Area Development Q1 2016

BUILDING A SUSTAINABLE SUPPLY CHAIN

The 30th Annual

CORPORATE

The 12th Annual

& CONSULTANTS

COLLABORATION TO ADVANCE MANUFACTURING

SURVEY

AREADEVELOPMENT S I T E

A N D

F A C I L I T Y

P L A N N I N G

www.areadevelopment.com

www.facilitylocations.com

Q1/2016

INNOVATIVE

INFRASTRUCTURE WHICH NEW TECH ADVANCES WILL BRING THE U.S. UP TO SPEED & CREATE HIGHSKILLED JOBS?

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CONTENTS 20

FEATURES 14 Beyond Silicon Valley:

COVER STORY

Promising New Tech Boomtowns

In its quest for lower costs, modern facilities, and access to talent, the booming tech sector is finding it can strike gold outside California.

17 Optimizing Integrated Project Delivery

IPD requires considerable time and effort on the facility owner’s side, but this frontend planning will help in avoiding costly delays once construction gets under way.

INFRASTRUCTURE INNOVATIONS WILL DRIVE MANUFACTURING From innovative road repair to driverless trucks, bullet trains, and 3D bridges, advances in technology will help to bring the nation’s infrastructure up to speed while creating high-skilled manufacturing jobs.

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59 Weighing Economic Incentives

The strength of the industrial market gives companies the upper hand when making site selection decisions.

30TH ANNUAL CORPORATE SURVEY & 12TH ANNUAL CONSULTANTS SURVEY Corporate new facility and expansions plan are up slightly on a year-over-year basis, although finding skilled labor is once again top of mind. Additionally, two thirds of the consultants believe the economy is on a continuous growth track, and nearly all are busy helping clients with new facility and expansion plans. (Report follows page 22.)

Exclusive Online Content

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• U.S. Legislative & Incentives Update

LOCATION NOTEBOOKS

• Millennials in Real Estate

• Auto Industry Driving the Kentucky Economy

• International Report: Site Selection in the Auto Industry — A Move to Mexico?

• Tennessee: Innovations to Meet Workforce Needs

• ICF International: Use of Wind, Solar to Generate Electricity Could Add Millions of Jobs

• Pitt County Provides “Healthful” Environment

Area Development® Site & Facility Planning (USPS 345-510) is published five times per year (Q1, Q2, Q3, and Q4 — and Annual Directory in December) at Richmond, VA, by Halcyon Business Publications, Inc., 400 Post Ave., Westbury, NY 11590. Periodicals postage paid at Westbury, NY, and additional offices. Single copies, $10. Yearly subscription U.S. & Canada, $75; foreign, $95.

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Volume 51 | Number1 Q1/2016

Quote:

Leaders must be close enough to relate to others, but far enough ahead to motivate them.

John Maxwell (1947–

), American author, pastor, and motivational speaker

62 Advancing Manufacturing

68 Building a Sustainable

Organizations

Through Public/Private Collaboration

The NIST Director of Advanced Manufacturing describes what’s being done to maintain U.S. leadership in this arena.

Supply Chain

Sustainable supply chain best practices can build upon site selection goals to reduce costs, mitigate risk, and increase speed to market.

The Cloud servers storage applications services Individuals

65 Cloud Computing

Broadens the Definition of “Technology Companies”

Reliance on a community’s telecom and energy infrastructure has heightened the importance of these factors in the location decision-making process.

71 SPECIAL REPORT

Public Power Communities: Technology for Business Success DEPARTMENTS

4 Editor’s note 2016 Projections

6 In Focus Incentives No More: Why States are Changing Course on Incentives

8 In The Know

• PwC’s Manufacturing Barometer Reflects Decreased Optimism • Use of Wind, Solar to Generate Electricity Could Add Millions of Jobs • CFOs Betting on North America • Business Location Tracker

10 First Person Mike McCormick, V.P. & Technical Plant Manager, Bosch Rexroth Corp., Fountain Inn, S.C.

Join Our Newsletter areadevelopment.com/newsletter Follow Us On twitter.com/areadevelopment

12 Front Line Implementing the New Ozone Standard: First Steps

13 Front Line Incubators Help Startups to Grow and Succeed

80 Ad Index/

Web Directory

Online Database Resources www.facilitylocations.com Follow Us On www.fastfacility.com

POSTMASTER: Send address changes to Area Development, Circulation Department, 400 Post Ave., Westbury, NY 11590. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2016 by Area Development® magazine. ISSN: 1048-6534. Printed in the U.S.A. Area Development® is a registered trademark of Halcyon Business Publications, Inc.

AREA DEVELOPMENT | Q1/2016

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EDITOR’SNOTE

Q1/2016

2016 Projections The new year has gotten off to a bumpy start. Declines in oil prices and worries about the slowing Chinese economy have led to a global stock market selloff. The strong dollar has made U.S.-made products more expensive overseas, causing the ISM manufacturing index to register below 50 percent, indicating a contracting manufacturing sector.

Despite an uptick in hiring, with all these worries about global growth, Americans are keeping their wallets closed. According to Morgan Stanley, consumer spending accounts for two thirds of the nation’s growth. With consumers pulling back on purchases, it’s no wonder manufacturing is contracting.

Decreasing optimism is borne out by PwC’s Q4 Manufacturing Barometer, with only 46 percent of those surveyed saying they were optimistic about the direction of the U.S. economy. According to the report, the surveyed manufacturers are holding their capital spending and hiring plans in check in this “challenging business climate.” In contrast to the PwC survey, although the CFOs polled by Deloitte in Q4 2015 are concerned about the global economy, they believe that North America (and the U.S. in particular) can continue to shoulder the burden of economic growth in 2016.

With whom do those surveyed by Area Development in the final quarter of 2015 agree? Interestingly, the respondents to our 30th Annual Corporate Survey are pretty much evenly split: 48 percent believe the U.S. economy has achieved a continuous growth track, while 52 percent say it has not. The Corporate Survey respondents’ main concern is the availability of skilled labor — the number-one site selection priority. Similarly 42 percent of those surveyed by PwC who plan to increase their workforces say they are primarily looking for skilled labor and professionals/technicians.

The second-most important location factor for Area Development’s Corporate Survey respondents is highway accessibility. Considering the importance of infrastructure in the site decision, in this issue’s cover story we focus on how innovative technologies will bring the nation’s infrastructure up to speed while creating highly skilled manufacturing jobs.

If hiring does continue to pick up, wages will increase further, and perhaps spur consumers to spend more and boost economic growth. Nonetheless, Gus Faucher, senior economist at PNC Financial Services in Pittsburgh, told The New York Times (1/29/16), “This year is going to look a lot like the past couple of years. Growth in 2016 will be good but not great.”

We won’t know whose projections are right until all the numbers are in.

www.areadevelopment.com EDITORIAL E-mail: editor@areadevelopment.com Editor Geraldine Gambale Staff and Contributing Editors Lisa Bastian Craig Guillot James Berger Cynthia Kincaid Dale D. Buss Phillip Perry Dave Claborn Mali R. Schantz-Feld Mark Crawford Steve Stackhouse -Kaelble Dan Emerson Karen Thuermer Tom Ewing Clare L. Goldsberry DESIGN/PRODUCTION Art & Design Patricia Zedalis Production Manager Jessica Whitebook Production Assistant Talea Gormican EXECUTIVE Publisher Dennis J. Shea dshea@areadevelopment.com Sydney Russell, Publisher 1965-1986 ADVERTISING SALES William Bakewicz (ext. 202) billbake@areadevelopment.com Valerie Krpata (ext. 218) valerie@areadevelopment.com ONLINE SERVICES Digital Media Manager Justin Shea (ext. 220) jshea@areadevelopment.com Business Development Matthew Shea (ext. 231) mshea@fastfacility.com Web Designer Carmela Emerson BUSINESS SERVICES Reader Service Barbara Olsen (ext. 225) olsen@areadevelopment.com Circulation Gertrude Staudt circ@areadevelopment.com

Editor

CONFERENCE SERVICES

2016 Editorial Advisory Board Christine Bustamante National Co-Leader, Global Location and Expansion Services, KPMG

Scott Kupperman Founder, Kupperman Location Solutions, LLC

Gregory Burkart Managing Director, Specialty Tax Practice Leader, Duff & Phelps, LLC

Dan Levine Practice Leader, Scott Redabaugh Managing Director, Location Strategies and Economic Development Jones Lang LaSalle Oxford Economics, Inc. Dick Sheehy Director, Advanced Planning & Jamie M. Lominack Real Estate Manager, Site Selection, CH2M HILL Michelin North America Eric Stavriotis Senior Vice President, Bill Luttrell Senior Locations Strategist, CBRE Werner Global Logistics, Werner Enterprises, Inc. Thomas Stringer Esq., Managing Director Michael McDermott Consulting Manager, & Practice Leader, Site Selection & Business Global Business Consulting, Incentives, BDO Consulting Cushman & Wakefield Dean J. Uminski Executive, Bradley Migdal Executive Managing Director, Site Selection Consulting, Crowe Horwath LLP Business Incentives Advisory Services, Dan White Senior Economist, Transwestern Moody’s Analytics John Morris Leader of Industrial Services for the Americas, Cushman & Wakefield, Inc.

Les Cranmer Senior Managing Director, Savills Studley Dennis Cuneo Partner, Fisher & Phillips LLP Tim Feemster Managing Principal, Foremost Quality Logistics Larry Gigerich Managing Director, Ginovus Stephen Gray CEO, Gray Construction Minah C. Hall Managing Director, True Partners Consulting LLC

Kathy Mussio Managing Partner, Atlas Insight

Program Manager Annie Gregson (212) 579-4469 annie@areadevelopment.com EXECUTIVE OFFICES Halcyon Business Publications, Inc. President Dennis J. Shea Finance Mary Paulsen finance@areadevelopment.com All correspondence to: Area Development Magazine 400 Post Avenue, Westbury, NY 11590 Phone: Toll Free: Fax:

516.338.0900 800.735.2732 516.338.0100

MEMBER of

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

THIS ISN’T THE CENTER OF TULSA.

YOU ARE.

Move your business to the Tulsa region and you can do more than share in the economic boom our downtown renaissance represents—you can be a driver of it. We offer businesses the resources, opportunities, incentives, and quality of life that add up to long-term, mutual success. Please visit GrowMetroTulsa.com/MoveForward to download our regional business overview.

Brien Thorstenberg, CEcD | Senior Vice President of Economic Development brienthorstenberg@tulsachamber.com | 800.624.6822

©2016 Tulsa Regional Chamber

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INFOCUS

Incentives No More: Why States are Changing Course on Incentives

By Tim Cook, CEO, and Katie Culp, President, KSM Location Advisors

The playing field for economic development incentives has been muddied recently due to evolving philosophies on incentives and cash-strapped states not only modifying their approach toward incentives, but using the fine print to reconsider promises made to companies looking to move or grow.

As the U.S. economy has recovered, some politicians think incentives aren’t as necessary to attract business and grow jobs. And as state administrations change, new philosophies on how incentives should be used are inevitably adopted.

Consider the following: • In Arizona, a new administration overhauled the state’s training grant program; what was once a primarily formulaic approach has been redesigned for grants to be more competitively awarded, resulting in less certainty whether a project would receive incentives.

• A distribution client was close to finalizing a deal to relocate their existing business within Illinois when state incentive programs were tabled by a new governor in June of last year; the project remains in limbo.

• In Michigan, Governor Snyder has spent his two terms focusing more on tax reforms than particular incentive and job growth programs. State incentives still exist, but are less pervasive and more customized to the deal.

Tim Cook and Katie Culp have consulted and advised clients about economic development incentives, location analysis, and related economic development opportunities on more than 400 projects in all 48 contiguous states.

While these are not necessarily negative developments, growing companies need to take this changing landscape into account when making site decisions.

Other states, including North Carolina, are overhauling their tax systems to make the business environment more attractive. Such efforts are designed to lessen the need for incentives and tax credits. While such approaches can have merit, sweeping tax changes have their own winners and losers, benefiting some businesses while hurting others.

Former Indiana Governor Mitch Daniels used to say, “All kinds of Hoosiers need all kinds of jobs.” This adage is now being tested in Indiana where the overall economy has improved and the state shifts its focus to incentivizing higher wage jobs. In contrast, incentives are not as aggressively used to court manufacturing and distribution deals, a strategy that de-emphasizes this centrally located state’s natural asset — being the self-proclaimed Crossroads of America.

In other states, officials are pulling out of existing contracts or reading the fine print more closely to undo deals completely. For example, due to budget concerns, Virginia defunded their enterprise zone program. A client in Virginia who had counted on these benefits to make a site decision lost hundreds of thousands of dollars as a result.

Critics of incentives argue that government shouldn’t pick winners and losers. But the most effective incentive programs level the playing field or bridge a gap to greenlight a project that would otherwise die. Without these tools, state and local government’s ability to influence economic development and site selection decisions will be severely compromised.

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INtheKNOW PwC’s Manufacturing Barometer Reflects Decreased Optimism PwC’s Q4/2015 Manufacturing Barometer reflects decreasing optimism about the direction of the U.S. economy in 2016. Just 46 percent of those surveyed by PwC were optimistic, down from 60 percent the prior quarter, and representing the lowest level of optimism since 37 percent was recorded in Q3/2012.

“Sentiment among U.S. industrial manufacturers decelerated in the fourth quarter, primarily reflecting the uncertain outlook for the global environment,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. “The overall economic picture has become more complex as management teams navigate slower growth in China, coupled with a stronger dollar and weak energy prices. Nearly one-third of annual rev-

enue among survey panelists is derived internationally, reflecting the significant exposure of domestic industrial manufacturers to the world economy. Turning more cautious, they are prudently dialing back on the overall level of capital spending and hiring as they prepare to transition to a more challenging business climate.

However, a healthy majority still anticipate revenue growth, albeit at a more moderate pace, in the year ahead.”

Only 42 percent of those surveyed said they plan to increase their workforces in 2016, down from the 60 percent who projected hiring increases in 2015. Those that do hire will primarily be looking for blue-collar/ skilled labor and professionals/technicians, according to the PwC report.

Use of Wind, Solar to Generate Electricity Could Add Millions of Jobs According to a recent report from the Virginiabased consulting firm ICF International, a large-scale shift to renewable sources for generating electricity could increase U.S. employment by one million jobs by 2030 and two million jobs by 2050, even after accounting for job losses related to fossil fuels. The transition to wind, solar, and other renewable sources of generation would also provide between $300 and $650 in additional annual disposable income per household in 2050, the report claims.

“While the study does paint an overall rosy picture, it also shows that there would be some losses in the fossil fuel sector compared to business-as-usual,” Dr. Bansari Saha, the report’s author and a senior manager at ICF, told InsideClimate News, a news organization covering climate change, energy, and the environment. “But on the whole we’re better off. There’s always a concern that we can’t actually shift to clean energy without hurting the economy. But it does look like you can under the scenarios modeled here, and you can do it with an overall benefit to the economy,” Saha added.

ICF’s analysis broke down the impact of two specific

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scenarios on the economy: switching almost entirely to renewables, and using a mix of renewables, nuclear energy, and natural gas. Under either scenario, reducing the nation’s reliance on fossil fuels requires large-scale infrastructure investments in the utility and transportation industries. The annual investments under both scenarios would be $150 billion to $200 billion until 2030, with investments then increasing until 2050.

A majority of the two million new jobs would be in the construction, utility, and manufacturing industries, according to the analysis. The utility business will see the biggest increase in jobs because a shift to cleaner energy sources will mean an increased reliance on the electric transmission grid. As households shift from gas to electric appliances, and as more electric vehicles hit the road, there will be a higher demand for electricity, the report predicts.

While the report’s author admits that the expected job numbers may fluctuate based on actual investments, etc., Saha concluded, “The impact could be significantly lower, but can it switch to negative? No, based on the conditions in this analysis, it doesn’t look like it could.”

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Track business relocations and expansions on Area Development Online.

Studies/Research/Papers on Area Development Online.

We cull insightful corporate real estate-focused studies, research, and papers from credible industry sources at www.AreaDevelopment.com/Studies.

We track announcements of all significant investment and job-creation projects throughout the United States and Canada at www.AreaDevelopment.com/NewsItems.

BUSINESS LOCATION TRACKER

NuTek Food Science Opens North Dakota Production Center NuTek Food Science has opened its new 100,000-square-foot manufacturing facility in Fargo, N.D., where it will produce its patented NuTek Salt for the global marketplace.

Danish Packaging Manufacturer Plans $30 Million Facility in Missouri Denmark-based Brodrene Hartmann A/S, which manufactures molded-fiber egg packaging and machinery for producing the packaging, will open a plant in Rolla, Missouri, and create 50 new jobs in the area.

Pharma Company To Create 1,400 Jobs in Western New York Athenex will invest $1.62 billion in drug discovery and an advanced manufacturing partnership, creating 900 jobs over the next 10 years in Dunkirk and 500 jobs in Buffalo, New York. SUNY Polytechnic Institute participated in the expansion.

French Company to Establish $60 Million Plant in Virginia France-based Polykon Manufacturing will locate its first U.S. plant on 22 acres in White Oak Technology Park, Henrico County, where it will manufacture ingredients for the cosmetic and pharmaceutical industries.

Farmers Insurance to Expand in Phoenix One of the nation’s largest multiline insurer groups, Farmers Insurance, plans to significantly expand its 500-employee operations campus in northern Phoenix, Arizona, which could eventually add 1,000 employees.

Nutramax Laboratories Expands in Lancaster, South Carolina A leading manufacturer of nutritional supplement products for people and their pets, Nutramax Laboratories is expanding operations in Lancaster, representing a $15 million investment and the creation of 125 new jobs.

New Gulfport Shipbuilding Facility to Create 1,000 Jobs Edison Chouest Offshore, an offshore energy service and supply company, is locating shipbuilding operations at the Port of Gulfport, Mississippi.

The project represents a $68 million corporate investment.

Unisys Opens Client Service Center In Augusta, Georgia

Aircraft Company Invests $30 Million in Jacksonville, Florida, Expansion

Unisys Corporation plans to create up to 700 jobs during a five-year period at its new 68,000-square-foot client service center in Augusta, Georgia, which is part of the Augusta Riverwalk complex.

Kaman Aircraft Corp., a global aerospace and industrial manufacturer and distributor, has expanded its operations center in Jacksonville, Florida, with plans to ultimately create 200 new jobs.

CFOs Betting on North America According to Deloitte’s CFO SignalsTM Q4/2015, although CFOs are concerned about slow global growth and geopolitical instability, as well as rising labor costs, many believe that North America (and the U.S. in particular) can continue to shoulder the burden of economic growth in 2016. In fact, only 27 percent of those surveyed believe improvement in North America’s economy

is dependent on improvement in China’s economy.

The CFOs say they will focus on growing existing businesses and becoming more efficient, while new markets are significant for some industries. Their home markets (and the United States for non-U.S. companies) are most important, but markets do vary by country and industry.

AREA DEVELOPMENT | Q1/2016

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FIRSTPERSON MIKE MCCORMICK

V.P. & TECHNICAL PLANT MANAGER

BOSCH REXROTH CORP.

FOUNTAIN INN, S.C.

Bosch Rexroth is just completing a five-year investment of $80 million to open your largest hydraulics manufacturing facility in North America. Why did you select Fountain Inn, S.C., as the place for this kind of investment?

McCormick: We are a European-based firm. We knew we had to grow our presence in North America. To do that, we needed good access to East Coast ports. South Carolina has an excellent port in Charleston, and we use it extensively. South Carolina also is a manufacturing-friendly state, and they are aggressively pursuing manufacturing. They see the future of South Carolina as the place that things get made. We like working with people that like manufacturing.

Why did you choose this particular piece of property?

McCormick: This investment turned out to be an extension of an existing facility. We were making a significant commitment to our future, so we looked at all the alternatives. We looked at other states before deciding to take our rather small presence and make a long-term commitment in a much larger facility.

The adjacent property and facility came on the market, but there was a protected tributary between these two properties. Also, the building was a logistics center, and we needed heavy manufacturing. To get there required driving a mile, but the building was only a few hundred meters away from our existing facility.

We met with government officials to tell them we needed to interconnect this into a campus.

South Carolina agreed to help us build a bridge over the waterway and a road from the end of the bridge to the property. We now have three buildings on a campus.

This property was originally a warehouse. How did you convert it to a modern manufacturing facility?

McCormick: Our internal architecture consultants and an engineering partner found a creative solution to transform the building, which brought us unique advantages. We kept the four walls and the tall roof. We needed an 18-inch floor for large machines, so we cut out the floors in the areas where we have heavy manufacturing. Then we put in the

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floor we needed. We retained half the original floor.

We have a lot of heavy utilities overhead. We installed a grid of steel beams below the roof deck to carry the additional utilities. Where that grid ended, we built the technical mezzanine, which housed the air-handlers and machines that take up a lot of floor space. We put that up in the air, as well. It took a year to gut and rebuild the building.

Tell us how Bosch Rexroth is working with Greenville Technical College to develop the labor force in the area.

McCormick: The number-one constraint for anyone in our business is high skilled labor.

Greenville Tech is our partner in our apprenticeship program. We provide the facility and they provide the classroom instruction. It was a true partnership to build up a world-class apprenticeship program. It also gives a career path to our existing associates.

What else are you doing to help develop your labor force?

McCormick: This issue of technically skilled workers has been identified as a key area of investment and development for our company. We have engineers from our facility go to the local middle school and keep the very youngest kids excited about STEM (science, technology, engineering, and math) education. We have a youth apprenticeship program of high school kids that come over once a week that compete in First (For Inspiration & Recognition of Science & Technology) Robotics, which is an international competition. We have dozens of university interns and we have people doing post-graduate work here. We are engaging in terms of time and talent at all levels. In terms of hiring for the facility, we had a lot of job fairs.

We also partnered with other HR firms to help us with marketing in this region and other regions.

Tell us about the Bosch Community Fund.

McCormick: Within Bosch communities, the Bosch Community Fund makes money available to specifically promote STEM education and help our Bosch businesses grow the local work force. We are now engaging ourselves in the education process. We’ve come to the realization that it doesn’t help to complain. You have to become engaged. We realize manufacturing was overlooked by one or two generations of young people, so we have a demographic issue developing.

We are working urgently to close it, in part, by using the fund.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Bosch Rexroth has a strategy to invest locally to serve global customers. Please explain.

McCormick: Compared to the size of our market in North America, we were under-represented here. We wanted to have local capabilities that were on par with our local customer base.

Some of our largest global customers have their main production, engineering, and administration in North America. When companies want to discuss a new product or application, we used to refer them to a different time zone and language. That’s not a success factor. We are building up our R&D in this bigger footprint, so that we can produce the product, but also engineer it locally. So all the things we can handle for a market the size of North America, we can now handle in this facility.

we are doing here are our own initiative. Some of them are supported through our parent, like the Bosch Community Fund. We benefit from our corporate infrastructure and our corporate giving. They let us recommend where we invest that money. There is a coordination of those efforts across the U.S. to ensure best practices are shared — and to ensure that we are not sprinkling a little bit everywhere and nothing is getting done. So they are ensuring we are giving significantly in places where we see the gaps nationally so that we can address systemic issues.

