The Corporate Move You Might Not Hear About and the Role Real Estate Played

by CoyDavidson on March 5, 2011


Navistar Acquires former Lucent Technologies Campus

When it comes to big corporate real estate transactions, a diesel engine and truck manufacturer in Illinois is not going to create the same buzz nationally as the social networking giant and most talked about company in the world these days recent real estate decision.

Navistar’s decision to keep its headquarters in Illinois and acquire the former 87 acre, 1.2 million square foot office campus of Lucent Technologies is a huge deal but won’t be as highly publicized as Facebook’s move to the former Oracle/Sun Microsystems campus.

The Role Real Estate Played

The increasing competition among various communities for new jobs and investments has generated a wide array of economic development incentives to lure new companies and land expansion projects. Navistar was reportedly heavily courted by numerous states and cities to relocate their corporate headquarters.

The interesting perspective is to hear the impact that real estate played in the decision, “You can’t build a campus like this anywhere for anywhere near the price we paid for this, and even though you might get more incentives, when you look at the whole picture, you really can’t beat it,” said Don Sharp, Navistar vice president.

New sites are often used to enhance a company’s financial, operational, and strategic and brand image goals. There are many factors dialed into a major corporate location decision, a few of the key drivers include:

  • Proximity to markets served / suppliers
  • Labor Costs
  • Labor Availability
  • Quality of Life Concerns
  • Transportation / Utility infrastructure access
  • Business Climate / Corporate Tax Rates
  • Incentives; and
  • Real Estate / Occupancy Costs

Occupancy costs are always a big factor in the decision matrix. In this particular case it sounds like Navistar finding the right facility with an attractive cost structure in their backyard, was the primary factor in sealing the deal.

Lower cost corporate real estate alternatives were created in a significant way as a result of the great recession. However, the cherry picking has been under way as the economy begins to show signs of life. Now is the time to assess what opportunities exist.

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