Area Development Q1 Issue 2021 by Area Development

JOB CREATION THROUGH RESHORING PAGE 8

ANNUAL CORPORATE & CONSULTANTS

SURVEY

ACCELERATING PROJECT EXECUTION PAGE 14

AREADEVELOPMENT SITE

AND

FACILITY

PLANNING

Q1/2021

WHAT’S DRIVING RECORD INDUSTRIAL REAL ESTATE

DEMAND PAGE 24

W W W . A R E A D E V E L O P M E N T. C O M

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CONTENTS

Cover Story

WHAT’S DRIVING RECORD INDUSTRIAL REAL ESTATE

DEMAND

A boom in e-commerce and shifting population densities as well increasing transportation costs are making industrial real estate a “can’t miss.”

features

14 Strategies for

66 Pandemic Fuels

Data Center Growth With employees working remotely, school being held virtually, and everyone being entertained via the Internet during the COVID-19 crisis, growth of these mission-critical facilities accelerated and will continue to do so.

59 Trends in Office

Accelerating Project Execution

and Industrial Parks Across the nation, the demand for suburban office and industrial parks is rising as more skilled workers move back to suburbs, due to concerns about housing costs and quality of education.

Pandemic-related project delays have prompted manufacturers to investigate alternative projectdelivery approaches to make up for lost time.

68 Challenges of

Moving Manufacturing Out of China

28 Southeast Ports Expand Capacity

18 Caribbean: Business

Locations in Sunny Places Sophisticated technology and infrastructure attributes, friendly wage rates, multilingual skilled labor, and sometimes surprising real estate deals make the Caribbean islands an attractive option for investment.

Southeastern U.S. ports are pursuing aggressive infrastructure expansion projects to accommodate larger vessels and more cargo.

When moving manufacturing out of China, there’s a lot to consider, e.g., employment contracts, retrieval of tooling and molds, IP protection, and taxes and fees.

Area Development® Site & Facility Planning (USPS 345-510) is published four times per year (Q1, Q2, Q3, and Q4) at Lancaster, PA, by Halcyon Business Publications, Inc., 30 Jericho Executive Plaza– Ste 400W Jericho, NY 11753. Periodicals postage paid at Jericho, NY, and additional offices. Single copies, $20. Yearly subscription U.S. & Canada, $75; foreign, $95.

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Volume 56 | Number 1 Q1/2021

“The secret of change is to focus all of your energy, not on fighting the old, but on building the new.” Socrates (470–399 BC) Greek philosopher from Athens who is credited as one of the founders of Western philosophy

departments

4 Editor’s Note

The Pandemic as a Catalyst for Change

70 Cultivate a Second Life for

Decommissioned Power Plants

As the need for industrial development grows and requirements for coal-fired decommissioning increase, land repositioning can offer a mutually beneficial solution.

6 In Focus

Construction Tech Adoption Speeds Up

8 Front Line

Job Creation Through Reshoring

10 Front Line

everse Logistics Opportunities, R Challenges

12 First Person

im Knavish, Executive Vice President, T PPG

72 Ad Index/Web Directory annual report

exclusive online content

ANNUAL

CORPORATE SURVEY As expected, the COVID-19 pandemic has affected our corporate readers’ location plans and priorities as they increased their resiliency efforts.

• In Focus: Driving Economic Prosperity Through Entrepreneurism • “Made in America” Executive Order to Affect International Companies and FDI • 3D Manufacturing and COVID-19 • Global Innovation Hubs: Markets Driving the Future of Business

ANNUAL

CONSULTANTS SURVEY Those responding to the Consultants Survey express optimism about their clients’ plans for the year ahead while acknowledging their increased focus on costs and logistics going forward.

• What Should a CFO Know About Investment Opportunities in Latin America • Another Look at Rural Economies • Global Innovation Hubs: Markets Driving the Future of Business Find these articles and more @ www.areadevelopment.com

POSTMASTER: Send address changes to Area Development, Circulation Department, 30 Jericho Executive Plaza– Ste 400W Jericho, NY 11753. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2021 by Area Development® magazine. ISSN: 1048-6534. Printed in the U.S.A. Area Development® is a registered trademark of Halcyon Business Publications, Inc.

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EDITORS NOTE

Q1/2021

The Pandemic as a Catalyst for Change

www.areadevelopment.com

he rollout of the COVID-19 vaccine is allowing us to envision an end to this pandemic that has thus far cost half a million lives and wreaked havoc on the U.S. and global economies, with many businesses shuttered and millions of jobs lost. However, after a rough start to the year, some economists are now predicting that growth of U.S. GDP will return to its pre-pandemic level by the end of 2021 with pent-up consumer demand powering the surge. Nevertheless, the results of our 35th annual Corporate Survey reveal that our readers are proceeding with caution when it comes to plans for new and expanded facilities. Only 30 percent of the respondents (many of whom are with mid-size or small firms in terms of number of employees) have plans for new as well as expanded domestic facilities over the next two years, as two thirds transitioned to employees working remotely temporarily or permanently during the pandemic. The fact that many workers have been quarantining at home has also resulted in a very high ranking of the quality-of-life factor from the Corporate Survey respondents. And, as in years past, we also surveyed consultants to industry, most of whom work with large or very large firms in terms of employment numbers. The respondents to our 17th annual Consultants Survey are much more bullish about the economy, with nearly all saying their clients have new or expanded facility plans. Also reflected in the results of our surveys is the heightened focus on workforce diversity and inclusion plans as well as environmental sustainability. These are other issues that have been brought to the forefront by the global pandemic and social unrest that followed. Corporate leaders have become more cognizant of their societal responsibilities and realize that, by making society’s goals their corporate goals, they will gain competitive advantage in the global economy. Some pundits are venturing to compare the post-pandemic period ahead with the roaring 1920s, as the country recovered from another pandemic. Whatever the years ahead hold from an economic perspective remains to be seen, but the two post-pandemic periods can be compared as catalysts for change.

EDITORIAL Editor Geraldine Gambale editor@areadevelopment.com Staff and Contributing Editors Lisa Bastian Dave Claborn Mark Crawford Dan Emerson Tom Ewing

Tom Gresham Mark Schantz Steve Kaelble Karen Thuermer

DESIGN/PRODUCTION Art & Design Patricia Zedalis Production Manager Jessica Whitebook jessica@areadevelopment.com

EXECUTIVE Publisher Dennis J. Shea dshea@areadevelopment.com Sydney Russell, Publisher 1965-1986

ADVERTISING SALES William Bakewicz (ext. 202) billbake@areadevelopment.com

ONLINE SERVICES Digital Media Manager Justin Shea (ext. 220) jshea@areadevelopment.com Web Designer Carmela Emerson

CONFERENCES/EVENTS Business Development Manager Matthew Shea (ext. 231) mshea@areadevelopment.com

CIRCULATION circ@areadevelopment.com

FINANCE finance@areadevelopment.com

Editor

EXECUTIVE OFFICES Halcyon Business Publications, Inc. President Dennis J. Shea

2021 Editorial Advisory Board Josh Bays, Principal, Site Selection Group, LLC Marc Beauchamp, President and CEO, The CAI Global Group H. Robert Boehringer, III, Managing Director, Global Location and Expansion Services, KPMG Brian Corde, Managing Partner, Atlas Insight, LLC Les Cranmer, Senior Managing Director, Savills Kate Crowley, Principal, Baker Tilly Capital, LLC Dennis Cuneo, Partner, Fisher & Phillips LLP

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Amy Gerber, Executive Managing Director, Business Incentives Practice, Cushman & Wakefield

Bradley Migdal, Senior Managing Director, Business Incentives Practice, Cushman & Wakefield, Inc.

Stephen Gray, CEO, Gray

Paul Naumoff, Principal, National Director of Tax Credits and Investment Advisory Services, EY

Michael Kruklinski, Head of Real Estate, Siemens Energy and Siemens USA Scott Kupperman, Founder, Kupperman Location Solutions, LLC Dan Levine, Practice Leader, Location Strategies and Economic Development, Oxford Economics, Inc. Bill Luttrell, Director of Corporate Real Estate, Werner Enterprises, Inc.

Eric Stavriotis, Senior Vice President, Advisory & Transaction Services, CBRE Margy Sweeney, Founder & CEO, Akrete, Inc. Dan White, Director, Government Consulting and Fiscal Policy Research, Moody’s Analytics

Business/Finance Assistant Barbara Olsen (ext. 225) olsen@areadevelopment.com All correspondence to: Area Development Magazine 30 Jericho Executive Plaza– Ste 400W Jericho, NY 11753 Phone: 516.338.0900 Toll Free: 800.735.2732 Fax: 516.338.0100

Joshua Wright, Vice President, Economic & Workforce Development, Emsi

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IN FOCUS Construction Tech Adoption Speeds Up Despite the bleaker impacts of COVID-19, the pandemic has created the opportunity for construction technology adoption to dramatically accelerate.

BY HENRY D’ESPOSITO, SENIOR RESEARCH ANALYST, CONSTRUCTION, JLL Based out of JLL’s Washington, D.C., office, Henry D’Esposito leads construction research in the Americas with focus areas on construction technology and costs, and broader macroeconomic trends impacting the construction industry.

Faced with the urgent need to both enable remote work and safeguard job-site activity, U.S. construction firms significantly ramped up tech investments in 2020, condensing three years worth of adoption into a single year. According to JLL’s State of Construction Tech report,1 mature technologies — including digital collaboration platforms, virtual scanning tools, and safety-focused wearables — were forecast to see strong growth in 2020, thanks to proven value and low barriers to adoption. But once the pandemic struck, these tools proved more than nice-to-have — they’ve become a veritable

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lifeline for companies of all sizes to keep projects alive through this public health crisis. Indeed, the novel coronavirus pressed tech adoption onto most every industry, as officebased workers moved en masse to remote work environments. But for the construction sector in particular, time-tested tech tools have proven essential to keeping job sites open, while enabling social distancing.

work as well as on-site execution. Following are four ConTech categories that received a high boost in adoption directly owed to COVID-19: • Digital collaboration — Like all industries, construction firms leaned into cloud-based collaboration during the pandemic. These tools have not only helped firms keep office employees working from home during shutdowns, they’ve also enabled teams to keep in-person numbers down at job sites, keeping projects flowing while meeting social distancing needs.

TIME-TESTED TECH TOOLS HAVE PROVEN ESSENTIAL TO KEEPING JOB SITES OPEN, WHILE ENABLING SOCIAL DISTANCING.

How COVID-19 Fueled Adoption of Established Contech Categories In particular, the pandemic boosted adoption of mature tech tools that help facilitate remote

• Scanning — Tools like automated optical cameras and laser scans enable teams to collect building and site data at unprecedented rates. Whether they’re handheld, mounted on tripods, strapped to helmets, or mounted on robots, these solutions pair with analytics and visualization tools to allow users to conduct virtual walk-throughs and tours. This helps keep onsite numbers down, while supporting collaboration and also improving data quality and efficiency. • Safety/wearables — By harnessing the Inter-

net of Things-powered wearables that can be clipped on or embedded in hard hats, vests, and boots, construction teams help keep realtime track of employee and contractor health and safety. Amid the pandemic, these safety measures can also help social distancing and facilitate contact tracing. • BIM/CAD — As the foundation of all other types of construction technology, these modeling systems have only gained more traction in a post-COVID world by providing a single source of truth for construction technology. The overall picture is bright for construction technology investment. Still, tighter budgets and lower profit margins mean some technology categories have less certain futures. Working with fewer discretionary dollars, construction leaders may be cautious about investing in emerging technologies like robotics and 3D printing. Overall growth in construction tech may be tempered by a thinning out of startups working in nascent categories. Ultimately, however, established ConTech tools have moved firmly into the must-have category for firms working to sustain business through and beyond the pandemic. 1

https://www.us.jll.com/en/trends-and-insights/research/the-state-of-constructiontechnology

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3/1/21 11:37 AM

FRONT LINE Job Creation Through Reshoring

FDI Jobs 40 Percent in 2020

Reshored Jobs 45 Percent in 2020

Source: Reshoring Initiative BY DAN EMERSON

Back in the 1980s, the term “offshoring” became a business buzzword as more and more U.S. companies moved manufacturing to foreign countries, typically to save on labor costs. In recent years, “reshoring” has been added to the lexicon as companies decide to bring manufacturing back to the U.S., for various reasons. In 2020, reshoring created more U.S. jobs than foreign direct investment (FDI) for the first time in seven years, according to data collected by the Reshoring Initiative.1 In 2020, U.S. companies reshored nearly 69,000 manufacturing positions, while greenfield investment in the same industries created fewer than 42,000 jobs, according to the Initiative. Reshored jobs were up nearly 45 percent last year, with FDI jobs down 40 percent. The report is based on job announcements and

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annualized data from the first half of 2020. Reshoring Initiative founder and President Harry Moser said the Covid-19 pandemic ac-

Myriad Reasons for Reshoring A May/June 2020 Thomas For Industry survey of 750 North American manufacturing firms found 69 percent were “likely” or “extremely likely” to reshore overseas operations.2 Why do companies decide to reshore? According to the Reshoring Initiative, increasing wages in hosting countries are one of the reasons most frequently given. Other factors include (non-labor) cost reduction; improved product quality and consistency; protection of intellectual property; shorter supply chains; a more skilled

