Location USA 2018/2019 Area Development

LOCATION USA FOR

THE

CORPORATE

INVESTOR

THE GLOBAL LEADER

in Business & Investment

Secret to SITE SELECTION SUCCESS

Assembling

THE TEAM CHALLENGES

Facing the International Project Manager

FDI & Reshoring

An Effective

RFP PROCESS MADE IN AMERICA:

U.S. Manufacturing Outlook

LOCATION USA.com

2018/2019

NEW JERSEY WHERE COMPANIES GROW A highly educated workforce. A strategic location. A business environment that’s connected to the world. An ideal gateway to the U.S. for international companies.

VISIT CHOOSENJ.COM

+1 609.297.2200 | info@choosenj.com 201 Rockingham Row, Princeton, New Jersey AREA0808.indd 1

21/05/18 4:18 PM

LOCATIONUSA

6

Table of Contents

19

he United States Remains the T Global Leader in Business and Investment

An improving business climate, including tax cuts and elimination of onerous regulations, bodes well for manufacturing in the United States.

The United States is the best place in the world to invest and do business. This isn’t hyperbole — it’s a fact.

9 The Secret to Site Selection Success Following the recipe of labor, real estate, and incentives has become a proven framework for both foreign and domestic companies to make educated decisions on new sites.

12

he Team…and the Timing When Making T a U.S. Location Decision

The company’s executive team, working in conjunction with outside legal and other consultants in a timely manner, can create a “win” for both the business and the community in which it chooses to locate.

15

F DI & Reshoring Lead to U.S. Manufacturing Growth

hallenges Facing the International Executive/ C Project Manager

Each FDI project is unique and faces a unique set of challenges, but an interview with one foreign project manager helps to shed light on the process of setting up a facility in the U.S.

22

n Effective RFP Process for A Your Next U.S. Capital Investment

A poorly managed RFP process may cause delays, distractions, and produce bad information for your next project. A well-executed process considers the goals of the project and crafts an RFP process with that end in mind.

25

ade in America: An Outlook for Manufacturing M in the U.S.

Multinational firms continue to make significant investments in U.S. manufacturing facilities and logistics networks regardless of vagaries in trade policy.

Letter from E. Erin Walsh There has never been a better time for companies to invest, grow, and create jobs in the United States. That was the clear message President Trump delivered in January to the global business community at the World Economic Forum, and that I am proud to share with you in the 2018 edition of LocationUSA magazine.

The United States is entering a new era of economic growth, with the first major reform of the U.S. tax code in 30 years, and a renewed focus on enabling businesses to operate with greater efficiency. With fewer regulations, a simplified tax structure, and new infrastructure improvement initiatives, U.S. leaders are working to create an environment in which all companies operating in the United States can flourish. This is making the United States one of the top destinations for business investment.

These reforms build on a legacy of productivity and innovation.

The U.S. market has topped the A.T. Kearney FDI Confidence Index for five years in a row and ranks as the easiest place to do business among countries with populations of more than 100 million, according to the World Bank’s Doing Business 2017 report.

Businesses of any size can succeed here — large automakers, small software companies, energy producers, service providers, and everything in between have found success in America — which is one reason why the Global Entrepreneurship Index ranked the United States first of 137 countries for entrepreneurship in 2017.

The U.S. Department of Commerce provides data, actionable business intelligence, and helps navigate the U.S. regulatory system for firms looking to invest in the U.S. market. Another way to take advantage of our services is through the annual SelectUSA Investment Summit, the highest-profile foreign direct investment event in the United States. Companies from around the world have the opportunity to explore investment locations and meet directly with the people who drive investment projects forward. Participants also hear about the U.S. investment climate directly from policymakers and business leaders, while also learning of specific investment resources and tools. Learn more about our Investment Summit and services at selectusa.gov, follow us on Twitter @SelectUSA, or connect with our colleagues in the U.S. Commercial Service located in offices across the United States.

On behalf of SelectUSA, I would like to express appreciation and gratitude to Area Development and the entire team behind the LocationUSA magazine. Now is the time to explore opportunities in the United States, and the SelectUSA team looks forward to working with you.

Sincerely,

E. Erin Walsh Assistant Secretary of Commerce for Global Markets, and Director General of the U.S. and Foreign Commercial Service

visit us at LOCATION USA.com

TOCLetter.indd 3

3

5/29/18 11:00 AM

LOCATIONUSA ARKANSAS

18

Arkansas Economic

Development Commission Arkansas is growing a workforce that is ready to succeed in the 21st century economy. The state — through strong relationships between industry, higher education, and state government — is nimble and responsive to needs of industry in workforce development.

Arkansas stands ready to meet the demands of a growing global economy with a skilled workforce that is second to none.

Jeff Moore, Executive Vice President, Marketing & Communications Arkansas Economic Development Commission 900 West Capitol Avenue, Suite 400 Little Rock, AR 72201 501-682-7317 JMoore@arkansasedc.com www.arkansasedc.com

NEW JERSEY

C2 Choose New Jersey, Inc. A highly educated workforce, a perfect location in the heart of the U.S. Northeast corridor, and a business environment that’s truly connected to the world make New Jersey an ideal gateway for international companies.

Add a world-class transportation infrastructure and a history of innovation and it’s easy to see why businesses choose New Jersey.

Margie Piliere Chief Economic Development Officer Choose New Jersey, Inc. 201 Rockingham Row Princeton Forrestal Village Princeton, NJ 08540 609-297-2200 mpiliere@choosenj.com www.choosenj.com NORTH CAROLINA

27

IOWA

C3

Iowa Economic Development Authority The state of Iowa is a worldwide leader in the advanced manufacturing, biosciences, and finance and insurance industries centered in the U.S. heartland. The state offers a low cost of doing business and is the easiest state in the country for companies to purchase renewable energy.

Debi Durham, Director The Iowa Economic Development Authority 200 East Grand Avenue Des Moines, Iowa 50309 515-725-3000 opportunities@iowaEDA.com www.iowaeconomicdevelopment.com

KENTUCKY

C4

Sponsors

Kentucky Cabinet for

Economic Development Kentucky offers companies a probusiness environment like no other.

Find out how our central location, skilled and available workforce, and tremendous quality of life will exceed your business needs.

John Bevington, Commissioner Kentucky Cabinet for Economic Development Old Capitol Annex 300 W. Broadway Frankfort, KY 40601 502-564-7670 or 1-800-626-2930 John.Bevington@ky.gov www.ThinkKentucky.com

Economic Development

Partnership of North Carolina (EDPNC) The Economic Development Partnership of North Carolina (EDPNC) assists companies during their search for new locations in North Carolina.

EDPNC assists with real estate identification, helps navigate taxes and financial incentives, and provides labor, wage and other requested data to inform location decisions.

Korey Howard Senior International Business Development Manager Economic Development Partnership of North Carolina (EDPNC) 15000 Weston Parkway Cary, NC 27513 919-447-7797 korey.howard@edpnc.com www.edpnc.com

OHIO

29

AEP Economic & Business

Development Covering 11 states, the Economic and Business Development team at American Electric Power (AEP) provides comprehensive, no-cost location advisory services to help you locate or expand your business. We also maintain an extensive portfolio of over 600 properties, including a large inventory of sites prepared for immediate development.

Emily Tucker, International Targeted Marketing Manager AEP Economic & Business Development 1 Riverside Plaza Columbus, OH 43215 800-360-7483 or 614-716-1273 ejtucker@aep.com www.aeped.com

TENNESSEE

5

Tennessee Department of

Economic and Community Development It’s no accident that some of the biggest and most respected brands in the world have chosen to call Tennessee home. We provide companies a central location with unparalleled infrastructure, a highly qualified workforce backed by game-changing education reform, a low tax burden, and a collaborate environment with a business-friendly administration.

Allen Borden Deputy Commissioner of Business, Community and Rural Development Tennessee Department of Economic and Community Development 312 Rosa L Parks Avenue Nashville TN 37243 615-624-2185 allen.borden@tn.gov TNECD.com

WASHINGTON

11

Port of Vancouver USA The Port of Vancouver USA is one of the major ports on the Pacific Coast.

Located on the Columbia River, its competitive strengths include available land, warehouse space, versatile cargohandling capabilities, vast transportation networks, a skilled labor force, and an exceptional level of service to its customers and community.

Mike Schiller, Director of Business Development Port of Vancouver USA 3103 NW Lower River Road Vancouver, WA 98660 360-693-3611 • Fax: 360-735-1565 mschiller@portvanusa.com www.portvanusa.com

Published by

400 Post Ave., Westbury, NY 11590 USA 516-338-0900 • Fax: 516-338-0100

PUBLISHER: Dennis J. Shea

ART & DESIGN: Patricia Zedalis

ADVERTISING:

DIGITAL MEDIA MANAGER: Justin Shea

BUSINESS SERVICES

EDITOR: Geraldine Gambale

PRODUCTION MANAGER: Jessica Whitebook

Bill Bakewicz

BUSINESS DEVELOPMENT: Matthew Shea

Barbara Olsen

FINANCE: Mary Paulsen

PRODUCTION ASSISTANT: Talea Gormican

Valerie Krpata

WEB DESIGNER: Carmela Emerson

4 LOCATION USA

SponsorMasthead.indd 4

© Copyright 2018

for free site information, visit us online at www.areadevelopment.com

5/29/18 12:09 PM

AREA0791.indd 1

27/04/18 6:55 PM

LOCATIONUSA

The United States Remains the Global Leader in Business and Investment The United States is the best place in the world to invest and do business.

This isn’t hyperbole — it’s a fact.

Contributed by SelectUSA

The fundamentals that have made the United States a great place to invest remain strong, and pro-growth reforms like a lower tax rate and a reduction in regulatory hurdles make the U.S. business climate more favorable than ever. From a diverse, highly educated, and skilled workforce to strong intellectual property protections, it’s easy to see why millions of global business investors continue to select the USA. (STILL) THE TOP SOURCE OF FDI At $3.7 trillion, the total stock of foreign direct investment (FDI) in the United States is unrivaled. In fact, FDI was equal to 17 percent of U.S. GDP in 2016 alone. That same year, new FDI expenditures (to acquire, establish, or expand) totaled $457 billion — one of the largest-ever annual amounts, according to the Commerce Department’s Bureau of Economic Analysis.

COMMON SENSE PRO-BUSINESS REFORM The United States is focused on creating an environment that attracts investment and removes the hurdles that distract companies from their basic mission: to do business. A focus on regulatory reduction in the U.S. government has led to 22 federal regulations being removed for every new regulation created during the last year.

The recently passed Tax Cuts and Jobs Act lowered the U.S. corporate tax rate from 35 percent to 21 percent. That means companies operating here can keep more of their profits to reinvest in their operations — a significant benefit for any business.

