And Real Estate Considerations For Site Selection
BY KURT ROSENE, THE ALTER GROUP
Anyone with a passing knowledge of call centers knows that labor is
king. The latest cost component breakdown shows that personnel
recruitment, training and salaries account for 70 percent of the operating
budget of a typical call center. With such overwhelming statistics, it
remains a given that the site selection process for call centers begins
and ends with a requisitely skilled, available labor pool. Since the
fundamentals of finding the right labor market have been explored in
voluminous detail in the media, I will highlight some of the innovations
that have emerged to uncover untapped sources of labor as companies
contend with an unemployment rate that remains perilously low.
Old Line Site Selection
The U.S. Bureau of Labor Statistics designates 315 of the most
populous metro areas as Metropolitan Statistical Areas or MSAs. As the
name suggests, the Bureau maintains a wealth of statistical information on
these areas, comprising demographic and economic information.
Consequently, site selection efforts for call centers tend to limit their
scope to just these 315 areas because they represent the most populated
areas across the country and are therefore within the "comfort
zone" of corporate America, and because information ranging from
demographics to economic data is much more readily available for these
"The consequence of the MSA paradigm is that these designated
areas have become saturated with call centers and other employers,"
said Jim Trobaugh, senior vice president of CB Richard Ellis' Call Center
Solutions Group (CCSG). Considering that a particular location is defined
as being saturated when more than two percent of the jobs are in the call
center industry, it is inevitable that former hotbeds like Salt Lake City,
Omaha and San Antonio are at the saturation point. It is therefore vital
that the site search be broadened to take into consideration new and often
Trobaugh said, "The key to success is to ensure that you have done
the proper research, because unlike MSAs, the most pertinent information
on these smaller cities cannot be downloaded from Web sites or gathered
through government sources. Ultimately, this keeps these communities
hidden from the herd."
In undertaking this more exhaustive search for the right labor
location, site selection consultants today take a multiphase approach in
qualifying all prospective locations to respond to a call center
requirement. The first step in the process entails having the client
complete a questionnaire that asks a full range of questions regarding
their call center project, including the following.
The desired age and educational level of agents. This allows companies
to select the appropriate age and education demographics to include in a
benchmark analysis. For example, a client may have ascertained from its
other centers that individuals between the ages of 24 and 30 with some
college experience (more than a high school diploma but less than an
associate or bachelors degree) perform the best. Through the profiling
process, a consultant can identify and apply these criteria to the
benchmark analysis to highlight communities that accord with these
The starting and average wages paid to agents in the new center. This
very important factor helps determine which communities can supply
candidates within the client's desired salary structure.
Other questions include the client's geographic limitations (including
appetite for extreme weather conditions), the project's timeline, the size
of facility required, the center's hours of operation, percentage of
part-time employees and the telecommunication requirements of the center.
The completed questionnaire becomes a crucial springboard for a site
selection study that is specifically focused on the client's unique needs.
"This is a 'new and improved' method, for two reasons," said
Mark Seeley, project manager, CCSG. "First, the call center industry
has broadened to a degree that it includes everything from outbound
telemarketing centers that pay minimum wage, to advanced technical support
centers that may require technical certifications and pay $80,000 per
year. Therefore, because requirements are so diverse, our information
needs to be that much more sophisticated. Second, as labor markets quickly
dry up in our booming economy, simply seeking out communities with high
unemployment and a low cost of living isn't good enough. Call centers are
stacking up on top of each other in markets that five years ago were
considered great for these reasons alone. Therefore, research capabilities
need to be up to the task of gleaning complex information to provide a
solution that addresses all requirements."
Pounding The Pavement
Often, in the midst of so much demographic data, site selectors and
call centers lose sight of one of the most effective means of compiling
information: empirical research or, in simple parlance, pounding the
pavement. Demographics and statistics are useful when trying to
efficiently and accurately weed though several thousand potential
communities, but once a short list is derived, nothing takes the place of
good face-to-face conversations. This may entail flying to a short-listed
community and setting up meetings with economic developers, community
college deans, job center reps and local employers. These hands-on,
in-person evaluations are indispensable.
"It's one thing to know that a community has an eight percent
unemployment rate and median household income below the national
average," said Trobaugh. "It is a whole other thing for the H.R.
manager at the local Wal-Mart to tell you that he received 3,000
applications last month for sales clerk positions starting at $6 per hour
as a result of a single ad placed in the local newspaper. We will often
hold impromptu interviews with retail managers, call center employees or
even pedestrians on their lunch breaks. If the economic development
official assures us that a location represents the best real estate option
and is located in a safe area, we don't take his word for it. We'll ask a
sampling of people on the street if they would be comfortable walking to
their car at night. The reactions and insights you get from locals are
always the most enlightening."
Trobaugh also recommends that location scouts stay especially alert
when touring the community. "Do all of the fast food restaurants have
'Now Hiring' signs posted in the windows? This could be an indication of a
tight labor market. It would behoove you to pop in on one and have a
conversation with the restaurant manager," Trobaugh said.
Of course, demographics alone do not secure the optimal location for a
new call center. A call center operator may do an exhaustive survey of
labor trends in an area but find no existing buildings or prospective land
parcels to accommodate their deadlines. What's more, if the labor market
in question is a tertiary real estate market, it may be difficult to find
the contractors and suppliers to complete the project on schedule. While
the vagaries of the building process are par for the course, call center
operators have become cognizant of the tremendous efficiencies to be
achieved by partnering with national site selection consultants/developers
who can draw on voluminous research, significant in-house expertise and
relationships with vendors to fast-track the process. A number of
prominent developers have recently partnered with site selection
consultants to offer one-stop shopping for the call center executive.
While labor and the fundamental real estate issues take precedence in
luring a call center to a particular location, economic development
agencies in obscure locations such as Hazard, Kentucky; Milton-Freewater,
Oregon; and Lancaster, California have been invaluable by aggressively
courting call center operators with significant incentive packages,
including tax credits, job training and even free land.
Sealing The Deal
Once the communities have been evaluated and approved by the operating
units, the terms of the transaction become paramount. The trend we are
seeing is towards initial lease terms of 10 years with a cancellation
option after year seven. With build-to-suits, the minimum term tends to be
10 years, reflecting the landlord's concern with residual value. It is
important to reconfigure call centers, for example, as rectangular boxes
rather than squares so they have residual value as industrial buildings.
Another important determining factor of the lease term is whether the call
center operations are contract-based. In this case, the length of the
contract (or concurrent contracts) dictates the terms of the lease. A
contract-based call center requirement also tends to engender a
dramatically shortened lead time for the site-selection process of as
little as eight weeks.
Kurt W. Rosene is senior vice president and director of National
Development for The Alter Group, build-to-suit and speculative developers
of office, industrial, call center, research and development space, and
healthcare facilities. Rosene is responsible for organizing and delivering
The Alter Group's services, including program management; land acquisition
and disposition; advisory land and site planning; design and construction;
consolidation; and build-to-suit transactions to corporate clients across
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