THE COVID-19 PANDEMIC ACCELERATED A RESHORING TREND THAT HAD ALREADY BEGUN. celerated a trend that had already begun, with the pandemic a motivating factor in 60 percent of cases since March 2020. Medical equipment reshoring cases in the first six months of 2020 were double the full-year 2019 figure. Longer-term, the most active industries in reshoring have been transportation equipment, machinery, electronic products, and appliances. Moser says China has lost the most reshored U.S. jobs (40 percent of cases) in the past decade. Mexico (23 percent) and Canada (10 percent) followed. Texas and the Midwest have attracted the most reshored jobs since 2010.

workforce; improved innovation; better responsiveness to customer needs; and total cost of ownership. One high-profile example of corporate reshoring is Stanley Black & Decker, which moved production of its Craftsman wrenches, ratchets, sockets, and more back to the United States from China. The company built a 425,000-square-foot facility in Fort Worth for that purpose. Smaller manufacturers are also part of the trend. Hardinge, a Berwyn, Pa.-based maker of CNC turning, milling, and grinding machines, has been doing some of its manufacturing in

Taiwan since the early 2000s, according to Global Marketing Director Allan Snider. Late last year, Hardinge decided to bring its manufacturing back to Elmira, N.Y. — where it has manufactured since the 1930s — for several reasons, including better supply chain management. Any advice for other manufacturers considering reshoring? “I can’t speak for other companies, but if reshoring allows them to better serve their customers, it is an option they should explore,” Snider told Area Development. To reshore more jobs, Moser says he would like to see the U.S., Canada, and Mexico collaborate more on trade matters: “The United States trade agreement with Mexico and Canada (USMCA) is a good start; it may bring back 50,000 manufacturing jobs, which is not a lot. We would like to see the U.S., Mexico, and Canada get together and agree to bring back two million manufacturing jobs from Asia.” The U.S. has a critical need for more qualified, trained workers to increase the country’s capacity to reshore, and needs to continue increasing productivity to be more price-competitive with comparatively low wages overseas, Moser adds. 1 2

https://reshorenow.org/ November-17-2020/ https://www.smeal.psu.edu/cscr/covid19-supply-chain-management-resources/documents/covid19-impact-on-northamerican-manufacturing-thomas.pdf

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FRONT LINE Reverse Logistics Opportunities, Challenges

BY KAREN E. THUERMER

The pandemic has accelerated the retail evolution, and people are shopping online more than ever. In fact, as reported by CBRE, the National Retail Federation forecasted that total online holiday sales would jump by 40 percent in 2020 to $234.9 billion, with up to $70.5 billion of those purchases being returned,1 thereby challenging retailers as a surge of products are pushed back into the supply chain — a process commonly known as reverse logistics. As these factors continue to grow, Kris Bjorson, international director of Industrial Brokerage and Retail/E-Commerce Distribution manager at JLL, told Area Development that demand for warehousing space will top one billion square feet. Melinda McLaughlin, vice president and global head of Research at Prologis pointed out to us that online order fulfillment requires more than three times the logistics space of brick-and-

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mortar sales because 100 percent of inventory is stored within a warehouse, versus on store shelves. “This translates into greater product variety, deeper inventory levels, and space-intensive parcel shipping operations,” she says. “Processing returns contributes to that ratio, as goods returned by a customer are not palletized and, therefore, take a lot of space — and this storage usually occurs inside a warehouse.” CBRE also estimated in its report that for the average return, reverse logistics costs amount to 59 percent of the original sales price of the item. “This is why you see some companies allowing consumers to keep the goods instead of returning them,” says McLaughlin. “Also, with logistics real estate in short supply, and demand for logistics talent at an all-time high, companies have found reverse logistics to be space- and labor-intensive as items are processed piece by piece.”

Optoro, a Washington, D.C.-based returns technology software provider, reports in the CBRE study that reverse logistics functions require an average of up to 20 percent more space and labor capacity compared to forward logistics. Consequently, reverse logistics is now a major driver for industrial real estate, says Matt Walaszek, associate director of Industrial & Logistics Research at CBRE and author of the report. He expects this demand to continue to grow: “More forward orders mean more inventory is coming back, increasing space demand especially during the holiday season.” JLL’s Bjorson estimates that as a result, probably 7.5 percent or 75 million square feet may have some application to reverse logistics. “We are noticing that depending on the path of the return, the policy and procedures implemented at the retail level don’t always translate to the industrial warehouse level,” he notes. “Another challenge is not having the technology advancements for shippers to enable early decisionmaking on returns.” E-commerce growth is already resulting in an additional 1.5 billion square feet of industrial space entering the marketplace over the next five years, CBRE projects. Walaszek expects that as upgrades are made to newly constructed buildings, those involved in

reverse logistics will have access to leasing more Class B space. “Typically, secondgeneration space is preferred over modern Class A facilities,” says Walaszek. “Lower ceiling heights are more appropriate since the activities within the space are high-touch with slower processing, and the varying size of the pallet loads makes them difficult to stack or safely store in high racks.” But finding such space varies from market to market. CBRE reports the Q4 2020 vacancy rate for the overall industrial market at 4.6 percent, with 3.9 percent for non-Class A buildings. This means locating desired space to accommodate reverse logistics activities will be extremely difficult to find, Walaszek says. Logic would suggest that lower-rent regions in the Central States would be prime for accommodating reverse logistics functions. “But reverse logistics is very seasonal. Holding that much dedicated space year-round doesn’t make sense unless the operators have dedicated their business to reverse logistics,” Walaszek explains. “Even liquidators, whose yearround reverse logistics activities have primarily been centrally located, are now considering bifurcating single site businesses into East/West regional sites.” 1 https://www.cbre.us/research-andreports/US-Industrial--Logistics-ViewPointReverse-Logistics-Stress-Test--2020

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FIRST PERSON TIM KNAVISH EXECUTIVE VICE PRESIDENT PPG

As the U.S. appears to still be grappling with the COVID-19 pandemic, how has the nation’s manufacturing sector been affected? Knavish: The coronavirus pandemic has impacted the coatings industry overall and PPG’s global businesses in many ways. At the onset of the pandemic, with almost all countries sheltering in place for an extended period of time, travel slowed and as a result dampened demand for some of our products, including aerospace, automotive refinish, and automotive OEMs. On the other hand, we’ve seen an increase in demand in some of our businesses, including architectural coatings. As much of the world continues to spend more time at home, homeowners have taken a closer look at their spaces, evaluating how they function and how they make them feel. Because of this, PPG has seen a surge in DIY home improvement projects, as homeowners use their excess time to tackle the projects that have long been on their to-do lists. PPG products also play an essential role in a wide range of important industries during this time. Our paints, coatings, and specialty materials help enable life-critical products for the healthcare, defense, food and beverage, hygiene, agriculture, energy, public works, and electronics industries, as well as many others.

What steps have industrial companies taken to meet the challenges of the coronavirus crisis in terms of workforce health and safety? Knavish: At the center of PPG’s purpose is a commitment to ‘protect and beautify the world.’ As we continue to navigate the COVID-19 pandemic, the word ‘protect’ has taken on even greater meaning, as we remain focused on protecting our people, customers, communities, and all of our stakeholders. PPG’s most important core value is protecting our people and their families, as well as our customers and communities. At the onset and throughout the pandemic, we implemented proven, safe operating processes according to guidance from the CDC, the WHO, and local governments, including the use of effective personal protective equipment, social distancing, and best-practice hygiene techniques that have been used around the world to keep our people safe.

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Why is a strong manufacturing sector important to a post-pandemic U.S. economic recovery? Knavish: The U.S. manufacturing sector has established itself as the backbone of economic stability and renewal amid times of crisis or downturn. In spite of business disruptions caused by the COVID-19 pandemic earlier in the year, the future for manufacturing is strong. According to the National Association of Manufacturers (NAM) fourth quarter 2020 outlook survey, 74 percent of manufacturer respondents are positive about their own company’s outlook (an 8 percent improvement over Q3), expecting sales, employment, production growth rate, wages, and more to increase at varying levels over the next year.1

In terms of supply chain challenges, can you discuss the need to address the nation’s infrastructure problems and possible solutions? Knavish: The pandemic placed a spotlight on infrastructure and its critical role to keep supplies moving to meet the needs of Americans across the nation, and we have reached a pivotal moment where we need to invest in and modernize our transportation and infrastructure systems. The current condition of U.S. infrastructure has not kept pace with the growing needs and demand. In fact, the American Society of Civil Engineers released a report card in 2017 of infrastructure in the U.S. and gave the nation a rating of D+.2 Without adequate investment, the U.S. is on track to lose 5.8 million jobs by 2040. Investment in a modern infrastructure system has proven ties to job creation

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3/4/21 1:03 PM

and economic stability, demonstrating its importance to both manufacturers and all Americans alike. In addition, modern infrastructure will be critical in order to accelerate the functionality and overall adoption of electric and autonomous vehicles — an area that is a high growth opportunity for PPG.

What steps should manufacturers take to keep their talent pipeline viable in terms of formal education, training initiatives, apprenticeships, etc.? Knavish: At PPG, we know that the manufacturing of tomorrow starts with the students and workforce of today. A study by Deloitte and The Manufacturing Institute found that manufacturers will need to hire 4.6 million workers by 2028, and that 2.4 million of those jobs could go unfilled if appropriate steps aren’t taken now to prepare more workers for the next generation of jobs.3 It is critical that the manufacturing industry supports and creates programs that help to increase and diversify the talent pipeline needed to sustain the evolving manufacturing landscape. To broaden the diversity of our talent pools, PPG recruits at events sponsored by organizations representing diverse candidates. In the U.S., for example, we take an active role in the National Society of Black Engineers (NSBE). We also provide PPG Foundation grant money to NSBE’s Summer Engineering Experience for Kids (SEEK) camp, and our interns volunteer at the camps for at least one day. PPG’s intern class in 2020 was 41 percent female and 37 percent racially and ethnically diverse.

Are workforce generational and diversity issues being adequately considered? Knavish: In 2020, as Black Lives Matter protests erupted, companies and individuals realized that to make real change, we all had to listen, learn, and seek to understand justice and equality in a more purposeful way. At our core, we are a company that believes in the basic values of human dignity, diversity, equity, and inclusion (DE&I). These are some of our most important values. We know that our differences make us stronger. One of PPG’s greatest strengths is the diversity of our people. We take a wide-ranging view of diversity, inclusive of gender, race, ethnicity, sexual orientation, disability/ability, religion, nationality, educational background, among other factors. Our employees’ unique perspectives enable us to meet challenges quickly, cre-

atively, and effectively, providing a significant competitive advantage in today’s global economy. In 2020, PPG strengthened its focus on DE&I across the company. We also relaunched and expanded our Employee Resource Networks, providing employees with more opportunities to participate and best leverage the unique skills, experiences, and perspectives of our team as we continue to build a more inclusive work environment. Across the globe, we have trained more than 1,800 managers over the past few years on unconscious biases.

How should governments respond with regard to tax and financial incentive considerations? Knavish: Permanent pro-growth provisions in the tax code and a competitive U.S. tax system are important for manufacturers like PPG. The NAM recently reported that two-thirds of its members would need to consider reducing investments in the U.S. if tax reform were rolled back.4 However, a commitment to tax reform ensures manufacturers have the opportunity to continue to pay forward the benefits.

Is there anything else you would like to add? Knavish: The paint industry has reached a pivotal moment where customers have become even more comfortable with — and oftentimes expect — an easy-tonavigate e-commerce experience and seamless pick-up and delivery options. COVID-19 has accelerated the need for these types of digitally-driven buying models, and we as manufacturers have a responsibility to continue to anticipate our customer needs in a post-COVID world. 1

https://www.nam.org/2020-4th-quarter-manufacturers-outlook-survey/ https://www.infrastructurereportcard.org https://www2.deloitte.com/us/en/pages/manufacturing/articles/future-of-manufacturingskills-gap-study.html 4 https://www.nam.org/wp-content/uploads/2020/01/NAM_CompetingToWin_Tax.pdf 2

THE ASSIGNMENT Area Development’s editor recently asked PPG’s Tim Knavish — who is responsible for the architectural coatings business in USCA, EMEA, and Asia Pacific regions, the global automotive refinish business, the Latin America region, and the digital and information technology functions — about his company’s response to COVID and important operating concerns.

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3/1/21 11:42 AM

CONSTRUCTION/FACILITY PLANNING

Strategies for Accelerating Project Execution Pandemic-related project delays have prompted manufacturers to investigate alternative project-delivery approaches to make up for lost time. By Brandon Darroch, Southeast Division Manager and Senior Associate; and Brian Arend, Senior Associate; SSOE

Courtesy of SSOE

ore than 75 percent of the companies responding to a recent survey from the National Association of Manufacturers (NAM)1 expect the COVID-19 pandemic will have a financial impact on their business, with more than 50 percent anticipating changes to their operations. Prior to the pandemic many manufacturing companies had design and construction projects, either in progress or in the pipeline, with aggressive schedules. To slow the spread of the disease, many manufacturing operations and construction sites were shut down while new safety precautions were developed and implemented. Furthermore, uncertainty in the market caused many companies to delay committing large capital investments into expanding their operations. Over the summer, the manufacturing industry has

Involving an A/E that can produce fabrication level designs in-house can significantly reduce the construction schedule.

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slowly begun its return to pre-pandemic production levels. As this occurs, companies have done little to relax pre-COVID targets for newly constructed facilities, as projected production dates are a key driver for the majority of manufacturers, especially for advanced technology markets like electric vehicles where speed to market is such an important factor. This has resulted in compressed design and construction schedules and a need for the architecture/engineering/construction (A/E/C) industry to offer unique ways to accelerate project delivery. Following are insights into strategies, solutions, and key considerations which can be implemented to accelerate project execution and help companies get back on track.