These reforms, along with the proposed incentives to modernize U.S. infrastructure, are making the United States more attractive than ever as a business location.

SELECT THE USA FOR ENTREPRENEURSHIP When companies select the United States for investment, they’re not only bringing good-paying jobs to communities across the country, they’re tapping into a market powered by innovation. Noting a particularly fertile environment for build-

6 LOCATION USA

SelectUSA.indd 6

ing ideas into profitable businesses, the Global Entrepreneurship Index ranked the United States first out of 137 countries for its business-creation ecosystem.

With a deeply-rooted business culture of experimentation and evolution, wide access to capital, and other resources designed to help new ideas take flight, there is arguably no better market than the United States for entrepreneurs and startups to experiment, take calculated risks, and even “constructively fail.”

SELECT THE USA FOR INNOVATION Entrepreneurs benefit from — and contribute to — a flourishing ecosystem for invention and inspiration, thanks to the robust and comprehensive protection of intellectual property

for free site information, visit us online at www.areadevelopment.com

5/22/18 2:35 PM

Largest Sources of FDI in the United States (by UBO*)

Rank Market

Fastest-Growing Sources of FDI in the United States (by UBO*) Rank Market

2016 Position CAGR** in USD millions 2010–15

2016 Position in USD millions

Share of total

1 United Kingdom

$598,319

16.1%

1. Thailand

2 Canada

$453,641

12.2%

2. Argentina

$73,677

36.9%

$2,614

30.4%

3 Japan

$424,347

11.4%

3. China

4 Germany

$372,778

10.0%

4. Singapore

$2,082

55.5%

$4,935

46.4%

$58,154

44.7%

5 Ireland

$279,647

7.5%

5. Chile

6 France

$267,573

7.2%

6. Ireland

$279,647

28.1%

$36,869

24.1%

7 Switzerland

$196,595

5.3%

7. Brazil

8 The Netherlands

$191,937

5.2%

8. Israel

$55,362

21.3%

$73,677

2.0%

9. Turkey

$1,290

17.2%

$67,179

1.8%

10. Greece

$1,057

16.2%

$33,460

16.2%

9 Singapore 10 Spain 11 China

$58,154

1.6%

11. Bermuda

12 Belgium

$55,940

1.5%

12. Belgium

$55,940

14.7%

$38,750

14.4%

13 Israel

$55,362

1.5%

13. South Korea

14 Australia

$54,307

1.5%

14. Denmark

$17,726

13.0%

1.4%

15. Canada

$453,641

12.9%

15 Sweden

$52,730

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

* Ultimate Beneficial Owner

* Ultimate Beneficial Owner ** Compound Annual Growth Rate

rights. Every year, more than a million new applications are sent to the U.S. Patent and Trademark Office, patents that contribute to a system of world-changing innovation.

Likewise, the United States is a recognized leader in research and development and has one of the highest-acclaimed networks of universities and institutions in the world. This culture of innovation offers an added competitive advantage to the business community and keeps the United States at the cutting edge of new ideas, technologies, and prosperity.

MADE IN THE USA By selecting the United States, international companies become part of the cities and towns they are investing in.

Nearly seven million U.S. jobs — with an average salary well above the economy-wide average — are directly supported by the U.S. affiliates of majority foreign-owned firms. The impact doesn’t end there: millions more indirect jobs in an array of industries are created across the country as a result. These affiliates produce more than a fifth of all U.S. goods exports: $353 billion.

Additionally, companies exporting from the United States reap benefits not only from the “Made in the U.S.A.” brand premium (innovation, quality, and reliability) but also from U.S. government export assistance programs, giving U.S.-made goods a competitive edge in global markets.

Fastest-growing sources of FDI ranks markets with 2016 FDI stock in the United States greater than $1 billion.

SOURCING FDI FDI in the United States is growing and diversifying. As of 2016, the United Kingdom remains the single largest source at 16.1 percent (nearly $600 billion in total stock), followed

by Canada at 12.2 percent ($453.6 billion), and Japan at 11.4 percent ($424.3 billion). Increasingly, South America and Southeast Asia are among the fast-growing sources; Thailand, Argentina, and China all had compound annual growth rates (CAGRs) greater than 40 percent. Thailand, the fastest-growing source, had a CAGR of 55.5 percent.

If you are looking for the next step — either to invest or attract investment — there are several resources available.

FEDERAL-LEVEL SUPPORT SelectUSA is the U.S. national investment-promotion program that works to facilitate job-creating business investment and raise awareness of the important role that FDI plays in the U.S economy. SelectUSA serves as a single point of contact to help business investors and U.S. economic development organizations (EDOs) navigate the federal regulatory system.

Working with U.S. EDOs, the program supports business inves-

visit us at LOCATION USA.com

SelectUSA.indd 7

7

5/22/18 2:35 PM

LOCATIONUSA

tors seeking information and guidance about entering or expanding their operations in the United States. Support from the SelectUSA team helps businesses find inroads to investment opportunities and make the necessary connections to make deals happen.

MAKING VITAL CONNECTIONS: THE SELECTUSA INVESTMENT SUMMIT High-profile events like the annual SelectUSA Investment Summit facilitate many such

PRO-GROWTH REFORMS like a lower tax rate and a reduction in regulatory hurdles make the U.S. business climate more favorable than ever. connections, enabling business to explore locations across the nation in a matter of hours.

Investment Summit participants also hear about the U.S. business and investment climate directly from senior government officials and industry leaders, and learn about specific resources and tools to invest in the United States.

For more information, please visit the www. selectusasummit.us, and join the conversation on Twitter with #SelectUSASummit. • • • ABOUT SELECTUSA SelectUSA is the U.S. Department of Commerce-led program that promotes and facilitates business investment into the United States.

SelectUSA assists U.S. EDOs to compete globally for investment by providing information, a platform for international marketing, and high-level advocacy.

SelectUSA also helps investors find the information they need to make decisions, connect to the right people at the local level, navigate the federal regulatory system, and find solutions to issues related to the federal government. For more information, visit www.selectusa.gov.

8 LOCATION USA

SelectUSA.indd 8

KY Opportunity Zones Encouraging Investment Ever since Kentucky was among the first states to unveil the new, federally certified Opportunity Zones, interest in the new program has been high. The newly created Opportunity Zone Program1 is designed to drive long-term capital to distressed communities by providing tax benefits on investments in Opportunity Funds, or “O Funds.”

“We’ve had great response from companies and site selectors throughout the world, determining how to take advantage of this new program, which Gov. Bevin discussed the Kentucky Opportunity Zone Initiative, community engagement, and the role of provides significant development in bringing vibrancy to multiple tax breaks,” said Terry business neighborhoods on Louisville’s West side.

Gill, Secretary of the Kentucky Cabinet for Economic Development. In fact, the state’s Opportunity Zone website, www.KYOZ.com, has received thousands of visits, with hundreds of follow-up questions, and calls from potential clients have been promising.

“These are zones that want and need further development, with an abundant and talented workforce and available sites and buildings. The tax advantages make a good situation for companies and developers even better,” added John Bevington, Commissioner of Business Development at the Cabinet.

Kentucky was awarded 144 opportunity zones throughout the state in both urban and rural areas. Louisville, for example, has 19 different tracts of land suitable for immediate growth in the western part of the city. During a recent meeting with community leaders in Opportunity Zone areas in Louisville, Dan Caudill, co-owner of Caudill Seed, a second-generation family business employing about 100 people in one of the designated zones, explained the importance of the new investment: “We are a 71-year-old company and we’ve been able to access an incredible workforce here in west Louisville.

Many of our employees walk to work or ride bicycles or ride the bus and they’re great,” he said. “Our company believes west Louisville’s time has come, and we want to encourage the community’s growth.”

Rural areas are starting to feel the increased interest as well. In Hazard, Kentucky, Governor Bevin told citizens, “Our hope is that this initiative will provide a catalyst for economic revitalization in both our rural and urban communities. We believe that the future is bright indeed for proud cities like Hazard, which stand ready and willing to seize upon innovative new possibilities.”

The U.S. Treasury is finalizing regulations for implementation of the zones, but Gill and Cabinet Co-CEO Vivek Sarin are already selling the benefits to companies globally, just recently returning from Japan and the Republic of Korea. https://www.enterprisecommunity.org/blog/2018/01/opportunity-fundstax-reform-created-a-new-class-of-community-investment-vehicles

1

Copy supplied by Kentucky Cabinet for Economic Development

for free site information, visit us online at www.areadevelopment.com

5/22/18 2:36 PM

LOCATIONUSA

The Secret to Site Selection Success Following the recipe of labor, real estate, and incentives has become a proven framework for both foreign and domestic companies to make educated decisions on new sites.

By Meredith O’Connor, International Director and Headquarters Practice Group Co-Chair, JLL Traveling to 20-plus states in two months with the Toyota and Mazda site selection teams confirmed something I have always known for sure. Incentives are a critical part of the site selection process, especially when pursued hand-in-hand with a sound labor strategy. Whether you’re evaluating an industrial or an office opportunity, that decision should always be driven by your people.

People make the widgets, manage the supply chain, market your brand, and drive business strategy. After identifying your ideal labor force, explore real estate development sites next to determine the most well-suited location for your operational needs and your team’s productivity and satisfaction. Look for incentives as the necessary push to get your deal past the finish line, and set your team up for long-term success. Economic incentives aren’t a secret anymore; they’ve become more of public auction. Given the past year’s splashy, household-name searches, it’s more important than ever for companies to come to the table educated and for states to have a new baseline level of programs in play and ready to deploy.

After years of partnering with many global Fortune 500s on their next headquarters offices and manufacturing facilities, our team has sharpened the ability to marry global and local perspectives, acting as a trusted facilitator of corporate and governmental partnerships that drive economic growth. Below I’ll outline our approach, which has been shaped by experience, positive outcomes, hard data, and qualitative observations made on the site selection trail.

LABOR COMES FIRST. As increasing numbers of global companies consider the United States for their next facility or headquarters location, we’re looking at labor analytics in an entirely new way. Every search should start with labor availability and, more specifically, job classification requirements. Companies gain a full picture of a potential future workforce by analyzing net migration and population growth, which are integral, forward-looking indicators for an investment-heavy site that will be operational for decades to come.

Around the country, job growth continues rapidly even with

talent shortages and employment occurring faster than the labor force can expand. But these workforce shortages can’t be ignored, especially when the complexion of your labor force is highly specialized. Finding the right talent, today and tomorrow, that won’t abandon ship for a marginally higher salary at a competitor, takes a deep dive into specific areas’ populations and long-term potential. Choosing a site with the cheapest labor today may be a harmful, short-sighted mistake without the proper analysis, causing significant turnover, hiring challenges, and productivity drains in the long run.