How does Bosch Rexroth work in conjunction with Robert Bosch North America?

McCormick: Bosch Rexroth is part of a larger organization, Robert Bosch North America. Our local efforts here are leveraged across the larger organization. Some of the local efforts

Mike McCormick, Vice President and Technical Plant Manager at the Bosch Rexroth facility in Fountain Inn, S.C., recently spoke with Area Development about the company’s decision to expand its presence in North America as well its efforts to build a qualified workforce.

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FRONTLINE

Implementing the New Ozone Standard: First Steps

I

ndustrial facility managers should be on the lookout in 2016 for how cities and metropolitan regions are initially judged under the U.S. EPA’s new air quality standard for ozone (O3). EPA lowered the standard last October, from 75 parts per billion (ppb) to a more stringent level of 70 ppb. Ozone (O3) is largely a summertime pollutant, commonly associated with “smog.” It is formed from precursor pollutants — volatile organic compounds (VOCs) and nitrogen oxides (NOx) — and controlling ozone depends on controlling VOCs and NOx, common pollutants emitted from hundreds of sources. At certain levels, ozone can cause lung and respiratory problems.

EPA’s October decision started a one-year regulatory clock. By October 1, 2016, state governors have to present to EPA which counties in their states will likely comply with the new standard (counties said to be “in attainment”) and which counties will NOT comply and are declared “nonattainment,” an unwelcome turn for a city or metropolitan region. An ozone nonattainment area requires new or different controls on air pollution sources, from cars and trucks to manufacturing and industrial facilities, even including consumer products such as aerosols, fuels, solvents, and paints.

Not a New Concept Attainment and nonattainment are not new regulatory concepts. Many urban industrial facility managers are familiar with working in nonattainment areas. But a new lower standard will sweep in new territory. Executives with facilities in these different locations will need to acquaint themselves with this difficult set of regulations.

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By Tom Ewing

Additionally, and importantly, a lower standard could mean that a current nonattainment area is ranked higher on the scale EPA uses to judge relative nonattainment.

(Ozone levels in Columbus, Ohio, for example, are lower than in Los Angeles.) In the Clean Air Act, mandatory controls are linked to the severity of the problem. Regions with more severe ozone problems face controls tougher than lower-ranked regions. Business leaders, therefore, may be familiar with existing nonattainment demands but a new, higher ranking requires a close look at expanded controls.

A state’s initial evaluation is the first step in the attainment/nonattainment designation. The EPA has one year after that in which to review the states’ analyses, and agree or disagree with the conclusions. Business managers should watch for this 2016 analysis. If a state’s report includes questionable data and assumptions, that work should be challenged. Be assured: environmental and public health groups will be monitoring this closely and will be prepared to push back at regulators.

EPA expects that 241 counties will violate the new standard. (For the older, 2008 standard, EPA listed 192 counties and 40 partial counties as nonattainment.) EPA expects most new nonattainment counties (except in California) will come into compliance in the next few years just from existing controls that are relatively new or just starting to show benefits. EPA’s critics strongly dispute that, arguing that states will face great difficulty finding additional and affordable controls on VOCs and NOx. Whether easy or difficult, this first cut at attainment or nonattainment will be a critical indicator regarding location and future regulatory burdens.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

FRONTLINE

Incubators Help Startups to Grow and Succeed

S

tartup fever is exploding across America, as a slowgrowth economy, corporate job cutbacks, and the work ethos and expectations of the burgeoning millennial generation reshape the business landscape. Cities, states, universities, and private interests are all scrambling to provide these lean startups with petri dishes in the form of incubators and other programs that help them succeed, keep them happy — and begin to derive economic development benefits out of the relationships.

Interestingly, many of the incubators that have opened to meet the needs of startups are situated in places not traditionally associated with entrepreneurial fervor. While it’s no surprise to see incubator spaces and small-company networking centers thriving in tech centers such as Silicon Valley; Austin, Texas; and the Research Triangle of North Carolina, the latest generation of incubator fever is taking root in places such as Des Moines; Kansas City; Gainesville, Fla.; and Grand Rapids, Mich.

Entrepreneurial Centers In the capital of Iowa, for example, Geoff Wood opened Gravitate in an old bank building in 2014, hoping to establish “an entrepreneurial center of gravity in downtown Des Moines.” Gravitate offers 15 office spaces beginning at $450 a month and “memberships” to sole practitioners beginning at $150 a month.

“The biggest productivity-limiting factor for working by yourself is loneliness,” Wood explains. “So memberships are for people who work remotely for companies in, say, California, who otherwise would be working in isolated fashion in their basements or in coffee houses. They can come into Gravitate and talk about new Apple keynote [presentations] and Iowa State basketball games, and it gives them a chance to be part of a physical Des Moines community versus peo-

Gravitate, an entrepreneurial center in downtown Des Moines, provides a sense of “community.”

By Dale Buss

ple on the other end of a computer.”

Matt Rizai, CEO of business-software company Workiva based in nearby Ames, Iowa, swears by the importance of a place like Gravitate, which his company has sponsored.

“Every corner of the world has lots of smart and ambitious people,” he says. “With incubation, you get experience that you wouldn’t get otherwise, and places like Des Moines don’t become so unlikely.”

Similar dynamics are at work at 40 Pearl, the headquarters in Grand Rapids, Mich., of Start Garden, a four-year-old startup funding organization that also has clustered in an old downtown bank building. The $15 million fund, emphasizing startups that “build things and get them into markets around the globe,” also offers space for fledgling entrepreneurs as well as start-up–centric coaching and workshops on topics ranging from pitch development to how to build equity-compensation structures for employees.

In Kansas City, C2FO, a financial-technology company, has begun offering free office space and other support services to up-and-coming companies in the area as an important node in an emerging technology scene known as “Silicon Prairie.” The company recently doubled the size of its headquarters and decided to use the extra room as incubator space.

Sometimes incubation occurs in the minds of entrepreneurs as much as in a physical space, and that’s why there’s a proliferation of programs such as the Executive Training Class at the Jim Moran Institute for Global Entrepreneurship at Florida State University. The five-month experience equips executives with business-growth skills and leadership training. “It was one of the best programs I have ever attended,” says Kim Miller, owner of Ink Link Marketing, a startup based in Miami Lakes, Fla. “My business has more than doubled since I attended it.”

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LEADING LOCATIONS

Beyond Silicon Valley: Promising New Tech Boomtowns In its quest for lower costs, modern facilities, and access to talent, the booming tech sector is finding it can strike gold outside California.

By Steffen Kammerer, Practice Leader, Technology Brokerage, JLL Americas

I

nnovation is still gold in the booming technology sector — but California’s Silicon Valley is no longer the only place to mine it. Many of today’s tech firms and startups need to expand outside primary tech hubs like Silicon Valley and San Francisco to find affordable labor and locations for operations that don’t necessarily require the high-cost locations at “ground zero.” The good news: today, they don’t have to. The tech industry is expanding outside its pricey hometown in the quest for lower costs, modern facilities, and access to talent.

In fact, the power of the $5.3 trillion global tech industry is resetting the office-leasing map across the United States, according to JLL’s 2015 United States Technology Office Outlook. Increasingly competitive leasing conditions and rapidly shrinking vacancies in the major tech hubs are spurring an exodus to lower-cost, high-opportunity cities like Nashville and Austin.

ing job growth, local tech wages, average rents for in-demand creative space, real estate costs per employee, as well as all-in costs.

Another factor in the nationwide tech diaspora is the importance of technology to almost all industries. Tech companies are not the only ones that need tech talent, as even professional services companies are increasingly technologydriven today.

Furthermore, the maturation of the tech sector has led to demand for specialty technologies for healthcare, marketing, scientific research, financial services, law, e-commerce, and other sectors. From “fintech” to “medtech” to, yes, corporate real estate data and analytics, demand for technology talent is creating new energy — and real estate demand — in secondary cities that serve industries now seeking tech-savvy talent in the science, technology, engineering, and mathematics (STEM) fields.

Impactful Expansion

Wanted: Room to Grow in a Fast-Growing Field

Last year, 34 technology companies expanded into more than 2.1 million square feet of new office space, across 19 markets outside traditional tech centers. These decisionmakers took into account a series of related factors, includ-

The tech sector is spreading like wildfire, and that progress is not expected to slow this year. The global tech market will continue to grow by 4 to 5 percent in 2016 and 2017, predicts Forrester, and tech office leasing is shooting up across the board also, as might be expected.

In 2015, roughly three quarters of technology office leases represented expansion, a meaningful 30 percent higher than the proportion of expansion leases in financial services, the second most-expansionary industry. Tech has also been responsible for the largest amount of large-block leases, accounting for about a fifth of office leases in the 20,000 square feet-and-up category.

Expansion, Not Exodus To be clear, traditional tech hubs are not losing their allure. Brand-name companies, as well as startups with no capital restrictions, continue to make markets like Silicon Valley, New York, Seattle, and Boston the hotbeds of innovation and excellent places for cross-pollinating ideas, accessing new capital, and winning patents.

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The fact that northern California rents are very high only underscores its appeal: Nine of the top 15 most expensive U.S. office markets are in the region, with downtown Palo Alto leading the pack at $98.68 per square foot. The most prized streets command even more, with San Francisco Peninsula’s Sand Hill Road and Palo Alto’s Hamilton Avenue ringing in as America’s most expensive streets, at $141.60 and $124.44 per square foot, respectively.

But these primary hubs are no longer the only option for growthoriented companies. Many startups are staying in their hometowns while establishing a smaller Silicon Valley office; while established organizations of all sizes that began their journey in northern California are expanding their horizons, along with their real estate footprints.

Will a different location with cheaper rents enable companies to spend more money on valuable talent or research and development? Or will spreading talent out across many different locations stymie innovation by reducing collaboration? Smart expansion is becoming a necessary, complex part of survival for technology companies, and the cost of real estate must be measured carefully against its value in terms of access to talent, venture capital, and resources.

THE TECH INDUSTRY IS

E X PA N D I N G OUTSIDE ITS PRICEY HOMETOWN IN THE QUEST

Another conventional viewpoint being turned upside-down is that a tech startup must be based in the Bay Area to have access to private capital.

But that’s no longer the case as startups and venture capitalists alike have begun to cast a wider net. In 2014, 75.8 percent of unicorn companies were in San Francisco or Silicon Valley. In 2015, that percentage shrank to 59.2, with lively start-up scenes emerging in Utah; Oakland/East Bay; Boston; Washington, D.C.; and Orange County as venture capitalists looked beyond Silicon Valley for opportunities.

Where Will Tech Grow Next?

Expanding companies grow best by finding the sweet spot between FOR LOWER cost and growth opportunity. Value comes in measuring factors like technology employment growth, perCOSTS, centage of millennials and educated workers in the area, innovationfriendly infrastructure, a concentration of startups, and access to venture capital. Cost calculations should include everything from real estate AND ACCESS costs and average tech wages to housing and costs of living.

T O TA L E N T. JLL has devised a matrix that takes all those factors into account, visually mapping market start-up opportunity compared to costs in all viable U.S. markets for expanding companies, from small startups to mid-size tech companies. It includes the full range of factors that influence tech leaders Some First-Class Benefits shopping for a place to grow. in Secondary Markets For example, low start-up opportunity and low-cost marMany tech leaders believe that multiple locations support, kets include Salt Lake City and Los Angeles, while “ideal” not challenge, innovation and talent development. In fact, high-opportunity, low-cost environments for tech companies startups and established companies alike are finding a new apon a budget include Nashville and Denver. In this category, proach to site selection. Some have concluded that paying high Austin wins out for strongest metrics for tech growth, yet rent to be close to a tech epicenter is not necessarily the best or relatively (still) affordable costs. Unsurprisingly, high-oponly way for a growing company to gain access to top talent. portunity, high-cost markets include Silicon Valley and San The top-15 most-expensive U.S. tech submarkets have an avFrancisco — though one surprise does come in the form of erage vacancy rate of 7.6 percent. Locations like New York, the the San Francisco Peninsula, which rests in the bottom five Bay Area, and Boston each provide deep access to capital, inof viable options (largely due to its lack of housing for the novation, and top talent — all generally worth the price tag for workforce). capital-rich startups and established companies. However, concessions aren’t going up, and rents aren’t going down. In many of these markets, competition for tech talent is just as fierce as Some standout markets — the competition for office space, so why not look elsewhere? for better or for worse — follow.

Silicon Valley technology heavyweights are seeking real estate opportunities far beyond their home base. In 2014, these What’s Hot? companies leased a total of 20,000 square feet or more across nine markets — including Atlanta, Detroit, Orlando, and AUSTIN: The Lone Star State’s tech hub is experiencing Phoenix — for a total of 3.5 million square feet in 20 leases.

15 percent annual tech job growth. Though rents are still a

MODERN

FA C I L I T I E S ,

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15

J L L’ s L o c a t o r M a t r i x H i g h s t a r t - u p o p p o r t u n i t y, l o w c o s t

L o w s t a r t - u p o p p o r t u n i t y, l o w c o s t Low Cost

Detroit Richmond, VA

Salt Lake City

Indianapolis Pittsburgh

Miami

Houston Baltimore Philadelphia

Low start-up opportunity

Phoenix

Dallas Raleigh-Durham Atlanta

Charlotte

Suburban Los Maryland Northern Angeles Virginia

Minneapolis-St. Paul Portland Denver Chicago New Jersey

Orange County

Boulder San Diego

Oakland Boston EastBay

Silicon Valley San Francisco Peninsula

L o w s t a r t - u p o p p o r t u n i t y, h i g h c o s t

High Cost

pretty penny less than in the primary markets, average asking rents are catching up. Now at $32.59, Austin rents are the tenth-highest of 37 U.S. markets.

NASHVILLE: The Music City is heating up fast, with the $100 million TechHire program and innovation running rampant. Nashville boasted the greatest patent density in the country in 2015. Rapid expansion, however, could be challenged by lack of modern office space.

PHOENIX: With 3.9 million square feet of new space under construction, workplace offerings here are expected to be friendly for tech talent, with modern space available at competitive prices. Already, Phoenix offers the second-lowest average apartment rent of all 37 markets, which could serve talent recruitment efforts. Moreover, the average office rent in Phoenix’s most-expensive tech submarket, Tempe, is 78.5 percent cheaper than in Silicon Valley’s most expensive submarket, Menlo Park.

Holding Steady LAS VEGAS: While Zappos has found success in the land of casinos, cost-prohibitive factors like 12.7 percent job growth and an average tech wage at $79,408 are holding back overall market growth as a tech center. The market’s future will

16

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Orlando Las Vegas

Nashville

Austin Seattle-Bellevue Washington, D.C.

High start-up o p p o r t u n i t y,

New York City San Francisco

H i g h s t a r t - u p o p p o r t u n i t y, h i g h c o s t

depend on whether another brand-name tech company will choose to expand in Las Vegas.

SAN FRANCISCO PENINSULA: It may be close to the tech epicenter, but the very high cost of living and real estate pressure holds this market back.

Of Interest With lackluster growth, Charlotte, Detroit, and Baltimore round out the bottom five viable tech markets in the United States — but they are on the map, and of high interest to many startups seeking affordable rents and talent.

Predicting the Next Wave of Tech Demand Austin may be hot now for tech startups, but rents will continue to rise in the next 12 to 18 months. Los Angeles may be in a holding pattern at the moment, but if the population of millennials and an educated workforce continues to expand, it’s poised to capture tech interest, too.

For growing tech companies, tomorrow’s search for space will be one that balances out the costs and returns for talent and creative space. Silicon Valley remains the epicenter. But increasingly, casting a wider web is just part of the business. ■

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

facility design/construction

Optimizing Integrated Project Delivery IPD requires considerable time and effort on the facility owner’s side, but this front-end planning will help in avoiding costly delays once construction gets under way.

courtesy Ghafari Associates

By Matthew Wagner, Ghafari

On this project, the elevation of the second floor was evaluated to determine the optimal height that allowed clearance for the first-floor cleanroom, while managing building elevation and facade costs.

I

ntegrated project delivery (IPD) is a strategy for leveraging technology to optimize return on investment. IPD requires the close and continuous integration of the client/owner with designer and construction teams from the earliest phase of planning. Because of the attention to detail and sequencing in the planning phase, the risks of costly change orders and attendant schedule slippage are often completely eliminated. Here are insights to optimize IPD.

Drivers for IPD IPD was adapted from the lessons learned by the lean processes model. It helps the owner to optimize ROI over the entire life cycle of the project rather than subjecting all values to lowest cost and shortest delivery time.

The focus on process and life cycle also ensures better quality of design and components. Ghafari Associates and Ringland-Johnson, the construction manager, leveraged technology in the design and construction of Woodward Inc.’s new facility in Loves Park, Illinois. While the Woodward project implemented many principles of IPD and realized corresponding benefits, the team members were not joined by a formal IPD contract.

When stakeholders are integrated under IPD, everyone has a common goal of project success. Because that success is in their interest, they willingly contribute value-adding effort. Sometimes the most efficient approach may cause one department to do more work — such as revising a large set of drawings — so that the overall project can be completed efficiently. In the conventional format of separate silos, the affected group would insist on a change order. With IPD the spotlight is on the reduction of total effort, so it compensates the person or group spending more effort. In the same way, it reduces rework and time wasted when multiple

teams carry out the same task.

The Woodward project succeeded because the project team leveraged the use of 3D BIM models to work out all conflicts and coordination before work was performed in the field. With IPD the overall schedule usually does not change. Rather, more time is invested on the front end so that when shovels do hit the ground, construction time is held to a minimum.

Because most of a project’s cost is in construction, the design is a small percentage of the total cost. Adding an extra 20 percent to the design phase might only add 2 percent to the overall project cost. The added cost is easily justified when it speeds up the schedule during its most expensive (construction) phase.

Optimizing Meetings Integrated projects often require more meetings, and it is critical that meetings are run efficiently. Every meeting should AREA DEVELOPMENT | Q1/2016

17

have an agenda with a clear purpose. Not every person will leave the meeting with action items, but those who do should be assigned a date for completion, whether it is by the next meeting or by the end of the day. Action items are addressed at the next meeting; there should be no outstanding items.

If there are no items to discuss at the next scheduled meeting, cancel it! If there is just one item, resolve it, and conclude the call. Short meetings are good for morale, but it takes strong project management skills to head off distractions. The meeting rules used at the Woodward project were clear and effective.

There was only one communicator; everyone was expected to listen and not engage in side conversations, and phones stayed in pockets. Face-to-face meetings occurred once a month, supplemented by weekly conference call meetings, which could run anywhere between 15 and 60 minutes.

Woodward had a process that was adopted at the very first meeting called “Collaborate to Cost” or CTC™. At first, one would think that CTC was just a fancy term for the dreaded Value Engineering (VE) — which is typically interpreted by the design industry as “reduce cost.” CTC’s main objective was to evaluate a suggestion, approach, or idea and determine its ROI. Sometimes CTC meant spending more, and sometimes it meant reducing cost by changing materials or systems. For example, because Woodward wanted to have jointless slab on grade — which allowed greater flexibility in process layout — the company was willing to spend the extra money required for that feature.

Leveraging Technology All parties shared information on a software platform built for BIM and used a cloud-based server system. Each discipline had instantaneous access to every other discipline’s model. For example, a structural engineer had all the other models at his disposal and could selectively switch those on or off to isolate a specific utility or feature.

Team members could engage in live collaboration without sitting together. Having all the disciplines under one area, and having all files linked simultaneously, created a streamlining advantage that shaved weeks off potential delays caused by waiting for milestone deliveries for coordination.

Team members also ran clash detection internally as part of their process. This feature is not required for all projects, but should be mandatory for projects with complicated systems or limited space. For example, on this project there were 24 deep beams that supported the second floor with openings in the webs to run smaller electrical and fire suppression lines within the beam space. This freed up valuable ceiling space and kept the second floor and overall building from being raised.

Any time a project team can integrate with the owner, it will reduce issues. In the Woodward project, updating occurred in real time. The team could view the current version of the model online during meetings and not have to wait for a drawing to be produced. This kind of instantaneous updating may not always be necessary. When the team is

Area Development's 100 Leading Locations 2015 Louisville/Jefferson County MSA • Top Big MSA — Year-Over-Year Growth Factors #1 • Top Regional MSA — Southern Region #3

18AREA0544.indd AREA DEVELOPMENT 1

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not using live updating, the project manager gets updates at every milestone and the team then has to wait for feedback before the design can progress. If the team is not working in that type of environment, it can still adapt to new challenges and opportunities, but it won’t be able to adjust as quickly.

Expending Considerable Effort IPD is not a buzzword or a trendy label. It requires considerable effort on a facility owner’s side. What owners want to understand before committing to IPD is that they must be engaged enough throughout the duration of the project to make decisions in a timely fashion. This commitment should be a well-defined and documented process. It works best when the owner assigns a key person to run the project and to present to the next level for signoff. That person needs to be in project meetings and ready with an immediate response when needed. Instead of the conventional pattern of assessing only at milestones, there needs to be live coordination between milestones. This reduces that likelihood of major conflicts popping up during milestone reviews.

How much should the team rely on models? There are several ascending levels of development available on a 3D BIM platform. The higher the number, the more detail will be in the model; but using a higher level of detail does not necessarily improve ROI. Whatever level is chosen, it should be determined early in the project. The level of detail should

always reflect what the model will be used for.

The Woodward/Loves Park project required some phases to be scheduled — which did not strictly conform to IPD methodology — because there was a critical path to reach the desired milestone for construction completion. The steel frame design had to be provided before other systems were designed. By having all parties at the table, team members compiled the information they needed and were able to push the steel design out.

The team had to coordinate with ownership to determine the client’s future roof hanging needs. In addition to the owner’s input on roof hanging requirements, the team learned what was already hanging from the roof, or supported on the roof, from mechanical, electrical, and plumbing teams. It completed the truss design before the process was completed on the floor and before the mechanical system was completely designed.

The designers were able to issue a steel package early in order to meet the construction schedule. Without the IPD methodology, they would almost surely have missed the deadline.

As the Woodward IPD experience has shown, planning before doing is the biggest key to reducing waste and maximizing ROI. Equally important, this can only happen with a fully integrated, collaborative team aimed and experienced at optimizing ROI for owners.

MATT WAGNER, SE, can be reached at 312-984-2300 or mwagner@ghafari.com.

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At less than 50 percent built out, Cape Coral has room to grow. Let our Economic Development team help you find the ideal business site.

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19 AREA DEVELOPMENT12/02/16 | Q1/2016 6:10 PM

COVER STORY

INFRASTRUCTURE INNOVATIONS WILL DRIVE

MANUFACTURING From innovative road repair to driverless trucks, bullet trains, and 3D bridges, advances in technology will help to bring the nation’s infrastructure up to speed while creating high-skilled manufacturing jobs.