Consider Alternative Project Delivery Methods Historically, many manufacturing leaders have preferred the traditional design/bid/build model. This delivery method takes a linear, step-by-consecutive-step approach, first bringing an A/E on board to design a complete package of construction documents. Once design is complete, project execution goes on hold as the construction documents are bid out to contractors. This bid process can take a considerable amount of time, dependent on the level of detail an owner puts into reviewing, evaluating, and eventually awarding a contractor. Although this process has the least amount of risk to the owner, its step-by-step approach makes it the longest in terms of schedule duration. Instead, consider a design/build approach where the A/E and the contractor are simultaneously brought on board at the beginning of a project. Not only does this delivery method facilitate a more expedited constructability review process, it can substantially compress the overall project schedule by omitting the bid delay between the design and construction phases. for free site information, visit us online at www.areadevelopment.com

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“It is

INFRASTRUCTURE

important to understand the impact of schedule compression strategies on the overall project lifecycle.

”

An alternative project delivery method, similar to the design/ build approach, is EPCM (engineering, procurement, construction, management). This “single source” approach, where a sole firm acts as designer, contractor, and owner of all vendor contracts, has been used extensively throughout the oil, gas, and petrochemical industries where projects are inherently complex and require extensive coordination. In a situation where it is imperative to meet an aggressive production date, an EPCM approach may prove beneficial, as having all project vendors leveraging their expertise under a single contract can reduce construction change orders and result in significant schedule reductions. One of the more progressive delivery methods from a procurement perspective is integrated project delivery (IPD). In this approach, the owner, design firm, and contractor are all bound by a joint agreement and, if well executed, all parties share the financial incentives of a project being completed ahead of schedule and below budget. Although this delivery method may come with an owner’s perceived loss of control, this extremely collaborative delivery method has resulted in projects completed with drastically reduced schedule and cost. Similar to design/build and

GEORGIA MOVES AT THE SPEED OF BUSINESS World-class transportation systems – airport, sea port, trucking, and rail – provide Georgia companies unparalleled access to domestic and global markets.

Georgia.org/ProBusiness

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Courtesy of SSOE

engineering details to be refined without impacting the overall construction schedule. By breaking the project up into smaller packages that are released sequentially and in alignment with the construction schedule, stakeholders can achieve the benefits of an accelerated schedule, while maintaining owner-required competitive procurement protocols. This does require a more robust level of construction manEarly collaboration between owner, A/E, and contractor can agement staff and may have a significant impact on reducing construction costs and compressing project schedules. necessitate additional Implement “Pull resources for manufacturAhead” Approach ers that do not have a U.S.-based facilities team. Each of the above alternative project delivery methods requires the owner to relinquish some portion of control over to the design/construction team in order to Determine Level of Design Detail accelerate the schedule. However, some manufacturing Under a traditional design/bid/build approach, conorganizations have very stringent procurement protostruction documents and 3D models are developed to cols that do not allow this perceived loss of control over a sufficient level of detail to support the contractor bid the competitive bid process. process. Once a contractor is awarded, select trades If that is the case, projects can be broken into must further develop the design to a fabrication level smaller, defined scopes of work based on critical path of detail based on the design intent provided within the activities. These “pull ahead” packages can enable an construction documents. owner requiring the design/bid/build delivery method For example, many engineering firms will produce to start construction activities before the bulk of design steel design drawings that require shop drawings, and is complete, allowing for the project to be completed at a subsequent lengthy shop drawing approval process a more accelerated pace than the traditional design/ (e.g., exact dimensions and details of bolt hole locabid/build approach. tions) before the steel can be ordered and fabricated. For example, take a greenfield manufacturing facilThis step inherently comes with over-production and ity. By designing and awarding an early civil/sitework extra processing — both of which are forms of waste as package, construction can begin while the structural defined by Lean methodology. steel and foundation design development is under Owners are encouraged to investigate the 3D modelway. As soon as key mechanical and/or electrical ing capabilities of potential A/E’s before selecting a equipment requirements are known, a long-lead equipdesign team, as some firms have the ability to design ment package can be released for pre-purchase. The to the fabrication level of detail, potentially avoiding the building shell can then be designed and bid, typically waste of redundant design effort. Involving an A/E that followed by the mechanical, electrical, and plumbing can produce fabrication-level designs in-house shortens (MEP) package to be released last. This process allows the schedule by eliminating this added step, and on construction to start early and gives more time for the large-scale manufacturing projects, this approach can EPCM, IPD invites key subcontractors to be part of the design process. This allows owner requirements and design intent to be communicated early to trades who can, in turn, provide constructability feedback in real time during the planning phase when its impact is most beneficial. This early collaboration between owner, A/E, and contractor can have a significant impact on reducing construction costs and compressing project schedules.

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PRO-BUSINESS ENVIRONMENT significantly reduce the construction schedule by enabling steel to be ordered months sooner than traditional methods.

Understand Impact of Schedule Compression Strategies It is important to understand the impact of schedule compression strategies on the overall project lifecycle, and keep in mind that design hours and construction hours do not always translate directly as a one-to-one time savings. An emphasis in decisive planning during the design process can translate into substantial construction time and cost savings. Just like swimming one mile can provide an equivalent workout and calorie burn as seven miles running, a one-day increase in the planning/design phase might result in a 15-day savings to the construction schedule based on the increase in coordination it can provide. Spending additional time up front during the planning and design phases can result in substantial time and money savings during construction execution. Owners should ensure those responsible for making schedule compression decisions consider recommendations from both the design and construction industry experts.

Remember Design and Construction Is a People Process Often in the design and construction of manufacturing projects there is a huge emphasis on technical qualifications of the design and construction team.

Predominantly less of a focus is placed on the “soft skills” that are necessary at the leadership levels of the project team, and it is the soft skills/personalities of leaders that drive the success of the team. When conducting project interviews — especially for the design/ construction of a complex, fasttracked manufacturing project that requires extensive collaboration to meet an aggressive schedule — consider whether team members have the right “chemistry” to work collaboratively. Many organizations underestimate the positive impact team compatibility can have on project execution or, just as important, how the lack of this chemistry can negatively impact it.

Accelerating Project Execution After COVID Delay Many manufacturing organizations continue to utilize the same project delivery method over and over because of familiarity and comfort with the status quo. Pandemic-related project delays, however, have prompted manufacturers to investigate alternative approaches to make up for lost time. If implemented effectively, these alternative delivery methods can help manufacturers not only make up for pandemic-related delays and meet critical start-of-production dates, but also enhance their competitiveness by ensuring their product’s speed to market, while potentially achieving some cost savings along the way.

COMMITTED TO YOUR BUSINESS Pro-business policies, a responsive government, and a partnership approach to business makes Georgia the state for companies to relocate, grow, and thrive.

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https://www.nam.org/coronasurvey/

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INTERNATIONAL INVESTMENT REPORT

t’s one of the top tourist destinations in the world, and with good reason. The scenery in the Caribbean is stunning, the cultures inviting and diverse, the location convenient but with a refreshing outof-the-way feel. How do the warm and sunny nations and territories of the Caribbean fare as locations for business operations beyond tourism? Some of the opportunities are obvious; some may be surprising. The benefits for ocean-centric businesses, including those tied to resources and commodity exports, almost go without saying. But there are also great opportunities in services, from financial operations to call centers, as well as the digital and creative sectors and advanced manufacturing. Similarly, there are some challenges that come immediately to mind for most observers, but advantages that may be less apparent to outsiders. Natural disasters from hurricanes to earthquakes make global headlines and thus won’t surprise anyone as they tally up the challenges. But some observers may overlook various bright points, from advanced digital infrastructure in some jurisdictions to diverse workforce capabilities in others.

Companies involved in the knowledge sector, software, and financial and business services are showing interest in locating in Puerto Rico.

CARIBBEAN: BUSINESS LOCATIONS IN SUNNY PLACES SOPHISTICATED TECHNOLOGY AND INFRASTRUCTURE ATTRIBUTES, FRIENDLY WAGE RATES, MULTILINGUAL SKILLED LABOR, AND SOMETIMES SURPRISING REAL ESTATE DEALS MAKE THE CARIBBEAN ISLANDS AN ATTRACTIVE OPTION FOR INVESTMENT. BY STEVE KAELBLE

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A Wide Range of Industries Consider a recent summation from the financial analysis website Investopedia.1 “The Caribbean region consists of small island economies that are major players in a wide range of global industries,” the analysis points out. Trinidad and Tobago, for example, has grown by way of oil and gas export revenues, and Jamaica sends the world not just tasty rum but lots of bauxite, valuable

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for production of aluminum and various other products. “The Dominican Republic and the Cayman Islands are well-known offshore tax havens of choice for multinational corporations and billion-dollar financial service companies,” Investopedia adds. The World Bank2 describes the Caribbean as “a diverse region with significant economic potential and growth opportunities…Many small economies, including those that are tourism-dependent, were maintaining a positive growth rate prior to the onset of the COVID-19 pandemic.” The United Nations’ Economic Commission for Latin America and the Caribbean also keeps watch over the Caribbean economy, and its most recent overview3 also found generally positive growth rates (again, before the pandemic rewrote the story all over the world). In particular, economies of those Caribbean nations that are part of the Eastern Caribbean Currency Union had a positive growth rate of 4.1 percent in 2019, even as there was a bit of a decline overall in the growth rates of the region’s service-producing economies. Goodsproducing economies in the region were seeing slow but positive growth in 2019.

Opportunities for Renewal Needless to say, the coronavirus pandemic threw a major wrench into the picture in 2020, but that is certainly not a challenge unique to the Caribbean. For the record, the World Bank last year was forecasting eco-

Puerto Rico: A “Muscle Memory” to Meet Any Challenge

S ANYONE WHO HAS BEEN AROUND through 2020

and the first part of 2021 knows, disaster can strike anywhere. And while no one volunteers to be part of a severe weather event or a pandemic, the one silver lining of such terrible occurrences is how they can teach ingenuity and build resilience. That’s certainly the case in Puerto Rico, according to Rodrick Miller, CEO of Invest Puerto Rico. The island has seen its share of tragedy, such as the devastating Hurricane Maria in 2017, a series of earthquakes, and financial crises. Through these challenges, Miller says, “There is a muscle memory of response. There is no market that is immune to risk, but Puerto Rico has a muscle memory that allows us to respond to disasters.” To that strengthened resolve and ingenuity, add in the fact that the island is a U.S. territory. “We are part of the United States but also part of the Caribbean and Latin America. That is a unique picture,” Miller says, with the benefits of U.S. connections ranging from intellectual property protection to billions of dollars’ worth of federal funds now being pumped into the infrastructure. No wonder Puerto Rico has a strong manufacturing economy, led by pharmaceutical companies and medical device-makers. Lots of big pharma names operate there, and newer biotech additions include CytoImmune Therapeutics and Biosimilar Solutions, which among other things are developing cancer therapies and COVID-19 vaccines, respectively.1 Add in an ever-growing location interest from companies involved in the knowledge sector, software, and financial and business services. The bottom line, Miller says, is Puerto Rico knows how to reinvent a better picture after getting through challenges. “If people think they know Puerto Rico, I’d advise them to look at Puerto Rico again. The last three to five years have put us on a different path and an exciting path.” 1

https://www.areadevelopment.com/newsitems/2-4-2021/cytoimmune-therapeuticsbiosimilar-solutions-puerto-rico.shtml

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Caribbean: Business Locations in Sunny Places – Continued from page 19

U.S. Virgin Islands: American Advantages with a Caribbean Address

he U.S. Virgin Islands combines the benefits of a Caribbean location with the advantages of U.S. connections. It’s an unincorporated U.S. territory, which means American currency, courts, and protections. And products made in the USVI can be labeled “Made in the USA.” Locating here comes with shipping advantages, duty-free imports, plus exports into the U.S. that are duty- and quota-free. There’s no state or territory tax, either. In fact, companies that qualify for the Economic Development Commission’s tax program can see their corporate and personal income tax dwindle by 90 percent, and there’s a 100 percent exemption on excise taxes, property taxes, and gross receipts tax. The local workforce has plenty of experience in both industrial work and services. That includes advanced manufacturing, rum distilling, and energy, along with financial/professional services, call center and back office operations, knowledge industries, and e-commerce. And of course, being in the Caribbean, there are plenty of opportunities in tourism and hotel development, as well as marine businesses. That said, USVI has all of the workforce-development options that you’d expect on the American mainland. The labor department’s One Stop Centers provide wide-ranging training and skills-upgrade options, along with recruitment and screening services and lots of consultation on labor markets and laws. Infrastructure is highly advanced as well, including two international airports, numerous ports, and shipping options that connect with major routes and the Panama Canal. Broadband connections are speedy, thanks to the public corporation known as Virgin Islands Next Generation Network, which makes sophisticated and affordable fiber connections available all over.