The U.S. economy is driven by talent. Before kicking off Toyota and Mazda’s $1.6 billion auto plant search, we spent a lot of time digging into the key characteristics of both companies’ ideal team members. I’ll note here that they make a point to refer to them as “team members,” which indicates a keen understanding that it takes a successful front line to lay the foundation to achieve global business goals. One of the major reasons Huntsville, Alabama, ended up winning this historic prize was its rare combination of skilled manufacturing and knowledge workers; but we didn’t just take the numbers at face value. On our tours in each state, we made a point to interview various HR directors and large employers in the area,

visit us at LOCATION USA.com

TheSecret.indd 9

9

5/22/18 2:42 PM

LOCATIONUSA

which helped validate our understanding of the marketplace with firsthand, local observations.

“BUT THERE’S LAND EVERYWHERE.” Toyota and Mazda required thousands of acres of land, which you would think would be easy to find in a country as vast as the United States. We saw land everywhere, but wellequipped mega sites that were truly ready for construction and move-in were more elusive. National site searches offer states and local developers the opportunity to assemble unique and often massive development parcels.

The real estate piece of site selection is an invaluable opportunity for public-private partnerships. When developers and municipalities can consolidate WITH TODAY’S ownership and collaborate on national publicity infrastructure around incentives, (rail, power, company names sewer, etc.), the resulting sites can no longer start to sell much remain a big secret more than the until they are ready land itself. Then they can begin to announce a final telling a story decision. around connectivity, a live/work/ play lifestyle for employees, and highly efficient operations and supply chain.

The front-end cost may oftentimes require millions, including federal funds. But for the potential economic impact, landing this facility or the next one, it is well worth the investment.

Mega sites are deserving of serious consideration by both states and foreign companies alike. And they can take many different forms, from a suburban build-to-suit to an urban hub that can accommodate large populations, quickly, in large city centers. Take the city of Greensboro, North Carolina, for example, a finalist in the Toyota and Mazda search. The city proactively reached out to our team with a mega site. Once they made the list, the city completed years of work on the site within a five-month period, allowing them to compete on a national stage with a site that was not on our radar the previous year.

One of the reasons my hometown of Chicago has been very successful in landing major headquarters moves and iconic projects — from ConAgra in the Merchandise Mart to the Obama Presidential Center on the South Side — is the city’s ability to mobilize quickly. The capacity to move from announcement to relocation within 18 months is almost unheard

10 LOCATION USA

TheSecret.indd 10

of, and combining this speed with unconventional real estate offerings and alternatives has positioned Chicago at the top of corporate tour itineraries.

BROADEN THE INCENTIVES “WISH LIST.” With today’s national publicity around incentives, company names can no longer remain a big secret until they are ready to announce a final decision. That might make some companies fearful of the attention, but I would like to suggest that it can be a positive development, and I certainly will not miss trying to find old project folders with indecipherable code names.

Both governments and businesses can benefit when we can share the name of the searching company as openly and widely as possible. There are exceptions, of course, in situations like a full corporate headquarters relocation where companies have sensitivities about losing their top talent. But by going public, companies can tell a convincing, specific story about the benefits they could create in a new market. This allows states and economic development groups to craft a customized incentives package more likely to close the deal. Lately, we are seeing both sides come to the table with nontraditional incentives, which are creative and effective ways to encourage corporate investment.

When considering your incentives “wish list,” take the time to think bigger and broader than traditional tax abatement or job training. States will take your requests seriously and respond with thoughtful alternatives when there are large numbers of jobs or a substantial capital investment (i.e., a data center) at stake. For example, imagine your own ombudsman within the permitting department who serves as a single point of contact for your interactions with all government agencies.

For a big brand, perks like naming rights or product displays in high-density areas (like the airport) could prove priceless. For others, exclusive sponsorship opportunities within the community could be key for generating local goodwill. We can’t forget that companies need a cultural fit as well, meaning they can conduct their business in a location that reflects their core values.

IN SUM… Following the recipe of labor, real estate, and incentives has become a proven framework for companies to make educated decisions on new sites. While traditionally there can only be one winning location, the playbooks that governments have created for corporate users scouting locations are a worthy exercise. If they tell a memorable, distinctive story, they can be reused when — not if — future pursuits hit the market. The demand is there, the volume is only growing, and both companies and states won’t be taking their feet off the gas any time soon. • • •

for free site information, visit us online at www.areadevelopment.com

5/22/18 2:43 PM

Port of Vancouver USA 22 Acres of Heavy Industrial Property Your U.S. West Coast Solution

1

Parcel 1A

SR

il a R

or d ri r Co

-50

Columbia River

8QEHDWDEOH ORFDWLRQ (DV\ $FFHVV 5DLO 6HUYHG 7KH 3RUW RI 9DQFRXYHU KDV UHDG\ WR EXLOG DFUHV 3DUFHO $ RÎ? HUV SUR[LPLW\ WR RFHDQ ERXQG DQG ULYHU VKLSSLQJ ODQHV QDWLRQDO UDLO OLQHV DQG PDMRU LQWHUVWDWH KLJKZD\V 7KLV SURSHUW\ LV LGHDO IRU KHDY\ LQGXVWU\ DGYDQFHG PDQXIDFWXULQJ VXSSO\ FKDLQ VXSSRUW DQG LV DPRQJ SOXV RWKHU LQGXVWULDO EXVLQHVVHV PDNLQJ LW RQH RI WKH PRVW GHVLUDEOH ORFDWLRQV LQ WKH UHJLRQ

Property Features •

Approximately 22 divisible acres

•

Zoned Heavy Industrial (IH)

•

Rail served

•

Level compacted gravel base

•

Utilities to property (includes water, sewer, storm, gas, power)

•

Long-term NNN lease available

Location Advantages •

Proximity to marine terminal

•

/HVV WKDQ ȴ YH PLQXWHV IURP ΖQWHUVWDWH 6WDWH +LJKZD\ DQG WKH Ζ %ULGJH WR Portland, Oregon

•

Favorable tax structure

•

%XVLQHVV LQFHQWLYHV DYDLODEOH

•

(OLJLEOH IRU 1HZ 0DUNHWV 7D[ &UHGLW Č´ QDQFLQJ

•

)RUHLJQ 7UDGH =RQH VHUYLFH DUHD

PORT OF VANCOUVER USA

Europe China Korea Egypt

India

Japan

Taiwan

Thailand

Guatemala

Philippines Vietnam

Brazil

Indonesia

Peru Australia

New Zealand

Chile

SEE WHY YOUR BUSINESS SHOULD LAND AT THE PORT OF POSSIBILITY, CONTACT:

Mike Schiller

Chrissy Lyons

D 360-992-1113

Select USA attendee D 360-213-1245 C 360-518-0074 E clyons@portvanusa.com

C 360-518-1257 E mschiller@portvanusa.com

3103 NW Lower River Road, Vancouver, Washington 98660 portvanusa.com

AREA0816.indd 1

28/05/18 5:44 PM

LOCATIONUSA

The Team…and the Timing When Making a U.S. Location Decision The company’s executive team, working in conjunction with outside legal and other consultants in a timely manner, can create a “win” for both the business and the community in which it chooses to locate.

By Stephanie Yarbrough, Partner, Womble Bond Dickinson

Imagine that a company has secured a contract to provide goods to a major customer and must be up, running, and producing those goods within 18 months in the United States. This company could be headquartered in California, New York, or Germany — virtually anywhere around the globe. This company is faced with a myriad of questions. Where do they locate? How do they identify the site?

What infrastructure will they need? What are the workforce needs? What size and type of building is required? Who will design the building? Who will build the building? Are there environmental issues on the site, and if so, who will address them? And this is just the beginning.

An economic development project must be managed thoughtfully, methodically, and strategically. This is an intricate, detail-oriented process. The team and the timing are everything, and much care should be given to think through both of these aspects of the deal.

TheTeam.indd 12

Environmental Issues

Timing

The

PROJECT

Infrastructure

Incentives

WHERE TO BEGIN First, let’s start with the right team. The team needs to be created early in the process. The company’s executive team, a site selection consultant, an attorney leading the economic development team, a broker, engineers, architects — all of these people are key to have involved in picking the right site. The company needs a team that works well together, that trusts each other, and that has a great track record for results.

Meegan Spicer, who is director of Site Selection and Incentives Advisory at Duff and Phelps, says, “The biggest factor determining ultimate success of the team is the level of communication between the various team members (i.e., legal, real

12 LOCATION USA

The Site

Real Estate/ Legal Issues

Taxes

Workforce

Corporate Concerns

estate, site selection consultant, tax, human resources, etc.).

Weekly standing, structured team calls are the best way to do this. Identifying a lead person with strong project management skills and leveraging those skills are critical to keeping the team on track. Oftentimes this is someone at the company or the location consultant. Each professional involved in the project needs to always be mindful of what’s best for the overall project to achieve its goals. You can’t get too focused on just your particular area of expertise because everything is interdependent. The devil is in the details on these deals. The more communication and attention to detail on the front end, the fewer issues on the back end of the deal.”

A company’s economic development team will often consist of an internal team and an external team. The internal team

for free site information, visit us online at www.areadevelopment.com

5/22/18 2:45 PM

When a company is coming into the UNITED STATES for the first time, there will be COMPLEX LEGAL issues that must be considered.

will be made up of company executives who are tasked with bringing options to the board of directors or other governing body of the company to ultimately make the site selection decision. Staffing of the internal team is a big deal, and it must be handled with the greatest of care. Typically, the core internal team will consist of the CEO or president of the company, the CFO, the COO, the general counsel, and perhaps the director of real estate (or someone in a similar role). This team should, as necessary throughout the process, include and incorporate continuous input from company human resources, tax, and logistics and supply chain representatives as well.

Next comes the external team. This team also should be assembled early in the process. As previously mentioned, this will be a larger team that consists of a group of site selection consultants, a legal team, the broker, engineers, and the architect.

The site selection consultants may begin their work first, and then the other members of the team are brought in when the sites are narrowed down to a smaller list. The external team should work and execute the process flawlessly together. This may initially be difficult with the diverse array of viewpoints and experiences that will constitute any large team. A company may be well served by coordinating regular “all hands” calls, both at the project’s outset and throughout the project, in order to clearly delineate and manage tasks and responsibilities within the group.

ADDRESSING COMPLEX LEGAL ISSUES When a company is coming into a particular location for the very first time, and especially if it is coming into the United States for the first time, there will be complex legal issues that must be considered. The legal team should consist of an economic development lawyer, as well as his/her supporting legal team (i.e., corporate, tax, employment, environmental, and real estate attorneys) with specialist support in areas such as immigration, antitrust, or intellectual property as needed.