By Stephen Gray, CEO, Gray Construction

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W

hen the long-term highway bill was signed into law last December, it was a step in the right direction not only for our nation’s transportation sector, but for manufacturing as well. It’s common knowledge that the United States’ aging infrastructure makes it harder for manufacturers to deliver products to customers on time, which in turn creates a major ripple in our country’s overall competitiveness. This bill is one of the most important things that Congress can act on for our country. Infrastructure’s critical role in our nation’s overall competitiveness cannot be ignored any longer.

Rehabilitating Infrastructure Through Innovation

Rosabeth M. Kanter, who holds the Ernest L. Arbuckle Professorship at Harvard Business School, wrote in her book Move: Putting America’s Infrastructure Back in the Lead, “We should be thinking not just about repair, which tends to be the conversation.

We should be thinking about reinvention. I’m arguing for more technology, better connections, and understanding how to design a system in which the parts augment and enhance each other.”

Kanter is exactly right. The future of American mobility is hinged upon not only the repair of what we already have, but more so on the innovation required to bring us back on the playing field. As a key driver of global competiveness, innovation is at the forefront of advancing every industry in the world. Just as manufacturing is seeing rapid changes in efficiency and production thanks to advanced technology, transportation infrastructure is on the cusp of this transformation as well.

Construction materials and methods used to repair and rebuild our infrastructure are being designed to be more efficient, reliable, and durable. For example, manufacturers are now producing ground tire combined with asphalt that extends the lifespan of pavement by 20 years. Three-D printers can now make reinforced structural beams for the construction of buildings and bridges.

There are even gravity-defying robots being built that promise to 3D print a steel bridge in mid-air. These changes will not only revolutionize infrastructure maintenance and

rehabilitation in America, they also hold the promise of creating American manufacturing jobs that will help us to better fulfill our economic potential.

Driverless Trucks to Transform Logistics and Transportation

A recent Forbes1 article estimated that the technology enabling driverless trucks to take off would largely be in place within three to five years. The first driverless freightliner, manufactured by Daimler, hit the road in May 2015 in Nevada. Autonomous trucks could provide a host of advantages to manufacturers, particularly in the logistics space. For example, whereas human drivers are required to take mandatory rest periods resulting in lost time, autonomous trucks can move continuously, driving increased efficiency and fewer delays in delivery — not to mention the fact that the shortage of humans willing to take the wheel is only worsening. The American Trucking Association predicts that by 2022, the industry could be short some 240,000 drivers, which does not bode well for manufacturers and distributors who are being challenged with increased demands for efficiency from online shoppers.

As this promising new mode of transportation takes off, auto manufacturers will see an increased need for highly skilled workers trained to maintain the technology required to keep these vehicles safe on the road. Likewise, if the layout and design of interstate roads are adjusted to accommodate the operation of driverless trucks, the impact on the industrial material manufacturing market could be substantial.

NEW MATERIALS CAN EXPAND THE LIFE OF PAVEMENT BY 20 YEARS.

Bullet Trains to Bolster Manufacturing

A recent issue of Gray Construction’s AREA DEVELOPMENT | Q1/2016

21

external newsletter publication, the GrayWay,2 discussed how high-speed rail in the U.S. could be a major game-changer for our nation’s infrastructure. In addition to alleviating congestion on the highways, waterways, and airways, highspeed rail could have powerful implications for manufacturing.

“If you get one of those lines up and running, I think it would be quite an eye-opener,” says Marcia Hale, president of Building America’s Future.

“And just think of the jobs that could be provided in manufacturing engines and cars and rail lines and the steel that’s needed.”

Though several delays have hindered its course thus far, California is one state that’s ready to roll on high-speed rail, as evidenced through the billion-dollar bullet train contract introduced last year. And Siemens is eager to capitalize on

ers. Then, robots will heat the metal to a molten 2,700 degrees Fahrenheit and construct the bridge “drop by drop.” Amazingly, the steel, which is developed to “dry” rapidly, will be able to neutralize the effects of gravity to keep the lines straight. The autonomous robots will create their own supports and have the ability to cross the metal formations as they build a self-supporting bridge design. While this bridge, in particular, will not support vehicles, it does prompt one to wonder if similar technologies could eventually be applied on larger-scale infrastructure projects in the future.

Another advancement in transportation infrastructure that’s already made a major impact is the creation of “instant bridges” through accelerated bridge construction. These bridges can be built off-site and transported into place in a matter of days (as opposed to years), resulting in a lighter impact to traffic flow than a longterm bridge construction project.

© Daimler

Looking to the Future

As new technologies become more widely adopted across the industry, more high-skilled jobs in manufacturing will be generated. Future jobs in the operations and maintenance of 3D printers, the management of complex and hyper-connected supply chains, and advanced manufacturing facilities will be generated, with hope that they spark the interest of industry newcomers and address the skills gap.

These innovations barely scratch the surface of what’s possible, or needed, to Daimler’s Freightliner Inspiration Truck – the first licensed autonomous driving truck in the U.S. — hit the road in May 2015 in Nevada. move our nation’s transportation infrastructure forward. But, with the National Network for Manufacturing Innovation the opportunity. Last summer, Siemens opened a (NNMI) advanced manufacturing hubs working 125,000-square-foot manufacturing facility on its hard to continually unveil new technologies to French Road plant site in Sacramento, California, boost our competitiveness, I am hopeful that we in hopes of using it for manufacturing high-speed will continue to see positive advancements. Our trains. With this facility will come more highly friends at the National Association of Manufacturers have long been rallying for a greater focus skilled, technical manufacturing jobs for the state. on our country’s infrastructure, as these improvements are critical for the future productivity and The Reinvention of Construction Materials the global competitiveness of manufacturing as a whole. So, as we look to the future of repairing As stated, also set to advance transportation America’s transportation infrastructure, let’s not infrastructure is 3D printing. For example, the first forget that our leaders must embrace the power 3D printed bridge is set to be “built” in 2017 by of innovators to create the changes that will have 3D printing R&D firm MX3D, Autodesk, and cona lasting effect on our economy. •• struction and civil engineering company Heijmans.

The pedestrian steel bridge will be built across Notes: a canal in Amsterdam by a multi-axis robotic 3D 1 http://www.forbes.com/sites/oliverwyman/2015/12/08/self-driving-trucks-could-rewritethe-rules-for-transporting-freight/ #52df9dbf68e4 printer that “draws” structures in the air.

2 https://www.gray.com/news/blog/2015/11/05/is-one-of-america%E2%80%99s-oldestEngineers will use AutoCAD to first input the modes-of-transportation-part-of-the-solution-to-its design and give directions to the robotic print22

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th 30 ANNUAL

corporate survey

&

12th

ANNUAL

consultants survey

By Geraldine Gambale, Editor

AREA DEVELOPMENT | Q1/2016

S1

th 30 ANNUAL

corporate survey New facility and expansion plans are up slightly on a year-over-year basis, although finding skilled labor is once again top of mind.

A

NEARLY HALF THE RESPONDENTS BELIEVE the U.S. economy is on a continuous growth track.

s 2016 began, the global economy decelerated, oil prices sank, and the stock market plunged. Nonetheless, President Obama painted a rosy picture of the U.S. economy in his State of the Union address based on hiring numbers of the last two years, which were the best since the late 1990s. The Labor Department reported payrolls increased by 292,000 jobs in December 2015 alone, although most of these jobs are in the services sector. The optimists are hoping that an increase in hiring will lead to an increase in spending and, in turn, bump up economic growth, which is actually more dependent on the manufacturing and energy sectors and registered less than 1 percent in 2015’s final quarter.

Mark Zandi, chief economist at Moody’s Analytics, commented on the remarkable consistency of employment growth over the last several years. And optimism about employment actually led the Federal Reserve to raise interest rates for the first time since 2008. However, Carl Tannenbaum, chief economist at Northern Trust, told The New York Times (1/8/16), “We certainly see the impact of global conditions in the manufacturing sector, where the strong dollar and weak commodities prices have diminished momentum substantially [although] the service side of the American economy is progressing unabated.”

PwC’s Q4 2015 Manufacturing Barometer indicates U.S. manufacturers are being cautious in their hiring and capital spending plans because of the uncertain global economic CURRENT OPERATIONS outlook. They still anticipate OF RESPONDENTS: revenue growth, but at a more modest pace. Do our corporate Manufacturing — Durable Goods 17% Manufacturing — Non-Durable Goods 6% executive readers’ plans reflect Manufacturing — Other 12% this tempered optimism?

Distribution/Logistics/Warehousing 10% Each year at this time — for 30 Financial Services/Insurance/ years, in fact — Area DevelopReal Estate 9% Data Processing, Software ment polls its readers to gauge & Other Computer-Related Services 4% their take on the economy as Hospitality Industry 2% revealed by their location and Healthcare/Life Sciences 2% expansion plans and site selecRetail Industry 3% Construction & Trades 13% tion priorities. Let’s take a look Other 21% at their responses to our Annual figure 1

S2

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Respondents titles: Business Unit Manager or Director

14%

Other

15%

Chairman, President, Partner, CEO, or Owner

45%

Real Estate, Facility, Dev. Mgr./Dir.

11% V.P., Secretary, or Other Corporate Officer

CFO, Controller, Financial Officer

7%

7% figure 2

Corporate Survey to see if they align with the expectations expressed elsewhere.

RESPONDENT PROFILE Of those responding to our 30th Annual Corporate Survey, just 35 percent are with manufacturing firms. Nearly 60 percent of these respondents represent the C-suite, i.e., they’re the owners or CEOs, CFOs, or other corporate officers.

More than three quarters of these respondents make either the final location decision or the preliminary recommendation of where to locate or expand. It stands to reason, therefore, that 80 percent of the corporate respondents say executive management is significantly involved in the site selection process; and it’s no surprise that more than half say management of their operations or business units are also involved in this decision.

More than 40 percent of the Corporate Survey respondents operate just one domestic facility, with about a quarter

operating five or more domestic facilities. The percentages are reversed when it comes to foreign facilities: just 29 percent of the respondents operate one foreign facility, while nearly 40 percent operate five or more. Thirty percent of the respondents employ 500 to 1,000+ people at their facilities worldwide, and 26 percent claim to be mid-sized in terms of employment (100-499 workers worldwide).

Fully two-thirds of this year’s Corporate Survey respondents say their number of facilities has not changed over the past year. However, 28 percent did increase their number of facilities, with only 6 percent claiming a decrease (these are the same percentages as reported in our prior year’s survey).

The Corporate Survey respondents are, however, more bullish on the economy than they were last year. Nearly half (48 percent) say they believe the U.S. economy is on a continuous growth track. Only 39 percent held that opinion in the prior year’s survey.

Primary role in company’s location decisions: Not involved Information gathering

17%

4% Final decision

Preliminary recommendation

44%

35% figure 3

Departments significantly involved in the site selection process/project: Executive management Tax and finance

81% 23%

Real estate

30%

Information technology

16%

Supply chain or logistics

19%

Operations or business unit management

55%

Human resources

14%

figure 4

Number of facilities currently operating:

Domestic: Five or more

24% One

Four

42%

7% Three

14%

Two

13% Foreign: One Five or more

39%

29% Two

18%

Four

7%

Three

7%

figure 5

AREA DEVELOPMENT | Q1/2016

S3

Number of people employed worldwide:

Analysis

1,000 or more

21% Fewer than 20

The question I asked from the Corporate Survey data was, “What can both state and local economic development organizations do to best prepare for the predominant number of projects that may occur in the foreseeable future?” It will be some combination of understanding the subject matter expertise of the decision-maker, project sizes and types, where projects originate, how the prospect will find information and, lastly, what’s included in the winning EDO toolkit?

Between 50 percent and 80 percent of the project decisions will be made by executive management and operations positions, while subject matter experts in other functions will be part of the location decision-making process in less than a third of the decisions. In addition, manufacturing and warehouse/distribution facilities make up more than 50 percent of all new domestic projects. About 50 percent plan to open new facilities, but more than 80 percent of the new domestic facilities projects represent less than $50 million in investment. Eighty-five percent of the respondents will use general business magazines to obtain site selection information, but 90 percent will receive their information from site magazines, such as Area Development, coupled with site information gained from robust local and state EDO websites.

From an inventory perspective, prepared EDOs will have a strong mix of small/medium-sized sites coupled with in-depth, searchable websites with demographic information. Regarding staffing, the ED project team will have key members with real experience in manufacturing and/ or distribution who can speak the language of the decision-maker. For marketing outreach, since many decisions will be domestic, it will be key for EDOs to maintain a good business retention program, while concurrently becoming much more effective and consistent in international target-marketing to maximize long-term effect. The EDO that has these traits coupled with proven training solutions, will earn their place in the winner’s circle.

By Von Hatley, Managing Director, Jones Walker Consulting, LLC NEW FACILITIES PLANS Some 49 percent of those responding to our Corporate Survey say they plan to open new facilities within the next five years (a 3 percent increase over the prior year’s survey). Of those, 87 percent say these facilities will be in the U.S., and just a quarter plan on locating these new facilities in a foreign location.

S4

AREA DEVELOPMENT

Nearly 70 percent of those with plans for new domestic facilities say they will open them within the next two years.

Nearly 60 percent say they’ll open one or two domestic facilities, but a fifth say they’ll open five or more.

More than half of these new facilities will be in a southern region of the U.S. — 17 percent of the total planned projects are

27%

500-999

9%

20-49

10% 100-499

50-99

26%

7%

figure 6

Change in the number of facilities during the past year: Decreased number of facilities by 4 or more Decreased number of facilities by 3 or fewer

4%

2%

Increased number of facilities by 4 or more

11%

Number of facilities not changed

Increased number of facilities by 3 or fewer

66%

17%

figure 7

Believe the economy has achieved a continuous growth track:

Yes

No

48%

52%

figure 8

slated for the South; 16 percent for the Southwest; 13 percent for the South Atlantic; and 9 percent for the Mid-South. Whereas the prior year’s Corporate Survey respondents had planned 20 percent of their new facilities for the Midwest, the respondents to the 30th Annual Corporate Survey say only 10 percent of their new facilities are slated for that region of the U.S. Plans for the types of new domestic facilities to be opened did not change much year over year: 29 percent of the respondents’ total planned new domestic facilities will house manufacturing operations, 22 percent will serve as

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

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AREA0543.indd 1

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Location of new domestic facilities (as percentage of total number to be opened): New England (CT, MA, ME, NH, RI, VT) Middle Atlantic (DE, MD, NJ, NY, PA)

8% 4%

South Atlantic (NC, SC, VA, WV)

Plan to open any new facilities (domestic and/or foreign) within the next five years:

Yes

No

49%

51%

If yes, plan to open new domestic facilities within the next five years: No

13% Yes

87%

If yes, plan to open new foreign facilities with the next five years: Yes

25%

No

75%

figure 9

Plan to open new domestic facilities within: 5 years

4 years

17%

2% 3 years

1 year

13%

43%

2 years

26% figure 10

Number of new domestic facilities to be opened: Five or more Four

7%

20% One

39%

Three

15% Two

20% figure 11

S6

AREA DEVELOPMENT

warehouse/distribution facilities, and 8 percent represent new headquarters projects.

Most of these new domestic facilities will create fewer than 100 jobs, say three quarters of the Corporate Survey respondents. And the majority of the respondents (59 percent) also plan on spending less than $10 million to establish these facilities. Once again, these results are quite similar to those of our prior year’s Corporate Survey.

Although fewer of our respondents have plans for new foreign facilities, of those that do, about 60 percent plan to open them within two years, with 46 percent opening just one.

In a dramatic change, none of the Corporate Survey respondents’ foreign facilities are planned for Canada — down from the 25 percent of the total reported by the prior year’s respondents. Plans for new facilities in Western Europe increased from 9 percent to 17 percent of the total reported by this year’s respondents, and Mexico increased from 9 percent to 13 percent of the total.

Plans for Asia held relatively stable, with 22 percent of the total planned new foreign facilities slated for that region. Of those, more than 70 percent are planned for China, despite its increasing costs and troubling economic picture.

More than a quarter of the

13%

Mid-South (AR, KY, MO, TN)

9%

South (AL, FL, GA, LA, MS)

17%

Midwest (IL, IN, MI, OH, WI)

10%

Plains (IA, KS, MN, NE, ND, SD)

5%

Mountain (CO, ID, MT, UT, WY)

6%

Southwest (AZ, NM, OK, TX) West (CA, NV, OR, WA)

16% 11%

Offshore (AK, HI, PR, VI)

1%

figure 12

Types of new domestic facilities (as percentage of total number to be opened): R&D

5%

Other

24%

Manufacturing

29%

Shared Services

8%

Warehouse/ Distribution

22%

Back Office/Call Center

3% Data Center

Headquarters

2%

8%

figure 13

Total number of new jobs to be created at new domestic facilities: 500-999 100-499

2%

1,000 or more

4%

20%

Fewer than 20

39%

50-99

13% 20-49

22% figure 14

new foreign facilities planned by our Corporate Survey respondents will be manufacturing plants, and 18 percent will be warehouse/distribution facilities.

The new foreign facilities will create only slightly more jobs than the domestic ones, with two-thirds of the respondents saying fewer than 100 jobs will be created at new foreign facilities. Once again, for the majority of the respondents (62

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

th 30 ANNUAL

corporate survey

Analysis

Reviewing 30 years of survey responses was an interesting check against my own perceptions and experiences from advising site selection clients over those same years, beginning in 1987 with a company that had built its reputation around locating industrial facilities, but was now expanding into the white-collar world of assessing locations for high-tech operations, R&D, headquarters, and the emerging functions of customer service, data, and operations centers. Along with this came a new client emphasis on technical and managerial skills and issues related to quality of life and attractiveness for recruiting, transferring, and retaining professional and administrative talent. Feasibility analysis of trade-offs involved “stay/go� decisions, comparing the benefits and cost-savings of a new location against the substantial business disruption costs and risks of relocation. These resulted in decisions not to move 50 percent of the time, especially for complex headquarters moves.

The changing factor emphasis over these 30 years, as reflected in the surveys, reveals trends that have steadily put more emphasis on quality-of-life measures as the competition for talent has become more intense due to evolving industry sector needs, as well as demographic challenges. Not only has this affected location decisions about R&D centers, headquarters, engineering, and other operational units, but also manufacturing as all industry sectors have adapted advanced digital technologies and additive production processes.

As my career evolved, I saw the impacts of globalization became major drivers in location strategy and site selection. Access became the client priority. Access to intellectual capital and talent, to markets, and to suppliers rose to be top weightings in executive decisions, with quality-of-life and other qualitative factors often identified as the most critical success factors.

There is no single factor chart or survey that reflects the needs of all businesses. Not only are the requirements of manufacturing vastly different from those used in siting a research center or headquarters, but also even within a narrow industry sector, competitive strategies, corporate culture, and individual requirements demand tailored approaches. Location analysis and decision-modeling has become ever more comprehensive and complex, but as the 30-Year Comparison of Site Selection Factors chart shows — the trend toward more focus on talent and other qualitative factors, while keeping an eye on costs, is prominent.

The bottom line for most businesses competing in the global marketplace is finding the optimal tradeoffs to achieve competitive advantage through access to talent and markets, while minimizing costs and risks. All other factors become secondary.

By Gene DePrez, Managing Partner, Global Innovation Partners, Ltd.

percent) these new facilities will represent an investment of less than $10 million.

EXPANSION AND RELOCATION PLANS Although expansion plans as reported by corporate re-

spondents have increased slightly on a year-over-year basis (39 percent to 43 percent of the respondents), fewer of the respondents to our 30th Annual Corporate Survey expect to expand an existing facility than open a new facility (49

percent). Of those with expansion plans, 79 percent plan to expand an existing domestic facility, with just 12 percent saying they plan to expand an existing foreign facility.

About 70 percent of those respondents who plan to ex-

AREA DEVELOPMENT | Q1/2016

S7

Total amount to be invested in new domestic facilities: $100 million– $500 million

7%

$50 million–$100 million

11%

Less than $10 million

$10 million– $50 million

59%

24% figure 15

Plan to open new foreign facilities within: 5 years

15% 1 year

3 years

38%

23%

2 years

23% figure 16

Number of new foreign facilities to be opened: Five or more

15% One

Three

46%

23% Two

15% figure 17

pand an existing domestic facility will do so within the next two years, with nearly 80 percent expanding one or two domestic facilities, and 85 percent of the respondents claiming the domestic expansions will create fewer than 100 jobs.

All of the respondents with plans for expanding foreign facilities will do so within one to two years, with 80 percent of these respondents saying they plan to expand just one or two foreign facilities. Interestingly, though, these expansions of foreign facilities will create

S8

AREA DEVELOPMENT

between 100 and 499 jobs, according to three quarters of the respondents to this question.

Overall relocation plans, on the other hand, are not as robust. Just 29 percent of the respondents to our 30th Annual Corporate Survey say they plan to relocate an existing facility within the next five years.

Of those respondents with relocation plans, 83 percent say they plan to relocate an existing domestic facility within the U.S., with more than half having one- to two-year plans to do so. The primary reasons for relocating domestically are new markets/market proximity (cited by more than 40 percent of the respondents), and labor availability and labor costs (each cited by a fifth of the respondents).

Nearly all (94 percent) of the Corporate Survey respondents have no plans to relocate a domestic facility to an offshore or near-shore location. The slight percentage who do plan to relocate offshore cite tax concerns as their incentive to move.

Similarly, only 10 percent of the respondents are planning to relocate a foreign facility back to the U.S. Fifty percent of these respondents cite costs (labor, energy, transportation), product quality issues, as well as intellectual property protection concerns as the reasons they are planning to reshore facilities.

Location of new foreign facilities (as percentage of total number to be opened): Canada Mexico

0% 13%

Caribbean

9%

Central America

9%

South America

13%

Western Europe

17%

Eastern Europe

4%

Middle East Australia

9% 4%

Asia

22%

figure 18

Location of new facilities planned for Asia (as percentage of total number to be opened there): Korea

14% India

14%

China

71%

figure 19

Types of new foreign facilities (as percentage of total number to be opened): R&D

14%

Other

18%

Manufacturing

27%

Shared Services

5%

Warehouse/ Distribution

Back Office/Call Center

18%

5% Data Center

Headquarters

9%

5%

figure 20

Total number of new jobs to be created at new foreign facilities: 1,000 or more

Fewer than 20

8%

17%

100-499

25%

20-49

33% 50-99

17% figure 21

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

th 30 ANNUAL

corporate survey Interestingly, the latest U.S. Reshoring Index for A.T. Kearney indicates that offshoring of U.S. manufacturing production continues to grow at a faster pace than reshoring of production to the United States (although some, including those with the Reshoring Initiative, take issue with A.T. Kearney’s finding of lackluster reshoring).