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nomic contraction of just under 2 percent in 2020, with tourism-dependent economies taking a hit from the slowdown in travel and the global economic struggle. Aside from that wild card that affects just about everyone around the world, “Caribbean countries are extremely vulnerable to climate change and natural disasters,” according to the World Bank. “Extreme weather events are common — the region experienced three Category 5 hurricanes between 2017 and 2019.” For example, according to the U.N.’s Economic Commission for Latin America and the Caribbean,4 Hurricane Dorian in 2019 affected most of the population of the Bahaman islands of Abaco and Grand Bahama, with an economic price tag of $3.4 billion that’s more than a quarter of the nation’s GDP. But fixating on such challenges would create a misleading and unfair picture of the region’s economic development prospects. Indeed — as proven by the pandemic and resulting economic downturn, along with weather catastrophes in the mainland U.S. and elsewhere — negative events can come into the picture anywhere. What’s more important is, how do the locals respond to challenges, and do the various upsides outweigh the fears of potential downsides? Check the sidebar to this article focused on Puerto Rico for thoughts related to that first question. Disasters are a challenge, to be sure, but they also build character, strengthen ingenuity, and in some cases open the door to unexpected opportunities for renewal. As a U.S. territory, Puerto Rico gains access to relief funds that are helping

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the island not just recover from past natural disasters but wind up in a better place in everything from the electrical grid to educational facilities. Other resources also provide opportunities for improvement, too. The World Bank, for example, points to an electrical distribution system modernization project that will rehab more than a thousand kilometers of distribution networks in the Dominican Republic.

THERE ARE GREAT OPPORTUNITIES IN SERVICES, FROM FINANCIAL OPERATIONS TO CALL CENTERS, AS WELL AS THE DIGITAL AND CREATIVE SECTORS AND ADVANCED MANUFACTURING.

Driving Positive Outcomes And the other upsides of Caribbean business locations are more numerous than many people understand. Jamaica, for example, has a strong investment climate that drives positive outcomes in a number of focus sectors, including energy, global digital services, manufacturing, mining, agribusiness, film and, of course, tourism. The Bahamas strives to supplement its tourist economy with investments in a variety of sectors, including banking/

insurance, IT/data processing, light manufacturing, pharmaceuticals, offshore medical services, and ship repair. Or consider Barbados, which encourages investment in everything from financial services to informatics and e-commerce, which supplement tourism and light manufacturing, among other sectors. Take manufacturing as an example. Jamaica is seen as a prime choice for near-shore facilities, aided by location, infrastructure, trade agreements that open market doors, generous business incentives, and an experienced English-speaking labor pool. Digital services is another opportunity that is an eye-opener for some. In Jamaica, for example, the sector drives more than 30,000 jobs, enabled by solid IT infrastructure, skilled labor, and laws that safeguard data. That last point — regulatory safeguards that coexist with business Continued on page 27

Why invest in the Turks & Caicos Islands? Easy Access Extensive direct air routes, from the Caribbean, UK and major US and Canadian cities.

Exceptional Weather 40 beautiful islands with 350 average days of sunshine, world-class beaches and great outdoor activities under the Caribbean sun.

Available Real Estate Prime undeveloped land available across 40 small islands and cays.

Pro-Business Investment Climate Government support at all levels, including the provision of investment incentives in priority sectors. n

Attractive Incentives Temporary and Permanent Residence status available to qualified investors. No direct corporate, personal, capital gains or inheritance taxes. No exchange controls.

Strong Economy Sovereign Credit Rating of BBB+, an estimated annual growth rate of 2.5% and the US$ as our national currency. n

Courtyard Plaza #2D, Leeward Highway, Providenciales, Turks & Caicos Islands Telephone: #1-649-338-4770 info@investturksandcaicos.tc www.investturksandcaicos.tc

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COVER STORY

WHAT’S DRIVING RECORD INDUSTRIAL REAL ESTATE

DEMAND T

HE GLOBAL PANDEMIC ACCELERATED the growth of e-commerce as lockdowns and safety concerns prompted an increasing number of consumers worldwide to shop online. As a result, several years of online sales growth were condensed into 2020 alone, causing industrial leasing to surge globally as logistics became essential for retailers. Changes in population densities, shifting consumer expectations, and increasing transportation costs all played a role in this rise in industrial property demand. But it’s the need for speed that will shatter industrial CRE pricing.

2020 – A BANNER YEAR FOR INDUSTRIAL

By JASON TOLLIVER,

Throughout Asia Pacific, strong leasing and tight market conditions translated into double-digit increases in rental rates. Tenant demand was also strong across

Global Head of Retail, Logistics & Industrial Research, Cushman & Wakefield

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Europe with impressive year-over-year gains in leasing activity in both Eastern Europe (+28 percent) and Western Europe (+10 percent). Meanwhile, activity in the Americas reached a new all-time high with more than 680 million square feet (msf) of new leasing. The U.S. industrial market finished the year remarkably strong with 90 msf of net occupancy growth, the strongest single quarter on record. More than half of U.S. markets recorded year-over-year leasing gains, with Southern California’s Inland Empire, Phoenix, Las Vegas, and Salt Lake City posting the strongest occupancy growth in the West, while the Pennsylvania I-81 and I-78 distribution corridor, Philadelphia, and New Jersey were the strongest markets in the East. In fact, 2020 was a recordbreaking year for the Pennsylvania corridor — with overall net occupancy growth of 23.5 msf, 40 percent more than the market’s previous record and two times the preceding three-year average. In the South, Atlanta, Dallas, and Houston bustled with activity (collectively growing by more than 60 msf), while Chicago, Indianapolis, Kansas City, St. Louis, and Cincinnati sat atop the leaderboard in the Midwest.

FOLLOW THE PEOPLE Changes in population densities have always been an important driver for commercial real estate demand, perhaps even more so in an online world where orders are individually picked, packed, and shipped to a doorstep. As millennials age, they are increasingly moving to more suburban locations where a lower cost of living makes it easier to purchase a home. Looking ahead, some of the metros expected to see the strongest domestic net migration gains over the next decade include Phoenix, Dallas, Miami, Houston, Las Vegas, Atlanta, Orlando, Tampa, Austin, and Seattle. The projected inflow of people to these cities will support demand for industrial real estate within them, and within the markets that support the delivery of goods with distribution hubs. In the years ahead, e-commerce leasing activity and development will be concentrated on regional distribution centers that allow retailers to position inventory much closer to end-consumers, on return centers that help manage reverse logistics costs and recirculate returned inventory faster, and on

A BOOM IN E-COMMERCE AND SHIFTING POPULATION DENSITIES AS WELL INCREASING TRANSPORTATION COSTS ARE MAKING INDUSTRIAL REAL ESTATE A “CAN’T MISS.”

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urban locations that allow for rapid order fulfillment.

THE LAST LINK IS THE COSTLIEST Last mile, final touch, and last link are just a few of the many terms used to refer to the final part of an ecommerce supply chain. The last link is the costliest part of the supply chain — often accounting for more than half of total supply chain costs — which explains why it will remain a key focus for occupiers. Attempting to control delivery costs while simultaneously ensuring speed and predictability is a tall task. The last link is also one of the most important steps in delivery, as it is the point of contact with consumers whose expectations on service, flexibility, reliable delivery times, and speed are rising in tandem with the surge in online shopping. Compounding the challenge for retailers to rise to consumer expectations are higher transportation costs caused by increasing driver wages, fuel costs, and the number of vans needed for daily deliveries. Partial van loading, inefficient delivery routes, and separate returns trips are also contributing factors. A general rule of thumb for last link facilities is to be within a 30-minute drive to a major city center and as close as possible to the first delivery point. Not every city, however, will require an urban-sited warehouse in the future. Deliveries in smaller cities and towns can often be effectively served from regional fulfillment centers where storing, picking, sorting, and shipping take place under one roof. Whether or not a last link is necessary must be determined on an individual market and property basis, but the growing number of retailers that must rely on proximity to consumers will shatter the logistics land price ceiling.

THE NEED FOR SPEED WILL SHATTER PRICING In the case of the last link, inefficiencies and costs converge around transportation, especially in dense urban areas. Although real estate is a small part of overall supply chain costs (typically 3–5 percent), it can make a big impact on controlling costs elsewhere. The trade-off of spending more on real estate

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costs through multiple warehouses or distribution centers can be an effective way to reduce transport distances, thereby reducing transportation costs. Investors and developers are primed to deliver more logistics space but are often challenged by a lack of rent pricing comparables to adequately underwrite the purchase of an expensive industrial-zoned site close to cities. At the same time, demand from retailers and 3PLs for just such locations is increasing. Eventually, more developers and investors will accept the risk to speculatively purTHE U.S. INDUSTRIAL chase these sites MARKET FINISHED at prices that, THE YEAR until now, were only affordable REMARKABLY for developers STRONG WITH of other asset 90 MSF OF NET classes. Strong OCCUPANCY rental growth GROWTH, THE potential for last link depots puts STRONGEST logistics in the SINGLE QUARTER same revenue ON RECORD. ballpark as traditional urban land uses. In fact, it is likely we are now at the beginning of that wave and news of record logistics land prices and rents will become a regular occurrence.

WHAT’S ON THE HORIZON FOR INDUSTRIAL CRE? According to Cushman & Wakefield’s North American Industrial Forecast,1 industrial asking rents are expected to reach a new nominal high of USD $6.97 per square foot by year-end 2022, and the growth will be broad-based across many markets in all regions. For the eighth consecutive year, net absorption in the U.S. will exceed 200 msf in 2021; we anticipate this streak will extend through 2022, further illustrating that industrial real estate is about as close to a “can’t miss” as it gets in the years ahead. n 1

https://www.cushmanwakefield.com/en/united-states/insights/ northamerican-industrialoutlook

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Caribbean: Business Locations in Sunny Places – Continued from page 23

friendliness — is an important consideration, one for which there are positive answers not just in Jamaica but numerous Caribbean destinations. Those with past or ongoing ties to major Western nations are among those ensuring that they deliver the right levels of regulatory security to companies that make an investment. Puerto Rico, for example, offers intellectual property protections that stem from its U.S. ties. Turks and Caicos has British historical ties that are still reflected in its safeguards for those in financial services. The U.S. Virgin Islands as a territory has tax benefits that make doing business there in many ways like operating within America’s states. Barbados prides itself on a well-developed legal system with roots in English Common Law. Saint Lucia promotes, among other things, strong protections for intellectual property and patents. The bottom line is, as with most places in the world, it’s well worth digging deep to get beyond the most obvious Caribbean attributes. For some, 300-plus days of sunshine and year-round warmth is plenty of reason to give Caribbean destinations high quality-of-life marks. For others, headlines of hurricanes provide enough concern to steer clear. The real story is in the middle ground of less obvious details. That’s where the picture emerges of locations with sophisticated technology and infrastructure attributes, friendly wage rates, multilingual skilled labor, and sometimes surprising real estate deals. The culture and landscape may feel like a world apart, but the actual distance in miles can be comfortably close to markets and home offices. n 1

https://www.investopedia.com/articles/investing/011916/ profits-paradise-top-4-economies-caribbean.asp https://www.worldbank.org/en/country/caribbean/overview 3 https://www.cepal.org/en/publications/45729-preliminaryoverview-economies-caribbean-2019-2020 4 https://www.miamiherald.com/news/nation-world/world/ americas/article237435814.html

The Turks and Caicos Islands: Sophisticated and Business-Friendly

N SOME WAYS, this small chain of islands is a separate

world unto itself, but its strong cultural and business ties to both the United States and United Kingdom are quite apparent, too. It’s an easy 90-minute flight out of Miami, with an economy tied to the U.S. dollar. And it’s a British Overseas Territory; its citizens are British citizens; the educational system is based on the British model; and the judicial system is based on English Common Law. Given its breathtaking natural beauty, it’s hardly surprising that tourism is a prime industry and major investment opportunity, with more than a million annual visitor arrivals. Adventure tourism is a big deal, thanks to a wealth of great dive sites, and ecotourism is quite the draw, too. Marina and lodging development are seen as promising sectors, and so is a completely different draw for visitors: medical tourism. An exceptional medical system combines with the lovely location, creating an enticing place to get cosmetic surgery or a new hip or knee, and then recuperate on the beach. Turks and Caicos is also an offshore financial center, one that is seen as safe and secure for international banking, corporate and offshore investing. That’s because its regulatory system fits snugly into the standards and practices of its bigger partners across the Western business world. Turks and Caicos is fully compliant with the International Monetary Fund, the Organization for Economic Cooperation and Development, and Financial Action Task Force standards. The territory is committed to the Foreign Account Tax Compliance Act as well as early adoption of the Common Reporting Standard. The business-friendly government is eager to encourage light manufacturing, especially businesses that serve the tourism and hospitality sectors. The government has also identified such things as agri-industries, food processing, and fish farming and processing as priority sectors.

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REGIONAL REPORT

Southeast Ports Expand Capacity Southeastern U.S. ports are pursuing aggressive infrastructure expansion projects to accommodate larger vessels and more cargo. By Tom Gresham

rowth is the key word at ports throughout the Southeast U.S. as they invest billions of dollars in ambitious infrastructure projects designed to accommodate larger ships, more cargo, and accelerating economic development activity. An ambitious approach to capital developments is necessary for ports in the region to keep up with growing volumes and the increasing capacity of the container ships that the ports need to attract to their terminals. For ports, that means always looking to the future and planning for what comes next. “The size of the container ships that are out there crossing the oceans have grown a lot faster than you can redo terminal infrastructure, so you can’t just say, ‘What do we need today?’” says Russell Held, vice president of Economic Development for the Port of Virginia. “You’ve got to always be looking ahead to what we need 10 or 15 or 20 or more years from now and build toward that.” According to the Journal of Commerce,1 ports in the Southeast will invest more than $850 million in 2021 alone in infrastructure projects designed to help terminals handle multiple vessels of 14,000 TEUs (20-foot equivalent units) and higher simultaneously. For example, Ports America Chesapeake, the operator of the Port of Baltimore, is investing more than $166 million in upgrades that will allow for the loading and unloading of two large container ships at once. Here are how some other key ports in the Southeast are expanding to boost economic development in their regions:

$2 Billion Investment in SC Ports Two hugely impactful projects will be introduced this year in Charleston by South Carolina Ports that will bring more freight through the Southeast. Liz Crumley, communications manager for the South Carolina Ports Authority, says SC Ports is investing more than $2 billion overall in infrastructure to handle larger ships and more cargo. In March, the Hugh K. Leatherman Terminal in Charleston will become the first container terminal to open in the United States since 2009. The terminal at full buildout will double the port’s existing capacity. In addition, the Charleston Harbor Deepening Project will lead to a 52-foot depth in 2021, en-

In 2020 the Port of Savannah added three new ship-to-shore cranes at its Garden City Terminal, giving it a total of 34, and the capacity to serve 15,000-plus TEU vessels more efficiently.