Peter Fennelly, president of Charleston, S.C.-based Bridge Commercial (an industrial real estate brokerage), says, “The ‘best team’ for a company to put together for a strategic location move or expansion into a new market should include a solid combination of internal and external stakeholders. For the internal stakeholders, it is best to have leadership representing executive decision-making covering legal, finance, and human resources. For the external stakeholders, it is best to have qualified legal professionals with economic development and real estate transaction experience, highly competent real estate professionals with specialization in the desired product type, and other qualified team members identified based on need

(geo-tech, environmental, land planning, architecture, construction, etc.).”

The site selection consultant will work diligently with the legal team on the many complex issues surrounding the selection and the launch of the project at the site. To narrow down the site possibilities, the consultant and the company will evaluate workforce availability, energy costs, infrastructure, tax matters, environmental issues, highway and/or rail and/or port access, etc., working in conjunction with the legal team as issues and specialized questions arise.

For example, the site selection consultant may identify a great site in one state, but the site may be lacking a necessary rail spur. The consultant will share this with the company and the legal team, which can work on seeking support from the rail carrier and the state to fund all or a portion of this rail spur by way of an incentive. Similarly, perhaps an interchange is needed to make a site work for a company. The internal and external site selection teams can then work strategically to help secure the necessary financial and other support of local governmental officials and agencies to commit to the timely completion of the interchange. By the site selection consultant, company executives, and legal team working closely together and communicating the pros and cons of potential sites, a preferred site may overcome its obstacles.

Once potential sites have been identified, the legal team’s real estate attorney can begin title work and due diligence on the site. An “ideal site” is not ideal if there are environmental issues that cannot be overcome without a material time delay and a significant price tag that derails the budget for the project. Such make-or-break environmental issues should be identified before the project gets too far along. If all team members work together, everyone is focused on the company and making sure potential sites are vetted to ensure they are worthy of consideration.

I envision an economic development project like spokes on a wheel. The center is the company and its project. The spokes originating from the center are (to name a few and in no particular order) the site, environmental issues, tax matters, workforce issues, corporate matters, economic development incentives, infrastructure needs, timing, and real estate matters. The very best teams do not have a secret sauce (other than a commitment to the project and the goals of the company). Egos must be left at the door, and the entire team must be committed to providing the very best service possible.

EXPECT COMPLEXITIES A deal is never done until it is really done. Projects go on hold all the time. Projects may be announced and then the

visit us at LOCATION USA.com

TheTeam.indd 13

13

5/22/18 2:45 PM

LOCATIONUSA

company merges with another company. The acquirer does not know if it will continue with the project the former company recently announced. In this scenario, an entire executive team at the company may now be gone and replaced with the leadership of the acquiring company. You may need to ask for an introduction to the new executive team before the other team exits. Within companies, departments, divisions, and individuals are vying for commitment of funds to do large projects.

A project may be in the works and then suddenly go dark.

Funds may have been diverted to another part of the company because of an unforeseen business need that arose.

The bottom line is that the project will take many twists and turns before it comes to fruition. Be ready for those. No project starts out anticipating these complexities, but a team must be structured with the potential for complexities in mind, and the entire team must be flexible to facilitate the dynamic and changing needs of the deal.

A local broker with much experience with large and midsize industrial deals, Bob Barrineau, a senior vice president at CBRE in Charleston, S.C., says, “There are several things that most site selection processes should have as a foundation. From the beginning, there should be clear drivers for the decision, and these should be discussed and weighted in order of importance.” Bob further explains that “as far as timing goes, it is best to work backward from the date you wish to be operational. The entire team must know the time end date and the consequences for missing the date. Depending on the complexity of the project, design and construction can take as long as two years. Concurrently, the company has to vet different locations, negotiate incentives, plan and finance necessary infrastructure, and close out their previous site if there is one.”

TIMING IS EVERYTHING When does a company involve site selection consultants to work with its internal real estate and legal team, if at all?

When is too early, and most importantly, when is too late?

Alexandra Segers with SSOE Group says, “The site selection phase will lay the foundation for the project, followed by the design and construction phases. If the core team consists of the right experts, they will be able to manage all phases successfully, supported by carefully selected designers, contractors, and consultants. Any oversight, for example, during the site selection could lead to major project delays and increase in cost.”

Remember, if a company is seeking economic development incentives (and large projects typically are), then timing is everything. Incentives are used for competitive projects to incentivize a company to locate in a particular state — i.e., to beat out the competition. This means that attorneys must be engaged in the incentive process while the project is still competitive with one or more states or even another country. Once

14 LOCATION USA

TheTeam.indd 14

the real estate deal is done (lease signed, dirt under contract, etc.), then there is no longer a need for governmental entities to incentivize a company to locate in a particular community and state.

Once the location process has narrowed down to two or possibly three sites, and conversations are started with local governmental representatives, questions will be asked of the company such as, “What is your anticipated capital investment in both real and personal property over the next five years?”

“How many new jobs do you expect to create in the next five years (and what are the anticipated wages associated with those jobs)?” The company may not be fully prepared for those questions. However, once those numbers have been given, they are not forgotten.

The company must to be very careful and conservative with projections. Nothing good happens when a company shares highly aspirational numbers that it may not hit. States, naturally, have stringent clawbacks for companies that do not meet capital investment and job creation targets. Companies must be cautious and careful when sharing these numbers, and make sure they are numbers the company will not only meet, but also exceed. Those numbers will appear later in the contracts that lock in the company’s incentives, so the numbers must be realistic. Remember, the company will be measured by these numbers and will face tough consequences if it fails to meet the targets.

Economic development counsel and site selectors have very different roles, and they are not competitive; they are complementary. With counsel and site selectors working together with the company, the project has its best likelihood of timely success.

According to Jubal Smith, a managing director of JLL’s Business Incentives and Site Selection Practice in Dallas, “Two time clocks govern every economic development project — one is the project timeline expected by senior company officials and the other follows a legal path dictated by state and local statutes. Oftentimes, these two clocks do not move in sync, resulting in unexpected project delays or even derailment.

With proper planning by a core company team partnering with experienced consultants keenly aware of local and state legal deadlines and procedures, critical timeline derailments both legal and non-legal may be avoided.”

A company should put together its best team early and work effectively with the team to ensure timely success. It will be an eventful and trying ride, but worth the rewards when the deal comes together in the end. The company wins. The community wins. A well-assembled, cooperative team can make the process more rewarding for all involved. • • • Stephanie Yarbrough practices in the area of economic development law. for free site information, visit us online at www.areadevelopment.com

5/22/18 2:46 PM

LOCATIONUSA

Challenges Facing the International Executive/Project Manager Each FDI project is unique and faces a unique set of challenges, but an interview with one foreign project manager helps to shed light on the process of setting up a facility in the U.S.

By Angela Grace, Principal, Blackshaw Partners; and Strategic Consultant, Kissimmee Gateway Airport

It is almost impossible to define the challenges facing the international executive, or any project manager of an FDI project and site selection, in one comprehensive manner. Project managers are selected specifically for the very unique skill set that they possess. Over the 20 years that I have worked in FDI, I have seen that skill set defined as follows: • A deep understanding of the parent company • Lead manager and/or engineer over the product that will be manufactured in the U.S. market • Some experience in the USA — often a school stint or exchange program where the manager was able to learn not only the English language, but also experience American “culture” • And, above all else, fearlessness They say the average FDI project takes twice as long and costs twice as much as planned. I would say this is almost too conservative of a statement. But the project managers that I have met through the years are truly rock stars. First, they are able to assimilate and convert the often intricate product from their home country to determine how to produce it, and second, they are able to sift through the massive amounts of information given to them by the states and communities they are working with in the U.S. to determine where to produce it — i.e, what site ultimately works best for them. While they are doing all of this, they are trying to manage not only their own families, but often the families of their employees who are slated to relocate to the U.S. and run the new operation.

The challenges they face are thus obvious — but then again not obvious at all. Each project is different; each community can be very different; each state may have slightly different laws; and finances are tight, no matter how much money the parent company has. One often overlooked fact is with respect to this last item. Companies looking at the U.S. are often in the process of setting up shop in other countries around the world at the same time. Operations in Mexico, China, Russia, other parts of Europe all ask to be financially supported by the parent company. Hence, incentives matter

RUAG Space is producing the structures and part of the thermal equipment for the OneWeb satellites.

as they can make the difference in a project being viable.

Other challenges faced by the international executive often include how to best navigate the “interim” period. This period is challenging due to the need for temporary housing — both for the employees and the company. In addition, frequent trips back to the home country are often necessary to ensure a smooth team transition, as well as to create efficient communication between the parent and subsidiary. Unforeseen obstacles — such as lengthy governmental permitting processes, legal issues, or unforeseen construction glitches — often threaten to derail intricate timelines and blow up slated budgets.

At the end of the day, the best way to learn about the challenges faced by international executives is to speak directly with them. With that in mind, following is a brief interview with Franck Mouriaux, chief engineer of Product Group Spacecraft at RUAG Schweiz, and project manager at RUAG Space, Titusville, Florida.

visit us at LOCATION USA.com

ChallengesFacing.indd 15

15

5/23/18 12:49 PM

What is your function with RUAG space?

MOURIAUX: I am the chief engineer for the Product Group Spacecraft, in charge of the product roadmap, R&D activities, and support for the business development. I was formerly the general manager of the Product Unit Structures and the manager of the OneWeb project for RUAG Space in Florida.

other Swiss or European partners. The setup of the footprint in Florida was RUAG’s own initiative and completely self-funded.

Were there any major hurdles to getting your business registered in the U.S. RUAG Space’s facility in Titusville, Florida, allows it to be closer to its or Florida? customer and to become a key supplier to the U.S. space industry.

MOURIAUX: Thanks to the great support of all actors [mentioned above], the registration of the business went very What is RUAG space producing in Titusville? smoothly and very quickly.

MOURIAUX: RUAG Space is producing the structures and part of the thermal equipment for the OneWeb satellites at What is the major difference between U.S. the Titusville facility to help control the temperature of the and Swiss companies — from a “doing spacecraft. business” perspective?

MOURIAUX: Personally, I didn’t notice too many differences What was the main reason for starting between U.S. and Swiss companies “doing business” — at RUAG Space in Florida? least from a RUAG Space perspective. RUAG Space has an MOURIAUX: The primary reason for starting RUAG Space in entrepreneurial spirit that translates in the current growth in Florida was the location of the OneWeb factory. RUAG Space the U.S. This is very much in line with the way U.S. companies strives to meet the needs of our customer. With the nature of do business. The only aspect to be treated carefully by RUAG the production envisioned by OneWeb — up to three spacecraft Space USA Inc. is the relation with the Swiss holding and the per day — it was crucial for us to be located in close proximity exchange of information that is critical in our business. For to the production line of OneWeb. Being close to the OneWeb that, RUAG Space USA Inc. was created and special measures facility allows us to provide just-in-time manufacturing and to were taken to regulate the way information is exchanged react quickly to potential issues during the production. between the U.S. and Swiss entities of RUAG. Were there any other reasons?

