Picture, if you will, the following scenario.

Despite the sluggishness of the overall economy, your company is actually doing rather well. In fact, you have more orders than you can possibly handle and are seriously considering opening up another manufacturing facility (or distribution center, or call center, or sales office - you get the gist).

In site selection, there are literally hundreds of things to look at and analyze in order to come up with the best location - items like work force quality and quantity, business climate, taxes (what kind and how much), transportation infrastructure, etc.

Add to that real estate - both availability and cost.

Getting the best deal

The odds are great that, once you make the commitment to open up a new facility or back-office operation, you'll want to be up-and-running as quickly as possible. That's why being able to compare the vacancy rates for different types of buildings throughout the country is so important.

And if you do find an existing building or structure that meets your basic needs, you want to get it at the best rate possible. That's where knowing the various average rental and purchase prices comes into play.

If you can't find an existing building, or find one at a reasonable price, it's important to know how much it will cost you to build the type of facility you need in a particular city or town.

As in years past, Expansion Management's Top 40 Real Estate Markets is based upon information provided by two of the nation's leading real estate companies: Grubb & Ellis, which publishes "Office Market Trends" and "Industrial Market Trends," and The National Real Estate Index, which publishes the "Market Monitor."

Our data is broken down into three principle areas: downtown office, suburban office and warehouse, and we looked at each in terms of costs and vacancy rates. When we looked at costs, we looked at both rental and purchase prices.

For construction data, we used RS Means' "Construction Cost Estimator," which compares the cost of material, labor and equipment among various cities across the United States. We have analyzed this data and come up with this year's Top 40 Hottest Real Estate Markets for expanding and relocating companies.

This year's No. 1 city is El Paso, Texas, followed by Tulsa, Okla., Greensboro/Winston-Salem, N.C., Greenville-Spartanburg, S.C., and Birmingham, Ala. Rounding out the Top 10 are Oklahoma City, Okla., Louisville, Ky., New Orleans, La., Memphis, Tenn., and Salt Lake City, Utah.

Part of the plan

So why do these cities appear on our Top 40 list? And what does that fact mean for you, the expanding or relocating company?

For starters, the listed cities didn't make the list by accident. A place on this ranking might tell you something about the business climate in an area. The top city on our list, El Paso, has a number of natural real estate advantages.

"It's extremely important to have the assets to market to new and expanding companies that want buildings ready to meet their timetables," said Roberto Franco, director of economic development with the City of El Paso.

Cities near the top of the list make it a point to have viable properties to show prospective companies.

"Having product (buildings and land) is one of the most important parts of our arsenal," said Ted Von Cannon, president of the Birmingham Metropolitan Development Board, which checked in at No. 5. "In order for an area to be attractive to companies, you've got to have some available buildings or sites, and it's got to be at a reasonable cost."

Local governments aren't usually responsible for a favorable real estate climate in a given area. However, government can go a long way toward creating a situation where developers get to do what they do best - build offices or industrial buildings.

And companies like to see a metro area that has lots of activity. If office complexes and manufacturing plants are popping up, then maybe that city is a great place to do business.

"We've found that companies want to see other companies that have also expanded into our area," said Gregory Wingfield, president of the Greater Richmond (Virginia) Partnership, which ranked No. 20. "This gives companies a confidence level that the decision they are making is a good one. They're not going it alone."

In the Birmingham area, you literally need a scorecard to keep track of all the government entities in the five-county MSA that encompasses Birmingham.

"You laugh, but there are 85 units of government in those five counties," said Birmingham's Von Cannon. "Those areas have done a good job of working together and making sure there's plenty of opportunities for businesses."

Another place with opportunities for companies is Norfolk, Va. (No. 12). Technology companies are snapping up properties in the Granby District in downtown Norfolk.

"There is a new 19-story office tower under construction, and our offering of "cool space" is responsible for attracting a new base of companies and young professionals to not only work, but live downtown," said Rod Woolard, director of development for the City of Norfolk.