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“INNOVATION STARTS WITH PEOPLE.”

ROBERT LEE,

CEO AND

CO-FOUNDER OF DR AGOS

When your mission is to protect the nation’s industrial infrastructure from cyber attacks, you need smart, passionate people behind you. Tapping into Maryland’s cybersecurity talent pool gives Dragos the edge it needs to complete its mission.

Hear Dragos’ story, and learn how Maryland supports innovation at open.maryland.gov/innovation Innovation lives here.

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Lisa Wolf-Chason, director abling mega container ships of port communications at to access port terminals no Port Tampa Bay, says the port matter the time or tide and recently completed 25 acres giving the port the deepest of additional paved storage channel in the Southeast Roughly $800 million is being invested in the Port to bring its total container for the time being. Widened of Virginia’s two primary container terminals — Virginia International Gateway and Norfolk terminal footprint to 67 acres turning basis as part of the International Terminals (shown here). — and the port has plans to deepening project will allow add another 30 acres. In additwo cargo ships to comforttion, the port will add a third ably pass each other and turn berth, which will mean three large ships can be worked near the Wando Welch Terminal, which is also seeing on at the same time at the port; a new container gate a series of enhancements designed to handle large complex; and two additional gantry cranes. Port Tampa ships efficiently. Bay now has full on-dock intermodal capability with the Crumley says the projects provide crucial value to SC addition of 17,000 linear feet of rail adjacent to the conPorts’ global competitiveness: “SC Ports’ investments tainer terminal, and construction is about to begin on a will equip the Port of Charleston with some of the tallnew on-dock rail-served trans-load warehouse. est ship-to-shore cranes on the East Coast and impresWolf-Chason says Port Tampa Bay is Florida’s largest sive big-ship capabilities…The opening of the Hugh K. cargo tonnage port, handling 33 million tons of cargo Leatherman Terminal and densification of the Wando per year. The port is also a major shipbuilding and repair Welch Terminal will provide capacity and efficiency for center and cruise home port. customers.” Through its sheer size, Port Tampa Bay is equipped SC Ports’ infrastructure investments will enable SC for expansion. The port has more than 1,000 acres of Ports to handle four 14,000-TEU vessels simultaneindustrially zoned land adjacent to deep water with ously. SC Ports will also be able to handle a 19,000highway and rail access. Approximately 300 acres curTEU vessel, something few other U.S. ports can acrently are available for expansion of existing facilities complish. Meanwhile, SC Ports is expanding Inland and new manufacturing, warehousing and distribution Port Greer, one of two inland ports with overnight rail projects. service with the Port of Charleston to handle growing “These expansion projects are critical to our ability cargo volumes. to keep pace and continue to efficiently serve the TamAccording to Crumley, the economic development pa/Orlando I-4 Corridor, Florida’s distribution hub,” benefits of SC Ports’ newest infrastructure improveWolf-Chason says. “This region is home to the largest ments are evident: “Companies planning to invest milconcentration of distribution centers in the state, with lions of dollars in a new manufacturing facility or retail close to 400 million square feet of space and is one of distribution center need the confidence that their prodthe hottest industrial real estate markets in the counucts will quickly arrive at their destinations…SC Ports try, with another 10 million square feet currently under offers well-run terminals, ensuring goods will be effidevelopment.” ciently moved between global markets and the booming Southeast consumer base.”

Tampa Bay Adds to Container Terminal Footprint Port Tampa Bay has been busy. The port saw 33 percent growth in its container business in 2020. Port Tampa Bay’s newest facility developments are positioning it for future growth both at the port and in the region.

AREA DEVELOPMENT

SoutheastPorts .indd 30

Georgia Ports Boosting Regional Economy

In 2020 the Port of Savannah added three new ship-to-shore cranes, giving it a total of 34. With the new cranes, the port’s Garden City Terminal can serve 15,000-plus TEU vessels more efficiently, says Robert Morris, chief communications officer for the Georgia Ports Authority, bringing faster vessel turn times and more scheduling flexibility. for free site information, visit us online at www.areadevelopment.com

3/1/21 11:50 AM

developments include investments outside the gate to In addition, the Georgia Ports Authority has opened improve truck throughput at the Richmond Marine TerPhase I of its Mason Mega Rail Terminal. The project minal and doubling capacity at the Virginia Inland Port will increase the rail lift capacity at the Port of Savanin Front Royal, where an intersection of interstate and nah to two million TEUs per year. Another key intermorailroad serves as a key jumping off and collection point dal project, the Appalachian Regional Port, an inland for cargo in the state. intermodal yard in Northwest Georgia, opened in 2018 Economic Development VP Held to serve nearby portions of Georgia, Alabama, and says renovation and expansion Tennessee. work throughout the Port of Morris says the latest infrastructure develVirginia includes modernopments represent an important boost to ization of equipment the regional economy. Savannah is the You’ve got to and automation of most westerly major port on the East always be looking terminal activity and Coast, giving it an edge for speed to gate functions to market with shorter overland routes ahead to what we need ensure fluid cargo to major inland destinations. 10 or 15 or 20 or more movements. In According to Morris, “Added cayears from now and build total, projects will pacity and more efficient handling toward that, allow the port to act as a draw for additional cargo. process an addiEach container moved via the Port says Russell Held, tional one million of Savannah means jobs and investcontainers annually. ment beyond our gates. Port activVice President, As a result, “through ity in Georgia supports nearly half a Economic Development, record volumes million full- and part-time jobs across Port of Virginia. month after month, the state and more than $120 billion in we’re seeing no effect as commerce annually.” far as congestion on the The developments are attracting busiterminals,” Held says. “Benesses. General Electric has located its $32 cause of the investments we made, million Southern Logistics Center in Murray County, we’re seeing that cargo fluidity, and that just two miles from the Appalachian Regional Port, and gets the attention of the shippers and the cargo owners Huali Floors is establishing its first U.S. headquarters that are looking for a fluid place to do business.”. and manufacturing facility in that area. Held also notes that partners in the region play a vital role in accommodating larger cargo volumes and ecoVirginia To Have Deepest East Coast Harbor nomic development projects, such as by increasing rail From 2014 to 2024, the Port of Virginia will have and interstate capacity and preparing shovel-ready sites invested nearly $1.5 billion in improvements designed for new business locations. to handle more cargo and larger ships. That includes “It’s all of these pieces together,” Held explains. “It’s roughly $800 million in its two primary container terterminal infrastructure, it’s outside the gates, it’s in the minals — Virginia International Gateway and Norfolk water with the expansion of the channels, it’s road, it’s International Terminals. Among the most eye-catching rail — all the planets are aligning right now.” projects is the dredging at Norfolk Harbor that will deepFor the Port of Virginia and other ports throughout en the channel to 59-plus feet, allowing it to surpass the Southeast, growth is showing no signs of slowing Charleston as the deepest harbor on the East Coast. and the demand to keep up with it — and with their When the dredging is complete in 2024, the harbor will peers — only appears likely to intensify. n be able to accommodate two ultra-large container vessels at the same time. 1 https://www.joc.com/port-news/us-ports/outlook-2021-us-southeastIn addition to waterside developments, landside ports-prioritizing-projects-handle-more-mega-vessels_20210126.html

“

AREA DEVELOPMENT | Q1 2021

SoutheastPorts .indd 31

3/1/21 11:50 AM

ANNUAL

CORPORATE SURVEY

As expected, the COVID-19 pandemic has affected our corporate readers’ location plans and priorities as they increased their resiliency efforts. by GERALDINE GAMBALE, Editor

he challenges faced in 2020 were unlike any

After falling by 1.4 million jobs in March/April 2020

other confronted in our lifetime. The global

during the beginning of the pandemic, manufacturing

pandemic wreaked havoc on our personal

gained back more than 800,000 jobs through the end of

and professional lives and the U.S. and

2020.4 Nonetheless, in light of the COVID-19 pandemic,

global economies.

manufacturers have had to adjust their production lines to increase worker safety and also deal with disrupted

The Commerce Department reports that U.S. GDP declined 3.5 percent in 2020, with the economy falling

global supply chains — measures that have generally increased their operating and production costs.

into recession in February 2020 — a month before the World Health Organization declared Covid-19 a pan-

As Area Development prepared to survey its corpo-

demic. The 3.5 percent decline is the worst year for

rate executive readers this winter, we wondered what

the U.S. economy since at least the end of World War

effect the pandemic had on their facilities in 2020 and

II, as reported by CNBC.1

what effect it would have on their location plans and priorities over the next two years. The results of this

As the novel coronavirus caused businesses to shut down, the U.S. unemployment rate rose from a low of 3.5 percent in February of 2020 to 14.8 percent in April of last year.2 However, as of January 2021, it had declined to 6.3 percent with more than 10 million

survey follow.

Profile of the Corporate Survey Respondents Nearly half (45 percent) of those responding to our

people still out of work. It should be noted that jobs

35th Annual Corporate Survey are with manufacturing

in the services sector, e.g., leisure and hospitality, suf-

firms and 60 percent are the owners/presidents/CEOs,

fered more than those in the goods-producing sector

with the same percentage responsible for their com-

during the pandemic-induced downturn. It is believed

panies’ final location decisions.

that the recession that began last year will be the first on record during which services employment fell faster than goods employment.3

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Corp.SurveyQ1.2021.indd 32

Of the responding firms, more than 40 percent of the respondents operate just one domestic facility and only

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

3/2/21 4:38 PM

Current operations of respondents: Manufacturing— Durable Goods

Primary role in company’s location decisions:

Manufacturing— Non-Durable Goods

15 percent operate foreign facilities. However, of those that do operate foreign facilities, nearly three quarters operate five or more. And

Manufacturing — Other

16%

Distribution/Logistics/Warehousing

12%

Data Processing, Software & Other Computer-Related Services

Finance, Insurance, Real Estate

Energy Industry

Healthcare/Life Sciences

Hospitality Industry

Construction & Trades

11%

Other

19%

0 5 10 15 20 25

our Corporate Survey respondents are primarily with small to mid-size

Interestingly, only 9 percent decreased their number of facilities in 2020, with 14 percent actually increasing their number of facilities — fewer than the 22 percent of the pre-pandemic respondents who said they had increased their number of facilities. In fact, three quarters of this year’s Corporate

Information gathering 11%

Final decision 60%

Preliminary recommendation 20%

Number of facilities currently operating worldwide: DOMESTIC: Five or more 15% Four 9% Three 10%

One 43%

Respondents’ titles:

firms: 74 percent employ fewer than 500 people all told.

Not involved 9%

25%

Real Estate Mgr./Dir.; Facility Mgr./Dir.; Development Mgr./Dir.; V.P. Real Estate 6%

Two 23%

Business Unit Manager or Director 7% Other 11%

V.P., Secretary, or Other Corporate Officer 13% CFO, Controller, Financial Officer 4%

FOREIGN (of the 15% who operate foreign facilities): One 7% Five or more 73%

Chairman, President, Partner, CEO, or Owner 60%

Two 13% Three 0% Four 7%

Survey respondents say they are not changing their real estate strategies as a result of the COVID-19

respondents have temporarily tran-

processes in response to COVID-19.

pandemic. Of those that are, about

sitioned to their employees working

In fact, a Thomas Industrial Survey5

a quarter will close or reduce opera-

remotely during the pandemic, with

conducted in April 2020 found that

tions, and 16 percent will geograph-

just 13 percent saying they’ll do

one in four U.S. manufacturers are

ically diversify operations.

this permanently. About half have

considering expanding industrial

also instituted more automated

automation as a result of COVID-19.

Half of the Corporate Survey

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Corp.SurveyQ1.2021.indd 33

3/2/21 4:39 PM

Number of people employed worldwide (all facilities): 1,000 or more 21%

Fewer than 20 26%

500-999 5%

20-49 9%

Have transitioned to an increase in the number of employees working remotely: No transition 36%

50-99 14%

100-499 25%

Change in the number of facilities during the past 12 months:

Temporarily 51%

Permanently 13%

Corporate Respondents’ New Facility Plans

Increased number of facilities by 4 or more Increased number of facilities by 3 or fewer

Number of facilities not changed

78%

Decreased number of facilities by 3 or fewer

Decreased number of facilities by 4 or more

Have instituted more automated processes in response to COVID-19:

As expected, the challenges faced by businesses during the pandemic are reflected in our

No 51%

Yes 49%

35th annual Corporate Survey respondents’ plans to open new facilities. Just slightly more than a quarter of the respondents have

0 10 20 30 40 50 60 70 80

new facility plans, as compared to Corporate real estate strategy has changed as a result of COVID-19: Yes 24%

nearly half who had new facility Plan to open a new (not relocate an existing) facility within the next two years:

No 76%

Yes 27%

plans in the previous year’s prepandemic survey. And whereas 87 percent of them were planning new domestic facilities when surveyed in 2019, it’s not surprising that now only 30 percent of our Corporate

No 73%

Survey respondents have plans for new domestic facilities.