A.T. Kearney could only identify 60 factory operations returning from offshore to the U.S. in 2015, with many returning to an existing facility. According to A.T. Kearney Partner Patrick Van den Bossche, “The reshoring phenomenon, once viewed by many as the leading edge of a decisive shift in global manufacturing, may actually have been just a one-off aberration.” Contributing to this lack of reshoring, he adds, is a lack of skilled workers and “service provider ecosystems that had disappeared years ago.”

SITE SELECTION PRIORITIES We asked those responding to our 30th Annual Corporate Survey to rate the factors they consider when making their new facility, expansion, and relocation plans as either “very important,” “important,” “minor consideration,” or “of no importance.” We then added the “very important” and “important” ratings in order to rank the

factors in order of importance.

Our Corporate Survey respondents’ number-one concern is availability of skilled labor, considered “very important” or “important” by 92.9 of the respondents, up 10.8

percentage points (the greatest increase overall) from the prior year’s survey, in which this factor had ranked fifth — a ranking that we considered somewhat of an aberration. This factor also trumps labor costs, ranked

Analysis

The cost of labor, as well as highway accessibility, has traditionally been the dominant site selection factor in choosing a new location. However, the availability of a skilled workforce has grown steadily in importance over the years and is now the leading site selection factor in this year’s Corporate Survey. Fifty-six percent of respondents cite the availability of a skilled workforce as having an effect on their new or expansion plans or current operations.

The integration of advanced technology into the site selection process leads to the question, is a community’s workforce keeping up with advanced skills necessary to meet the evolving talent demands of current and future workforces? Capital investment demands of technology also necessitate a strong confidence in the area workforce’s ability to support the facility. The presence of a feeder system, including industry clusters and universities, may ensure a skilled workforce is achievable in the location.

Training programs and the availability of technical colleges in a community are generally viewed as important factors in the survey, but not necessarily very important factors. Companies requiring higherskilled workforces expect to find those skills readily available in the community as opposed to developing skills via training. [Nonetheless], many state and local governments offer excellent training initiatives that address any gaps between a company’s labor needs and what’s available in the local workforce.

Finally, [of those survey respondents planning new domestic facilities], 69 percent plan to open them within two years. This is good news! The survey also reveals approximately half of the new domestic facilities will be manufacturing and/or warehousedistribution, and more than half (61 percent) of new domestic facilities will create fewer than 50 new jobs.

By Gary Marx, CEcD, Managing Director, BlueCap Economic Advisors, LLC

AREA DEVELOPMENT | Q1/2016

S9

Expect to expand existing domestic facilities within: 5 years

4 years

10%

5%

1 year

3 years

sixth by our survey respondents with an 80.8 percent combined importance rating.

With lower unemployment and a slowly growing economy, wages are starting to rise — but finding workers with the right combination of skills still takes precedence.

Each day the media contains

Total amount to be invested in new foreign facilities: $50 million–$100 million

8%

$100 million–$500 million

$10 million– $50 million

23%

8% Less than $10 million

62%

figure 22

Plan to expand any existing domestic and/or foreign facility within the next five years:

No

57%

Yes

43%

If yes, plan to expand existing domestic facilities: No

21%

Yes

79%

If yes, plan to expand existing foreign facilities:

Yes No

88% figure 23

S10

AREA DEVELOPMENT

12%

stories of companies stressing the importance of finding a skilled labor force for their current and future needs. For example, Archer Daniels Midland (ADM) Chief Information Officer Marty Schoenthaler recently explained, “The decision on where to locate our new technology center rested heavily on where we could find the talent.” On January 18th he told IndustryWeek the company choose Northern Kentucky for its new technology center because “when you have an established pool of large multinational companies, experienced technical talent is attracted to the area.”

This explains why more than half (56 percent) of our Corporate Survey respondents say that availability of skilled labor is having an effect on their new facility and expansion plans.

It’s also why 68 percent of the respondents say they consider whether there are businesses performing activities similar to those of their company in the area of search.

When it comes to labor skills, nearly two-thirds of our Corporate Survey respondents say workers are lacking advanced skills such as advanced welding or machine tool programming. Half the respondents also say workers are lacking the critical STEM skills.

The second-ranked factor in our 30th Annual Corporate

38%

13%

2 years

33% figure 24

Number of domestic facilities to be expanded: Five or more

11% Three

One

11%

55%

Two

24% figure 25

Total number of new jobs to be created by domestic expansion(s): 100-499

15% 50-99

Fewer than 20

15%

49%

20-49

21% figure 26

Expect to expand existing foreign facilities within: 1 year

20% 2 years

80% figure 27

Number of foreign facilities to be expanded: Five or more

20%

One

60% Two

20% figure 28

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

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AREA0506.indd 1

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Total number of new jobs to be created by company’s foreign expansion(s): Fewer than 20

25%

100-499

75%

figure 29

Plan to relocate an existing facility within the next five years: Yes

29% No

71%

If yes, plan to relocate an existing domestic facility within the U.S.: No

17% Yes

83% figure 30

Expect to relocate domestically within: 5 years

24% 1 year

41%

3 years

21% 2 years

14% figure 31

Primary reasons for relocating domestically: Tax concerns Government regulations

10% 7%

Labor costs

21%

Labor availability

21%

Healthcare costs

3%

Quality-of-life concerns

7%

Infrastructure

24%

New markets/market proximity 41% Proximity to research centers/Industry consortium 7% Other figure 32

S12

AREA DEVELOPMENT

34%

Survey is highway accessibility, which has historically been ranked as a top factor (last year it was ranked first). Fully 88 percent of the survey respondents rated this factor as “very important” or “important.” Infrastructure factors “will continue to grow in importance as we become even more of an economy where just-in-time manufacturing and distribution of goods are more critical,” says Larry Gigerich, managing director of location consulting firm Ginovus.

Related to distribution is proximity to major markets, considered “very important” or “important” by more than three quarters of the survey respondents and ranking eighth among the factors. Remember, the main reason the survey respondents say they are relocating domestically is new markets/market proximity, cited by 41 percent of the respondents.

For our 30th Annual Corporate Survey we did not ask our survey-takers to separately rate the importance of quality-oflife factors including climate, housing availability and costs, healthcare facilities, ratings of public schools, cultural and recreational opportunities, colleges and universities in area, and crime rate. In the prior year’s survey none of these factors was considered “very important” or “important” by fewer than 60 percent of the respondents. Our current survey respondents give overall quality of life an 87.6

percent combined importance rating, placing in third among all the site selection factors! It seems the importance of quality of life has steadily been creeping up.

This might be a reflection of the composition of respondents. Just as the industrial

Expect to relocate a domestic facility to an offshore or near-shore location: Yes No

6%

94%

If yes, expect to relocate to an offshore or near-shore location within:

2 years

100%

Primary reasons for relocating to an offshore or near-shore location:

Tax concerns

100% figure 33

Expect to relocate a foreign facility back to the U.S. (reshoring): Yes

10% No

90%

If yes, primary reasons for reshoring: Labor costs Energy costs

50% 50%

Product quality issues

50%

Transportation/supply chain costs

50%

Tech transfer/intellectual property protection

50%

figure 34

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

th 30 ANNUAL

corporate survey composition of the U.S. labor force has changed, Area Development’s respondent pool has changed over the survey’s 30-year history from one comprised primarily of manufacturing firms to one now representing a more diverse, service-based sector. Added to that is the cultural shift among

generations — i.e., today’s workers (mainly millennials) want more of a work-life balance than those of previous generations.

Although occupancy and construction costs vary among markets, these cost factors are always top of mind for companies building or expanding facili-

Analysis

The 2015 Corporate Survey results illustrate very precisely the major trend that we are seeing in the marketplace. The most sought-after companies by economic developers are actively chasing very select and indemand skill sets. Irrespective of the industry, corporate decision-makers are seeking the “value add” quotient for their businesses, and they are searching for and catering to that talent factor with increasing ferocity. In a mature value-added economy like the U.S., a location would be wise to prove its particular value proposition and help match corporate needs to the requisite type of skilled labor it has to offer.

If the site selection process is about anything, at its core, it should be about finding the best possible location to make a particular product or to perform a particular service better than anywhere else. Ultimately, that means finding the workforce that can do the task better than the competition and grow the business. That is why skilled labor is the number-one factor and, to a large degree, why the quality-of-life factor has grown in importance. This is a trend likely to continue.

But there is one catch and it’s the premium paid for that workforce and the attendant amenities. All of the other factors in the survey really reflect costs to ultimately secure that workforce. Determining a location’s value proposition is more important than ever. How those costs are balanced and mitigated against the value-add quotient that the workforce can create is critical in moving a location from short-list to winner.

Macro-economic events like globalization, shale oil, the 2008 recession, and the sustained period of zero interest rates have commoditized many of the survey factors that historically served as cost differentiators across the U.S. Survey factors like real estate, energy, highway accessibility, and low-skill labor are all declining in importance as price differences narrow across geographies. Low cost alone is no longer the driving competitive advantage in the site selection process.

Successful locations would be wise to develop their skill set niches and not merely rely on the old cost differential. As more locations compete for high-skilled and value-add jobs in the U.S., the effective use of targeted and useable incentives can be a decided advantage when coupled with the right product in the location process. It’s surprising to see their [comparatively low ranking] in the Corporate Survey as senior corporate decision-makers are actively driving for these benefits on projects, and now they can often be the deciding number in the value proposition calculation and a key differentiator among the short-list contenders.

By Tom Stringer, Managing Director & Service Leader Site Selection & Incentives, BDO Consulting

AREA DEVELOPMENT | Q1/2016

S13

CORPORATE SURVEY 2015 * Site Selection Factors

Very Important Important Minor Of No % % Consideration % Importance %

Labor Availability of skilled labor Availability of unskilled labor Training programs/ technical colleges Labor costs Low union profile Right-to-work state

58.2 8.5

34.7 39.3

6.1 36.2

1.0 16.0

22.9 41.4 45.9 45.5

45.8 39.4 20.4 22.2

22.9 15.2 17.4 17.2

8.3 4.0 16.3 15.2

55.0 16.2 23.2

33.0 16.2 35.4

10.0 30.3 32.3

2.0 37.4 9.1

28.1

36.5

16.7

18.8

4.0

20.0

32.0

44.0

14.4

39.2

26.8

19.6

32.3

35.4

21.2

11.1

36.4 41.4 38.4

42.4 33.3 37.4

9.1 18.2 19.2

12.1 7.1 5.1

35.7 38.5

48.0 35.4

13.3 12.5

3.1 13.5

45.8

39.6

10.4

4.2

38.1 18.6 39.2 22.9 45.4 23.2

36.1 34.0 36.1 46.9 30.9 41.1

21.7 20.6 18.6 18.8 18.6 23.2

4.1 26.8 6.2 11.5 5.2 12.6

17.5 17.5 38.1

30.9 37.1 49.5

33.0 23.7 10.3

18.6 21.7 2.1

Transportation/Telecommunications Highway accessibility Railroad service Accessibility to major airport Inbound/outbound shipping costs Waterway or oceanport accessibility Availability of advanced ICT services

Finance Availability of long-term financing Corporate tax rate Tax exemptions State and local incentives

Other Available buildings Available land Occupancy or construction costs Expedited or “fast-track” permitting Raw materials availability Energy availability and costs Environmental regulations Proximity to major markets Proximity to suppliers Proximity to innovation/ commercialization/R&D centers Water availability Quality-of-life factors

* All figures are percentages and are rounded to the nearest tenth of a percent.

figure 35

S14

AREA DEVELOPMENT

ties. This factor received an 85.4 combined importance rating from our Corporate Survey takers and ranked fourth among the site selection factors.

With companies requiring quick turnaround times once the decision to open a new facility or expand is made, they often look for available buildings. This factor ranked fifth, considered “very important” or “important” by 83.7 percent of the respondents to our Annual Corporate Survey. If a company can find an existing facility that works for them, and they can upgrade and occupy it quickly, they will often choose the existing building instead of constructing a new one.

The “tax” factors also rank highly: Corporate tax rate is ranked seventh by the respondents, with a 78.8 percent combined importance rating; state and local incentives is ranked ninth, with a 75.8 percent combined rating; and tax exemptions is ranked 11th, with a 74. 7 percent combined rating. Nearly two thirds of the respondents say tax incentives are considered most important when making a location decision, with nearly 70 percent saying incentives are very or somewhat important to a project moving forward in a particular location.

Rounding out the top-10 factors is energy availability and costs, with a 75.3 percent

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

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combined importance rating. In fact, more than 70 percent of the Corporate Survey respondents say they are making energy-saving modifications to their facilities to keep costs down.

Although only rated “very important” or “important” by slightly more than half of the respondents to our 30th Annual Corporate Survey, water

COMBINED RATINGS CORPORATE SURVEY 2015* Site Selection Factors

2015

2014

92.9*

82.1 (5)**

88.0 87.6 85.4 83.7 80.8 78.8 76.3 75.8 75.3 74.7 74.2 73.9 69.8 68.7 67.7 67.7 66.3 64.6 64.3 58.6 54.6 53.6 52.6

88.3 (1) N/A 87.9 (2) 82.2 (4) 81.6 (6) 75.6 (10) 77.1 (8) 73.2 (11) 76.8 (9) 73.2 (11T) 71.0 (13) 85.7 (3) 68.6 (16) 62.8 (18) 63.1 (17) 77.9 (7) 70.9 (14) 69.5 (15) 60.3 (21) 62.4 (19) 44.0 (25) 45.1 (24) 53.7 (22)

48.4 47.8 32.4 24.0

N/A 52.5 (23) 30.9 (26) 27.8 (27)

Ranking 1. Availability of skilled labor 2. Highway accessibility 3. Quality of life 4. Occupancy or construction costs 5. Available buildings 6. Labor costs 7. Corporate tax rate 8. Proximity to major markets 9. State and local incentives 10. Energy availability and costs 11. Tax exemptions 12. Expedited or “fast-track” permitting 13. Available land 14. Environmental regulations 15. Training programs/technical colleges 16. Availability of long-term financing 16T. Right-to-work state 18. Low union profile 19. Inbound/outbound shipping costs 20. Proximity to suppliers 21. Accessibility to major airport 22. Water availability 23. Availability of advanced ICT services 24. Raw materials availability 25. Proximity to innovation/ commercialization R&D centers 26. Availability of unskilled labor 27. Railroad service 28. Waterway or oceanport accessibility

* All figures are percentages and are the total of the “very important” and “important” ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent. ** 2014 ranking

figure 36

S16

AREA DEVELOPMENT

availability shows the second-largest increase in combined importance, increasing 10.6 percentage points and now considered “very important” or “important” by 54.6 percent of the survey respondents. This factor keeps rising in importance as problems with water availability and quality — take for example the crisis now occurring in Flint, Michigan — keep drawing the attention of companies making location decisions.

A 2014 survey of major U.S. corporations by the Pacific Institute and VOX Global found that 60 percent of companies believe water challenges will negatively affect business growth and profitability within five years, as reported by the U.S. Chamber of Commerce Foundation. More than 80 percent said it would affect their location decisions. Five years prior, fewer than 20 percent responding to the organizations’ survey expressed concern about water risks.

The factor showing the largest decrease in importance rating (11.8 percentage points) and dropping from third in the rankings to 13th is available land, considered “very important” or “important” by 73.9 percent of the Corporate Survey respondents. Available land is much more important to a large manufacturing project going forward than to an office facility, for example, where an available building might be a better fit. Considering the fact that manufacturers represent just 35 percent of the survey respondents, the decrease in importance of this factor is more understandable than its high rating and ranking in the prior year’s survey.

The right-to-work state factor shows the second-largest drop in the ratings (decreasing 10.2 percentage points) and rankings (from seventh to 16th). Our Corporate Survey respondents give this factor a combined importance rating of 67.7 percent. Half the states now have right-to-work laws in place, and others — like Kentucky — have local right-to-work laws at the county level. Additionally, in many states that are not right-to-work, unionization

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AREA0536.indd 1

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30-YEAR COMPARISON OF SITE SELECTION FACTORS* Corporate Survey 2015 2015

2010

2005 2000 1995 1990 1986

92.9 47.8 68.7 80.8 66.3 67.7

85.9 45.4 56.7 91.0 75.4 67.9

87.2 50.6 59.6 87.9 77.0 69.7

87.7 65.5 57.2 91.6 79.7 72.9

87.9 64.9 58.6 94.2 82.8 77.8

87.1 73.6 49.6 92.1 78.7 71.3

84.8 54.4 50.9 96.6 79.0 N/A

Labor Availability of skilled labor Availability of unskilled labor Training programs Labor costs Low union profile Right-to-work state

Transportation/Telecommunications Highway accessibility Railroad service Accessibility to major airport Waterway or ocean port accessibility

88.0 32.4 58.6 24.0

97.3 36.0 50.0 21.9

91.4 28.9 50.0 20.2

95.9 29.8 53.2 21.0

93.6 29.7 59.5 20.0

92.3 32.2 55.5 16.2

91.3 25.8 61.0 15.3

Inbound/outbound shipping costs Availability of telecommunications services Availability of advanced ICT services

64.6 N/A

84.0 N/A

N/A 79.8

N/A 77.1

N/A 80.2

N/A 76.7

N/A N/A

53.6

72.9

85.7

N/A

N/A

N/A

N/A

67.7 78.8 74.7 75.8

58.5 86.3 90.9 89.3

56.5 85.0 83.6 86.0

58.4 84.7 81.6 83.6

65.5 N/A 86.4 87.8

75.4 N/A 85.8 88.7

55.2 N/A 77.9 79.6

83.7 N/A 73.9 85.4 74.2 52.6 75.3 69.8 76.3 64.3 54.6 87.6

81.0 N/A 73.4 89.8 68.2 61.5 82.1 74.8 66.4 63.6 N/A 62.1

N/A 79.1 75.0 83.7 N/A 62.3 82.8 71.1 83.2 66.7 N/A 54.7

N/A 75.8 75.5 83.0 N/A 56.1 77.7 80.9 76.8 63.8 N/A 58.8

N/A 83.2 83.7 90.2 N/A 64.9 89.6 86.5 74.5 66.5 N/A 70.4

N/A 84.0 82.3 88.5 N/A 64.1 88.1 82.9 74.9 65.1 N/A 70.6

N/A N/A N/A N/A N/A 49.1 N/A N/A 84.8 N/A N/A 60.4

Finance Availability of long-term financing Corporate tax rate Tax exemptions State and local incentives

rates are low, making this factor more of a non-issue.

LOCATION DECISION PROCESS Ninety percent of our 30th Annual Corporate Survey respondents get their site selection information from magazines like Area Development. Nearly 60 percent also search online sources (e.g., AreaDevelopment.com) for this type of information, with about three quarters looking for economic data on specific locations, and half looking for listings of available sites and buildings.

Availability of skilled labor having an effect on new facility/expansion plans or current operations:

Other Available buildings Cost of land Available land Occupancy or construction costs Expedited or fast-track permitting Raw materials availability Energy availability and costs Environmental regulations Proximity to major markets Proximity to suppliers Water availability Quality of life**

(N/A) Data not available due to changes and additions to the survey * All figures are percentages and are the total of “very important” and “important” ratings of the Area Development Corporate Survey.

No

Yes

44%

56%

If yes, workers are lacking: Basic skills (e.g., reading comprehension, mathematical competency, etc.)

STEM skills (science, technology, engineering, mathematics)

S18

AREA DEVELOPMENT

50%

figure 37

Healthcare coverage mandated under the Affordable Care Act is affecting location decisions: Yes

** Quality-of-life rating for prior years’ surveys is the average of rating of nine quality-of-life factors (climate, housing availability, housing costs, healthcare facilities, ratings of public schools, cultural opportunities, recreational opportunities, colleges and universities in area, and low crime rate).

figure 36A

37%

Advanced skills (e.g., advanced welding, machine tool programming, bioprocessing, etc.) 63%

No

29%

71% figure 38

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

th 30 ANNUAL

corporate survey

More than half of these respondents begin the informationgathering process one to two years before making a location decision. Three quarters make contact with the locations of interest within one to six months of beginning their initial search.

About 90 percent say they put between one and five locations on their “short list.” A third only visit one or two of the location finalists, but more than half visit up to five locations before making their final decision. About 80 percent say the final site selection decision is made within three months to one year of initial contact.

Fewer than half (43 percent) use outside location or business consultants when site selecting. Of those that do, about half say they are providing feasibility studies, location/comparative analyses, incentives negotiations/ management, and help with the real estate transaction, as well making the final location decision.

Analysis

The top three location selection factors for corporate users rarely tend to change from year to year: • Labor — quality and availability • Cost — employees, real estate, overall occupancy (including taxes, 1x costs, etc.)

• Accessibility — logistics and supply chain networks, access to markets, and inputs/employees, etc.

The continuing war for talent: Skilled labor availability, typically the numberone ranked issue annually, ranked even higher than previous years. It also ranked significantly higher than just cost of labor, which is particularly true for knowledge-based industries.

In general, this harder-to-find talent may require a partnership with educational institutions — note that the training programs/technical colleges ranking is also up, reflecting what we see in our clients’ desire for partnerships with these entities in order to provide ongoing training and re-train the existing workforce to meet the needs of the corporate user; help develop the local talent pipeline; and ensure continuity among existing employees. This doesn’t necessarily apply to unskilled labor. This is easier to find and is more ubiquitous.

Natural resources: Water, particularly in the West, is on everyone’s radar (availability, costs, and use restrictions). The importance of availability and sustainability of water has risen, and I’d expect this factor to continue to rise in this survey. This impacts industrial users the most (food/beverage manufacturing, agriculture, paper mills, chemical manufacturing, etc.)

Right to work and union profile are both down in importance. Why? This is generally less of an issue for companies with a higher ratio of skilled employees.

Available buildings are still really important, but importance of available land seems to have gone down in priority. There are more spec buildings available in many markets — and more options for existing core/shell buildings. Thus, many companies — especially those in higher skilled industries/operations — are focusing less on peripheral locations, so they’re less concerned about land and more concerned about available buildings. Fewer companies are buying land and doing development of their own facility. With time to market being critical, it’s easier to get up and running if you can build out a spec instead of engaging in a ground-up development process.

Quality of life is important, but typically not a “first tier” site selection criteria like the top three listed above.

However, it is increasingly important, particularly for recruitment/retention of knowledge workers, especially millennials.

By Bradley Lindquist, Senior Managing Director, Newmark Grubb Knight Frank AREA DEVELOPMENT | Q1/2016

S19

YEAR-OVER-YEAR COMPARISON

Sustainable facility development more important now than in the past: No

Quality of the workforce would be negatively affected in states that are legalizing marijuana use:

No

Yes

44%

56%

Legalized marijuana laws would affect the decision to locate a new facility in states that have enacted such laws:

Yes

No

47%

53%

figure 39

The conclusion’s made in our prior year’s survey — i.e., that our 30th Annual Corporate Survey would reflect increased new facility and expansion activity — appear to hold true. Economists also are predicting U.S. GDP growth of 2.4 percent for 2016, according to The Conference Board, propelled by growth in employment and wages.