MOURIAUX: The second reason was more strategic in nature, and was linked to the plan of RUAG Space to become a key supplier for the space industry in the U.S. The area around the Kennedy Space Center has huge potential for expansion, attracting the main players of new space.

Does “America First” influence your business?

MOURIAUX: Not directly, but for sure now it is an advantage for RUAG Space to have several footprints in the U.S. Primarily, the motivation for RUAG Space to come to the U.S. was to be closer to our customer for better efficiencies and for growth of the U.S. space market.

As a Swiss investor/manufacturer, when did you start looking at the U.S.?

MOURIAUX: RUAG Space has been doing work with U.S. companies for many years, supplying large satellite and launcher manufacturers with components. Five years ago, RUAG Space decided to move its production for the launchers of ULA (United Launch Alliance) to Alabama. That was the first move of RUAG into the U.S. Then, the need to expand the footprint became obvious with the development of the commercial space activities. The U.S. is the largest market for space business, and it was strategic for RUAG to become a player in that market.

Do you see opportunities for other Swiss [aerospace] companies in Florida?

MOURIAUX: Yes, I think that other Swiss companies could also have opportunities in Florida. The expected growth in the aerospace business represents a significant potential for tech companies, and Switzerland is known for being very good in that field.

Was there support from Swiss/European partners?

MOURIAUX: RUAG Space didn’t received any support from

16 LOCATION USA

ChallengesFacing.indd 16

Given your overall experience, would you recommend setting up a business in the U.S.?

MOURIAUX: Definitely!

What actions should a Swiss company take when thinking about setting up a business in the U.S.?

for free site information, visit us online at www.areadevelopment.com

5/23/18 12:50 PM

LOCATIONUSA Accessing Wind Energy, Development-Ready Sites in Iowa MOURIAUX: I would recommend asking for the support of the local authorities in order to accelerate the process and prevent mistakes.

Understanding the administrative procedures and complying with the regulations are crucial to your business. There are entities that specialize in assisting Swiss/German companies with establishing business in the U.S.; they are familiar with the procedures and have all the necessary contacts with the U.S. administration. I also recommend working in close collaboration with the Swiss embassy and the Swiss entities supporting business relations between Switzerland and the U.S. Switzerland and the U.S. have had privileged relations for many years, and Switzerland is one of the most active foreign countries in the U.S. What mistakes should be avoided?

MOURIAUX: As mentioned above, the first mistake is to attempt to do everything on your own. The second mistake is to try to set up a fully Swiss company in the U.S.! The company shall be a U.S. company, with U.S. culture and U.S. employees. The company shall also be an integral part of the community and help in the economic development of the area where it is located. As an example, support the development of the apprenticeship and vocational training like RUAG Space is doing in Florida.

Where do you see RUAG Space in five years?

MOURIAUX: I see RUAG Space as an established U.S. company with several sites throughout the country, providing the overall U.S. space industry with state-of-the-art products and services. I see an expansion of the Florida site in Titusville and the development of our activities beyond production of space products to include engineering and development activities. RUAG Space will develop a complete ecosystem of partners and suppliers in Florida but also throughout the U.S. to support industry activities, creating hundreds of high-tech jobs and supporting the U.S. economy. • • •

Apple will build a new $1.375 billion data center in Iowa, which will be 100 percent powered by wind energy. While there are several reasons Apple chose Iowa, including a low overall cost of doing business, there’s one reason that is unique to the Hawkeye State — Iowa makes accessing renewable energy easier.

The #1 state for accessing wind energy In fact, Iowa is the easiest state in the country for businesses to procure renewable energy, according to a joint 2017 report A 2017 study named Iowa the easiest state in the country for companies to purchase from the Retail Industry Leaders renewable energy.

Association and the Information Technology Industry Council.1 It’s not surprising, therefore, that tech giants Apple, Google, Facebook, and Microsoft have invested in data centers in Iowa to take advantage of the state’s affordable wind power.

“For us, [access to renewable energy is] kind of a gate,” Apple CEO Tim Cook said last summer, after his company announced it would spend more than $1.3 billion on a data center in the Des Moines suburb Waukee. “If we couldn’t do that, we would not be here. To Iowa’s credit, Iowa saw this and had the vision to work with the utilities and so forth so it could happen. I think that says a lot about the people here and how they work together.”2 Certified Sites Available In additional to renewable energy, certified sites are drawing companies to Iowa. The state’s Certified Sites program is administered by the Iowa Economic Development Authority (IEDA), and the certification process is rigorous. Vital site components are vetted to avoid surprises when it’s time to break ground.

Iowa’s largest certified site, the Cedar Rapids Land and Air Super Park, is almost 600 acres of land and adjacent to Alliant Energy’s Big Cedar Industrial Center. Once certified, the Big Cedar Industrial Center will be Iowa’s first mega site. Combined, the two sites consist of almost 2,000 acres with access to two Class I railroads, an interstate, two U.S. highways, and an airport with direct flights to 14 U.S. cities.

In total, there are 18 certified sites available throughout Iowa, ranging in size from 60 to 600 acres.3 Several sites have access to the five Class I railroads servicing the state. Each has its own unique advantages. For example, the Commerce Center of Southeast Iowa is located on a military installation and, therefore, offers ambulance, EMT, fire rescue, and security on-site. http://www.itic.org/dotAsset/f9040bd1-7681-455a-9a64-5a518c16551d.pdf https://www.radioiowa.com/2017/08/24/iowas-wind-power-paramount-toapples-decision-on-new-data-centers/ 3 https://www.iowaeconomicdevelopment.com/certified-sites 1 2

Copy supplied by Iowa Economic Development Authority

visit us at LOCATION USA.com

ChallengesFacing.indd 17

17

5/23/18 12:50 PM

Governor

LEADERSHIP NOTICED AROUND THE WORLD. RESULTS NOTICED AROUND HERE.

Since Governor Asa Hutchinson took office, he’s made economic development his mission and his passion. And that effort is paying off with more and more businesses making their way to The Natural State. To see a list of industries from all over the globe who have decided to call Arkansas home, visit ArkansasEDC.com/asa today.

AEDC 35118.1 Area Dev Location USA.indd 1

ArkansasEDC.com/asa 1-800-ARKANSAS

5/24/18 9:39 AM

LOCATIONUSA

FDI & Reshoring Lead to U.S. Manufacturing Growth An improving business climate, including tax cuts and elimination of onerous regulations, bodes well for manufacturing in the United States.

By Stephen Gray, President & CEO, Gray Construction

During the first quarter of 2018, U.S. manufacturing was riding a wave of 19 consecutive months of growth.1 This manufacturing growth is largely attributed to improving global economies and robust business investment.

According to the Reshoring Initiative, reshoring and foreign direct investment (FDI) together grew by more than 10 percent in 2016, adding 77,000 jobs and surpassing the rate of offshoring jobs by 27,000. In 2017, reshoring and FDI job announcements soared adding over 171,000 jobs. The jobs equal 90 percent of the total U.S. manufacturing jobs added in 2017. Already, the preliminary data for 2018 is at least as strong as 2017.2 AN INVITING DESTINATION FOR BUSINESS The American industrial sector is flourishing, with the United States continuing to be the largest receiver of FDI in the world. A number of factors are contributing to U.S. manufacturing’s rapid growth: • Manufacturers want to expand in the U.S. because of its abundance of natural resources. In particular, rebounding oil prices have spurred more drilling and investment.

• The U.S. has high labor standards, encouraging a highquality, safe working environment. Manufacturers are responding to increasing scrutiny of production practices. In addition, manufacturers are pushing training programs and partnering with colleges and universities to create a more competitive workforce. At the same time, states and communities are integrating job training programs as part of their incentive packages to attract manufacturers’ investment.

• The Tax Cuts and Jobs Act, which reduced the corporate tax rate from 35 percent to 21 percent, has created investment opportunities for businesses, and the manufacturing industry has already experienced positive results.

• The American consumer continues to be a draw for manufacturers. Consumer spending is a significant driver of a strong economy. As SelectUSA points out, the U.S. offers the largest consumer market on earth with a GDP of $18 trillion

and 325 million people.3 Manufacturers prefer to be near these consumers.

• The trusted business climate in the U.S. allows businesses to operate in a secure and stable environment.

Companies are finding a wealth of opportunity in the U.S. marketplace. Champion Petfoods, based in Canada, invested in the U.S. economy with a new world-class facility featuring custom-designed kitchens to reach its fastest-growing market — American consumers — as well as select export markets.

The DogStar® Kitchens operation is the company’s first manufacturing facility to be located outside Canada.

“Kentucky stood out for its rich agricultural heritage, enabling Champion Petfoods to further our mandate of sourcing fresh regional ingredients through local supply chain partners,” said Frank Burdzy, president and CEO of Champion Petfoods.4 Italian-based Sofidel Group, one of the world’s leading manufacturers in paper production for sanitary and household use, broke ground in Circleville, Ohio, in 2016 to build its first integrated plant on U.S. soil, representing the largest private sector investment in Circleville in decades.

“The U.S. market is a key market for our group, because it

visit us at LOCATION USA.com

FDI&Reshoring.indd 19

19

5/23/18 12:53 PM

LOCATIONUSA

is the first in the world in terms of per capita consumption in the tissue sector,” explained Luigi Lazzareschi, CEO of Sofidel Group.5 Sofidel also recently announced a project in Oklahoma that will include two tissue technology machines producing a total output of 120,000 metric tons a year.6 This will create some 300 jobs. Both the Ohio and Oklahoma Sofidel facilities are expected to boost the economy for years to come.

PROGRESS IN REGULATORY ENVIRONMENT Regulation has significantly influenced manufacturing investment in the United States, but the landscape has improved in the last year. While manufacturers recognize the need for effective legislation, the environment shouldn’t be burdensome.

In January 2017, President Trump told business leaders he planned to cut federal regulations by 75 percent or more. Federal department and agency heads were told there would be a hold on all rules, with the exception of emergencies, to allow a thorough review and approval process. This was quickly followed by the signing of an Executive Order declaring that for every new regulation issued, two would need to be removed.

The order was contested in arbitration, but the complaint was recently dismissed, pushing the regulatory reform movement forward.

The administration has touted the withdrawal or delay of some 1,579 regulatory actions from the fall of 2016 to the fall of 2017, according to the Office of Information and Regulatory Affairs.7 Furthermore, agencies hope to finalize three deregulatory actions for every new governing rule in fiscal 2018.