If yes, company will be:

Other 26%

Closing operations 5% Reducing operations 18%

Of those with such plans, most Plan to open new domestic facilities within two years:

of the new domestic facilities will be built in the Mid-South and South (14 percent each of the total)

Yes 30%

and Southwest (15 percent). Twelve percent of the new domestic facili-

Expanding operations 34%

Geographically diversifying operations 16%

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Corp.SurveyQ1.2021.indd 34

No 70%

ties are slated for the Midwest. The West and Mountain regions will each garner 10 percent of the total. Manufacturing and warehouse/

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3/2/21 4:39 PM

ANNUAL

Pandemic Affects the Ranking of Location Factors

CORPORATE SURVEY

distribution facilities represent a

considering such zones in the prior

Factors like logistics, shipping costs, IT, and quality of life made strong gains in a business environment defined by the need to offer customers safe options for buying goods and for companies to design increasingly efficient distribution models.

quarter each of the planned new

year’s survey.

James Blair, Managing Director, Navigator Consulting

domestic facilities. And it’s interesting that about 40 percent of those

Plans for new foreign facilities

with plans said they are considering

are down even more significantly

locations in Opportunity Zones,

than those for new domestic facili-

double the percentage who were

ties. Nearly all (92 percent) of this

To read all of the analyses of the Corporate Survey in their entirety, go to www.areadevelopment.com/ corporate-survey

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AREA DEVELOPMENT | Q1 2021

Corp.SurveyQ1.2021.indd 35

3/2/21 4:40 PM

th Location of new domestic facilities (as a percentage of total number to be opened): New England (CT, MA, ME, NH, RI, VT)

Middle Atlantic (DE, MD, NJ, NY, PA)

South Atlantic (NC, SC, VA, WV)

If company is planning new domestic facilities, it is considering locating in a newly created Opportunity Zone:

Yes 41% No 59%

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

14%

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

14%

dents say they have no such plans.

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

12%

The last time our corporate read-

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

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

10%

Southwest (AZ, NM, OK, TX)

15%

West (CA, NV, OR, WA)

10%

Offshore (AK, HI, PR, VI)

0 3 6

year’s Corporate Survey respon-

Plan to open new foreign facilities within two years:

ers responded to this question, fully one third had plans for new foreign facilities.

Yes 8% No 92%

Of those few with current foreign facilities plans, a quarter are planned for Western Europe, slightly more than a fifth each for

9 12 15

Mexico and Asia, and 17 percent for Canada. A quarter of these Types of new domestic facilities to be opened (as a percentage of total number to be opened): Manufacturing Warehouse/ Distribution

25% 27%

Headquarters

Data Center

Back Office/Call Center

Shared Services

13%

R&D

Other

0 5 10 15 20 25 30

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

17%

Mexico

22%

Caribbean Central America

0% 0%

South America

Western Europe

26%

Eastern Europe

Middle East

Africa

Australia Asia

0% 22%

0 5 10 15 20 25 30

foreign facilities will house manufacturing operations, while 16 percent represent distribution/ warehouse facilities.

Corporate Respondents’ Relocation and Expansion Plans Relocation and expansion plans are also down significantly from the previous year’s pre-pandemic Corporate Survey. Only 18 percent of those responding to our 35th annual Corporate Survey say they plan to relocate an existing facility (down from 23 percent the previ-

AREA DEVELOPMENT

Corp.SurveyQ1.2021.indd 36

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

3/2/21 4:40 PM

ANNUAL

CORPORATE SURVEY Putting the Effects of a Turbulent Year into Perspective No surprise that availability of skilled labor remains high on the list of factors — it’s top of mind for nearly every project; the challenge is how best to measure it. While data answers part of the question, this factor is becoming increasingly difficult to assess in a “work from anywhere” environment.

ous year). Of those, 100 percent

H. Robert Boehringer, III, Managing Director, Global Location and Expansion Services, KPMG LLP

say they will relocate a U.S. facility to another domestic location. None have plans for off-shoring, near-shoring, or reshoring. In comparison, of those responding to the year prior survey, 5 percent had reshoring plans and 4 percent had off- or near-shoring plans. The respondents to our 35th annual Corporate Survey are also curbing their facility expansion

Types of new foreign facilities to be opened (as a percentage of total number to be opened): Manufacturing

25%

Warehouse/ Distribution

16%

Headquarters

Data Center

have plans to expand a domestic

R&D

facility, and only 7 percent plan

Other

25%

to expand a foreign facility. In

Relocate a U.S. facility to another domestic location 100%

Relocate a domestic facility to off/nearshore 0%

11%

Back Office/Call Center Shared Services

plans — just 30 percent say they

If yes, plan to:

5 10 15 20 25

Relocate a foreign facility closer to the U.S. (nearshoring) 0%

Relocate a foreign facility back to the U.S. (reshoring) 0%

comparison, nearly all of those responding a year ago to the prepandemic survey had domestic expansion plans, and 20 percent had

Plan to relocate an existing facility within two years:

foreign facility expansion plans.

To read all of the analyses of the Corporate Survey in their entirety, go to www.areadevelopment.com/ corporate-survey

Plan to expand a domestic facility’s footprint within two years:

Yes 18%

No 82%

No 70%

Yes 30%

AREA DEVELOPMENT | Q1 2021

Corp.SurveyQ1.2021.indd 37

3/2/21 4:41 PM

Location of expanded domestic facilities (as a percentage of total number to be expanded): 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)

gions of the U.S. are slated for many of the domestic expansions planned by the Corporate Survey respondents, with 15 percent go-

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

15%

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

18%

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

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

10%

Southwest (AZ, NM, OK, TX)

Once again, the southern re-

10%

13%

West (CA, NV, OR, WA)

Offshore (AK, HI, PR, VI)

ing to the South and 13 percent to

Plan to expand a foreign facility’s footprint within two years:

the Southwest, but the most will be garnered by the Midwest (18 percent). A third of these expan-

Yes 7%

sions will occur at manufacturing

No 93%

facilities and about 40 percent at warehouse/distribution centers. As stated, just 7 percent of our

0 5 10 15 20

Corporate Survey respondents

Manufacturing Warehouse/ Distribution

32% 41%

Headquarters

Data Center

Back Office/Call Center

R&D

Other

0 10 20 30 40 50

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Corp.SurveyQ1.2021.indd 38

facility, with 29 percent of these expansions occurring in Western

Canada

14%

Mexico

21%

Caribbean Central America

0% 0%

South America

Western Europe

29%

Eastern Europe

Middle East

Africa

Australia

Shared Services

have plans to expand a foreign

Location of expanded foreign facilities (as a percentage of total number to be expanded):

Types of domestic facilities to be expanded (as a percentage of total number to be expanded):

Asia

Europe, 21 percent in Mexico, and 14 percent each in Canada and Asia. More than a quarter of the planned foreign expansions will house manufacturing operations, 22 percent will be at warehouse/ distribution facilities, and nearly a fifth at back office/call centers.

Corporate Respondents’ Location Priorities

14%

As in past years, we asked 0 5 10 15 20 25 30

our survey-takers to rate the site

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3/9/21 2:45 PM

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th CORPORATE SURVEY* Site Selection Factors

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

Labor Availability of skilled labor 55.7 35.7 7.1 1.4 Availability of unskilled labor 17.7 35.3 27.9 19.1 Training programs/ 26.5 36.8 23.5 13.2 technical colleges Labor costs 47.1 37.1 12.9 2.9 Low union profile 47.1 22.9 15.7 14.3 Right-to-work state 52.1 19.7 12.7 15.5 Transportation/Telecommunications Highway accessibility 52.1 36.6 5.6 5.6 Railroad service 10.1 14.5 20.3 55.1 Accessibility to major airport 17.4 30.4 23.2 29.0 Waterway or oceanport 11.6 13.0 23.2 52.2 accessibility Inbound/outbound 44.9 31.9 7.3 15.9 shipping costs Availability of advanced 7.7 29.2 26.2 36.9 ICT services Finance Availability of long-term 31.9 27.5 21.7 18.8 financing Corporate tax rate 52.9 27.1 11.4 8.6 Tax exemptions 44.3 34.3 12.9 8.6 State and local incentives 42.9 34.3 14.3 8.6 Other Available buildings 25.0 45.6 17.7 11.8 Available land 27.3 37.9 19.7 15.2 Occupancy or 43.3 37.3 9.0 10.5 construction costs Expedited or “fast-track” 29.4 32.4 26.5 11.8 permitting Raw materials availability 21.2 37.9 16.7 24.2 Water availability 17.7 32.4 22.1 27.9 Energy availability and costs 39.7 45.6 10.3 4.4 Environmental regulations 31.3 40.3 19.4 9.0 Proximity to major markets 29.9 41.8 20.9 7.5 Proximity to suppliers 20.9 43.3 22.4 13.4 Proximity to innovation/ 7.5 22.4 46.3 23.9 commercialization/ R&D centers Quality-of-life factors 33.3 51.5 10.6 4.6 * All figures are percentages and are rounded to the nearest tenth of a percent.

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Corp.SurveyQ1.2021.indd 40

Types of foreign facilities to be expanded (as a percentage of total number to be expanded): Manufacturing

28%

Warehouse/ Distribution

22%

Headquarters

Data Center

Back Office/Call Center

17% 5%

Shared Services R&D

11%

Other

0 5 10 15 20 25 30

selection factors as “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 to the location decision. Over the 35-year course of this survey, availability of skilled labor and highway accessibility have ranked as the two most important

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3/2/21 4:42 PM

ANNUAL

CORPORATE SURVEY

factors with rare exception. This year, availability of skilled labor ranks first — considered “very important” or “important” by 91.4 percent of the Corporate Survey respondents. Despite an increase in remote working during the pandemic, basing the location decision on where the available skilled workers can be found is still paramount. Remember that half of the respondents to our survey say they are only temporarily shifting to remote work, with more than a third making no such transition at all. The respondents to our 35th annual Corporate Survey rank

COMBINED RATINGS* CORPORATE SURVEY Site Selection Factors

2020 2019

Ranking 1. Availability of skilled labor 91.4 2. Highway accessibility 88.7 3. Energy availability and costs 85.3 4. Quality-of-life 84.8 5. Labor costs 84.2 6. Occupancy or construction costs 80.6 7. Corporate tax rate 80.0 8. Tax exemptions 78.6 9. State and local incentives 77.2 10. Inbound/outbound shipping costs 76.8 11. Right-to-work state 71.8 12. Proximity to major markets 71.7 13. Environmental regulations 71.6 14. Available buildings 70.6 15. Low union profile 70.0 16. Available land 65.2 17. Proximity to suppliers 64.2 18. Training programs/technical schools 63.3 19. Expedited or “fast-track” permitting 61.8 20. Availability of long-term financing 59.4 21. Raw materials availability 59.1 22. Availability of unskilled labor 53.0 23. Water availability 50.1 24. Accessibility to major airport 47.8 25. Availability of advanced ICT services 36.9 26. Proximity to innovation 29.9 commercialization/R&D centers 27T. Railroad service 24.6 27T. Waterway or oceanport accessibility 24.6

92.3 (2)* * 92.4 (1) 79.5 (7) 82.2 (4) 87.1 (3) 80.3 (5) 79.7 (6) 75.0 (8) 70.2 (14) 69.8 (15) 72.0 (11) 72.6 (10) 73.0 (9) 71.3 (12) 62.7 (18) 64.4 (17) 68.1 (16) 60.3 (19) 70.7 (13) 59.5 (20) 56.1 (22) 59.0 (21) 45.2 (24) 50.6 (23) 26.7 (26) 35.7 (25) 25.3 (27) 20.3 (28)

highway accessibility second with a combined importance rating of 88.7 percent. The ranking confirms this factor’s consistent importance

* 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.

* * 2019 ranking

in the location decision when it comes to moving supplies in and products out, as well as providing easy access to the facility for a company’s employees. Energy availability and costs is ranked third this year (up from

Change in Location Plans Over the Short Term The pandemic has not changed the corporate real estate strategy of many companies to go forward with domestic and international investments, but it has slowed it down. For example, travel restrictions still limit the possibility of foreign companies to visit possible sites in the U.S. Nevertheless, several new projects have started including FDI ones. Alexandra Segers, General Manager, Tochi Advisors

AREA DEVELOPMENT | Q1 2021

Corp.SurveyQ1.2021.indd 41

3/2/21 4:43 PM

th Importance of a shovel-ready/ pre-certified site: Very important 10%

Corporate diversity and inclusion strategy a consideration when assessing new locations:

Of no importance 25%

More important than other factors 21%

No. 7 the prior year), considered

Yes 45%

“very important” of “important”

No 55%

Of equal importance to other factors 44%

by more than 85 percent of the Corporate Survey respondents. With the new focus on the use

Importance of sustainability efforts to your company: Of no importance 7% Of equal importance to other factors 51%

Very important 28%

Consider whether there are businesses performing similar activities in the area of search:

of renewable energy to reduce greenhouse gas emissions and the decreasing costs of generation through renewables, one

No 34%

Yes 66%

would think industry would not have increased concern about energy availability and costs. However, a recent Forbes article explains the paradox between

More important than other factors 13%

Type(s) of incentives considered most important when making a location decision: Cash grants

35%

Worker training incentives

42%

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

58%

Corp.SurveyQ1.2021.indd 42

Yes 80%

72%

0 10 20 30 40 50 60 70 80

AREA DEVELOPMENT

No 20%

35%

Tax incentives (tax credits, exemptions, etc.) Other financial incentives (bonds, loans, etc.)