And according to Deloitte’s Q4/2015 CFO SignalsTM Report, there is considerable optimism in CFOs’ expectations and plans for 2016. Growing existing businesses and getting more efficient are the CFOs’ dominant focuses, but new markets are

40%

Yes

60%

If so, measures undertaken to reduce company’s “carbon footprint”: LEED certification for new or existing facilities

25%

Energy-saving modifications to existing facilities 72% Installed on-site renewable generation

11%

Change of supply or distribution routes/methods 18% Recycling or re-use of waste products, etc.

Other

76% 5%

figure 40

Type(s) of incentives considered most important when making a location decision: Cash grants Tax incentives (tax credits, exemptions, etc.)

21% 64%

Other financial incentives (bonds, loans, etc.)

32%

Worker training incentives

50%

Other incentives (land, utility-rate subsidies, infrastructure support, etc.

55%

figure 41

Analysis

The corporate responses indicate that businesses are still risk-averse. Only 6 percent of the respondents indicated that they plan to relocate a U.S. facility to an offshore or near shore location. Plus, the respondents appear to favor expanding existing facilities: [of those with expansion plans], 79 percent plan to expand existing domestic facilities.

This indicates to me that executives do not want the disruption or uncertainty associated with new locations.

If a company does plan a new domestic facility, the projects tend to be smaller. About 60 percent of the respondents indicate that their domestic projects will involve the creation of fewer than 50 jobs and less than $10 million of capital investment.

The availability of skilled labor remains the number-one consideration in site selection. Over the past 30 years, as the importance of skilled labor has increased, the concern about labor costs has fallen. If you compare the results of 1986 to 2015, the two factors have swapped places in the rankings. Today, companies are willing to pay for a higher skilled labor force because executives believe the workers will be more productive.

Quality of life has become a major concern in 2015 because companies realize that millennials are important to their future work force, and millennials are very concerned with the community and its amenities. To attract the higher skilled millennials, companies are increasingly worried about locating in places where millennials want to live. Or, as we are seeing, companies are locating where the millennials are already living — places that tend to have higher quality of life.

By Gregory Burkart, Managing Director & Practice Leader Site Selection & Business Incentive Services, Duff & Phelps, LLC S20

AREA DEVELOPMENT

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AREA0539.indd 1

10/02/16 11:42 PM

Importance of incentives to a project moving forward in a particular location: Of no importance

If company received and utilized incentives in the past, percentage of the incentives initially estimated value secured (or expected to secure):

Very important

8%

31%

A minor consideration

24% Somewhat important

38% figure 42

very significant for some industries, says the report. The CFOs say they will increase their investment in North American markets, with little additional focus on Europe or China.

As this is an election year, there’s been much talk about what’s needed to help businesses and the nation as a whole

75% to 100%

grow even faster and further.

Commenting in The Wall Street Journal (6/21/15), Glenn Hubbard, dean of Columbia Business School, and Kevin Warsh, a former Federal Reserve governor and a distinguished visiting fellow at Stanford University’s Hoover Institution, noted the next president must be committed to policies that increase the nation’s economic potential, including long-term tax and regulatory reform, as well as trade policies that continue to open global markets and educational policies that empower schools to put students’ skills over other interests. They

21% 10 to 25%

50% to 75%

42%

13% 25% to 50%

24% figure 43

Communities are offering specific incentives for “green initiatives”: Yes No

32%

68%

figure 44

Analysis

Industrial site selection is the most complex of all site locations to undertake successfully. Site selection requires finding the necessary labor skills, but over the past two decades logistics associated with manufacturing and distribution have played an increasingly larger role as shifting customer demand interfaced with a company’s existing and expanding supply chain footprint can be either positive or negative cost and efficiency factors for a corporation. This is due to the fact that for manufacturing and warehouse distribution investments, logistics should drive location instead of location driving logistics — otherwise corporations are not minimizing costs and maximizing efficiencies.

Over the past 15 years, Area Development’s Annual Corporate Surveys have typically shown that highway access has been the number-one site selection factor overall, with labor being number two. This was true for 2000, 2005, and 2010. However, the current 2015 Corporate Survey shows the availability of skilled labor as the number-one factor, with highway access slipping to the number-two spot. While I found this to be very interesting, I thought it to be a bit contrary to what I have been experiencing as a corporate site selector, at least for manufacturing and warehouse distribution investments.

I took a look back and analyzed the makeup of prior respondent pools since 2000. In the year 2000, the respondent pool was comprised of 77 percent of manufacturing companies. In 2005, the makeup was 80 percent manufacturers. This figure dropped to just 66 percent for the 2010 survey. However, the current 2015 survey respondent pool is made up of only 35 percent manufacturers. This shows a respondent pool that is largely non-manufacturing in nature and hence not reflecting the highway access aspect as much as the surveys of the past. It is still my belief that for manufacturing and warehouse distribution, highway access remains the top factor.

By Bill Luttrell, Senior Locations Strategist, Werner Global Logistics S22

AREA DEVELOPMENT

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Importance of the existence of a shovel-ready/pre-certified site: Of no importance

Consider whether there are businesses performing similar activities to company's in the area of search:

18%

No

No

Very important A minor consideration

Consider weather-related factors and geological events in the location decision:

25%

Yes

32%

Yes

68%

18%

62%

figure 46

Somewhat important

38%

figure 47

40% figure 45

LOCATION DECISION PROCESS Sources of site selection information used during the past 24 months: Site magazines (Area Development, etc.)

B2B industry-related magazines/sites (food, plastics, etc.)

90% 41%

General business magazines and financial papers papers

(IndustryWeek, The Wall Street Journal, etc.)

Contact information for consultants and/ or real estate professionals who can assist in the site search Listings of available sites and buildings

After the initial contact, location decision is generally made within:

1 month 3 months

16% 27%

6 months After 6 months

33% 24%

3–6 months 6 months to 1 year 1–2 years More than 2 years

41% 40% 17% 3%

85%

Information searched for online: Economic data on specific locations Specific economic development agencies’ websites

After the initial search, contact is made with the locations of interest within:

74% 57%

45%

(e.g., FastFacility)

51%

Site selection and facility planning strategy and information (e.g.,AreaDevelopment.com)

58%

Use of outside site selection or business consultants when site selecting:

Number of locations/economic development organizations making the “short list”: 1–5 5–10

89% 11%

5% 19%

1–2 years

55%

More than 2 years

22%

don’t support the theory of today’s economic growth being the “new normal.” They believe that with the right policies in place, the U.S. can return to significantly higher rates of growth.

43% 57%

If yes, consultants are providing: Number of locations usually visited before finalizing the location decision: 1 or 2 Up to 5 More than 5

33% 57% 10%

Prior to the location decision, the information-gathering process is begun within: 3–6 months 6 months to 1 year

Yes No

Our next Corporate Survey will be conducted at year’s end, with a new president elected. The results will, no doubt, reflect our corporate executive readers’ confidence

Feasibility studies Global asset positioning Location studies/comparative analyses Incentives negotiations/management Location decision Real estate transaction Other

5 50% 2% 59% 48% 48% 52% 5%

in the president-elect’s ability to help their businesses prosper and grow.

•• •• •• •• •• ••

AREA DEVELOPMENT | Q1/2016

S23

12th

ANNUAL

consultants survey Two thirds of the consultants believe the economy is on a continuous growth track, and nearly all are busy helping clients with new facility and expansion plans.

FORTY PERCENT OF THE CONSULTANTS SAY their clients have more than 1,000 employees.

S24

AREA DEVELOPMENT

W

ith 57 percent of those responding to our 30th Annual Corporate Survey saying they do not use outside consultants when site selecting, it stands to reason that the responses to our 12th Annual Consultants Survey will differ from those of our Corporate Survey. Let’s take a look at the profile of the responding consultants and their clients’ location and expansion plans and site selection priorities.

RESPONDING CONSULTANTS’ PROFILE Three quarters of the responding consultants work with durable goods manufacturers, and nearly 60 percent with nondurable goods manufacturers. Two thirds are helping to site distribution/warehouse facilities, and nearly 40 percent are working on projects in the data processing/ computer-related services and healthcare/life sciences sectors.

Additionally, the majority of their clients are very large in terms of employment numbers (1,000+), say 40 percent of the responding consultants. This stands in contrast to the respondents to our Corporate Survey wherein 79 percent of the respondents are with firms employing fewer than 1,000 people.

Nearly 90 percent of the respondents to our 12th Annual Consultants Survey are providing their clients with location studies/comparative analyses as well as incentives negotiation and management, although two thirds do say their clients have gathered preliminary data and already narrowed down the geographic area in which they wish to locate before engaging their services. Nearly all (93 percent) are working with executive management at their client companies, with more than 70 percent also working with the tax/finance and real estate departments at client firms.

Finally, nearly two thirds of the responding consultants believe the economic recovery has achieved a continuous growth track. These consultants are more optimistic than the Corporate Survey respondents — only 48 percent of them hold that opinion. Needless to say, that is

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Percentage of respondents working on projects in the following industries:

probably because the consultants are primarily working with companies that are in a growth mode.

CLIENTS’ NEW FACILITIES PLANS This reasoning is borne out by the fact that 95 percent of the responding consultants say their clients plan to open new domestic facilities within five years (only half of the Corporate Survey respondents have new facilities plans), with three quarters of the consultants saying those clients plan to do so within two years. Two thirds of the respondents say their clients will open just one new domestic facility, while a quarter say they will open two.

The primary recipient of these new facilities will be the South — 17 percent of the total and the same percentage as reported by the Corporate Survey respondents.

This region is followed by the South Atlantic, accounting for 14 percent of the projects the

responding consultants are working on, followed by the Southwest and Midwest, each responsible for 12 percent of the total projects.

A quarter of these new facilities will be manufacturing plants, say the respondents, with about a fifth housing warehouse/distribution operations, 16 percent being new headquarters operations, and 12 percent back office/call centers. These last two facilities uses are not as heavily represented in the Corporate Survey responses.

More than half of the respondents to our 12th Annual Consultants Survey also say their clients expect to open new foreign facilities within the next five years — only 25 percent of the Corporate Survey respondents say they have such plans.

Three quarters of the consultants’ clients plan to open these foreign facilities within two years, with more than 90 percent having plans for one or two foreign facilities.

Manufacturing — Durable Goods Manufacturing — Non-Durable Goods Manufacturing — Other Distribution/Logistics/Warehousing Financial Services/Insurance/Real Estate Data Processing, Software & Other Computer-Related Services Call Center Operations Energy Industry Hospitality Industry Healthcare/Life Sciences Retail Construction & Trades Other

76% 59% 29% 66% 46% 39% 31% 24% 10% 39% 14% 6% 8%

chart A

Percentage of respondents providing the following services to their clients: Feasibility Studies Global Asset Positioning Location Studies/Comparative Analyses Incentives Negotiations/Management Location Decision Real Estate Transaction Other

46% 20% 88% 88% 77% 48% 8%

chart B

In terms of their employment numbers, client companies utilizing their services are generally: Small (20-99 employees) Mid-size (100-499 employees) Large (500-999 employees) Very large (1,000 or more employees)

2% 32% 26% 40%

chart C

Nearly a quarter of these foreign facilities projects are slated for Mexico, 18 percent for Asia, 14 percent for Western Europe, and 11 percent for Canada. Notably, none of the respondents to our Corporate Survey report plans for new fa-

AREA DEVELOPMENT | Q1/2016

S25

Number of new domestic facilities average client plans to open: One Two Three Four Five or more

67% 25% 6% 0% 1%

chart H

Departments of clients’ organizations significantly involved in the site selection process/project: Executive management Tax and finance Real estate Information technology Supply chain or logistics Operations or business unit management Human resources

93% 72% 78% 18% 51% 67% 54%

chart D

Most of the clients who ask consultants to perform a location search have: Not actively initiated the site selection process Already gathered preliminary data Already narrowed down the geographic area in which they wish to locate Already chosen several “finalist” communities Expect the consultant to narrow or make the location decision for them

34% 64% 64% 28% 31%

chart E

Believe the economic recovery has achieved a continuous growth track: Yes No

64% 36%

chart F

CLIENTS’ RELOCATION AND EXPANSION PLANS

Clients plan to open new domestic facilities within five years: Yes No

95% 5%

Clients who expect to open new domestic facilities plan to do so within: 1 year 2 years 3 years 4 years 5 years chart G

S26

AREA DEVELOPMENT

cilities in Canada.

China will receive 28 percent of the consultants’ clients’ projects in Asia, but a fifth are also going to Malaysia, and 15 percent each to India and Vietnam. In contrast, the respondents to our 30th Annual Corporate Survey who have plans for Asian facilities say 71 percent of them will be in China.

The types of foreign facilities the responding consultants’ clients are opening range from manufacturing facilities (35 percent) to warehouse/distribution and back office/call centers (each 14 percent) to shared services operations (10 percent). Only 5 percent of the Corporate Survey respondents’ new foreign facilities will house back office/ call center as well as shared services operations.

23% 54% 17% 4% 3%

When it comes to their clients’ relocation plans, 65 percent of those responding to our Consultants Survey say their clients plan to relocate an existing domestic facility within the U.S. within the next five years.

Of those consultants’ clients who plan to relocate domestically, three quarters of the respondents claim they will do

Clients’ domestic location projects are slated for the following regions (as a percentage of total new domestic projects):

New England (CT, MA, ME, NH, RI, VT) Middle Atlantic (DE, MD, NJ, NY, PA) South Atlantic (NC, SC, VA, WV) Mid-South (AR, KY, MO, TN) South (AL, FL, GA, LA, MS) Midwest (IL, IN, MI, OH, WI) Plains (IA, KS, MN, NE, ND, SD) Mountain (CO, ID, MT, UT, WY) Southwest (AZ, NM, OK, TX) West (CA, NV, OR, WA) Offshore (AK, HI, PR, VI)

3% 10% 14% 11% 17% 12% 6% 7% 12% 7% 2%

chart I

Types of new domestic facilities clients are opening (as a percentage of total new domestic projects): Manufacturing Warehouse/Distribution Headquarters Data Center Back Office/Call Center Shared Services R&D Other

26% 22% 16% 8% 12% 8% 7% 2%

chart J

so within a year or two. Three quarters of the respondents also say the primary reasons their clients are moving are market proximity/new markets and labor availability. Two thirds also cite labor costs, and half cite tax concerns among the reasons for these domestic relocations.

Nonetheless, the majority of responding consultants (86 percent) say their clients

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Clients planning new facilities slated for Asia will locate them in the following countries (as a percentage of total new Asian projects): China India Vietnam Singapore Malaysia Other Asian nation (including Indonesia, Taiwan, Thailand, Korea, Myanmar)

28% 15% 15% 10% 20% 12%

chart N

Clients plan to open new foreign facilities within five years: Yes No

52% 48%

Clients who expect to open new foreign facilities plan to do so within: 1 year 2 years 3 years 4 years 5 years

17% 60% 21% 0% 2%

chart K

Number of new foreign facilities average client plans to open: One Two Three Four Five or more

64% 29% 5% 0% 2%

chart L

Clients’ foreign location projects are slated for the following regions (as a percentage of total new foreign projects): Canada Mexico Caribbean Central America South America Western Europe Eastern Europe Middle East Africa Australia Asia chart M

S28

AREA DEVELOPMENT

11% 23% 2% 8% 9% 14% 10% 2% 1% 2% 18%

are not planning to relocate a domestic facility to a foreign location. In fact, nearly two thirds of the Consultants Survey respondents say they have seen a decrease in the number of companies establishing foreign facilities or conducting site searches in foreign locations as opposed to domestic ones in the last year.

Of those clients that are planning to move a domestic facility offshore, half the responding consultants claim the moves are planned two years out. Nearly 90 percent cite labor availability as the reason for their clients going offshore; more than three quarters again cite market proximity/new markets; and two thirds say government regulations along with labor costs are prompting their clients to consider foreign locations.

Similarly, two thirds of the respondents say their clients have not relocated a foreign facility back to the U.S. (reshored) in the past year, nor are they planning to do so.

(Notably, 90 percent of our Corporate Survey respondents say they do not expect to reshore a facility.) Of those consultants’ clients that have reshored, three quarters of the

Types of new foreign facilities clients are opening (as a percentage of total new foreign projects): Manufacturing Warehouse/Distribution Headquarters Data Center Back Office/Call Center Shared Services R&D Other

35% 14% 5% 11% 14% 10% 9% 3%

chart O

Clients plan to relocate an existing domestic facility within the U.S. within the next five years: Yes No

65% 35%

Clients who expect to relocate domestically plan to do so within: 1 year 2 years 3 years 4 years 5 years

39% 35% 20% 2% 4%

chart P

consultants say their clients have done so because of product quality issues, and nearly 70 percent say transportation/supply chain costs are to blame for their clients’ reshoring moves.

Nearly all of the respondents (90 percent) to our 12th Annual Consultants Survey say their clients are planning

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

12th

ANNUAL

Primary reasons for clients’ domestic relocations: Tax concerns Government regulations Healthcare costs Market proximity/new markets Infrastructure concerns Labor availability Labor costs Energy costs Access to capital Proximity to research centers/ industry consortium Quality of life concerns Other

24% 20% 22%

chart Q

Clients plan to relocate an existing domestic facility to a foreign location within the next five years: Yes No

14% 86%

Clients who expect to relocate a domestic facility to a foreign location plan to do so within: 1 year 2 years 3 years 4 years 5 years

consultants survey

54% 36% 4% 74% 18% 76% 66% 20% 8%

0% 56% 22% 11% 11%

chart R

to expand an existing domestic facility within the next five years, with more than 80 percent expecting to do so within two years.

CLIENTS’ SITE SELECTION PRIORITIES We’ve also asked the consultants to rate the site selection factors on which their clients base their location and expansion decisions as “very important,” “somewhat important,” “minor consideration,” or “of no importance.”

Although the site selection priorities of our Corporate Survey respondents (only 43 percent of whom use outside consultants when site selecting) and the Consultants Survey respondents diverge at many points, both groups highlight availability of skilled labor as the number-one factor.

In fact, 100 percent of the responding consultants rated this factor as “very important” or “important.” Ninety percent of these consultants say availability of skilled labor is having an effect on their clients’ facility plans or current operations, with 85 percent saying workers are lacking advanced skills like machine tool programming or bioprocessing; 60 percent note that workers lack the increasingly important STEM skills as well.

Interestingly, the responding consultants are not as concerned about the effect on the workforce of legalizing marijuana: two thirds say it will have no effect on workforce quality, nor do they feel legalized marijuana laws would affect their clients’ decisions to locate facilities in states that have enacted such laws. In contrast, more than half of the Corporate Survey respondents

Primary reasons for moving these facilities offshore: Tax concerns Government regulations Labor costs Labor availability Healthcare costs Energy costs New markets /market proximity Proximity to research centers / industry consortium Quality of life concerns

56% 67% 67% 89% 11% 44% 78% 22% 11%

chart S

Increase or decrease in the number of companies establishing foreign facilities or beginning site searches in foreign locations as opposed to domestic ones in the last year?

Increase Decrease

36% 64%

chart T

Clients have relocated a facility back to the U.S. from a foreign location (reshored) in the recent past or are planning to do so: Yes No

35% 65%

If so, reasons for reshoring: Labor costs Skilled labor Energy costs Product quality issues Transportation/supply-chain costs Geopolitical/government policy concerns Tech transfer/intellectual property protection Other

43% 7% 32% 75% 68% 32% 36% 18%

chart U

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Clients are planning to expand an existing domestic facility within the next five years Yes No

90% 10%

Clients who expect to expand domestic facilities plan to do so within: 1 year 2 years 3 years 4 years 5 years

28% 53% 18% 1% 0%

chart V

say marijuana legalization would affect workforce quality, with nearly 50 percent saying it would also have a bearing on their location decisions — obviously there’s a disconnect here!

It should be noted that the consultants’ overall ratings of the factors as “important” or “very important” is higher than the ratings given to the factors by the Corporate Survey respondents. In fact, the top eight site selection factors have combined “very important” and “important” ratings of more than 90 percent.

For example, although highway accessibility is ranked sixth by the consultants, this factor has a 93.5 percent combined importance rating. And a related factor, proximity to major markets, is tied in the rankings for the number-two spot with labor costs, with both of these site selection factors considered “very important” or “important” by 96.1 percent of the responding consultants. Another cost factor — inbound/ outbound shipping costs — is

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CONSULTANTS SURVEY 2015* Site Selection Factors

Very Important Important Minor Of No % % Consideration % Importance %

Labor Availability of skilled labor Availability of unskilled labor Training programs/ technical schools Labor costs Low union profile Right-to-work state

88.3 23.4

11.7 41.6

0.0 29.9

0.0 5.2

35.6 62.3 50.6 31.2

51.3 33.8 32.5 45.5

13.2 1.3 13.0 16.9

0.0 2.6 4.0 6.5

58.4 13.0 44.2

35.1 39.0 44.2

6.5 39.0 11.7

0.0 9.1 0.0

7.8

35.1

45.5

11.7

37.7

50.7

9.1

2.6

14.3

42.9

33.8

9.1

14.3

24.7

44.2

16.9

37.7 49.4 65.0

36.4 41.6 29.9

23.4 7.8 5.2

2.6 1.3 0.0

59.7 52.0 33.3

35.1 39.0 50.7

5.2 9.1 16.0

0.0 0.0 0.0

42.9 13.5 16.9 41.6 23.7 48.7 36.8

45.5 51.4 58.4 44.2 59.2 47.4 47.4

11.7 24.3 16.9 14.3 15.8 2.6 13.2

0.0 10.8 7.8 0.0 1.3 1.3 2.6

7.9 15.8

54.0 48.7

30.3 34.2

7.9 1.3

Transportation/Telecommunications Highway accessibility Railroad service Accessibility to major airport Waterway or oceanport accessibility Inbound/outbound shipping costs Availability of advanced ICT services

Finance Availability of long-term financing Corporate tax rate Tax exemptions State and local incentives

Other Available buildings Available land Occupancy or construction costs Expedited or “fast-track” permitting Raw materials availability Water availability Energy availability and costs Environmental regulations Proximity to major markets Proximity to suppliers Proximity to innovation commercialization/R&D centers Quality-of-life

* All figures are percentages and are rounded to the nearest tenth of a percent. chart W

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

600 ACRES OF

AVAILABLE PROPERTY. MILES OF WIDE OPEN POSSIBILITY.

58 50 492 ACRES READYTO-BUILD

ACRES READY-TODEVELOP

ACRES FUTURE DEVELOPMENT

SEE WHY YOUR BUSINESS SHOULD LAND AT THE PORT OF POSSIBILITY. CONTACT MIKE SCHILLER AT 360-693-3611 OR MSCHILLER@PORTVANUSA.COM, OR VISIT PORTVANUSA.COM.

The Port of Vancouver USA is open for business.

And open for opportunity. In addition to extensive operating facilities and warehouse space, we have acres of undeveloped and ready-to-build land. With infrastructure, access to river, road and rail, and development experience, it’s not your ordinary industrial location. And we’re not your ordinary landlord.

