There’s a trend toward reshoring—companies bringing contact centers back home after having shipped them overseas. According to Mor Armony, an associate professor at New York University’s Stern School of Business, companies have been bringing call-center jobs back to the U.S. from India, the Philippines, and elsewhere. Why? One reason is that new customer-service technology is making outsourcing less competitive. According to Vijay Mehrotra at the University of San Francisco, simple jobs that were once cost-effective to outsource are now handled online or through apps.
When deciding where to locate a call center (or contact center as they are now more commonly known), you need to consider more than just the costs to rent or own a space or property. Other considerations include:
- Hourly wages now and in the future
- Population growth
- Size of workforce
- Demographics of workforce (ie: education level, languages spoken)
- Cost-of-living index
- Incentives (local and state)
- Unemployment rate
- Income
- Local landscape of competing contact centers
It’s About More than Just Hourly Wages
I recently represented a global retailer for the leasing acquisition of their North American customer-service center in Chicago, which supports their U.S. online business. If there’s a problem or question with your online order, these are the folks who help you over the phone or in online chats. In addition to Chicago, they also considered Columbus, OH. The average gross rental rate in Chicago is slightly more than twice that of Columbus ($41.73/SF in Chicago and $20.71/SF in Columbus). Chicago’s benefits included the size of the civilian workforce, the demographics (diversity, education level) access to a major airport (the company is based overseas), and the number of property/space options. Columbus would have been approximately 25 percent less expensive when considering hourly wages and occupancy costs, but the unemployment rate in Columbus is 3.4 percent versus Chicago’s 6.5 percent, which indicates that there is a limited pool of hourly candidates in an already smaller market. Acquisition costs of new employees and turnover costs add up significantly. When all the variables were modeled, it was clear that Chicago offered the most long-term value for the business. Real estate was just one factor in the decision-making process.
Colliers recently completed an analysis of all the U.S. markets for a national company that was considering relocating their main contact center because of the minimum-wage increases scheduled in their HQ city. The top five most expensive markets in which to set up a contact center included one big surprise: Tacoma, WA (ranked #4). With hourly wages at $10.35/hour and rents at $27.18/SF, Tacoma is currently more expensive than Chicago! Of course, that may change as minimum wage increases are enacted in each city. Chicago saw increases to $10.50 in July of this year, with additional increases of $1 per year for the next three years to top out at $13.00/hour in July of 2019.
All this means that companies with contact-center operations must constantly be evaluating their existing locations to account for new minimum-wage laws, varying rental costs, and shifting demographics.
Dougal, a Senior Vice President at Colliers International, Chicago, is an office leasing expert with 15 years experience representing a diverse set of companies. He is passionate about understanding his clients business first and ensuring that their real estate matches their business needs.