Consider a location’s history of weather/hazards (flooding, tornadoes, earthquakes, etc.) in the location decision:

To read all of the analyses of the Corporate Survey in their entirety, go to www.areadevelopment.com/ corporate-survey

Rapidly Evolving Real Estate Environment Manufacturing and warehousing has expanded and is predicted to continue to expand in the coming years to add buffers to inventories ensuring uninterrupted production and supply chains and U.S. control over key pharmaceutical production. Where these facilities land is typically driven primarily by logistics costs and labor availability. Ann Marie Collins, Executive Vice President, Savills

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3/2/21 4:44 PM

ANNUAL

CORPORATE SURVEY 35-YEAR COMPARISON OF SITE SELECTION FACTORS Corporate Survey 2020

2020 2015 2010 2005 2000 1995 1990 1986

cheaper generation and rising transmission costs. Power generation “only accounts for 44 percent of the total cost…The other main costs affected by renewables integration are transmission and distribution of electricity to its point of use, reliability costs to maintain stable voltage and frequency, maintenance needed to keep the system running, depreciation, and taxes.”6 Ranked No. 4 by the Corporate Survey respondents as in the prior year’s survey is quality of life, with an 84.8 combined importance rating. This site selection factor has taken on increased importance over the last 10 years. Now, with more workers able and willing to work remotely, perhaps quality of life is even more important, as for some job functions workers can work from wherever they choose to live.

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

91.4 92.9 53.0 47.8 63.3 68.7 84.2 80.8 70.0 66.3 71.8 67.7

85.9 45.4 56.7 91.0 75.4 67.9

87.2 87.7 87.9 87.1 84.8 50.6 65.5 64.9 73.6 54.4 59.6 57.2 58.6 49.6 50.9 87.9 91.6 94.2 92.1 96.6 77.0 79.7 82.8 78.7 79.0 69.7 72.9 77.8 71.3 N/A

Transportation/Telecommunications Highway accessibility 88.7 88.0 97.3 91.4 95.9 93.6 92.3 91.3 Railroad service 24.6 32.4 36.0 28.9 29.8 29.7 32.2 25.8 Accessibility to major airport 47.8 58.6 50.0 50.0 53.2 59.5 55.5 61.0 Waterway or ocean port 24.6 24.0 21.9 20.2 21.0 20.0 16.2 15.3 accessibility Inbound/outbound shipping costs 76.8 64.6 84.0 N/A N/A N/A N/A N/A Availability of N/A N/A N/A 79.8 77.1 80.2 76.7 N/A telecommunications services Availability of advanced 36.9 53.6 72.9 85.7 N/A N/A N/A N/A ICT services Finance Availability of long-term financing 59.4 67.7 Corporate tax rate 80.0 78.8 Tax exemptions 78.6 74.7 State and local incentives 77.2 75.8

58.5 86.3 90.9 89.3

56.5 58.4 65.5 75.4 55.2 85.0 84.7 N/A N/A N/A 83.6 81.6 86.4 85.8 77.9 86.0 83.6 87.8 88.7 79.6

Other Available buildings 70.6 83.7 81.0 N/A N/A N/A N/A N/A Cost of land N/A N/A N/A 79.1 75.8 83.2 84.0 N/A Available land 65.2 73.9 73.4 75.0 75.5 83.7 82.3 N/A Occupancy or construction costs 80.6 85.4 89.8 83.7 83.0 90.2 88.5 N/A Expedited or fast-track permitting 61.8 74.2 68.2 N/A N/A N/A N/A N/A Raw materials availability 59.1 52.6 61.5 62.3 56.1 64.9 64.1 49.1 Energy availability and costs 85.3 75.3 82.1 82.8 77.7 89.6 88.1 N/A Environmental regulations 71.6 69.8 74.8 71.1 80.9 86.5 82.9 N/A Proximity to major markets 71.7 76.3 66.4 83.2 76.8 74.5 74.9 84.8 Proximity to suppliers 64.2 64.3 63.6 66.7 63.8 66.5 65.1 N/A Water availability 50.1 54.6 N/A N/A N/A N/A N/A N/A Quality of life ** 84.8 87.6 62.1 54.7 58.8 70.4 70.6 60.4

In fact, many economic developers are offering incentives for the creation of remote jobs in their states and communities no matter where the company’s physical facility is located.7 And with more individuals

(N/A) Data not available due to changes and additions to the survey * A ll figures are percentages and are the total of “very important” and “important” ratings of the Area Development Corporate Survey. ** Quality-of-life rating for earlier 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).

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Corp.SurveyQ1.2021.indd 43

3/2/21 4:45 PM

working remotely permanently or

The COVID-19 pandemic has

factor in the No. 5 position. Inter-

temporarily during the pandemic,

also increased companies’ focus

estingly, both labor costs and low

it’s no surprise that the factor show-

on costs as many are struggling fi-

union profile (No. 15) are rated as

ing the largest percentage increase

nancially. Consequently, more than

“very important” by nearly half of

— 10.2 percentage points — in the

84 percent of the respondents to

the survey respondents, with the

combined “very important” and

our 35th annual Corporate Survey

latter factor increasing 7.3 per-

“important” ratings is availability of

rate labor costs as “very impor-

centage points in the combined

advanced ICT services.

tant” or “important,” placing the

importance ratings. And right-towork (No. 11) is considered “very important” by more than half of

State and Local Incentives Still in the Offing

the survey respondents. Having a non-union facility is also seen as a

State and local taxes and incentives continue to be top 10 criteria for decision-makers. While recent declines in state and local tax revenue collections resulting from the global pandemic have impacted many public-sector budgets, economic development authorities continue to seek meaningful engagement with the business community and offer financial support.

way to keep costs down.

Steve Tozier, US-East Region, Credits & Incentives Leader, Indirect Tax; Ernst & Young, LLP

or construction costs in the No.

Other cost-related factors follow in the rankings. Occupancy 6 position and corporate tax rate as No. 7, both rated as “very important” or “important” by more

Realignment of Supply Chains and Automation Mitigate Risks

than 80 percent of the Corporate Survey respondents. And it’s logi-

The United States will continue to see a new age of industrial expansion as companies realign their supply chains. This helps mitigate risk and reduces cost by locating closer to their end markets. It also results in higher levels of automation, which make users more sensitive to energy reliability and rates. Monty Turner, SVP Location Strategy, Colliers Site Selection

cal that those measures sought to offset costs — i.e., tax exemptions and state and local incentives — follow in eighth and ninth place, considered “very important” or “important” by more than three quarters of the respondents to

To read all of the analyses of the Corporate Survey in their entirety, go to www.areadevelopment.com/corporate-survey

AREA DEVELOPMENT

Corp.SurveyQ1.2021.indd 44

our 35th annual Corporate Survey. As companies seek more ways to

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

3/2/21 4:45 PM

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keep costs in check, state and lo-

Quality of Life Rising in Priority For our clients in the tech industry, “quality of life” and “quality of place” are rising up in the hierarchy of factors we’re evaluating as part of a location strategy. While they’re not as highly weighted as talent availability and cost, they are seen as an indicator of whether the new location will be a match with the company’s existing corporate culture and values. Chris Volney, Senior Director, Labor Analytics, CBRE

Use outside consultants when site selecting:

Yes 29% No 71%

cal incentives actually moved up

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The factor showing the larg-

to No. 9 from a No. 14 ranking the

est percentage decrease in the

prior year.

combined importance ratings is expedited or “fast-track” permit-

Rounding out the top 10 site se-

ting. It dropped from the No. 13

lection factors is inbound/outbound

spot to No. 19, decreasing by 8.9

shipping costs, moving up five plac-

percentage points in the com-

es in the rankings this year and also

bined importance ratings and is

considered “very important” or “im-

now considered “very important”

portant” by more than three quar-

or “important” by only slightly

ters of the survey respondents. With

more than 60 percent of the re-

supply-chain and logistical concerns

spondents to our Corporate Sur-

increasing in importance during the

vey. The fact that so many projects

pandemic, it’s no surprise that this

have been put on hold because of

factor has become more important

the global pandemic, and fewer are planned right now by our Corporate Survey respondents, is

Services consultants are providing:

likely responsible for this factor’s current decrease in importance.

Feasibility Studies

42%

Global Asset Positioning

21%

question, more than 40 percent of

Location Studies/ Comparative Analyses

84%

the survey respondents say a shov-

Incentives Negotiations/Management 58%

To read all of the analyses of the Corporate Survey in their entirety, go to www.areadevelopment.com/ corporate-survey

than some others.

Location Decision

47%

Real Estate Transaction

58%

0 20 40 60 80 100

However, in response to a related

el-ready or pre-certified site is of equal importance to other factors in their location decision. We also asked our Corporate Survey-takers about some other

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

3/2/21 4:46 PM

ANNUAL

CORPORATE SURVEY A New Perspective on Real Estate Footprints

factors they consider when making location as well as operational decisions. Nearly half (45 percent) say they consider corporate diversity and inclusion strategies when assessing new locations, which is not surprising considering the racial inequities highlighted during 2020 and demands for more inclusive workplaces. Also, half of the respondents say sustainability efforts are of equal importance

The pandemic has also amplified the need for companies to evaluate existing and new markets from fresh perspectives…In the years ahead, we believe many business leaders will continue to have fluid discussions about their footprints and start to consider new factors as they make location decisions, specifically as they relate to population size and density, population growth and momentum, public transit dependence, housing costs and foreclosure risks, fiscal impacts, university pipeline, major airport access, and climate.

Staying Afloat During the Crisis but Dark Times Ahead? Numerous challenges brought by the pandemic did not equally affect all industries and their investment projects, [yet] in the short term, the need for many corporations to re-adjust from the effects of the past 12 months may take precedence to new facility and expansion plans.

Eric Stavriotis, Executive Vice President, Advisory & Transaction Services, CBRE

Marc Beauchamp, President & CEO, CAI Global

to other factors — a further confirmation that corporate leaders are aware of their larger societal commerce, realigning supply chains,

operate going forward, and it will

and successfully employing digital

be interesting to see how these

technology for remote workforces,

changes will be reflected by our

they have managed to weather

next annual Corporate Survey of

leaders are starting to be more

2020’s economic turbulence. And

our readers.••¬

optimistic.

the J.P. Morgan survey also confirms

responsibilities.

Corporate Outlook for 2021 As we move into 2021, business

that they have an increased focus According to J.P. Morgan’s 2021

on “causes that matter to their com-

Business Leaders Outlook,8 leaders

munities, employees, and other key

of midsize U.S. businesses are voic-

stakeholders.”

ing optimism about growth in 2021 even as they plan for continued

The changes companies made

economic unpredictability. Through

during 2020 will undoubtedly have

technology adoption, embracing e-

a lasting effect on the way they

https://www.cnbc.com/2021/01/28/fourth-quarter-gdpincreased-4point0percent-vs-4point3percent-estimate. html 2 https://tradingeconomics.com/united-states/ unemployment-rate 3 https://www.bloomberg.com/opinion/articles/2021-01-13/ it-s-still-a-service-economy-even-in-a-pandemic 4 https://www.bls.gov/ces/publications/highlights/2020/ current-employment-statistics-highlights-12-2020.pdf 5 https://www.thomasnet.com/insights/manufacturerresponse-to-covid-19-disruptions-increased-interestin-automation-reshoring/ 6 https://www.forbes.com/sites/brianmurray1/2019/06/17/ the-paradox-of-declining-renewable-costs-and-risingelectricity-prices/?sh=75adf0dc61d5 7 https://www.areadevelopment.com/workplace-trends/ Q4-2020/expanded-incentives-support-growth-in-remotework.shtml 8 https://www.jpmorgan.com/commercial-banking/ insights/2021-business-leaders-outlook

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ANNUAL

th CONSULTANTS SURVEY Those responding to the Consultants Survey express optimism about their clients’ plans for the year ahead while acknowledging their increased focus on costs and logistics going forward. by GERALDINE GAMBALE, Editor

Profile of the Consultants Survey Respondents

tives negotiation/management. Half are involved in

t least 80 percent of those responding

their clients’ real estate transaction and 82 percent

to our 17th annual Consultants Survey

claim to make the location decision for their clients,

work with manufacturers of durable

although about 70 percent say their clients have al-

goods, with some of these consultants

ready gathered preliminary data and narrowed down

also working with other manufacturers, and three

the geographic area in which they wish to location

quarters are working on distribution/logistics proj-

before asking the consultants to perform a location

ects. Nearly half represent clients in data processing/

search.

computer-related sectors as well as finance/insurance/real estate.

Although only a quarter of our Corporate Survey respondents say they changed their corporate real

About 70 percent of the respondents work with

estate strategy in response to the COVID-19 pan-

companies that are large in terms of their employ-

demic, 80 percent of the respondents to the 17th an-

ment numbers, i.e., 500 employees or more. Since

nual Consultants Survey claim their clients have done

74 percent of those responding to our 35th annual

so. Some 70 percent say their clients are geographi-

Corporate Survey represent firms with fewer than 500

cally diversifying operations, while more than half

employees — and only 29 percent claim to use con-

claim some of their clients are reducing operations

sultants when site selecting — we would expect the

while others are expanding operations.

consultants’ reporting of their clients’ location plans and priorities to differ greatly from those reported by

Additionally, three quarters of the responding con-

the Corporate Survey respondents. Let’s see if this

sultants say their clients are temporarily transitioning

holds true.

to remote work, while 42 percent say their clients are permanently transitioning to remote work. Only 13

More than 90 percent of those responding to our

percent of those responding to the Corporate Sur-

Consultants Survey provide their clients with loca-

vey made the latter claim. However, both groups of

tion studies/comparative analyses as well as incen-

respondents see an uptick in the use of automated

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Respondents worked on projects in the following industries:

processes. Nearly two thirds of the respondents to the Consultants Survey say their clients are instituting more automated processes in response to the pandemic, and about half the respondents to the

Manufacturing— Durable Goods 80% Manufacturing— Non-Durable Goods 62% Manufacturing — Other 30% Distribution/Logistics/ Warehousing 77% Data Processing, Software & Other Computer-Related Services 45% Finance, Insurance, Real Estate 47% Energy Industry 15% Hospitality Industry 15% Healthcare/Life Sciences 52% Retail 18% Construction & Trades 8% Other 8%

Corporate Survey say they are doing so as well.