One of the selling points of the Omaha, Neb., (No. 24) area is the diversity of available real estate. Omaha's downtown is undergoing rapid change, with a lot of development along the riverfront as well as the outlying areas.

"This metro area offers a choice of an urban or rural setting," said Rod Moseman, vice president of the Greater Omaha Chamber of Commerce. "And we find that companies like and appreciate that. Even if they have a downtown office, they can live outside the city, or vice versa."

Another city in the middle of the country - Oklahoma City (No. 6) - made a concerted effort, along with the state of Oklahoma, to improve its downtown area.

"The Metropolitan Area Projects Plan has been a major initiative to improve the downtown Oklahoma City area," said Tracy Alford, Oklahoma Department of Commerce promotions manager. "There has been a lot of construction in the downtown area close to the convention center and the ballpark."

Big projects have a ripple effect

Sometimes, a mega-expansion project in a city creates great opportunities for other businesses in the area. In Richmond, Capital One and Infineon Technologies are constructing new campuses and adding new employees.

When companies like Capital One and Infineon move into their new digs, that opens up some great space for other firms.

"We want to have a competitive marketplace, where companies have some choices in types of sites as well as price," said Wingfield. "That's a good situation for both companies and a city."

A hot real estate market adds another benefit - a thriving and competent local construction labor force.

"Projects can now be completed quicker here," said Richmond's Wingfield. "We have built up some quantity and quality in the local construction market so that projects can be fast-tracked. There's more options locally for companies to choose from."

In Norfolk, Ford Motor Co. recently announced plans for a $375 million expansion of its F-150 assembly plant.

"We expect to see a substantial increase in manufacturing/distribution operations by key suppliers," said Norfolk's Woolard.

Balance is the key to (real estate) life

Of course, any piece of real estate is attractive because of what surrounds it and what people are willing to pay for it. It's why you can get a chunk of land in the middle of farm country for a fraction of what it costs in downtown Manhattan.

In other words, most of the cities listed here are great places to do business, and not just spots for great real estate deals. Nashville, Tenn. (No. 16), fits this description.

"The market is in balance here," said Fred Harris, vice president of the Nashville Area Chamber of Commerce. "We've done a lot of call centers, but also facilities to house 400 systems analysts for Sprint PCS."

The Greensboro/Winston-Salem metro area (No. 3) is also turning heads.

"The dynamics of our region increase the interest in real estate," said Robert Leak, Jr., president of Winston-Salem Business Inc. "The Triad Region has a tremendous transportation network, easy access to the Triangle and Charlotte and an expanding business community. This creates a demand for all types of real estate."

Transportation gains more prominence

While cheap land is great, it doesn't mean much if you can't get your goods to your customers in time. Many of the locations in our ranking offer terrific transportation options.

"Given our strategic location - the crossroads of two major interstate highways (85 and 26), proximity to GSP International Airport and only a four-hour drive from the Port of Charleston - Spartanburg County business and industry benefits from our transportation infrastructure," said R. Carter Smith, senior vice president, economic development, of the Spartanburg Area Chamber of Commerce.

San Antonio, Texas, (No. 11) is another city with transportation advantages and a quality business climate.

"A company looking for a greenfield site could choose a location at KellyUSA (a former air force base) with access to a runway or a beautiful Hill Country campus environment in northwest San Antonio," said Mario Hernandez, president of the San Antonio Economic Development Foundation.

What does the future hold?

If you're a company that's ready to expand or relocate, you want a city that will meet your real estate needs not only now, but down the road as well.

Does the area still have room to grow? Have prices risen dramatically over the last few years, or will the city continue to be affordable? Does the city have a long-range plan?

And the knowledge gathering shouldn't stop once the project is complete. After all, you never know when your boss might march through the door and say those magic words - "We need to expand."

Bill King is the chief editor, and Lance Yoder is the managing editor, of Expansion Management Magazine. You can contact them at (913) 381-4800.