What Gets Measured Gets Managed
Some places care a lot about getting things done, other places are tied up in knots of red tape. Since Alliance invests in commercial real estate across the US, we have gotten to see first hand what a difference location can make. Clearly, we prefer the business-friendly locations.
Over my career, I’ve followed the rise of ease of doing business indices with great interest. These lists have become increasingly popular because they add valuable transparency for investors. I’m in favor of anything that helps investors understand their risk profile.
In this case, the risks I’m thinking about are complex and opaque tax codes, confusing regulatory processes, and onerous permitting requirements. If it’s hard to predict when, or even if a needed permit will be issued, it gets very difficult to justify a big investment.
Rankings are always imperfect and can be subject to “gaming” as we have seen many times. But these lists are worth the downside. For one, the alternative is to really have no idea what’s going on. But more importantly, these lists help establish trend lines over time.
It might be hard to tell how a college stacks up against its hundreds of peers. It can similarly be tough to know ahead of time whether one mid-sized city will be much easier to deal with than another one. But watch the rankings over time, and you can start to get a sense of what their managers care about. That trend is a super helpful leading indicator of where to invest for future performance.
In business, there’s a saying that’s been passed around for decades: what gets measured gets managed. This is mostly true, and ease of doing business rankings are bringing that needed accountability to local governance. If you want more investment, here are the things you need to improve.
Here in the US, and around the world, this kind of transparency is spreading, and it’s making a really positive impact. There’s a virtuous cycle, where leaders know that people are paying attention, and that leads to even more improvements. So I’ll keep watching the business rankings and looking for the locations that are rising. In real estate, momentum plays out over many years, and it pays to catch the leading indicators.