Seattle is among costliest cities

Seattle is facing tough competition for corporate offices from smaller, second- and third-tier cities because of the high cost of doing business in Washington state's largest city, according to a location consultant.

A company can expect to spend an estimated $19.6 million a year to run a typical corporate office in Seattle, making the city the 15th most expensive out of 50 cities studied by The Boyd Co. Inc., based in Princeton, N.J.

The study used the example of a 350-person office occupying 50,000 square feet of Class A office space and analyzed the geographically variable costs including labor, office rent, electric power, heating and air conditioning costs, as well as corporate travel costs.

As business looks to cut operating costs, Seattle will struggle to compete for corporate offices with less-expensive cities in smaller markets, The Boyd Co. concluded.

"People need to wake up to the reality that the trend towards smaller markets is happening," said John A. Boyd, a consultant with The Boyd Co. "You have to recognize you're in a war, and the first thing you have to realize is that you're competing like never before."

But local government and business leaders say Seattle's competitive strategy is driven not by costs but by leveraging its assets, like a highly educated work force and high quality of life.

"Seattle is not a low-cost place to do business, but you get what you pay for to some degree," said Bill McSherry, public affairs manager for the Greater Seattle Chamber of Commerce.

The Boyd Co. presented its findings earlier this month to a group of Seattle corporate planners. The consultant prepared the report for the benefit of former and prospective clients in the Seattle area.

Seattle was the 15th most expensive city with a total annual operating cost of $19.6 million. In the most expensive city, San Francisco, a 350-person office would cost $22.4 million annually; in the least expensive city, Savannah, Ga., it would cost $17.3 million.

"These are the numbers our clients are looking at when they're making decisions," Boyd said, adding, "In this softened economy, comparative economics dominate the site selection process."

The Boyd Co. has provided location consulting for such clients as Time Inc., Pratt & Whitney, PepsiCo, and Hewlett-Packard.

Boyd said clients today are telling him they don't expect to increase revenue substantially, so profits will have to come from the other side of the ledger. As a result, "we're seeing unprecedented corporate cost-cutting," he said. If a company can relocate to a less expensive city and immediately boost profits by $5 million a year, that's very appealing to corporate executives, Boyd said.