THE PORT OF

AREA0525.indd 1

Possibility

09/12/15 9:59 PM

COMBINED RATINGS CONSULTANTS SURVEY 2015* Site Selection Factors

2015

2014

Ranking 1. Availability of skilled labor 2. Labor costs 2T. Proximity to major markets 4. State and local incentives 5. Available buildings 6. Highway accessibility 7. Available land 7T. Tax exemptions 9. Expedited or “fast-track” permitting 9T. Inbound/outbound shipping costs 9T. Accessibility to major airport 12. Energy availability and costs 13. Training programs/technical schools 14. Proximity to suppliers 15. Occupancy or construction costs 16. Low union profile 17. Environmental regulations 18. Right-to-work state 19. Water availability 20. Corporate tax rate 21. Availability of unskilled labor 22. Raw materials availability 23. Quality-of-life factors 24. Proximity to innovation/ commercialization/R&D centers 25. Availability of advanced ICT services 26. Railroad service 27. Waterway or oceanport accessibility 28. Availability of long-term financing

100.0 96.1 96.1 94.9 94.8 93.5 91.0 91.0 88.4 88.4 88.4 85.8 86.9 84.2 84.0 83.1 82.9 76.7 75.3 74.1 65.0 64.9 64.5

97.3 (2)** 97.3 (2T) 91.5 (8) 95.8 (5) 88.8 (11) 98.6 (1) 95.8 (5T) 90.2 (9) 97.2 (4) 77.4 (18) 86.1 (12) 91.6 (7) 83.3 (15) 85.9 (14) 90.2 (9T) 82.2 (16) 78.9 (17) 74.0 (19) 68.0 (21) 86.1 (12T) 65.3 (23) 62.0 (24) N/A

61.9 57.2 52.0 42.9 39.0

N/A 62.0 (24T) 69.0 (20) 47.1 (26) 38.9 (27)

* All figures are percentages and are the total of the “very important” and “important” ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent. ** 2014 ranking

chart X

ranked ninth (tie) with an 88.4 percent combined importance rating, representing the largest increase in the combined importance ratings with a jump of 11 percentage points over the prior year’s Consultants Survey.

Since incentives negotiation/management is one of the primary services the consultants are providing to their clients, it stands to reason that state and local incentives is ranked fourth among the factors, receiving a 94.9 percent

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combined importance rating from the respondents to our 12th Annual Consultants Survey.

Eighty percent of the respondents say incentives have always been of great importance to their clients when making location decisions. Nearly 90 percent say their clients actually consider cash grants most important, with more than three quarters saying tax incentives are most important. Two thirds note the importance of training incentives as well.

The related factor of tax exemptions is ranked seventh with a 91 percent combined rating. Surprisingly, corporate tax rate only ranks 20th, slipping 12 percentage points from the prior year’s Consultants Survey (the second-largest decrease in the combined importance ratings) and now considered “very important” or “important” by only 74.1 percent of the respondents. The explanation for this might be contained in a recent article in Area Development (Directory 2016) from Hartley Powell and David Padykula at KPMG: “Why Location Matters to Manufacturers in Lessening the Tax Bite.” The authors say, “Statutory tax rates only tell part of the story. While topline rates are important, and high rates may provide “sticker shock” for companies considering locating within a given state, they are just one component of an enterprise’s effective tax burden.

Tax incentives, apportionment, throwback rules, and other factors often have a dramatic effect on effective tax burdens. In some cases, states with low statutory tax rates often impose high effective tax burdens, and vice versa.”

Available buildings and available land also land among the top-10 site selection factors in the Consultants Survey, ranking fifth and seventh (tie), respectively, with combined importance ratings of more than 90 percent. Available buildings are the clients’ choice for getting projects up and running quickly, and available land is needed for many of the larger, build-to-suit projects consultants are working on. Remember, two thirds of

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

12th

ANNUAL

Availability of skilled labor is having an effect on clients’ facility plans or current operations: Yes No

90% 10%

If yes, workers are lacking: Basic skills (e.g., reading comprehension, mathematical competency, etc.)

39%

Advanced skills (e.g., advanced welding, machine tool programming, bioprocessing, etc.) 85% STEM skills (science, technology, engineering, mathematics)

60%

chart Y

Quality of the workforce would be negatively affected in states that are legalizing marijuana use: Yes No

33% 67%

Legalized marijuana laws would affect clients’ decisions to locate facilities in states that have enacted such laws: Yes No

35% 65%

chart Z

Sustainable development is more important to clients now than in the past: Yes No

71% 29%

Measures clients have undertaken to reduce their companies’ “carbon footprint”: LEED certification for new or existing facilities Energy-saving modifications to existing facilities Installed on-site renewable generation Change of supply or distribution routes/ methods Recycling or re-use of waste products, etc.

consultants survey

57% 86% 21% 36% 54%

chart AA

the responding consultants are working on projects for facilities with more than 500 employees.

More than three quarters of the responding consultants also say the existence of a shovel-ready or pre-certified site is very or

somewhat important in their clients’ site searches. Closely related to this is expedited or “fast-track” permitting in a tie for the ninth spot with an 88.4 percent combined importance rating.

The factor showing the largest drop in its combined importance rating (17 percentage points) is railroad service, now rated “very important” or “important” by slightly more than half of the responding consultants. This seems to be an anomaly because although trucks are the primary conveyance for domestic freight, all signs point to the increased importance of rail as part of the logistics picture. Just last year, the Federal Railroad Administration projected the tonnage of freight shipped by the U.S. rail system would increase 22 percent by 2035. Products being shipped into and out of the U.S. at the nation’s ports are arriving and leaving by rail — a key link in the nation’s intermodal system. Are falling fuel prices having an effect on the preference to ship by rail? Analysts say that if rail loses some of its cost advantages over trucking, companies may switch back to take advantage of trucking’s faster speed and greater convenience over rail. This new conundrum might be reflected in the drop in the consultants’ rating of railroad service.

Relative importance of incentives to clients when making location decisions: Have always been of great importance Are more important now than in the past Are less important now than in the past

80% 14% 5%

chart BB

Types of incentives clients consider most important when making a location decision: Cash grants Tax incentives (tax credits, exemptions, etc.)

Other financial incentives (bonds, loans, etc.)

Worker training incentives Other incentives (land, utility-rate subsidies,

infrastructure support, etc.)

87% 77% 26% 65% 71%

chart CC

Communities are offering specific incentives for “green” initiatives: Yes No

45% 55%

chart DD

Importance of the existence of a shovel-ready/pre-certified site in clients’ site searches: Very important Somewhat important A minor consideration Of no importance

33% 44% 19% 4%

chart EE

AREA DEVELOPMENT | Q1/2016

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94% 6%

tant” or “important” by more than three quarters of the consultants. Again, as problems with water availability as well as quality take center stage across the nation, we can only expect this factor to keep rising in importance.

86% 14%

CONSULTANTS’ INFORMATION SOURCES

Clients consider whether there are businesses performing similar activities to their’s in the area of search (clustering): Yes No chart FF

Clients consider weather-related factors in their location decisions: Yes No chart GG

Just as water availability showed the second-largest increase in importance among our Corporate Survey respondents, it also showed the second-largest increase among our Consultants Survey respondents — this time increasing 7.3 percentage points, and now considered “very impor-

Nearly all (93 percent) of the respondents to our 12th Annual Consultants Survey say they use site and facility planning magazines like Area Development for site selection information, while three quarters also use general business publications. When searching for information online, 90 percent of the respondents look at specific economic development organizations’

websites and they’re looking for economic data on specific locations. Interestingly, more than 70 percent say they don’t use social media for site and facility planning. Additionally, more than half of the responding consultants say their firms maintain their own site selection databases.

More than 85 percent of the respondents to our Consultants Survey say their clients generally put between one and five economic development organizations on their “short list,” with three quarters saying their clients make up to five site visits. Once their services are engaged, 46 percent of the consultants say their clients generally reach a location decision within six months to a year.

•• •• •• •• •• ••

CONSULTANTS’ SOURCES OF INFORMATION Sources of site selection information used during the past 24 months: Site and facility planning magazines

(e.g., Area Development, etc.)

B2B industry-related magazines

(e.g., food, plastics, etc.)

General business magazines (e.g., IndustryWeek, etc.)

93%

Contact information for other consultants and/or real estate professionals who can assist in the site search Listings of available sites and buildings (e.g., FastFacility)

Site selection and facility planning strategy and information

(e.g., AreaDevelopment.com)

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Number of locations clients usually visit before finalizing the location decision:

Use Don’t use

1 or 2 Up to 5 More than 5

29% 71%

53% 76%

Information searched for online: Economic data on specific locations Specific economic development organizations’ websites

Use of social media (e.g., Twitter, LinkedIn, etc.) for site and facility planning:

88%

Consulting firm maintains its own site selection database: Yes No

56% 44%

90%

38% 53%

44%

Number of locations/economic development organizations that usually make a client’s “short list”: 1-5 5–10 More than 10

13% 74% 13%

Length of time after engagement of consultants’ services that clients generally reach a location decision: 3–6 months 6 months to 1 year 1–2 years

39% 46% 14%

86% 13% 1%

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

12th

ANNUAL

consultants survey

Sponsors FLORIDA

KENTUCKY

OHIO

Debbie McMullian, CareerSource Florida 1580 Waldo Palmer Lane, Suite 1 Tallahassee, FL 32308

Mandy Lambert, Commissioner, Department for Business Development Kentucky Cabinet for Economic Development Old Capital Annex 300 West Broadway Frankfort, KY 40601

Don Johnson, National Accounts Manager, Data Centers Fabcon Precast 6111 West Highway 13 Savage, MN 55378-1298

850-922-8647

dmcmullian@ c a re e r s o u rc e f l o r i d a . c o m w w w. c a re e r s o u rc e f l o r i d a . c o m Paul Marttila, Senior VP, Business Development Enterprise Florida, Inc. 800 N. Magnolia Ave., Ste. 1100 Orlando, FL 32803 1-877-YES-Florida Fax: 407-956-5599

pmarttila@enterpriseflorida.com w w w. f l o r i d a t h e f u t u re i s h e re . c o m IOWA Debi Durham, Director Iowa Economic Development Authority 200 E. Grand Ave. Des Moines, IA 50309 515-725-3000 Fax: 515-725-3010

business@iowa.gov www.iowaeconomicdevelopment.com KANSAS Don Johnson, National Accounts Manager, Data Centers Fabcon Precast 6111 West Highway 13 Savage, MN 55378-1298

800-626-2930

M a n d y. L a m b e r t @ k y. g o v www.ThinkKentucky.com MINNESOTA Don Johnson, National Accounts Manager, Data Centers Fabcon Precast 6111 West Highway 13 Savage, MN 55378-1298 800-727-4444

don.johnson@fabcon-usa.com w w w. f a b c o n - u s a . c o m NORTH CAROLINA Joseph Beasley, Economic Development Coordinator, Planning & Neighborhood Development City of Concord 35 Cabarrus Avenue West Concord, NC 28025 704-920-5128

b e a s l e y j @ c o n c o rd n c . g o v w w w. c o n c o rd n c . g o v

800-727-4444

don.johnson@fabcon-usa.com w w w. f a b c o n - u s a . c o m PENNSYLVANIA Don Johnson, National Accounts Manager, Data Centers Fabcon Precast 6111 West Highway 13 Savage, MN 55378-1298 800-727-4444

don.johnson@fabcon-usa.com w w w. f a b c o n - u s a . c o m

WASHINGTON 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 w w w. p o r t v a n u s a . c o m

800-727-4444

don.johnson@fabcon-usa.com w w w. f a b c o n - u s a . c o m

AREA DEVELOPMENT | Q1/2016

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Vital. Useful. Updated Daily.

The best information on site selection and facility planning available online • Current News: Real estate & industry news, and economic indicator reports updated throughout the day • Valuable Resources: Tax and incentive information, development contacts, and insightful surveys • Latest Studies, Research,

White Papers:

Aggregated from the top consultants, think tanks and institutions, and distilled into usable information • Reviewable Archives: Search the Area Development archives for content, opinion, and reports spanning the last five years from the top industry minds

Visit – www.areadevelopment.com

Providing What Others Don’t

SITE SELECTION/INCENTIVES

Weighing Economic Incentives The strength of the industrial market gives companies the upper hand when making site selection decisions.

By Brad Migdal, Executive Managing Director, Consulting Services, Transwestern

W

hat used to be “icing on the cake” in a corporate site selection project is now often a key ingredient in the cake itself: economic incentives.

Thanks to an increase in the U.S. gross domestic product, the outlook of manufacturers has improved, and many are eager to move forward with real estate improvement plans — whether those include expansion or relocation of existing facilities into new or revitalized real estate. The general consensus is that during the economic downturn, space optimization studies and lean manufacturing processes aimed at managing workflow and increasing efficiencies served a purpose, but the time seems right to alleviate overcrowding and/or transition from obsolete buildings by expanding footprints and relocating into newer, more efficient industrial properties.

Despite this optimism, rising operating costs and an intense focus on profit margins mean the dollars required to make these shifts are tighter than ever. Today’s market conditions call for a savvier real estate approach, and it is no longer a secret that a solid incentives package can mean the difference between propelling a deal forward and maintaining the status quo.

The Story Behind the Headlines

courtesy Hoist Liftruck

The relocation and expansion of manufacturing and distribution facilities are constantly in the news, and companies have come to understand that when headcount and anticipated job creation is significant enough to boost a local or regional economy, they can expect lucrative economic incentives to assist in those efforts.

The fact is that without these types of incentives, many plans would be sidelined

due to the realities of today’s marketplace.

According to Ridge Development, the industrial development arm of Transwestern Development Co., while construction costs have been relatively stable since the start of the recession, the price of desirable land, such as that along major highways or near airports, has increased. And in many regions, labor costs continue to rise. Furthermore, businesses are now competing with institutional investors for capital and are operating at a disadvantage.

Incentives, if structured correctly, can go a long way toward offsetting those variables.

The story behind the headlines is that states are desperately trying to retain their industrial base — and attract companies seeking to obtain valuable real estate deals like those secured by other firms. In Q3 2015, Transwest-

Hoist Liftruck Manufacturing Inc. secured a multimillion-dollar incentives package to support the high-capacity forklift manufacturer’s relocation to East Chicago, Indiana.

AREA DEVELOPMENT | Q1/2016

59

ern’s brokerage and consulting professionals assisted Hoist Liftruck Manufacturing Inc. in identifying a 550,000-squarefoot facility for acquisition and simultaneously secured a multimillion-dollar incentives package to support the high-capacity forklift manufacturer’s relocation. A more suitable facility combined with highly favorable economics prompted the company to move only 25 miles from property in Bedford Park, Illinois, to East Chicago, Indiana, where it will shift approximately 300 jobs and is expected to employ 500 people by 2022.

Due Diligence Is Key To reap the greatest rewards, due diligence on potential locations goes hand-in-hand with the creation of stimulus packages during a site selection process. Conducting a comprehensive assessment of human capital requirements and the company’s existing real estate portfolio is a good place to start to determine where the greatest opportunities lie.

Up front, it is important that a company can show the short- and long-term financial impact on an area if it were to join the local economy. How effectively this is done can impact the responses from economic development entities.

Available inventory of industrial facilities in an area also comes into play, so detailed explanation regarding specific industrial requirements is best communicated at the onset of a search. With the national industrial vacancy rate at 6.4 percent at the close of 2015, new industrial property is scarce in many regions, and a willingness to rehabilitate older facilities may be the most cost-effective route to relocation.

The Crossroads of Access and Advantage.

Strategic Negotiations

"Now under construction — 70,000square-foot spec building”

We are positioned, prepared, successful.

Contact Jim Plump, Executive Director, CEcD, FM Jackson County Industrial Development Corporation 301 North Chestnut Street P.O. Box 783 Seymour, IN 47274 Phone 812.522.4951 jimplump@jcidc.com www.jcidc.com

60

AREA DEVELOPMENT

AREA0537.indd 1

From this point, it often comes down to strategic negotiations with various governmental entities because competition can be fierce. The Council for Community and Economic Research reported that between 1999 and 2015, the number of state business incentives programs grew from 940 to 1,934. Tax credit, grant, loan, and tax exemptions accounted for the majority of incentives. It’s also important for companies and their advisors to take into account upfront dollars as well as savings that could be achieved over the longer term. This could include support in the way of marketing and sales assistance, technology development, or infrastructure improvements.

In the Hoist Liftruck example noted previously, the real estate relocation decision included more than the company’s need for additional physical space. Hoist specifically wanted to lower above-the-line operating costs such as property taxes and workers’ compensation premiums. It also was looking for a state that was producing the skill sets that could make the company successful. The business climate and regulatory environment in a business-friendly state such as Indiana was best positioned to respond to those needs.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com 10/02/16 11:37 PM

During the incentives negotiations process, companies expanding their industrial footprint should not jump at the package with the highest dollar value on paper. There have been many examples of site selection decisions made primarily on this basis that ultimately did not serve the company long term. Instead, economic incentives should be utilized to make a great deal even better. It is crucial that a company making a relocation decision not only look at the economics of the deal to manage the risk but also examine the other intangibles related to the offer. Using economics of geography to maximize business opportunity by minimizing cost and

AREA0528.indd 1

risk is a sophisticated and financially rewarding way to position for future business success.

Is there a limit to how much competition the market can support when it comes to economic incentives for industrial properties? Probably, but we may not reach it for several years. For now, companies can reap the benefits of stiff competition among those entities offering incentives and upgrade their industrial portfolio without hurting their balance sheets. Because when all else is equal between two or more locations, incentives may be the secret ingredient to a lower project cost. â–

7:13 PM AREA DEVELOPMENT11/12/15 | Q1/2016 61

GOVERNMENT POLICY

ADVANCING MANUFACTURING THROUGH PUBLIC/ PRIVATE COLLABORATION

By Mark Crawford

MIKE MOLNAR is director of the U.S. Department of Commerce’s Advanced Manufacturing Office, based at the National Institute of Standards and Technology (NIST) in Gaithersburg, Maryland. NIST is also home of the interagency team that supports the National Network for Manufacturing Innovation (NNMI), a program authorized by the 2014 bipartisan Revitalize American Manufacturing and Innovation Act. The goal of NNMI is to maintain U.S. leadership in advanced manufacturing by bringing industry and academia together to solve industry-relevant challenges.

Each institute is a public-private partnership, owned and operated by an industry-led consortium. Today there are seven operating institutes with a goal of a mature network of 45 institutes. Each institute has a specific industry focus (for example, photonics) with the goal of advancing innovation in that sector and workforce development.

Area Development checked in with Molnar to see how the program is doing so far.

AD: It seems like NNMI is rolling along — seven institutes were established between 2012 and 2015. With the many 62

AREADEVELOPMENT

courtesy cour tesy NAM

The NIST Director of Advanced Manufacturing describes what’s being done to maintain U.S. leadership in this arena.

Ag group roup p off metals metal t ls manufacturing manufa f ctu t ring i g st students tud dentts ttour th the eW Western estern t Star ttruck St ruckk man manufacturing ufa f ctu t rin i g ffacility acilit ility in P Portland, ortl tland d O Ore., re on “Manufacturing “Manuffactturiing D “M Day” ay” ” iin n 201 2015 2015.

5

partners involved, it must require a tremendous amount of collaboration and focus to make these institutes work. How do you manage that?

Molnar: NNMI is designed to be a collaborative effort that involves extensive input from industry and academia. In 2012, five public workshops were held and more than 1,200 voices heard. Each institute is a privatepublic partnership, meaning the institute is managed by an industry-led consortium. The public investment is intended to establish the institute, and is a cooperative agreement awarded through an open competition. The competitions require proposing teams to co-invest in the institute, with at least a 100 percent match to federal funds. To date, every institute solicitation has been highly competitive with coFOR FREE SITE INFORMATION, CALL

investment levels significantly above expectations.

There are currently two active competitions: a Department of Defense-sponsored competition for an institute on revolutionary fibers and textiles, and a Department of Energy-sponsored competition for an institute on smart manufacturing. This year up to six additional institute competitions are planned. The NIST-sponsored competitions are open to any topic proposed by the private sector.

AD: The NNMI was established by the Obama Administration.

What will happen if a Republican is voted into the White House?

Molnar: The NNMI program was authorized by Congress under the Revitalize American Manufacturing and Innovation Act of 2014. RAMI was strongly bi-partisan, with 118 co-sponsors

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

evenly split from both sides of the aisle.

AD: You’ve had a 30-year, private-sector career in advanced manufacturing, yet left for a new career in the public sector. What do you like best about your job? What is most challenging?

Molnar: Much of my industry career involved technology development using collaboration — with other companies, academia, and national labs/federal agencies. This experience has been invaluable in forming an inter-agency team to build stronger partnerships with industry and academia. I really enjoy the collaboration and teamwork with our agency partners, and with all of our stakeholders in U.S. manufacturing.

The biggest challenge is often the best opportunity — understanding the various viewpoints, constraints, and objectives of each participant.

A surprise for many of us is that so many of the best practices in industry are present in the public sector, but often described with different terminology. Rephrased then, the opportunity with collaboration is to find the common terms and approaches that every stakeholder can understand and support.

There is a misperception that a career in manufacturing today is unwise, based on the “4 Ds” — that U.S. manufacturing is dirty, dark, dangerous, and declining.

As a result, many people never consider manufacturing.

Manufacturing today, however, is an exciting, high-tech sector that offers significantly higher wages and benefits.

Manufacturers should also understand their local, regional, and federal resources — especially their local Manufacturing Extension Partnership (MEP) centers. MEP is a public-private partnership that helps small- and medium-sized manufacturers become more efficient and profitable. The MEP network has centers

AD: Do you have a call to action for all U.S. manufacturers?

Molnar: I would offer several recommendations. First, show your community why you are important by being involved in Manufacturing Day (www.mfgday.org), a national celebration held on the first Friday in October. The 2015 celebration (our fourth) included more than 2,600 events across the country. The website provides toolkits for hosting an open house or other event to celebrate U.S. manufacturing.

Consider sharing your story in 2016 and the exciting things your business is doing.

A key recommendation from the President’s Council of Advisors on Science and Technology (PCAST) is upgrading the image of manufacturing. Surveys continue to show that one of the biggest issues limiting growth in U.S. manufacturing is the shortage of skilled workers.

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to reduce the cost of composites by 50 percent, reduce energy use by 75 percent, and increase recyclability to over 95 percent. Those who are involved and develop a technology at an institute own the technology. Become aware of what each NNMI institute offers and then decide if this is beneficial to your technology and future product plans.

President Obama and Vice President Biden tour the Techmer PM, LLC production facility and look at a 3-D printed car created using carbon fiber infused polymer materials — and announce a manufacturing innovation hub focused on next-generation composite materials.

in every state, which offer information about local, regional, and federal programs, as well as providing access to experienced subject matter experts — yet many manufacturers do not take advantage of this resource. The NIST MEP program is also valuable to large companies because many of their tier-one and tier-two suppliers are small manufacturers.