An executive directive was also issued calling for executive departments to accelerate reviews and approvals of proposals to build and expand manufacturing facilities in hopes of advancing U.S. industry. This action led to a report from the

20 LOCATION USA

FDI&Reshoring.indd 20

Commerce Department identifying some 20 regulations in need of reform, based on information from manufacturers and industry influencers.

“The current onerous and lengthy processes and inadequately designed rules add to an already overwhelming amount of government waste,” Commerce Secretary Wilbur Ross said in a release.8 “This report is an important step in correcting the status quo and promoting, instead of shackling, American manufacturing.”

The report found three major themes, including: • Overlap, duplication, and lack of coordination between states and the Environmental Protection Agency (EPA); • Uncertainty related to the permitting process; and • Inconsistency in application and enforcement.

In an effort to address these concerns, each federal agency’s Regulatory Reform Taskforce must deliver an action plan to the President responding to the permitting and regulatory problems found in the Commerce Department’s report.

Additionally, an annual forum will be held both for regulators and manufacturers to assess the regulatory landscape.

The Commerce Department plans to work with Congress to use the already streamlined permitting procedures established in the Fixing America’s Surface Transportation Act (FAST Act)9 on other legislation pertaining to manufacturing projects. This should increase projects’ speed to market.

Historically, the EPA has been the source of many of the regulations affecting industrial production. The Clean Power Plan was intended to drastically reduce greenhouse gas emissions from the power sector by 2030. Many companies spoke out against its threats to jobs and manufacturers’ access to affordable energy. The Trump administration has proposed a plan to repeal the act in order to alleviate its negative impact on the industrial sector. However, the EPA intends to develop a replacement plan that will take the sector’s concerns into consideration, while also accommodating concerns about negative environmental effects.

More recently, the EPA issued a guidance memorandum10 to improve the air permitting process for manufacturers working to increase efficiency by building or modifying facilities such as power plants and refineries. In April, the agency determined through its Midterm Evaluation process that the current greenhouse gas emissions standards for 2022 to 2025 model year cars and light trucks are not appropriate and need to be revised.11 The goal of this development is to set a national standard for greenhouse gas emissions that allows automak-

for free site information, visit us online at www.areadevelopment.com

5/23/18 12:54 PM

Location: A Critical Factor in Selecting a U.S. Site

ers to manufacture vehicles that consumers want and can afford, without compromising environmental impact or safety.

PROMISE AHEAD Manufacturers, both foreign and domestic, have maintained that regulatory burdens hinder new investment and expansion. Facing nearly 300,000 restrictions on manufacturing operations from federal regulations, according to the National Association of Manufacturers,12 businesses welcome the recent changes. While much progress has been made, further action is needed to continue to improve investment into the U.S. Multiple bills have been introduced, with some being partially passed, that seek to increase transparency, expand effective oversight and, most importantly, mitigate overregulation and encourage manufacturing investment. This activity, coupled with growing awareness of manufacturers’ needs, sets the United States apart as an even more enticing destination for business.

“An increase in ‘Made in America’ strengthens the U.S. manufacturing sector,” said Harry Moser, founder of the Reshoring Initiative.13 “For every manufacturing job added through ‘Made in America,’ somewhere else another one to five jobs are created. As more products are made here, it becomes possible to fill ecosystem niches that had hollowed out from offshoring. As those niches are filled, upstream and downstream sectors expand.” • • • 1 https://www.instituteforsupplymanagement.org/ISMReport/MfgROB. cfm?SSO=1 2 http://www.reshorenow.org/ 3 https://www.selectusa.gov/largest-market 4 https://www.petfoodindustry.com/articles/4267-champion-petfoods-tobuild-new-kentucky-kitchen 5 https://www.prnewswire.com/news-releases/the-sofidel-group-continues-to-grow-with-new-investments-in-the-usa-540880791.html 6 https://www.prnewswire.com/news-releases/sofidel-continues-to-growin-the-usa-with-a-newgreenfield-investment-in-oklahoma-677118293.html 7 https://www.reginfo.gov/public/do/eAgendaMain 8 https://www.commerce.gov/news/press-releases/2017/10/us-department-commerce-releases-report-streamlining-government 9 https://www.transportation.gov/fastact 10 https://www.epa.gov/sites/production/files/2018-03/documents/ nsr_memo_03-13-2018.pdf 11 https://www.epa.gov/newsreleases/epa-administrator-pruitt-ghgemissions-standards-cars-and-light-trucks-should-be 12 www.nam.org/Data-and-Reports/Reports/Holding-Us-Back--Regulationof-the-U-S--Manufacturing-Sector/ 13 https://www.gray.com/news/blog/2017/12/13/made-inamerica%E2%80%94good-for-the-country-good-for-the-brand

When Y International USA, a division of LuLu Group International, made the decision to expand its operations into the United States, selecting the perfect location was of utmost importance. The company, which exports products for its parent company’s 130 hypermarkets in the Middle East and India, required a location with access to airports, seaports, and over-land connections. The ability to easily source “Made in America” products to satisfy the growing demand in the Gulf Region also factored into the location decision.

Y International ultimately selected a site in New Jersey for its first U.S. export distribution center. It was its location near the largest maritime cargo center on the East Coast, three international airports, and an extensive transportation infrastructure that became the deciding factor.

While each company has a distinct set of criteria when selecting a site for their U.S. operations, location must always factor heavily into the decision. In fact, it may be the most critical factor in the site selection process for International companies.

Access to Specialized Talent Nestle Health Sciences, the subsidiary of the Swiss food giant, could have selected any location in the world for its Health Science research home. The company ultimately chose a facility in New Jersey’s bioscience corridor. Why? The location offered the company the ability to tap into one of the most highly concentrated scientific talent pools in the United States.

While workforce needs differ depending on the company’s core operations and industry, selecting a location that has a talent pool that can both support operations today and growth in the future is important to all companies no matter their industry or function.

The Competitive Advantage In an era where delivery speed can be critical, location and easy access to a broad consumer market can give a company a competitive advantage. This is particularly true for companies that rely on same-day deliveries, such as e-commerce and food companies.

Many companies find that selecting a location near both consumers and suppliers can both reduce time to market and keep distribution costs in check. With access to 22 million consumers within a two-hour drive of a central New Jersey location and 40 percent of the U.S. population within a two-day drive from anywhere in the state, it is no wonder international companies that depend on reaching consumer markets quickly and efficiently are choosing sites in New Jersey.

As business becomes more competitive, the selection of a U.S. location that is a perfect fit for a company’s talent, infrastructure, and business needs will become increasingly important in our global economy.

Copy supplied by Choose New Jersey, Inc.

visit us at LOCATION USA.com

FDI&Reshoring.indd 21

21

5/23/18 4:10 PM

LOCATIONUSA

An Effective RFP Process for Your Next U.S. Capital Investment A poorly managed RFP process may cause delays, distractions, and produce bad infor mation for your next project. A well-executed process considers the goals of the project and crafts an RFP process with that end in mind.

By David H. Cooper, Shareholder, Maynard Cooper Gale P.C.

An Effective RFP Process Use

Multiple Phases.

Decide whether to

maintain confidentiality.

Provide

project information.

Only request

Choose the RFI/RFP recipients.

important information.

Evaluate RFI

responses and eliminate sites.

Provide additional information with a follow-up RFP. Evaluate

RFP responses for

Avoid

location bias.

project fit.

Analyze

incentive proposals.

Hold the project team accountable.

As an attorney who represents companies during the growth and expansion phases of their business, I have seen a variety of approaches to the Request for Proposal (RFP) process.

In the past decade, the site selection RFP process has gone from a behind-the-scenes component of business expansion that was only discussed in small circles of economic develop-

22 LOCATION USA

ers to an increasingly public process that is often the topic of dinner table conversations. While there is not a one-size-fits-all approach, there are a few key considerations that drive the process your company should take when structuring an RFP for your project in the United States.

OVERVIEW When a company plans to develop a new facility in the U.S., it needs to gather information about potential sites and communities for its project. This information is often gathered by submitting a Request for Information (RFI) followed by one or more RFPs to the candidate communities. • Use multiple phases. While it is often called an RFP, the first document submitted to a community should actually be an RFI (Request for Information). Many companies focus too heavily on incentives early in their site selection process. While important, the incentives discussion should come later in the process.

As such, a company should not request a specific proposal for incentives in its initial contact with a community. Instead, it should gather information about the communities and their available sites to determine whether a community may be a good fit for the project. An RFP should be submitted once the information from the RFI has been digested and the number of eligible sites has been reduced. • Decide whether to maintain confidentiality. Most companies still run their RFI/RFP process on a confidential basis.

This is particularly important when jobs may be at stake at another location in the U.S. or abroad. Companies often prefer to keep their projects confidential to avoid revealing their growth strategy to competitors as well. To help maintain confidentiality, it is best to include a confidentiality requirement in the RFI/ RFP as well as any cover e-mails or letters when transmitting the documents. If confidentiality is of paramount importance, the company should not include its name in the RFI/RFP documents nor should company e-mail addresses be on transmittal e-mails.

for free site information, visit us online at www.areadevelopment.com

Don’t request unnecessary INFORMATION in the initial RFI. Differentiate between“nice-tohaves” and “MUST-HAVES.”

At the appropriate time, RFP recipients should sign confidentiality and non-disclosure agreements. Site selection service providers can help maintain confidentiality by interfacing with the communities on the company’s behalf.

There are times, however, when a public RFP process might be advantageous. If a company’s project does not require confidentiality, a public RFP process can create a competitive environment and may reveal which communities are most willing to work with a company to win the project. A public RFP process poses risks as well. Unsolicited responses to the RFP can reduce efficiency of the project team; uninformed news articles could cause distractions; and public bias may interfere with the company’s process.

Each project will warrant a different level of confidentiality, and the RFP process should be adjusted accordingly. Many states have open records acts that could compel disclosure of sensitive documents, which may include RFI/RFPs, and project agreements. Companies should have a plan in place if project information is leaked or disclosed through a state’s open records process.

• Choose the RFI/RFP recipients. The company must first narrow the geographic scope of the RFI. Once the initial group of states is determined, the RFI is typically sent to each state’s primary economic development agency, which then distributes the RFI to its eligible communities. As sites are narrowed, subsequent RFI/RFP documents may be sent directly to the local communities as well as the state, depending upon the relationship between the parties.

• Provide project information. The RFI should not only request information, but should also provide useful information about the project and the company. In order to receive the best information from a community and determine whether it might be a good fit for the project, the company must accurately describe the key parameters and requirements of the project.

This RFI should include job numbers, ideally broken down by job category or Standard Occupational Classification, and an estimated wage range, dependent on labor availability, prevailing rates, etc. If possible, the RFI should also state the breakdown between full-time, part-time, direct, and indirect (contract labor) positions.

