Labor is the reason you put your non-retail assets where you do. If you don’t have a workforce, you don’t have a business. But often it is the most overlooked aspect of a real estate decision.
Why is labor so overlooked? Because it’s hard to understand. People can grasp that there is a population of 100,000 in a metro area but they have a much harder time understanding that 11,000 of those people work in the call center space and the market is oversaturated with that type of employment leading to higher than expected turnover based purely on market conditions. They can understand self-inflicted turnover due to low wages or bad management but explaining to them that even if you pay well and have good management in a market that you will still have high turnover….you’ll get the look.
People and metros are often considered interchangeable. Surely if you move 10 miles down the road you won’t be changing your employee base by much. But in reality those 10 miles may be leading to 30% current workforce turnover and a 12 month replacement lead time to rehire to full strength. Those are real dollars impacting the business’ top and bottom lines.
It’s not all about commutes either. There are intrinsic properties to labor forces and geographies that can be diagnosed to understand if an operational model will be successful. This involves not just looking at demographics and employment characteristics, but understanding the nature of the business that will be brought in.
When you make your next real estate decision make sure you ask about the impact of labor in the market.