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Cincinnati’s low costs for facility leasing, transportation and property taxes contributed significantly to its ranking as the least-costly location to do business in the United States among the 27 largest metro areas (all with populations exceeding 2 million), according to a study by KPMG LLP, the audit, tax and advisory firm.
Atlanta was the second most cost-competitive location in the large-cities category, followed by Orlando, Tampa and Dallas-Fort Worth, which ranked third, fourth and fifth respectively. Other locations that performed well were Baltimore, St. Louis and Cleveland.
The most expensive places to do business in the large-cities category were San Francisco and New York, according to the study.
“KPMG’s Competitive Alternatives study provides a thorough biennial comparison of more than two dozen large metropolitan area business locations in the United States, offering a comprehensive guide for companies considering sites for their business operations,” said Hartley Powell, principal in KPMG’s Global Location and Expansion Services practice. “The KPMG study is particularly valuable for its measurement of significant factors that contribute to business operating costs and which often vary by location, including costs associated with taxes, labor, facilities, transportation and utilities.”
KPMG’s 2012 Competitive Alternatives study measured 26 significant cost components in each market, including labor, taxes, real estate and utilities, as they apply to 19 industries over a 10-year analysis horizon. Information is also provided on a variety of non-cost components. The study enables companies to perform a “quick scan” of locations to determine which markets can offer an advantageous business environment.
Cost Index Results by City
Cincinnati – The KPMG study reveals that Cincinnati had a cost index of 95.9, representing business costs 4.1 percent below the U.S. national baseline of 100.0. Cincinnati was followed closely by Atlanta at 96.2, Orlando at 96.3, Tampa at 96.4 and Dallas-Fort Worth at 96.5.
- Atlanta and Orlando – Atlanta’s ranking was driven by a very favorable effective income tax rate and competitive business operating costs in such areas as transportation, employee benefits, natural gas and factory leasing. Orlando benefited from very competitive costs for salaries and wages, and employee benefit plans.
- Tampa and Dallas-Fort Worth – Tampa had the lowest labor costs of all the large U.S. cities, along with low downtown office leasing costs. Dallas-Fort Worth had particularly strong cost advantages for utilities and facilities, which contributed to the location’s ranking for lowest overall business operating costs among the large U.S. cities examined in the KPMG study.
- Baltimore, St. Louis and Cleveland – Baltimore ranked sixth in the study with a cost index of 97.0, benefiting from the lowest suburban office lease costs among large cities and low property-based taxes. St. Louis and Cleveland followed Baltimore, both with a cost index of 97.1. St. Louis’ low costs for factory leasing and electricity contributed significantly to its ranking, while Cleveland benefited from low office lease costs.
- San Francisco and New York – In contrast, San Francisco and New York represent the most expensive large U.S. cities in which to do business, with cost indexes of 104.5 and 103.4, respectively, reflecting their high labor and facility costs, as well as high sales tax costs in San Francisco and utility costs in New York.
Other Factors Influence Site-Selection
“While business costs are a major component of the site-selection process, organizations should carefully consider non-cost factors that influence the business attractiveness of different locations,” Powell said. “Our study addresses these non-cost factors, which include labor availability and skills, economic conditions, infrastructure, innovation, regulatory environment, cost of living and quality of life.”
Cost indexes for the 27 large U.S. cities follow. The baseline cost index (U.S. = 100.0) is defined as the average of business costs in the four largest U.S. metropolitan areas: New York, Los Angeles, Chicago and Dallas-Fort Worth.
KPMG’s 2012 COMPETITIVE ALTERNATIVES STUDY
(U.S. Cities with population of more than 2 million)
Cost Index Rank City Cost Index Rank
Cincinnati, OH 95.9 1 Riverside-San Bernardino, CA 98.6 15
Atlanta, GA 96.2 2 Detroit, MI 98.7 16
Orlando, FL 96.3 3 North Virginia, Metro D.C. 99.2 17
Tampa, FL 96.4 4 Chicago, IL 99.3 18
Dallas-Fort Worth, TX 96.5 5 Portland, OR 99.3 19
Baltimore, MD 97.0 6 Philadelphia, PA 99.4 20
St. Louis, MO 97.1 7 Sacramento, CA 100.0 21
Cleveland, OH 97.1 8 San Diego, CA 100.6 22
Pittsburgh, PA 97.2 9 Los Angeles, CA 100.9 23
Phoenix, AZ 97.6 10 Boston, MA 101.2 24
Miami, FL 97.8 11 Seattle, WA 101.5 25
Houston, TX 97.8 12 New York, NY 103.4 26
Minneapolis, MN 98.3 13 San Francisco, CA 104.5 27
Denver, CO 98.4 14 — — —
Cost-index figures were created by measuring the combined impact of 26 cost components that are most likely to vary by location. More than 1,900 individual business scenarios were examined, analyzing more than 50,000 items of data.
These results are part of a global 2012 Competitive Alternatives study, which measured business operating costs in more than 110 cities in 14 countries. The complete 2012 global study is available online at www.CompetitiveAlternatives.com <http://www.competitivealternatives.com/