The RFI should describe the project’s utility requirements at a detailed level. For example, the electricity requirements should include load, demand, and redundancy requirements, at a minimum.

If environmental factors will be an issue, then a statement about the estimated emissions or other environmental

considerations should be included. For example, if a site is in an environmental “non-attainment” zone and the project is a major emitter of particulate matter, then the community should know this on the front end to avoid issues later in the process.

The RFI should inform the recipient if there is a particular area of the state that works best for the project. For example, the RFI might require that sites be within 100 miles of a key supplier or within 10 miles of an on-ramp to a particular interstate.

It’s important to remember that the RFI/RFP process not only enables the company to review the communities, but the communities must evaluate the project as well to determine whether it is a good fit for their region. By providing sufficient information, the company will eliminate a barrage of inquiries from each recipient of the RFI. • Only request important information. Keep it simple.

Don’t request unnecessary information in the initial RFI. Instead, focus on “non-starter” items and issues that are critical to the success of the project and initial round of site eliminations. It is important to differentiate between “nice-to-haves” and “must-haves.” For example, if having a rail-served site would be “nice-to-have” because a supplier could bring in raw product by rail for a few cents cheaper per ton, but this would not offer a material savings, then the RFI should include a railserved site as a preference, but not a requirement. To do otherwise will result in a significant number of non-rail sites being eliminated, even though those sites might be more favorable based on other criteria.

One of the early projects on which I worked included a 30-page initial RFI. This document produced responses from the states that were several hundred pages long and included a significant amount of unnecessary information for that phase of the project. Not only did this waste each community’s time in preparing their responses, but the project team spent many needless hours combing the documents for the most important data. A better approach is to request the correct amount of information for the stage of the project and follow-up for more information as needed.

It’s also important to specify the format for responses. For example, the RFI might include a table for communities to fill out with utility information. For states that will be submitting multiple sites, it’s helpful to request an overall state map with site locations and coordinates identified.

• Evaluate RFI responses and eliminate sites. Even with a perfectly crafted RFI, some communities will still provide too much unnecessary information and others will fail to provide

visit us at LOCATION USA.com

AnEffective.indd 23

23

5/23/18 12:57 PM

critical information. The goal of the project team is to efficiently distill the information provided into a useful comparative format so that the initial desktop analysis can be performed. At this stage, the project team will identify gaps in key information and will eliminate sites that do not meet the critical requirements of the project.

• Provide additional information with a follow-up RFP. After the RFI responses have been reviewed, the project team should prepare a Request for Proposal. The RFP not only provides an opportunity to solicit proposals, it provides the company with an opportunity to convey more information about the project to a narrower pool of candidate communities. States and local communities are more likely to make strong proposals if they know the company and understand the project. If a community perceives a project with a high degree of uncertainty, then they view it as a riskier investment and will not be willing to commit at the same level as a project with a lower level of risk perception.

If the company has not already done so, it should consider whether to disclose its name at this time, provided that confidentiality and nondisclosure agreements are in place and open records laws have been considered. The company should use the RFP as an opportunity to raise the profile of the project and reduce the perception of risk.

• Evaluate RFP responses for project fit. When evaluating RFP responses, companies should look for the overall best fit for the project, not just the location with the highest incentives. This evaluation should include an analysis of quantitative components such as labor availability and wage rates, logistics considerations, and tax profile; as well as more qualitative components such as community fit, the permitting process, and site due diligence items.

• Analyze incentive proposals. A good incentive package is tailored to meet the needs of the project. The RFP should specify these needs. If the company has narrowed the list of eligible sites to three locations, the individual RFP that is sent to each community may be different from the others. It should be tailored to the needs of the project in each site and community.

As a general rule, incentives should not be evaluated on the overall size of the incentive package, but rather on the cost savings provided by the incentives to the company. For example, if Site A has a property tax rate that is double the property tax rate of Site B, and each community offers a 50 percent abatement, the incentives offered for Site A will correspondingly be twice as much as for Site B; however, the tax burden net of the incentives will still be twice as high for Site A. Rather than looking at the value of the incentive, the com-

24 LOCATION USA

AnEffective.indd 24

pany should consider the total cost of operations at a particular site, net of incentives. These operating costs should be forecast over an appropriate time period (usually 10 years or more) and discounted to present value using a discount rate that takes into consideration the company’s time value of money. By discounting future costs (net of incentives) to present value for each potential project site, the company may evaluate each site side-by-side for an effective comparison.

Remember that your operations will likely extend far beyond the duration of the incentives, so the company should also consider the operating costs once any ongoing incentives have expired. Additionally, certain incentives may include “clawbacks,” “recapture provisions,” or other performance-based requirements. The company should evaluate the compliance risk as well when considering the value of the incentives.

• Avoid location bias. Most company’s project teams enter the process with a bias toward a particular location or develop a bias along the way. While it is helpful to analyze subjective variables and community fit for a project, these should be distinguished from personal bias for or against a particular location. Once location bias creeps in, this bias may find its way into the objective analysis and may skew the ultimate recommendations of the project team to the company’s executive team.

For example, if the project team member responsible for financial analysis is partial to Site A, and the incentives for Site A are offered over a shorter period of time compared to Site B, then that project team member might suggest a higher discount rate for the comparative analysis, thereby causing Site A’s incentive package to appear more favorable.

• Maintain momentum. Companies should seek to maintain momentum throughout the RFP process. When projects stall out and project teams become unresponsive, the community’s perception of credibility around the project may decrease, and this may have a negative impact on their willingness to support the project.

• Hold the project team accountable. After the company completes its RFP process, it should be in a position to work directly with a limited number of remaining communities and continue with site due diligence, incentive negotiation, and overall evaluation of these locations for its project. To achieve this result, it is important for members of the project team, internal and external, to be able to hold each other accountable for deadlines, responsiveness, and performance. While there is much to do after the RFP process is complete, an effectively managed process will lead to better results on a shorter timeline. • • •

for free site information, visit us online at www.areadevelopment.com

5/23/18 4:08 PM

LOCATIONUSA

Made in America: An Outlook for Manufacturing in the U.S. Multinational fir ms continue to make significant investments in U.S. manufacturing facilities and logistics networks regardless of vagaries in trade policy.

By Jason Tolliver, Americas Head of Logistics & Industrial Research, Cushman & Wakefield

As changing U.S. trade policies continue to dominate headlines and discussion, many have examined how policy shifts will impact manufacturing, both at home and for our partners overseas. However, it’s also critical to look at the reverse — how U.S. manufacturing has impacted the policies our leaders put forward. When we do, it’s clear that the production, distribution, and consumption of goods within the U.S. have directly affected trade policy.

Trade policy does not exist in a vacuum. It is governed by a complex framework of obligations embodied in 14 free-trade agreements with 20 countries, the World Trade Organization, and other aspects of international law. According to the U.S. Department of Commerce, U.S. trade with free-trade partners represented nearly 70 percent of exports and more than 90 percent of all U.S. imports by value in 2017. Clearly, the trade policies that enable this global flow of goods are key to most U.S. industries, and commercial real estate is no exception.

This begs the question, what is the state of modern U.S. manufacturing, and how might it continue to impact trade and, consequently, commercial real estate? Modern U.S. manufacturing has been marked by shifts in production and the emergence of extensive and increasingly complex global supply chains that make manufacturing more efficient and make firms more globally competitive. This has prompted multinational firms to make significant investments in manufacturing facilities and logistics networks in the U.S. and across North America.

Still, certain trade risks have the potential to send disruptions through the manufacturing industry. For example, the implementation of trade barriers could fundamentally alter how, and from where, firms procure intermediate and final goods.

This, in turn, could greatly increase the logistical complexities throughout global supply chains and substantially increase the costs of production and distribution. Even the threat of tariffs causes uncertainty and increases costs as supply chain network engineers must plan for alternative sourcing to insure against any possible disruption in production.

U.S. MANUFACTURING RESURGENCE Over the past decade, U.S. manufacturing has witnessed a dramatic rebound. Thanks to a variety of economic and noneconomic location drivers that have evolved dramatically to improve U.S. competitiveness, more companies are seeking to invest and produce in the U.S. “Made in the U.S.” has become much more than a moniker. Increasingly, it is a key strategy for manufacturers seeking to bolster production and gain global market share.

Further, as wages continue to increase overseas — particularly in China — it is becoming less cost-effective to manufacture goods outside the U.S. Clear U.S. advantages like innovation and R&D spending, as well as higher labor productivity, higher skill levels, and companies’ increased desire for shorter supply chains, add to the appeal of manufacturing in the U.S. Throw in lower energy prices, which help reduce the cost of not only creating goods, but also transporting them, and it isn’t surprising that manufacturers are finding that placing production facilities in the U.S. makes them more competitive.

This shift has been beneficial to the U.S. commercial real estate industry. In fact, for CRE, the U.S. manufacturing sec-

visit us at LOCATION USA.com

MadeInAmerica.indd 25

25

5/23/18 1:00 PM

LOCATIONUSA

tor has witnessed steady occupancy gains since it hit bottom in 2010, with more than 181 million square feet of positive net absorption since then. As a result, vacancy rates for U.S. manufacturing facilities have fallen by 340 basis points during this period to a current level of 3.8 percent — well below the 10-year average of 7.3 percent. Meanwhile, manufacturing construction has rebounded too. The current average of 12.5 million square feet of new manufacturing product added per year is close to the pre-recession average of 12.6 million square feet. Since 2010, 62.5 million square feet of manufacturing space has come online in the United States.

When companies consider new locations to realign or expand their manufacturing capacity, manufacturers must weigh numerous factors. Which drivers are evaluated and how they are prioritized will vary according to a firm’s industry, existing locations and facilities, customer and supplier bases, major operating costs, technology levels, timing, and so forth.

The United States is increasingly chosen as the destination for manufacturing investment because it often presents the optimal combination of these factors.

Over the past decade, the case to be made for the United States as a manufacturing base had less to do with its costs structure than the opportunity to access its customer markets, predictable operating conditions and infrastructure, and regulatory frameworks. Specifically, the United States has always offered the following desirable traits as tradeoffs against its higher structural costs: • Direct access to the world’s largest consumer market; • More advanced manufacturing technologies, superior quality standards, and higher productivity levels; • Stronger intellectual property protections and transparent systems for health, safety, and environmental standards; and • Significant raw materials and land resources to feed production.

The move by multinational firms to shift supply chains from centralized to regional structures in an effort to locate production closer to consumption has resulted in increased investment in U.S. manufacturing. Being closer to the customer allows firms to adapt to changes in the market and consumer demand more quickly. The United States offers the connectivity firms need to optimize cost structures and customer service, thereby making them more competitive.

