Doing business in a big city? It'll cost you
The price of doing business in a major city can be a double-edged sword: You pay more, but you probably end up with access to more business opportunities.
But some metropolitan areas are so pricey that business costs can push a company or person to their financial limits. According to IHS (IHS), the costliest metropolitan areas are mostly on the U.S. east and west coasts. Those regions "tend to have higher than average wages, as well as high real estate and energy prices," along with land constraints and high population densities, the research firm says.
IHS's "Business Cost Index" (BCI) calculates businesses' labor, energy, real estate and other costs in different cities, measuring the total expenses that a typical firm faces in these categories. That figure is then divided by average business costs nationwide. A score above 100 indicates that it is pricier to do business in a given metro than in the U.S. overall, while a score below that level means it is less costly.
Here are what IHS lists as the 10 most expensive American metropolitan areas for doing business as ranked by their BCI scores.
- Honolulu, Hawaii 145.9
- Bridgeport-Stamford-Norwalk, Connecticut, 125.7
- New York-Northern New Jersey-Long Island, (NY-NJ-PA) 123.4
- Washington, DC, Arlington-Alexandria (DC-VA-MD), 122.4
- San Francisco-Oakland-Fremont, California, 121.8
- San Jose-Sunnyvale-Santa Clara, California, 121.6
- San Diego-Carlsbad-San Marcos, California, 120
- Los Angeles-Long Beach-Santa Ana, California, 118.7
- Oxnard-Thousand Oaks-Ventura, California, 115.5
- Boston-Cambridge-Quincy (MA-NH), 114.7
Not surprisingly, most of the metropolitan areas in the top 1o are major cities or suburbs of those cities. As for Honolulu, the cost of living in Hawaii has always been an issue.
"The primary problem is that a cost of living more than 50 percent higher than the norm makes it very difficult to make a decent living, and wages in the state are not nearly high enough to compensate," Tom Yamachika, interim president of the Tax Foundation of Hawaii, recently noted in a commentary in the Hawaii Reporter.
"On top of that," he added, "employees surveyed for the Gallup-Healthways study gave the state very low grades for its work environment."
And here are the 10 least expensive U.S. metro areas for conducting business, according to the IHS rankings.
10. Sioux City (IA, NE, SE), 89
9. Memphis, Tennessee, 88.9
8. Canton-Massillon, Ohio, 88.9
7. Akron, Ohio, 88.8
6. Knoxville, Tennessee, 88.2
5. Chattanooga, Tennessee, 87.6
4. El Paso, Texas, 87.3
3. Monroe, Louisiana, 87
2. Lake Charles, Louisiana, 86.8
1. Beaumont-Port Arthur, Texas, 85.9