Human Capital & Careers

KPMG’s Battle of the Sans: It’s Juan over Jose

Accountancy calls them the cheapest and the costliest cities to do business in--and ranks 25 others between them.
Stephen TaubApril 1, 2008

The nation’s center of technology, followed by its financial capital, are the costliest cities for operating a business, according to a new survey from KPMG.

San Jose, nestled in the Silicon Valley, beat out New York for the title of most expensive among 27 U.S. and affiliated cities/locations with populations exceeding 1.5 million. They were followed by Trenton, N.J.; Detroit; and Boston.

At the other end of the scale, San Juan led Atlanta, Tampa, and Dallas Fort-Worth for the honor of least-expensive city for doing business.

A Faster Close with NetSuite ERP

A Faster Close with NetSuite ERP

Learn how Ubiquity Retirement + Savings switched from QuickBooks to NetSuite ERP and brought their close from 21 days to five.

KPMG’s study of the most cost-competitive cities for operating a business measured 27 significant cost components that are most likely to vary by location, including labor, taxes, real estate, and utilities, as they apply to 17 industries, over a 10-year planning horizon. Data on a variety of non-cost competitive factors was also compared.

KPMG asserted that the study enables companies to perform a “quick scan” of jurisdictions to determine which can offer a cost-competitive business environment.

More than 2,000 individual business scenarios were examined, analyzing more than 50,000 items of data, KPMG claims. The overall study measured business-operating costs in 136 cities throughout 10 countries.

“Selecting the best site for a business operation requires balanced consideration of many factors, including business costs, business environment, personnel costs and quality of life issues,” said Hartley Powell, national leader for KPMG’s Strategic Relocation and Expansion Services practice. “This study offers a comprehensive guide for comparing business costs in the United States and contains valuable information for any company seeking a cost advantage in locating a business operation.”

According to the study, Atlanta’s ranking was driven primarily by a favorable effective corporate tax rate as well as a very competitive position among many other cost factors, including labor and industrial land.

Tampa benefited from very competitive labor costs (by continental U.S. standards) and moderately low facility costs, while Dallas Fort-Worth was helped by very low costs in natural gas and industrial construction.

KPMG also pointed out that the cost-competitiveness of Atlanta and Tampa, along with seven mid-sized and small city locations in the study, contributed to the Southeast’s position as the lowest cost region in the United States.

KPMG pointed out that high costs of operating a business in San Jose and New York reflect the high labor costs of San Jose’s technology-based economy and New York’s position as the most populous city in the United States.

In general, labor and facility costs are among the most significant location-sensitive cost components, according to KPMG, and New York and San Jose have very high costs in both of these areas.