- Created on Sunday, 04 June 2006 01:44
- Written by Craig Lloyd
Supply and Demand. This basic business principle affects your ability to hire management talent in two critical ways. Some types of experienced candidates (e.g. chief engineer with tunnel experience) are in short supply -the demand has resulted in on going open positions and / or increasing salary levels.
The second supply and demand affecting your ability to hire external candidates or promote / transfer internal candidates is the decreasing supply of house inventories in the $ 200,000 to $ 350,000 range. This is particularly seen in Metropolitan Statistical Areas (MSA), including the urban land of a city and its suburbs as well as the rural land that surrounds them.
Often the lack of a local supply of experienced laundry plant manager, chief engineer, sales manager, service manager or GM candidates necessitates the consideration of candidates who will need to move to your MSA to accept your job offer. Chances are these candidates are in the middle stages of their career, so they need four bedrooms, a two car garage, and good schools. Ideally they will move from a comparable MSA and transfer their current home equity into a comparable house in your MSA. Typically what happens is a chunk of their equity gets eaten up by the broker’s commission and a second mortgage payoff. As a result, the equity often diminishes to a smaller available down payment for house hunting.
Do the math. Chances are the candidates will need at least 2500 sq feet. At $125 sq foot the homes will be in the $300,000 range. If the employee’s salary is in the $ 60,000 range then the monthly take home (after taxes, medical, etc) will be about $3800. Even if they have $ 100,000 in transferable equity, a 30 year fixed rate mortgage loan for $200,000 plus taxes will grab at least $ 1800, leaving $2200. If the spouse isn’t bringing home a second pay check then this family is in trouble.
Ten, twenty thirty years ago this dilemma was limited to a handful of MSAs around the US. Metro New York, Los Angeles, San Francisco traditionally headed the list, with Chicago and Washington DC not too far behind. In the past two years the sticker shock of 4 bedroom houses has rattled many a candidate taking a plant tour for a prospective job offer or promotion. With just enough internet research they have enough ammunition to ask for a deal breaking salary or to the dismay of the employer, turn the offer down.
Our industry gets cornered with this issue because in most demographics the urban center of the MSA often has the greater supply of available low wage non exempt workforce, public transportation, existing laundry plant facilities, and proximity to the customers. Meanwhile, 42 of the top 50 US cities experienced population increases within their city (urban) limits between 1990 and 2000. These population increases have continued throughout the suburban segment of the MSA.
The critical trend is to figure out what 2500 sq ft houses sell for within 30 minutes of your plant. You can look at the supply (housing inventory in various price categories) and demand (market time needed to close) within each major MSA. Visit the Relocation Appraisers and Consultants (RAC) website at www.rac.net and look at the RAC Report for your MSA. Another helpful website is sponsored by the .Employers Relocation Council (www.erc.org).
Two other factors are twisting the knife – upward bound interest rates, and the rising cost of materials for new construction. Many of us have heard about sheet rock prices doubling this past year, but few people know about the Three River Gorges Dam in China corralling the world supply of concrete.
New construction has fueled sprawl - the spreading out of cities and its suburbs into rural land. Over a 20-year period, the 100 largest Urbanized Areas (1000 people per square mile) sprawled out over an additional 9 million acres, about half of America live in those 100 cities. During this period sprawl usually provided affordable housing within a 45 minute commute of urban laundry plants. In most MSAs the inventory (supply) of listings in the 30 to 45 minute commuting “belt” has decreased, so the houses sell quicker (demand), and the prices have trended upward. When the transferee realizes they cannot afford a $ 300,000 house in this belt, they are forced to look farther out, which lengthens their commute time to an hour or more.
One recent example of supply and demand occurred last year, and it was not even in a city. Remember how the Florida Gulf coast got hammered by hurricanes in the fall of 2004? At the time I thought there would be many real estate bargains available as coastal homeowners would sell at any price to get away from future hurricanes. In reality, the hurricanes demolished a significant part of the inventory, demand stabilized and prices skyrocketed. As a result laundry plants in the Florida panhandle have struggled to find management candidates financially able to relocate to their region.
Supply and demand affects the ability of employers to find good talent, and it affects good talents’ ability to find suitable housing.
Next month: Are there real solutions to the real estate dilemma?
Craig Lloyd represents LaundryCareers.com, a management search firm specializing in the industrial / institutional laundry industry. He holds a degree in Industrial Relations from Rider University and has been a Certified Personnel Consultant since 1979.
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