AD: Should all manufacturers become involved with NNMI and its institutes?

Molnar: The choice to join NNMI depends on how a company values collaborative research. The charter for each institute is unique and bold, involving a challenge that is transformational and beyond the means for an individual company, university, or laboratory to achieve. The composites institute, for example, aims

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FOR FREE SITE INFORMATION, CALL

AD: NNMI is less than five years old, but what impresses you the most so far?

Molnar: The dedication by all stakeholders to make this work — they all realize what is at stake, and how critical it is to the U.S. economy to have a robust, competitive manufacturing industry. The response from the private sector to pilot institutes has been extraordinary in validating the concept, and the need for the institutes.

Establishing something new is always difficult, and there were concerns expressed that the requirement for at least 100 percent-matching funds was impossible.

Every one of the solicitations had multiple proposals with not only matching funds, but at considerable multipliers — two or three times. The recent competition for integrated photonics, with a federal investment of $110 million, garnered over $500 million of co-investment. It was noted that without the public investment — and the creation of a neutral convening ground — this partnership would not have been possible. This is just one of many achievements.

The status of the program and its progress toward achieving its goals will be made public very shortly in the first annual report on NNMI. All reports and information on NNMI are available at www. manufacturing.gov. With the FY16 budget approved by Congress, the NNMI program should comprise 15 institutes by 2017.

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

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INFRASTRUCTURE/ENERGY

Cloud Computing Broadens the Definition of “Technology Companies” Reliance on a community’s telecom and energy infrastructure has heightened the importance of these factors in the location decision-making process for both the providers and users of cloud computing services.

By Larry Gigerich, Managing Director, Ginovus

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ccording to Bessemer Venture Partners’ “The State of the Cloud 2015” report1 , the cloud-based computing market is projected to grow at a compounded annual growth rate (CAGR) of 22.8 percent from 2014 to 2018, and 62 percent of all customer relationship management (CRM) software will be cloud-based by 2018. What’s more, the number of Internet of Things (IoT) connected devices is predicted to surge to 38.5 billion by 2020, a rise of over 285 percent.2 This is not new or surprising news, but it’s significant when considering that software as a service (SaaS) will likely affect nearly all industries, and we are only at the dawn of this new age. The trickle down impact on the telecommunications and power industry is significant. The infrastructure capacity required to support cloud computing will undoubtedly become an increasingly critical component for companies and the communities and states in which they are located.

Moving to Cloud-Based Systems According to The National Institute of Standards and Technology, “Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (networks, servers, etc.) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

Organizations

The Cloud servers storage applications services Individuals

Most industries have a keen interest in lowering costs through reducing expenses and streamlining technology operations to drive efficiency. Cloudbased applications can provide singleentry data capabilities and access to real-time data, and enable real-time collaboration and mobility. Reducing dependency on hardware, on-premises server rooms, cooling systems, and maintenance provides companies with tangible cost and time savings.

One of the key components to the cloud’s success is the pooling or sharing of certain resources — similar to what occurs in the multitenant office

building model. The cloud provider serves multiple customers with different physical and virtual resources by sharing storage, processing, memory, network bandwidth, servers, and other technology infrastructure. The real uniqueness, however, is the ability of the cloud provider to serve different customers and industries, all with different usage patterns. Patterns can vary due to physical location (i.e., customers from different countries, time zones, climates, etc.) or business practices. This can give the cloud provider, data centers, and their customers the best leverage for power and telecomAREA DEVELOPMENT | Q1/2016

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ating the number of Internet munications use. However, it Lowest Electrical Rates — 2014 exchange points and network also provides great opportunity Ranking State Average Electric Rate access points could become a for utility service to be one of for All Sectors component in the location dethe most scrutinized factors in (cents per kilowatt-hour) cision-making process. Having the site selection process for 1 Washington 7.15 access to multiple national or those in the cloud computing regional fiber backbone providindustry.

2 West Virginia 7.65 ers, including digital switches, In a traditional setting, infor3 Wyoming 7.78 is an important consideration mation technology equipment 4 Arkansas 7.85 for a company utilizing cloud (servers, storage, and comservices and a necessity to those munications gear) is stored on 5 Idaho 7.95 providing cloud-based services. a system of racks. Computer 6 Oklahoma 8.10 The ability to prioritize Internet room air conditioners (CRACs) 7 Louisiana 8.11 traffic to avoid congestion and deliver a cooling system to eliminate failure of cloud-based prevent the equipment from 8 Kentucky 8.13 services is an ideal efficiency. overheating. Data centers, how9 Iowa 8.24 A community that can offer ever, have dedicated cooling 10 Utah 8.41 multiple Tier 1 Internet service systems and power delivery providers, and has the ability to that typically has a high level of Source: www.neo.ne.gov seamlessly reroute traffic in the reliability. Uninterrupted power event of a failure, has a better supply is available through a opportunity to land projects operating with the use of cloudseries of battery backups or flywheels. The power is distribbased services. uted throughout, and backup generators are in place in the Because of overlap between voice carriers and Internet event of a power outage. Cloud-based application use allows backbone carriers, the largest voice carriers, such as AT&T, any company or individual to eliminate the need for server Verizon, and Sprint, own some of the largest Internet backrooms, A/C units, and the hardware investment necessary to bone networks. In turn, they sell their services to the Interrun and maintain on-premises networks. Cloud computing net service providers. Those providers that are considered gives the company the opportunity to only use what space is Tier 1 have comprehensive telecommunications networks, needed, as the servers are off-site, and the space to store data access points, and redundancies. Communities with muland run the applications is leased on an as-needed basis. tiple Tier 1 Internet service providers can create a more costUtilizing SaaS applications reduces and, in some cases, elimicompetitive marketplace with more opportunities to reduce nates the capital-intensive model of the on-premise servers, downtime risk. upgrades, and maintenance.

The reliability of the Internet is critical in site selection.

Locations are removed from consideration regularly in the Whether a company has made the move to the cloud or not, site selection process due to inadequate utilities. A lack of waodds are high that it’s dependent on Internet communicater, electric, wastewater, or telecommunications infrastructure tions in order to continue to conduct everyday business. Uncan toss a site from contention early in the location decision derstanding potential downtimes and redundancies will be process. Even in a location where utilities are abundant, the key, as Internet connections are essential to company operacost of those utilities is of key importance when locating a tions. And for the cloud provider, reliability is second only to cloud-based software company or data center. Ongoing opersecurity in the eyes of its customers. The risk of being offline ating expenses for power and telecom and robust infrastrucmust be minimal. ture requirements for these industries consistently rank on the list of top important factors in making a location decision.

Telecom Infrastructure, Reliability Access to fiber optics is an expectation for almost every industry. For those utilizing cloud-based services, fiber optics access is essential. For a community, the telecommunications infrastructure is critical in the retention and attraction of companies and the subsequent capital investment associated with them. Competitiveness and redundancy of the broadband services can make a location more attractive as well. Numerous options for providers and services drive down costs and increase broadband speeds.

It is possible that a company that has detailed energy requirements will need to also understand the fiber backbone structure of the locations under consideration. Depending on the cloud use and operational needs of a company, evalu-

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Energy Costs/Reliability

Power is one of the highest utility costs in operating any facility. For a cloud-based service provider, data center power consumption can easily total over half of the operating costs for the facility.

Electricity rates vary widely across the United States and are affected by many factors that impact site selection decisions. Fuel costs, power plant expenses, transmission and distribution costs, weather conditions, and regulations all affect the cost of energy. In 2014, the average price for commercial customers was 10.75 cents per kilowatt-hour. For industrial customers, the average price was 7.01 cents per kilowatt-hour.3 Rates can be lower for large energy consumers, such as data centers.

In a recent study by the National Resources Defense

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Council (NRDC), U.S. data centers consumed an estimated 91 billion kilowatt-hours of electricity, equivalent to the annual output of 34 large (500-megawatt) coal-fired power plants. Data center electricity consumption is projected to increase to roughly 140 billion kilowatt-hours annually by 2020, the equivalent annual output of 50 power plants, costing American businesses $13 billion annually in electricity bills.4 If worldwide data centers were a country, they would be the globe’s 12th-largest consumer of electricity, ranking between Spain and Italy.

There is a 26.38 cent span per kWh between the least expensive and the most expensive electrical rates in the United States. Some of the cost difference is tied to how energy is generated. As an example, states in the Mountain and Northwest regions benefit from hydro and wind power generation.

The Midwest States fall closer in line with the national average — Indiana (8.97), Illinois (8.87), Iowa (8.24), Kentucky (8.13), and Ohio (9.97) — but are at risk for seeing their rates increase due to more restrictive federal environmental regulations impacting energy generated from coal.

Clean energy can be a factor for data center site selection.

Google is using less than 1 percent of all data center energy used globally.5 Along with Apple and Facebook, Google is one of the most efficient consumers of energy. These companies are investing in renewable energy resources such as wind power to generate the electricity needed to help power their data centers. The same NRDC report states that 80–85 percent of energy consumption is not a product of the big data centers. This leaves a great number of organizations relying, at least in part, upon the cost and availability of nonrenewable energy resources, such as coal-powered electricity.

With the expectation that non-data center facilities will become more reliant on cloud-based software and services, it is natural to consider the necessity of the reliability of a community’s power infrastructure. Much like telecommunications infrastructure, the redundancy and reliability of electricity is mission-critical to nearly all industries. Companies using cloud services, along with the cloud service providers, must be able to depend on the community where they are located to provide as minimal downtime risk as possible from the area’s power grid. Companies simply cannot have their operations go down.

The infrastructure of the power grid, its redundancies and

even accessibility to multiple grids, continues to be important in daily operations and production. The addition of cloud computing gives all industries something new to consider.

Incentives and More There was a time when it was thought that a community needed to offer specific types of incentives in order to attract or retain businesses in the coveted technology industry. With the dawn of cloud computing, however, every company has, in some way, become a technology company. Over time, communities have come to realize that technology companies are looking for the same attributes as non-tech companies when site selecting: human capital, favorable tax rates, low energy costs, a good quality of life, available real estate, and incentives.

There is a reliance on telecommunications and energy infrastructure like never before. A community that understands how to implement, maintain, and continually improve its telecommunications infrastructure will become increasingly attractive to a wide variety of industries. Solid utility infrastructure and affordable energy costs will never go out of favor, especially in the world of increasing regulation.

As data center operators, service providers, and multitenant customers consider factors involved in selecting a site for new and growing businesses, a thorough evaluation of internal organizational structure and external contract arrangements, as they pertain to energy and telecom usage, will need to be conducted. Developing “green” contracts and investment in energy efficiency should be rewarded. Communities need to evaluate current and future plans for telecommunications and power infrastructure with the knowledge that shared data space and cloud-based computing will be increasing at a rapid pace. Nearly one-third of leased data center space in the United States is due to come up for renewal in the next few years. Nearly all of those leases are based on square footage. The optimum can be accomplished with collaboration between owners, tenants, and communities to ensure the infrastructure and end-user costs work to the advantage of all parties. ■ Notes: 1 https://www.bvp.com/blog/state-cloud-2015 2 http://www.juniperresearch.com/press/press-releases/iot-connected-devices-to-triple-to38-bn-by-2020 3 www.eia.gov 4 www.nrdc.org 5 http://www.forbes.com/sites/emc/2014/07/10/why-big-tech-companies-are-investing-inrenewable-energy/#2715e4857a0b66b2daf676bc

Find the Right Location for Your Next Project.

FacilityLocations is a GIS map-driven, online economic development directory used to research potential locations during the business re-location or expansion process.

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SUSTAINABILITY/LOGISTICS

Building a Sustainable Supply Chain Sustainable supply chain best practices can build upon site selection goals to reduce costs, mitigate risk, and increase speed to market.

By Lily Russell, Founder, Explain the Chain; and Mariana Souza, Sustainability and Management Consultant

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eporting and regulatory panies also look to requirements, transpartheir manufacturency, traceability, closeders for fair labor loop manufacturing, and buildpractices and the ing strong communities are five presence of comkey sustainable supply chain modities of conissues to consider. cern like conflict Often, facilities and value minerals, palm oil, chain partners are presented and unsustainable with Key Performance Indicators seafood. Facilities (KPIs) or mandates to demonand manufacturers strate and integrate sustainable need to build casupply chain practices. Or worse, pacity to respond facilities are confronted with to these reporting business-damaging events that requirements in illustrate the importance of inteorder to maintain Method, an innovative green cleaning product company, has built a closed-loop supply chain. grating these controls…though a B2B relationships, bit too late. For example, Toyota speed-to-market, profits slid 18.5 percent over six and smooth operations. months as the company scrambled to get visibility into its supply chain and recover supply shortfall after the 2011 Japan Tsunami.1 2. Transparency: Transparency allows supply chain partners to respond to stakeWhether addressed proactively or reactively, the first step is to understand what each topic means and how it enhances existing goals to reduce costs, mitiholder needs, proactively manage risks, gate risk, and increase speed to market. and build a resilient supply chain.

Supply chain transparency starts with having visibility in your supply 1. Reporting and regulatory requirements: Reporting is widely adopted. KPIs, cuschain: Where did the raw materials tomer expectations, and regulatory requirements are driving this scrutiny up and downcome from? Who made them? How? stream into the supply chain.

As we saw with reporting and regulaSeventy-five percent of the S&P 500 published corporate sustainability reports tory requirements, customers and govin 2014, drastically up from 20 percent reporting in 2011.2 Like financial reporting, ernments already ask some of these sustainability reports build accountability and trust with stakeholders and drive questions. Supply chain partners who continuous improvement towards KPIs. Eighty-eight percent of firms that report can provide data and assurance from say it increases their efficiency and decision-making capacity.3 Further, as supply their own operations as well as their chain scrutiny heightens, technology improves, and globalization broadens, firms suppliers’ operations will be valued. are integrating the full supply chain into sustainability reporting. The lens is no While reporting is about building longer at an individual facility. systems to efficiently respond to partReporting pressures come from regulators, customers, and special interest ners’ requests and goals, transparency groups. Conflict minerals are regulated under Dodd Frank, human trafficking under is about building visibility in order to California’s SB 657, and best-in-class brand practices under the consumer’s watchful proactively identify risks and opportueye. In addition to traditional accounting for energy, waste, water, and toxins, com-

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

nities, lower costs, and avoid disruptions. In 2011, if Toyota had more visibility into its suppliers, they could have built stronger contingencies and mitigated the 18.5 percent profit slide. The insight gained creates a new set of opportunities for procurement teams. Insights often present opportunities to proactively mitigate risk to build a more resilient supply chain internally and for B2B partners.

3. Traceability: Traceability helps facilities — and ultimately the entire supply chain — maintain strict quality standards and effective recalls and minimizes supply chain disruption.

While transparency is about getting visibility and acting on it, traceability further specifies and documents the precise path of a product, commodity, or process. According to the UN Global Compact,4 traceability is “the ability to identify and trace the history, distribution, location, and application of products, parts, and materials, to ensure the reliability of sustainability claims, in the areas of human rights, labor (including health and safety), the environment, and anticorruption.”

Traceability enables targeted and effective recalls, protects against counterfeiting, and helps meet regulatory and safety standards. As such, traceability can minimize costs and supply chain disruptions and maintain speed to market. A timely example is the Chipotle E. coli event which led to a 6.8 percent year-over-year decline in Q4 2015 earnings;5 perhaps E. coli will always exist, but it can no doubt be isolated and targeted more specifically — so as to not damage an entire brand network. Further, robust traceability programs can provide competitive advantage

Facilitating the Reporting Process GlaxoSmithKline (GSK), a global pharmaceutical company, calculates that 40 percent of its total carbon footprint is embedded in the supply chain. GSK takes a value-chain approach to sustainability and looks to supplier partnerships to achieve global sustainability goals and KPIs. To facilitate the reporting process, GSK suppliers use Ecodesk, a publicly accessible database, to manage and track value chain sustainability impacts on an annual basis.

Further, industry groups and coalitions are emerging to streamline reporting requirements and reduce the reporting burden — commonly known as “audit fatigue” — on suppliers. Other noted resources and associations include Sustainable Apparel Coalition, Sustainability Consortium, and Global Social Compliance Programme.

by helping customers and end-consumers avoid allergenic products or meet customer preferences for certifications such as organic or kosher.

Many traceability systems offer facility-level tracking, using RFID and lot coding. While these systems are important, heightened supply chain scrutiny, regulations, and consumer preferences of today demand that companies expand traceability beyond the facility walls. Meeting this expectation is increasingly challenging with more extractors, processors, intermediaries, manufacturers, packagers, and shippers to consider. These challenges highlight the imperative that each individual facility operates as a finely tuned, well-oiled player in the system.

4. Closed-loop manufacturing: A $4.5 trillion opportunity awaits those who can effectively eliminate “waste” in their supply chain.

In its broadest sense, a closed loop, or circular, economy is one in which resources are endlessly repurposed, reused, and recycled. Large companies are integrating closed-loop thinking to increase resource-use efficiency, cut costs, and gain competitive advantage.

Fundamental to closed-loop manufacturing are products made from benign, nontoxic, and durable components. A closed-loop system “aims to keep products, components, and materials at their highest utility and value at all times,” according to the Ellen MacArthur Foundation,6 the foremost authority on closed loop research. For example, Interface Carpets, the world’s largest carpet manufacturer, pioneered a glue-free, carpet tile system that is easily replaced, recov-

Remanufacturing End-of-Life Material The Circulars, an award program that recognizes firms who use circular economy principles, provides various case studies on closedloop thinking in multinational firms. Winners this year included HP, Philips, Unilever, and Caterpillar. 9 Caterpillar was recognized for Cat Reman, a remanufacturing business line that takes back over 80,000 tons of end-of-life material annually and remanufacturers it into good-as-new condition. Caterpillar’s “circular economy portfolio” generated almost $10 billion in 2014. That $10 billion reflected 18 percent of Caterpillar’s total revenue, all of which was associated with reduced waste, lowered greenhouse gas emissions, and minimized need for raw materials.

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ered, and recycled. In 2014, 50 percent of Interface’s raw materials were recycled or bio-based.

In Waste to Wealth research,7 Accenture Strategy identifies a $4.5 trillion opportunity for those who can transform their business for a circular economy by 2030 using natural resources, products, and assets to effectively eliminate “waste.” How do you make this tangible and realistic now? Firms looking to integrate closed-loop thinking should engage with partners and even competitors to explore innovative new opportunities to change the way resources are made, used, and repurposed.

Method has eliminated freight and reduced its carbon footprint by locating its supply chain at a single site.

TRACEABILITY ENABLES TARGETED AND

nity, site, and workforce.

“Building a sustainable, transparent, closed-loop supply chain allows us to optimize our triple-bottomline approach,” said Garry Embleton, VP of Global Supply Chain at method. “At our South Side Soapbox, we’re primarily hiring people who live in the local community, we have greater control over our environmental footprint, and have eliminated non– value-added freight costs that improve our financial health.”

Migrating from a disaggregated supply chain spread across multiple locations to a single site has dramatically increased method’s supply chain flexibility and responsiveness. With bottles now traveling an average of 1,000 feet instead of 1,000 miles, method has eliminated freight — a non– value-added cost — and reduced its carbon footprint. Operating a highly sustainable manufacturing and distribution site enables greater transparency and control.

It empowers method to take realtime action to respond to changes in customer demands.

5. Strong supply chain communities: Ensuring a strong commuEFFECTIVE RECALLS, nity and location is not only critical for an individual facility, but also PROTECTS AGAINST provides big wins for an entire business and value chain.

COUNTERFEITING, Social and environmental variables are the basis of sustainability and, not surprisingly, AND HELPS MEET the basis of strategic, lasting site selection decisions. Viewed REGULATORY qualitatively and quantitatively, these include access to environIn Sum AND SAFETY mental resources (water, energy, As illustrated, sustainable supwaste disposal) and social capital ply chain practices do not need STANDARDS. (a willing workforce, welcoming to be a reactive “add-on.” Used community, license to operate). proactively, they can help reduce Stakeholder engagement is neccosts, mitigate risks, and mainessary when identifying a site location where both business tain speed to market. Trends suggest companies across the and community can thrive with sufficient environmental and entire supply chain must now internalize these value chain social resources. effects. No longer a single facility, each player is a spoke in For resources, Ceres, a network of investors and compathe whole system. Once each sustainable supply chain stratnies established to advance sustainable business practices, egy is understood, the next step is to prioritize the topics as has developed a set of community engagement tools in its they relate to a specific facility, industry, or operation. ■ Facility Reporting Project (FRP).8 Further, the following ofNotes 1 fers a great case study in site selection and strong commuhttp://www.huffingtonpost.com/2011/11/08/toyotas-profit-tsunami_n_1081532.html 2 http://www.ga-institute.com/nc/issue-master-system/news-details/article/flash-report-seventy-fivenity engagement: percent-75-of-the-sp-index-published-corporate-sustainability-rep.html 3 http://www.ey.com/US/en/Services/Specialty-Services/Climate-Change-and-Sustainability-Services/ Method, an innovative green cleaning product company, Value-of-sustainability-reporting 4 recently opened the industry’s first LEED-platinum certihttps://www.unglobalcompact.org/library/791 5 http://www.chicagotribune.com/suburbs/daily-southtown/opinion/ct-sta-arvia-chipotle-stfied manufacturing plant in the Pullman neighborhood in 0216-20160215-story.html 6 http://www.ellenmacarthurfoundation.org/circular-economy/overview/concept Chicago. The company chose the Pullman Park district in the 7 https://www.accenture.com/t20150916T215126__w__/us-en/_acnmedia/Accenture/Conversionsouth side of Chicago because of its rich history and need Assets/DotCom/Documents/Global/PDF/Strategy_7/Accenture-Waste-Wealth-Exec-Sum-FINAL. pdf#zoom=50 8 for economic development. Before breaking ground, method http://www.ceres.org/resources/reports/facility-reporting-project-guide-to-stakeholder-engagement 9 https://thecirculars.org/finalists met with municipal and civic groups to engage the community and set the foundation for a strong, sustained commu-

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

ic l b u P r e s: w e o i t P i n u m Com ology n Te c h for ess n Busi ss e c c u S

B Y Steve Stackhouse-Kaelble

Message from the 2015-2016 APPA Chair Public power utilities across America provide reliable electricity at competitive rates and support economic development in their communities. They are committed to helping businesses like yours with all of your energy needs and can consult with you on conservation, efficiency, and any special needs.

Staff and leaders of public power utilities are your neighbors — they’re accessible and responsive. Whether your business has been in the community for years, you’re new, or considering locating to a public power community, your local utility is always willing to meet and discuss matters of interest to you.

As not-for-profit entities accountable to the customers that own them, public power utilities are not beholden to shareholders with an interest in profits. Across the country, public power utilities charge lower rates, respond more quickly to power outages, and have higher reliability.

Public power utilities are environmentally responsible and are embracing growth in renewable energy sources. They are willing to work with you to provide energy from alternative sources, while protecting the grid to keep it stable and reliable.

