with lower operating costs, said Dean Shapiro, senior managing director at the Stamford office of CB Richard Ellis commercial real estate.

He mentioned the former GTE Corp., which relocated its Stamford headquarters to Texas several years ago, and UPS, which moved to Atlanta from Greenwich more than a decade ago, as examples.

The long-term implications are not whether companies will leave but whether the Stamford office market is robust enough to replace them, Shapiro said.

In the long term, Stamford should focus on its advantages for companies, Boyd said. The city's entertainment, educational and cultural offerings could attract European companies, he said.

"Stamford needs to continue to market its strengths," he said. "It can't be all things to all industries."

In another report released yesterday, New York-based Moody's Investor Services rated the Fairfield County office market in the middle third of its quarterly ranking of commercial real estate markets in the country.

Sally Gordon, a Moody's vice president who conducted the study, said the county's office vacancy rate is 16.7 percent and will increase amid reduced demand for space.

She said reduced demand leads to low cash flow while landlords' operating costs keep going up, making the market less attractive to real estate investors. Moody's rates bonds that are backed by commercial mortgage securities.

Copyright 2004, Southern Connecticut Newspapers, Inc.