DISRUPTION IN PRODUCTION The bottom line is that a growing number of companies are reinvesting in U.S. plants and equipment and relocating manufacturing facilities stateside. The growth has two sources:

26 LOCATION USA

MadeInAmerica.indd 26

reshoring by U.S. companies that previously established or moved manufacturing overseas and foreign direct investment by companies choosing to establish U.S. manufacturing operations. The strongest reshoring has occurred in the transportation equipment, electrical equipment, and computer electronics manufacturing sectors. Transportation equipment is also the strongest subsector for foreign direct investment, followed by fabricated metal products and plastic/rubber products.

Still, while trade policy carries risk implications to regulation, market access, and the movement of goods and individuals, it’s important to remember that disruptive technologies such as additive manufacturing and robotic process automation also continue to transform the manufacturing landscape by reshaping the production cycle. Businesses are being impacted by digital disruption as new entrants and existing competitors invest in technology to enable mass customization.

The automotive industry is a good example of an industry amid disruption. Electrification and autonomous vehicle technology are already altering automotive value chains. Increasingly, the new norm is a complex, horizontally structured clustering of design, technology, production, and service that is redefining how those products are created and delivered — and by whom.

THE TAKEAWAY In this period of accelerating change and digital transformation, pure cost-reduction strategies are being challenged. Companies are increasingly focused on activities with the greatest potential for creating value and identifying the talent that will enable them to create and deliver this value successfully. In this paradigm, the United States has an advantage.

The future of manufacturing will be about connectivity. As consumers demand more customization, markets will be microsegmented, and competition will intensify. The ability to manufacture and deliver product quickly will become an even greater differentiator among firms. This will drive the regionalization of manufacturing near large centers of consumer demand.

Pressure to get products to market faster, cheaper, and better will increase. This will drive tremendous innovation in workflow, production lines, and simultaneous production, as “design, source, build, and assemble” all happen in seamless ecosystems of manufacturing clusters. Production will become super-automated and highly digitized. Real-time reporting, robotics, soft tooling, and additive manufacturing will revolutionize assembly lines.

In sum, the manufacturing of tomorrow, which will impact several U.S. industries including commercial real estate, will differ greatly from the manufacturing of today. We will have a variety of factors, including trade policy, to either thank or blame for that. • • •

for free site information, visit us online at www.areadevelopment.com

5/23/18 1:00 PM

GO BIG. SPEND LESS. At just 3 percent, North Carolina is home to the lowest corporate income tax in the country. With low business and labor costs, this is where you can spend less on operations and more on what fuels your growth.

E C O N O M I C D E V E L O P M E N T PA R T N E R S H I P O F N O R T H C A R O L I N A

|

EDPNC .C O M

LOCATIONUSA

University Innovation Parks Link the Academic and “Real World” Research and innovation parks continue to evolve to meet the needs of students, faculty, and private-sector tenants alike.

By Steve Kaelble

In an era of ever-increasing global competition, innovation is the key to long-term corporate prosperity. University-affiliated research parks and innovation zones aren’t a brand-new idea, but they are more relevant than ever in today’s environment, as forward-thinking companies strive to stay ahead, generate better ideas, and bring those ideas to life.

These developments go by a variety of names and definitions and structures, but the common thread is the goal of creating partnerships between universities and the private sector that will drive innovation. The end result is a win-win-win for all of the various partners, including corporations, universities, and the communities in which these developments blossom.

Private-sector companies benefit by gaining access to expertise and new technologies. Universities benefit by commercializing their promising research, achieving a better understanding of what the “real world” needs from their graduates, and creating internship and job opportunities for their students. University communities gain from technology-led economic development.

“You get this sort of symbiotic relationship from a research park,” says Ronald J. Miller Jr., executive director of the Leon County Research and Development Authority, which oversees the Innovation Park of Tallahassee.

A great place to begin a conversation about linking companies with university expertise is the granddaddy of all of these kinds of developments, the Research Triangle Park in North Carolina. The “triangle” in its name refers to the three university communities in relatively close proximity that serve as a magnet for innovation activity: University of North Carolina in Chapel Hill, North Carolina State University in Raleigh, and Duke University in Durham.

Research Triangle Park planted its flag on the map in the late 1950s and early 1960s. The company that invented Astroturf was its first tenant in 1960, and IBM soon followed. Today there are 200 companies in this innovation neighborhood, with some 50,000 technology experts making things happen in such fields as microelectronics, biotechnology, telecom, pharmaceuticals, environmental sciences, and chemicals.

28 LOCATION USA

UniversityInnovation.indd 28

Arizona State University is partnering with the Mayo Clinic to create an innovation zone focused on biomedicine and health sciences.

A WIDE RANGE OF ACTIVITIES These days, though, the number of university research and innovation parks is approaching 200, according to the Association of University Research Parks.1 The concept gained a lot of momentum in the early 1980s, says Miller. “A lot of this goes back to the Bayh-Dole Act in 1980, in which the federal government said you can take intellectual property developed as a result of federal funding and the university has a right to license it,” he explains. “That opportunity to license technology made them start thinking, what can we do with this stuff?”

Quite a lot, it turns out, and the activities go far beyond technology licensing. “Our industry partners are engaged in a wide range of research and development activities,” says Cliff Hawks, president and CEO of the Cherokee Farm Innovation

visit us at LOCATION USA.com for free site information, visit us online at www.areadevelopment.com

5/29/18 11:44 AM

SIMPLIFY SITE SELECTION WITH THE BUILD-READY MINDSET. We get it. Site selection is complicated. Working together, we’ll simplify the process to help you identify the site that’s right for your business.

AEP Economic and Business Development +1 (614) 716-1273 | (800) 360-7483 | aeped.com/susa

10435-SelectUSA_Ad_V4.indd 1

5/25/18 2:39 PM

LOCATIONUSA

“The presence of corporate partners Technologies Associates. It also includes Campus at the University of Tennesthe California Strawberry Commission, on or near CAMPUS see. “Our partners at Cherokee Farm bringing a focus on sustainable farming represent a broad range of R&D scientific and other activities. disciplines and activities, including but provides easy The Tallahassee park ties into not just not limited to data analytics, material one but three local educational instituscience, and cyber security.” access to internships tions — Florida State University, Florida He rattles off a number of specific A&M University, and Tallahassee Comexamples. “Arkis Biosciences is currently and other real-world munity College. The partnership has working closely with researchers at our built a strong chemistry between the Joint Institute for Advanced MateriOPPORTUNITIES institutions, Miller says. The two universials facility and benefiting from the lab ties, in fact, collaborate on a college of facilities and spectroscopy capabilities,” for students. engineering. And that college, in turn, Hawks says. “AUBO Robotics manufacbenefits from the presence of privatetures lightweight collaborative robots for sector companies at the innovation park industrial and academic use, and works in many ways. For one thing, it gives closely with the College of Engineering educators a better understanding of the in the areas of mechanical and aerospace skill sets that the private sector is seeking, which results in the engineering. CEC Inc. works directly with the College of Envidevelopment of pertinent curriculum additions. ronmental Engineering.”

Not only is Cherokee Farm near and affiliated with a major WIDENING STUDENT OPPORTUNITIES research university, it’s also just 25 minutes from the Oak Ridge That points to a significant plus for universities that build National Laboratories. Miller’s development in Tallahassee also private-sector partnerships: opportunities for students. The boasts a connection to a major national research facility, the presence of corporate partners on or near campus provides National High Magnetic Field Laboratory. That has helped Innoeasy access to internships and other real-world opportunities. vation Park of Tallahassee become known for a specialization in “It makes students’ experience much richer, and they are more magnetics. “Research parks all have their niches, and you try to informed of the challenges of the real world,” Hardy says. develop industry clusters around the niches,” Miller explains.

That is one of the driving forces behind Rose-Hulman Ventures, part of the Rose-Hulman Institute of Technology in the BECOMING PART OF THE ECOSYSTEM western Indiana community of Terre Haute. It’s an institution Arizona State University, meanwhile, has established a that ranks highly among engineering schools that are focused whole portfolio of innovation zones that allow the private primarily on bachelor’s- and master’s-level education, and its sector to plug directly into university technology and expertise.

Rose-Hulman Ventures connection to the real world serves that The ASU Polytechnic Campus in Mesa, for example, provides educational need, while also sparking private-sector innovation. research collaboration opportunities in everything from advanced manufacturing to aviation, robotics, and energy. Some AN EVOLVING CONCEPT 300 acres of adjacent land are ready for companies of all sizes Research and innovation parks continue to evolve to meet to settle in, says Todd Hardy, managing director of the univerthe needs of students, faculty, and private-sector tenants alike. sity’s innovation zones.

According to Association of University Research Parks, as many “When a company comes to one of our innovation zones, as one in five parks is planning the addition of non-student they do so because they would like to work with the univerhousing.2 A lot of parks have also been adding or planning sity in an integrated way,” Hardy explains. “The company is thoroughly integrated in what we do in every way that can be retail and restaurant offerings, and working toward a more connected with the objectives of the company.” urban feel.

Innovation parks are attractive to a broad spectrum of What isn’t changing is the strong link between the academoperations, some more obvious than others. For example, ic world and the “real world” that builds through innovation the tenant list at Cal Poly Technology Park, in the California park connections. As Miller observes, “There’s a feedback that community of San Luis Obispo, includes a data management happens for both components.” • • • and analytics company called Healthcare IQ, a company called Tyvak that provides space vehicle products and services, and 1 https://aurp.memberclicks.net/assets/documents/aurp_batelllereportv2.pdf 2 Ibid a maker of oil industry technology products called Applied

30 LOCATION USA

UniversityInnovation.indd 30

for free site information, visit us online at www.areadevelopment.com

5/29/18 11:45 AM

WHEN YOU ARE

READY TO GROW OUR SITES ARE READY TO GO.

Don’t let us slow you down. Iowa’s Certified Sites program designates the project-ready industrial sites you’re looking for to build a new facility.

They come credentialed, with site-related data and documentation assembled up front. Which makes developing on an Iowa Certified Site relatively risk-free to you. Visit our website below. Ready, set, grow. iowaeconomicdevelopment.com/certifi edsites

iowaeconomicdevelopment

AREA0804.indd 1

businessiowa

18/05/18 5:31 PM

(800) 626-2930 • ThinkKentucky.com

FIRST, WE CUT RED TAPE. NEXT, WE CUT RED RIBBONS. Kentucky is becoming the most pro-business state in America by catering to the needs of the business community. Governor Matt Bevin is cutting red tape, eliminating bureaucracy and fostering an atmosphere of growth never before seen. This has resulted in a record level of investment and new jobs in Kentucky – and a record number of ribbon cuttings!

Having trouble cutting through the red tape where you are? Come to Kentucky.

You will be on the cutting edge of success!

Making Business Strong. Making Life Exceptional.

AREA0796.indd 1

15/05/18 3:41 PM