Most public power utilities belong to the American Public Power Association, and also to joint action agencies and state or regional associations to stay abreast of new trends and technologies, influence policy and regulation, and provide economies of scale to enhance the benefits of public power.

Public power utilities are passionate about serving their community and enabling businesses to thrive and stimulate the economy. We encourage you to get to know your public power utility and the many advantages it offers.

DOUGLAS HUNTER, CHAIR

APPA BOARD OF DIRECTORS 2015–2016 CEO, UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS

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From powering up huge data centers to providing telecom and water services, and helping customers become energy-efficient through the latest technologies, public power companies re-invest in the communities they serve.

People have been plugging lights and appliances into electric power for well over a century, and the average user probably doesn’t give a lot of thought to the transmission system that delivers power to the wall outlet. Behind the scenes, though, the technology supporting the needs of power customers is increasingly advanced, and the nation’s public power utilities are among those leading the way. These utilities are delivering power that’s more reliable than ever, along with a growing menu of services designed to help commercial and residential power customers manage their usage and control their costs. The menu often goes well beyond electricity itself.

Consider the critical nature of data to business operations and everyday lives. It’s not a stretch to say that many aspects of our modern way of life rely on the ability to store and manipulate data in data centers, which rely on vast supplies of incredibly reliable energy.

In the Phoenix area, public power provider Salt River Project is energizing innovation with deployment of its SRP DataStation™, a modular data center concept that provides highly reliable power located closer to the bulk transmission system.

“This first-of-its-kind deployment works to address the growing need of power in a sustainable way,” says Caryn Gose, senior project manager for economic development.

The concept “minimizes the construction of transmission lines and supports economic development in the community.”

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

THERE’S NO DENYING IT: NORTH CAROLINA IS A GREAT PLACE TO DO BUSINESS. In fact, Site Selection magazine ranked North Carolina 2nd in its annual Top Business Climate survey for 2013. The state also came in at #4 on Forbes Best States for Business 2013 rankings. Safe to say that when it comes to business, North Carolina is where it’s at!

team illuminate the way. We represent more than 70 NC Public Power communities across the Tar Heel state.

Plus, we’re well-heeled with homegrown information, industry expertise and economic incentives to help you reach your goals.

So if you’re looking at NC (and you should be), let ElectriCities of North Carolina’s Economic Development

Got your sights set on NC? We’ve not only got the vision—we’ve got the sites, too.

See for yourself…

CONCORD

CONCORD

International Crossing Business Park Location: 215 International Dr., Concord, NC 28027 Building size: 277,253 s.f.

Build-to-suit office space Ceiling height: 32’ clear height Sprinkler: ESFR Sprinkler System Dock doors: 70 dock doors with 10 knock-outs Trailer: Storage onsite Depth: 240’ Column spacing: 45’ typical Doors: 2 drive-in

River Oaks Corporate Center Location: 8475 Automation Dr., NW, Concord, NC 28027 Building size: 309,536 s.f.

Year built: under construction Ceiling height: 32’ minimum Dock doors: 54 dock-high, 4 drive-in Flooring: 6 inch concrete

CONCORD

CONCORD

Concord Airport Business Park Phase 3 Location: Derita Rd., Concord, NC 28027 Building size: 150,000 s.f. expandable up to 1,000,000 s.f.

Year built: under construction Adjacent to Concord Regional Airport

River Oaks Corporate Center Location: 800 Derita Rd., Concord, NC 28027 Building size: 20,000 to 70,003 s.f.

Year built: under construction Ceiling height: 24’ minimum Dock doors: 17 dock-high, 1 drive-in Flooring: 6 inch concrete

We partner with our member cities to provide customized assistance with all aspects of economic development. Our comprehensive approach begins at project outset and continues through the site selection and building processes.

What can we do for you? From site selection to targeted recruiting to grant assistance and marketing, we’ve got all the tools and expertise you need to successfully develop your business. To help us serve you better, let us know more about your needs and areas of interest, or go to electricities.com/ecodev for more information.

KINSTON Highway 70 West Industrial Park Location: 2010 Smithfield Way, Kinston, NC 28504 Building size: 40,000 s.f. expandable to 160,000 s.f.

Year built: 2009 Acreage: 9 acres with additional 8 acres available Ceiling height: 30 feet Dock doors: 2 dock-high, 1 drive-in Flooring: 10 mil vapor barrier

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Brenda Daniels Manager, Economic Development 800.768.7697, ext. 6363 bdaniels@electricities.org

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a holistic solution to business needs. In the Salt River Project’s initiative facilitates the case of cogeneration, the utility can provide data center growth that’s inevitable these the natural gas used to fire the generator. days, while increasing reliability, reducing “We’re working with a large manufacturer to costs, and minimizing the need for exteninstall peak generation,” Cannon says, addsive overhead power lines running through ing that it’s a six-megawatt project. “We’re commercial and residential territories. It’s able to install a natural gas peak generator just one of many examples across the counto allow price breaks.” try of the technologies and trends that are It’s not uncommon for public power utilireshaping the relationship between utility ties to provide more than just electricity. For and customer. example, Salt River Project also diversifies its Data centers also are among the big offerings with telecommunications services, beneficiaries of Nebraska Public Power DisGose says. “SRP Telecom provides dark fiber trict’s large-customer economic development services to commercial service providers in incentive electric rate, which offers energy at the Phoenix metropolitan market.” a discounted price for a fixed period of time.

And Tom F. Gray, economic development “This rate is ideally suited for data center consultant for loads, especially large enterprise Grand River Dam operations,” observes Mary Authority in northPlettner, economic development east Oklahoma, manager with NPPD. IT’S NOT provides another Across the country in North Car- UNCOMMON for public power utilities to example: “GRDA’s olina, Greenville Utilities Commisprovide more than just largest customer, sion (GUC) is one of many public electricity.

Northeast Oklapower utilities calling on technolhoma Electric ogy to help customers reduce their Cooperative, has costs, not just by cutting consumpmade the commitment to deliver high-speed tion but by more intelligently managing their fiber-optic service to every electric meter in usage and, when appropriate, adding in its service delivery area,” he says. “Connecpower generated on site. The latest technoltivity is critical to businesses located in rural ogy gives large customers a real-time window areas to serve a broad range of customer into their power usage, as well as the status needs on a global basis.” of the system providing that power.

And it’s not just a matter of connecting “They are able to monitor not only their rural business customers to resources and cliload but ours,” says Tony Cannon, general ents globally. Connectivity is also a vital part manager and CEO of Greenville Utilities of helping businesses attract the talent they Commission. A few dozen customers have need to succeed, Gray points out — particuelectricity cogeneration capabilities, and larly the millennials who are vital to the workwith benefit of the load data they can fire up force requirements of a lot of companies. during high-demand times when costs could “The quality of life offered to business owners be higher. The number of business customers and employees in a rural setting enables with cogeneration technologies is small but them to experience the millennials’ optimum growing, and the load monitoring abilities satisfaction with ‘live, work and play.’” helped that cadre of happy customers collectively save $1.5 million last year.

More Than Electricity The fact that Greenville Utilities provides not only electricity but also natural gas, water, and wastewater services helps it offer 74

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Saving Energy

“We’re the only company in our area that’s spending money to keep people from buying our product,” says Cannon of GUC. He’s referring to the efforts to help customers

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

achieve greater energy efficiency. “We have staff dedicated to working with our customers on energy efficiency. It is their full-time job to help customers save money.”

There are examples all over the country, including in Arizona. “Salt River Project offers demand management and energy-efficiency programs to help our commercial and industrial customers manage their energy usage and reduce costs,” says Gose. “The programs include a wide range of new and proven energy-saving technologies — such as LED lighting and high-efficiency HVAC systems and controls — to enhance the operation of the customers’ facilities.”

Customers are the obvious beneficiaries, because saving energy saves money. But the benefits are broader, says Gray at Grand River Dam Authority.

“Energy-efficiency programs and demand management are bigger than just the utility, and when customer-owners can grasp the concept and put it into practice, they can have positive impacts on the system that last for many years to come. Such programs can delay the need to build more generation, and, thus, help keep rates lower.”

Favorite Color is Green Reducing electricity consumption can be good for the planet, too, so energy efficiency is a significant part of the environmentally friendly initiatives that an increasing number of customers are demanding. But that’s just one aspect of the interest in green power.

“Based upon customer input relating to efforts at minimizing their company’s carbon footprint, Nebraska Public Power District has developed a green power product that allows them to achieve their desired environmental goals from renewable and sustainable generation resources,” says Plettner.

“NPPD supports energy research with the University of Nebraska-Lincoln’s Nebraska Center for Energy Sciences Research to conduct research on renewable energy sources, energy efficiency, and energy conservation to expand economic opportunities.”

NPPD, she says, is one of the Midwest’s leaders when it comes to generation from non-carbon-emitting resources, at 42 percent. “In the near future, NPPD will add hydrogen to that list of carbon-free generation resources through its partnership with Monolith Materials, a cutting-edge manufacturer of carbon black.”

When it comes to expanding or relocating your data center,

• Low-cost, high-quality energy Our industrial rates are 26% lower than the national average

• Diverse and reliable energy mix Our 42% carbon-free resource mix is the best in the region

• Economic development electric incentive rate option 'LVFRXQWHG HQHUJ\ UDWH IRU XS WR ÀYH \HDUV IRU TXDOLI\LQJ FXVWRPHUV

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econdev.nppd.com 800.282.6773, ext. 5534 econdev@nppd.com

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power, through facilities at three The company uses natural dams. But it also draws power gas in its production of carbon THESE DAYS, from five wind farms and a gasblack, and one of the byprodGREEN POWER powered generating facility, ucts of the process is hydrogen, is on radar screens according to Gray. In the works is Plettner explains. NPPD will use across the public power a new combined-cycle gas genthe hydrogen as a new alternative community. eration plant at the Grand River clean-energy source: “NPPD plans Energy Center. Gray says it’s “the to replace an existing coal-fired latest, most efficient design, and the first of its kind boiler at its Sheldon Station plant in Hallam with one to be built in the Western Hemisphere.” Soon after that uses clean-burning hydrogen fuel.” Good for the it comes online in 2017, a coal-fired plant will be planet, yes…and also good for the economy, because decommissioned. creation of 600 jobs is also part of the equation.

“We have built more than 28 megawatts of certiIt wasn’t that long ago that green power was an fied green power, which means it meets strict environinteresting option provided by just a few forwardmental and consumer standards,” says Lonnie Carter, thinkers, but these days it’s on radar screens across president and CEO of Santee Cooper in South the public power community. “From a generation Carolina. “Residential and commercial customers perspective, Salt River Project works with our busican voluntarily purchase green power, and all of that ness customers to meet their corporate goals in terms revenue is put back into a fund that Santee Cooper of serving the facility with green energy,” says Gose. uses to develop new renewable energy resources in “SRP offers cost-effective options to our customers that South Carolina.” include leveraging output from our community solar The program also has provided solar arrays to operations if customers desire.” nearly 30 middle schools, Carter says, “with realAs its name suggests, Grand River Dam Authortime and historical performance monitoring, along ity has excellent access to carbon-free hydroelectric

BUSINESS. HERE, IT HAS ITS OWN CULTURE. You’ll find proof in our abundant land, power, facilities, financial incentives, and college workforce programs all geared for economic growth. Yet you can also discover art and music festivals doing a booming business. Run or bike 35 miles of riverside trails on 1400 acres of dedicated greenway. Or enjoy home ownership where the median price runs a comfortable $184,200. And when you’re ready to discuss your needs, you’ll find a local government eager to satisfy.

Call or go online to discover a culture that values growth.

866.949.0357 | www.sanantonioedf.com © 2 0 1 5 S A N A N T O N I O E C O N O M I C D E V E LO P M E N T F O U N DAT I O N

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with a renewable energy curriculum that meets state science standards, to help prepare the next generation of energy professionals and consumers.”

Communities — and their utilities — that make a strong commitment to green power can find themselves all the more attractive to companies that share such a commitment. That was the case in the Mid-America Industrial Park east of Tulsa, says Gray of GRDA. A large technology company with a strong corporate commitment to the environment announced a millionsquare-foot expansion there. The availability of hydro and wind power was one of the selling points in making that expansion a reality, Gray explains.

Customer-Friendly Business Model One might ask what motivates public power companies to offer services and technologies that save businesses money, improve quality of life to facilitate more successful recruitment, and even save the planet. Perhaps the best answer is to observe what does not motivate them…the profit motive.

Public power utilities are just that — public, owned and operated by municipalities or other non-for-profit

entities. “These electric utilities operate at cost of service, and any revenues above that point are utilized for plant improvements, transmission facilities, and overall system reliability and integrity,” says Plettner, adding that her state of Nebraska is the only state where every home and business gets electric service from a publicly owned utility.

“We don’t pay dividends to shareholders,” agrees Cannon at Greenville Utilities Commission. “We reinvest into the utility and technology.”

“Operating costs are minimized because their debt, cost of money, and inventory are typically low; their service region is constrained; and [most] of their annual operating budget is committed to strengthening and maintaining their system rather than growing regionally,” adds Bob DeWitt, director of business development and energy efficiency for American Municipal Power Inc. “This, in turn, makes the system reliable from both an operations and response perspective,” he says.

Without the need to deliver a profit to shareholders, public power utilities can keep rates lower than average. But that’s really only part of the benefit.

“Local accountability has translated over the decades

MORE AFFORDABLE ENERGY. MORE WATER TO THRIVE. MORE GROWTH. From some of the lowest electricity and labor costs in the Southwest to a young and qualified workforce, SRP and Greater Phoenix offer you the tools and incentives needed to make your move a success.

With low taxes and a reliable water supply, Greater Phoenix is consistently named one of the top 10 places to locate businesses. Coupled with SRP’s awardwinning customer service and broad dark fiber network, you’ll find what you need to build your business here.

To learn what we can do for you, visit PowerToGrowPHX.com.

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into customer satisfaction rates well above the national average, as well as excellent reliability throughout our transmission, distribution, and generation systems,” says Carter of Santee Cooper. “Our responsibility is to the people we serve, and they are our friends and neighbors. Local management means we can also be nimble in our ability to anticipate the needs of business customers, and provide solutions that help them be successful.”

This connection to the well-being of the local community — and its people and businesses — makes public power utilities natural allies in the work of economic development, says DeWitt. “Once a business decides to make an expansion or location move, time is money,” he explains. “Professional site location consultants know this, and to be successful they must work quickly to identify and recommend to their clients sites that offer the least risk and lowest cost. Municipalities that own and control their own electric systems know this as well, and in response have cut the red tape and developed community-owned, shovel-ready sites with marginally excess water, sewer, and electric utility capacity. In many cases fiber is in place as well.”

Making economic development happen is also a primary objective for ElectriCities, which serves about a million energy users across North Carolina and nearby states as a not-for-profit government service organization representing municipalities and universities that have their own electric distribution systems. “One of ElectriCities’ roles is to represent member communities to expanding and relocating companies,” says Brenda Daniels, manager of economic development. “We maintain comprehensive databases for all public power municipalities in North Carolina. Prospects can order detailed reports on dozens of sites, from mountains to coast.”

ElectriCities will promptly provide profiles of locations that match the requesting company’s specifications. “It’s no coincidence that some of the state’s most dynamic growth has occurred in our communities. Any power-intensive industry is going to find significant advantages here. ElectriCities remains a partner through the entire process, facilitating site visits and contact 78

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with local, county, and state officials.”

Such involvement can be key to making good things happen, whether the project is small or huge, such as the $500 million, 2,000-job Volvo plant that South Carolina landed. Santee Cooper was part of the team that made that win a reality, Carter says.

“Santee Cooper was able to quickly secure the property for the plant with our loans and grant programs, and through Edisto Electric Cooperative, which will serve the plant site, Volvo is using our discounted incentive rate for large industry,” Carter says.

•• ••

Sponsors Arizona

Salt River Project More energy. More growth. From low electricity and labor costs to a young and qualified workforce and reliable water supply, SRP and Greater Phoenix offer you the tools and incentives to make your move a success. To learn what we can do to help you build your business here, visit powertogrowphx.com.

Caryn Sanchez and Karla Moran, Senior Project Managers, Economic Development Salt River Project 602-236-2192 or 602-236-2396 Caryn.Sanchez@srpnet.com Karla.Moran@srpnet.com www.PowerToGrowPHX.com

Nebraska

Nebraska Public Power District Nebraska Public Power District is Nebraska’s largest electric utility, with a chartered territory including all or parts of 86 of Nebraska’s 93 counties. NPPD uses a diverse mix of generating facilities to meet customers’ needs, including nuclear, coal, natural gas, oil, wind, hydro, and diesel resources.

NPPD and public power utilities work with their local, regional, and state economic development organizations to position communities and regions for economic growth, to assist with the expansion and retention of existing industry, and to attract new businesses.

Mary Plettner, CEcD* Economic Development Manager Nebraska Public Power District 1414 15th Street P.O. Box 499 Columbus, NE 68602-0499 402-563-5534 • Cell: 402-750-1907 Fax: 402-563-5090 econdev@nppd.com econdev.nppd.com

North Carolina

ELECTRICITIES Of North Carolina, Inc. ELECTRICITIES is a not-for-profit government service organization representing 70+ N.C. cities and universities that own electric distribution systems. A site selection professional can receive detailed reports from our extensive databases on dozens of N.C. sites, from mountains to coast, within 48 hours of a request. We’re your turnkey services partner.

Brenda Daniels, Manager, Economic Development ELECTRICITIES of North Carolina, Inc. 1427 Meadow Wood Blvd.

Raleigh, NC 27604 1-800-768-7697 ext. 6363 Cell: 919-218-7027 bdaniels@electricities.org

Texas

San Antonio Economic Development Foundation San Antonio, Texas, America’s new “Capital of Influence” (Forbes), is recognized for its diverse and skilled workforce, central location, and rich culture. It offers a “Culture of Business” that supports industry sectors including advanced manufacturing, aerospace, bioscience, alternative energy, IT, and the second-largest federal cyber community in the nation.

Tom Long, Executive Vice President of Business Recruitment San Antonio Economic Development Foundation 602 E. Commerce St. San Antonio, TX 78205 210-226-1394 tlong@sanantonioedf.com www.sanantonioedf.com * This corrects an error in our 2016 Select Sites Directory. Mary Plettner replaced Rick Nelson at NPPD as of Dec. 1, 2015.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Providing the Necessary Tools

NV Energy’s Economic Development Department can provide the most cutting edge comprehensive listing of available properties for companies to consider in the state of Nevada. Nevada Site Locator is the state’s most advanced and only searchable GIS site selection database that is geared towards assisting businesses, brokers and developers searching for the perfect location.

` Save hours of research time ` Generates site-specific demographic and business analysis ` Download comprehensive easy to read reports

www.nevadasitelocator.com

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ADINDEXWEBDIRECTORY Advertiser ARIZONA

Salt River Project www.PowerToGrowPHX.com Caryn.Sanchez@srpnet.com Karla.Moran@srpnet.com

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CONNECTICUT

Cheshire Economic Development Corporation www.cheshirect.org jsitko@cheshire.org

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FLORIDA

City of Cape Coral Economic Development Office www.bizcapecoral.com econdev@capecoral.net

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Career Source Florida www.careersourceflorida.com dmcmullian@careersourceflorida.com

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Enterprise Florida www.floridathefutureishere.com pmarttila@enterpriseflorida.com

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KANSAS

Fabcon www.fabcon-usa.com don.johnson@fabcon-usa.com Kentucky Cabinet for Economic Development www.kentuckyskillsnetwork.com www.ThinkKentucky.com Mandy.Lambert@ky.gov Louisville Forward www.louisvilleky.gov

MINNESOTA

Fabcon www.fabcon-usa.com don.johnson@fabcon-usa.com

NEBRASKA

Nebraska Public Power District econdev.nppd.com econdev@nppd.com

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ElectriCities bdaniels@electricities.org

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OHIO

Fabcon www.fabcon-usa.com don.johnson@fabcon-usa.com

OKLAHOMA

Tulsa Regional Chamber www.tulsachamber.com brienthorstenberg@tulsachamber.com

PENNSYLVANIA

Fabcon www.fabcon-usa.com don.johnson@fabcon-usa.com

Lubbock Economic Development Alliance www.lubbockeda.org carolyn.rowley@lubbockeda.org

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Tomball Economic Development Corporation www.tomballtxedc.org info@tomballtxedc.org kviolette@tomballtxedc.org

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The 2016 C2

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WASHINGTON

Port of Vancouver USA www.portvanusa.com mschiller@portvanusa.com

Gold & Silver Shovel Awards recognizing those states that have attracted significant business investment and have created high valueadded jobs in 2015.

The

100 Leading Locations

UTAH

Utah Governor’s Office of Economic Development/ Economic Development Corporation of Utah business.utah.gov tfoxley@utah.gov edcutah.org jedwards@edcutah.org

COMING IN THE Q2/2016 ISSUE

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TEXAS

San Antonio Economic Development Foundation www.sanantonioedf.com tlong@sanantonioedf.com

LOUISIANA

Ascension Economic Development Corporation www.ascensionedc.com info@ascensionedc.com

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KENTUCKY

Page

City of Concord www.concordnc.gov beasleyj@concordnc.gov

Knoxville-Oakridge Innovation Valley www.knoxvilleoakridge.com dlawyer@knoxvillechamber.com

IOWA

Iowa Economic Development Authority www.iowaeconomicdevelopment.com business@iowa.gov

NORTH CAROLINA

TENNESSEE

INDIANA

Jackson County Industrial Development Corporation www.jcidc.com jimplump@jcidc.com

Advertiser

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showcasing metro areas that are leaders in achieving economic growth.

Also a “playbook” to the location decision process with content from authoritative sources

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

FacilityLocations.com

Find the Right Location for Your Next Business Site, Facility or Headquarters FacilityLocations is a GIS map-driven, online economic development directory used to research potential locations during the business re-location or expansion process.

DISCOVER Search and identify potential site and facility locations within big, easy-to-navigate, GIS-driven maps

RESEARCH Drill-down into location profile pages: • Google Streetview and Bing Bird’s Eye Imagery • Heat Maps and Data Layers • Downloadable Point-and-Click Radius Demographics Reports • Available Property Listings and Key RE Assets

CONNECT A directory with 6000+ listings including: • Local and Regional Economic Development Contacts • Port Authority Contacts • Utility Contacts • Foreign Trade Zone Contacts • Foreign Inward Investment Contacts If you are an economic development agency and want to have an enhanced listing with a location profile on FacilityLocations.com, please contact Dennis Shea at 800.735.2732 x 208 or dshea@areadevelopment.com

(800) 626-2930 • ThinkKentucky.com

More than just shovel-ready.

Kentucky has

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Kentucky has set a new, higher standard. With our certified Build-Ready sites, we have drastically shortened the time needed to plan and begin construction. With a Build-Ready site, a company is guaranteed that: •

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Kentucky communities are offering a growing list of certified Build-Ready sites. To learn more, call (502) 564-7140 or visit BuildReadyKY.com

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