Consultants’ Clients’ New Facility Plans All of the responding consultants say their clients plan to open new domestic facilities within the next two years. Most of these are

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

3% 28% 12% 57%

slated for various areas of the southern U.S. — South (18 percent of the total), South Atlantic (15 percent), Southwest (14 percent), and Mid-South (13 percent). Another 13 percent will go to the Midwest. A quarter of their clients’ new domestic facilities will house manufacturing operations and another 25 percent will be warehouse/distribution centers.

Primary services required by their clients: Feasibility Studies Global Asset Positioning Location Studies/ Comparative Analyses Incentives Negotiations/ Management Location Decision Real Estate Transaction Other

Clients who have asked 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

40% 72% 70% 30% 40%

Clients have indicated that they are changing their corporate real estate footprint as a result of COVID-19: 80% 20%

Yes No

If yes, they will be: Closing operations Reducing operations Geographically diversifying operations Expanding operations Other

21% 56% 71% 54% 10%

47% 22% 93% 92% 82% 53% 13%

Clients are transitioning to an increase in the number of their employees working remotely: Temporarily Permanently No transition

76% 42% 7%

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Domestic location projects consultants are working on are slated for the following regions

(as a percentage of total number of projects):

Clients have instituted more automated processes in response to COVID-19: 64% 36%

Yes No

Clients plan to open a new (not relocate an existing) domestic facility within

the next two years:

Types of new domestic facilities to be opened by clients

(as a percentage of total number to be opened): Manufacturing Warehouse/ Distribution Headquarters Data Center Back Office/Call Center Shared Services R&D Other

of the responding consultants

say their clients’ new domestic

15% 13% 18% 13%

facilities represent foreign direct investment. More than 40 percent of those responding to our 17th annual Consultants Survey also say their clients have plans for new foreign

facilities, as compared to only 8

percent of our Corporate Survey

14% 6% 1%

respondents with such plans. About a fifth of the consultants’ clients’ new foreign facilities are slated for Mexico, 15 percent for Asia, and 14 percent each for Can-

100% 0%

Yes No

Interestingly, nearly 60 percent

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)

26% 25% 11% 9% 8% 9% 10% 2%

Clients’ new domestic facilities represent foreign direct investment (FDI): 58% 42%

Yes No

ada and Western Europe. Thirty percent of these new foreign facilities will house manufacturing operations, and more than 20 percent will be warehouse/distribution centers.

Clients plan to open a new (not relocate an existing)

foreign facility within the next two years: Yes No

Consultants’ Clients’ Relocation and Expansion Plans Three quarters of the respon-

42% 58%

dents to our 17th annual Consultants Survey say their clients plan to relocate an existing facility

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Types of new foreign facilities to be opened by clients

(as a percentage of total number to be opened: Manufacturing Warehouse/ Distribution Headquarters Data Center Back Office/ Call Center Shared Services R&D Other

30% 22% 5% 3% 10% 17% 10% 3%

Foreign location projects consultants are working on are slated for the following regions

Clients plan to expand a domestic facility footprint within two years: 90% 10%

Yes No

(as a percentage of total number of projects): Canada Mexico Caribbean Central America South America Western Europe Eastern Europe Middle East Africa Australia Asia

14% 19% 5% 4% 5% 14% 12% 6% 1% 6% 15%

within two years. More than 90 percent say their clients will relocate domestically; about a third

Types of domestic facilities to be expanded by clients (as a percentage of total number to be expanded):

near-shore a foreign facility; and a fifth say their clients plan to off-

30% 28% 8% 7% 8% 9% 8% 1%

Manufacturing Warehouse/ Distribution Headquarters Data Center Back Office/ Call Center Shared Services R&D Other

say their clients plan to reshore or

shore a domestic facility. In comparison, none of the respondents to our annual Corporate Survey had off- or near-shoring or reshoring plans. Ninety percent of the responding consultants also say their clients

Clients plan to relocate an existing facility within two years: 74% 26%

Yes No

If yes, plan to: Relocate a U.S. facility to another domestic location Relocate a domestic facility to off/nearshore Relocate a foreign facility back to the U.S. (reshoring) Relocate a foreign facility closer to the U.S. (nearshoring)

93% 19% 33% 30%

Location of domestic facilities to be expanded by clients (as a percentage of total number):

plan to expand a domestic facility’s footprint. Once again, most of those expansions will occur in the southern U.S. — South ( 20 percent of the

2% 8% 15% 12% 20% 14% 4% 6% 13% 6% 1%

total expansions), South-Atlantic (15 percent), Southwest (13 percent), and mid-South (12 percent). The Midwest will garner 14 percent of the planned domestic expansions. And, as expected of the total domestic expansions, 30 percent represent manufacturing and nearly 30 percent warehouse/distribution. Half of the responding consultants also

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say these expansions represent FDI. Whereas only 7 percent of the respondents to our Corporate Survey have plans for foreign facility expansions, 25 percent of the responding consultants say their

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clients have such plans. Mexico will take the largest share (19 percent), followed by Canada and Eastern Europe (16 percent each), and Western Europe (14 percent). It appears that manufacturing is the largest choice for these foreign expansions at nearly 40 percent of the total.

Consultant Respondents’ Location Priorities We also asked the consultants taking our annual survey to rate the

Introducing the Lubbock Logistics Center II, the second hi-tech speculative distribution building built by Bandera Ventures, a Dallas-based commercial real estate development company. Bandera chose to build the facility in the “Hub City” due to the low industrial real estate vacancy and Lubbock’s role as a regional hub. Ranked by Indeed as one of the top three best cities in the nation for above-average, high-projected growth, Lubbock is a premier choice for business expansion. With 201,913 square feet of space, the Lubbock Logistics Center II is scheduled to be completed by early fall 2021. Located in the Lubbock Business Park, the building will offer a clear height of 36 feet, 100 trailer parking positions, cross-dock configuration and more.

site selection factors as “very important,” “important,” “minor consideration,” or “of no importance” to their clients. We then added the “very important” and “important” ratings in order to rank the factors

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in order of importance to their clients’ location decisions.

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th Clients’ new domestic facilities expansions represent foreign direct investment (FDI): 50% 50%

Yes No

Clients plan to expand a foreign facility footprint within two years: 25% 75%

Yes No

Types of foreign facilities to be expanded by clients

(as a percentage of total number to be expanded): Manufacturing Warehouse/ Distribution Headquarters Data Center Back Office/Call Center Shared Services R&D Other

38% 16% 9% 6% 13% 9% 9% 0%

Location of foreign facilities to be expanded by clients

(as a percentage of total number to be expanded): Canada 16% Mexico 19% Caribbean 4% Central America 5% South America 4% Western Europe 14% Eastern Europe 16% Middle East 7% Africa 2% Australia 4% Asia 11%

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Interestingly, the consultants

over the short and long term.

responding to our 17th annual Consultants Survey bumped the

Two related factors that affect

availability of skilled labor factor,

labor costs — low union profile

which was ranked No. 1 a year

and right-to-work state — also

ago, down a notch; it is now tied

increased in importance. Low

with highway accessibility for the

union profile jumped six spots in

No. 2 ranking, although these

the consultants’ ranking to No.

factors are still considered “very

11 with an 86 percent combined

important” or “important” by

importance rating, and right-to-

98.3 percent of the respondents.

work state is now considered

In fact, in the “very important”

“very important” or “important”

category alone, availability of

by more than three quarters of

skilled labor is still top-ranked by

the responding consultants and is

86 percent of the respondents

up four spots in the rankings from

(about 25 percent more than

the prior year to No. 16 among

any other factor). However, 100

the factors.

percent of the responding consultants rank labor costs as the

Other cost concerns are re-

top site selection factor overall

flected in the consultants’ rank-

when the “very important” and

ings: the energy availability and

“important” categories are com-

costs factor is ranked fourth, with

bined. This is probably not a

a 94.7 percent combined im-

surprise given that many of their

portance rating, up from eighth

clients are attempting to cut

place the year prior. And state

costs during the pandemic and

and local incentives and tax ex-

position themselves for survival

emptions, which help to lower

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3/3/21 12:14 PM

ANNUAL

CONSULTANTS SURVEY

CONSULTANTS SURVEY* Site Selection Factors

costs, take the No. 5 and 6 spots, respectively, considered “very important” or “important” by more than 90 percent of the respondents. Since more than 90 percent of the responding consultants also say they are involved in incentives negotiations and management for their clients, these last two rankings are to be expected. The global pandemic has also caused the consultants to focus on their clients’ proximity to suppliers and proximity to major markets — factors ranking seventh and eighth, respectively. Proximity to suppliers actually rose five places in the rankings. The consultants are hyper-aware of the logistical challenges brought about by the COVID-19 pandemic and want to make sure their clients re-examine their supply chains. Rounding out the responding consultants’ top-10 factors are

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

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

86.0 12.3 1.8 0.0 21.1 43.9 28.1 7.0 19.3 52.6 26.3 1.8 60.7 39.3 0.0 0.0 28.1 57.9 12.3 1.8 17.5 59.7 21.1 1.8

Transportation/Telecommunications Highway accessibility 61.4 36.9 1.8 0.0 Railroad service 7.3 34.6 45.5 12.7 Accessibility to major airport 24.6 56.1 19.3 0.0 Waterway or oceanport 3.5 31.6 47.4 17.5 accessibility Inbound/outbound shipping 45.6 40.4 10.5 3.5 costs Availability of advanced 12.5 41.1 39.3 7.1 ICT services Finance vailability of long-term A 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

8.8 21.1 45.6 24.6 19.3 56.1 19.3 5.3 35.1 56.1 8.8 0.0 52.6 40.4 7.0 0.0

50.9 36.8 12.3 52.6 36.8 5.3 35.1 49.1 14.0 35.1 47.4 15.8

0.0 5.3 1.8 1.8

21.1 43.9 28.1 10.5 38.6 42.1 33.3 61.4 3.5 17.5 54.4 24.6 47.4 42.1 10.5 46.4 44.6 8.9 5.3 49.1 42.1

7.0 8.8 1.8 3.5 0.0 0.0 3.5

8.8 61.4 24.6 5.3

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

available land and available build-

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th COMBINED RATINGS* CONSULTANTS SURVEY Site Selection Factors

2020

2019

Ranking 1. Labor costs 2. Availability of skilled labor 2T. Highway accessibility 4. Energy availability and costs 5 . State and local incentives 6. Tax exemptions 7. Proximity to suppliers 8. Proximity to major markets 9. Available land 10. Available buildings 11T. Inbound/outbound shipping costs 11T. Low union profile 13. Occupancy or construction costs 14. Expedited or “fast-track” permitting 15. Accessibility to major airport 16. Right-to-work state 17. Corporate tax rate 18T. Training programs/technical schools 18T. Environmental regulations 20. Quality-of-life 21T. Availability of unskilled labor 21T. Raw materials availability 23. Proximity to innovation commercialization/R&D centers 24. Availability of advanced ICT services 25. Water availability 26. Railroad service 27. Waterway or oceanport accessibility 28. Availability of long-term financing

100.0 98.3 (2)** 98.3 100.0 (1) 98.3 98.2 (3) 94.7 89.6 (8T) 93.0 93.1 (5T) 91.2 88.0 (10) 91.0 85.7 (12) 89.5 94.9 (4) 89.4 91.2 (7) 87.7 93.1 (5T) 86.0 79.3 (15T) 86.0 77.6 (17) 84.2 86.2 (11) 82.5 89.6 (8T) 80.7 80.4 (14) 77.2 69.0 (20) 75.4 72.4 (18) 71.9 80.7 (13) 71.9 79.3 (15T) 70.2 66.7 (21T) 65.0 69.2 (19) 65.0 66.7 (21T) 54.4 48.3 (25) 53.6 49.1 41.9 35.1 29.9

60.7 (24) 62.1 (23) 43.1 (26) 37.9 (28) 40.3 (27)

ings, with nearly 90 percent rating those two factors as “very important” or “important” in the location decision. As consultants help their clients recover from the pandemic and start to grow and expand, it seems these two site selection factors have become more important relative to others. In fact, about 40 percent of both the Corporate and Consultants Survey respondents say the availability of a shovel-ready or pre-certified site is equally important to other factors when site searching. One factor that is far less important — comparatively speaking — for the responding consultants than for those responding to our Corporate Survey is quality of life. Those responding to our annual Consultants Survey rank

* All figures are percentages and are the total of the “very important”

and “important” ratings of the Area Development Consultants Survey and are rounded to the nearest tenth of a percent.

* * 2019 ranking

this factor at No. 20, with only about 70 percent considering it “very important” or “important.”

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ANNUAL

CONSULTANTS SURVEY

However, nearly 85 percent of the Corporate Survey respondents rated it as such, ranking quality of life fourth in importance among their location factors. It would seem those responding to our 17th annual Consultants Survey believe their clients should be more concerned with quantitative than qualitative factors, but that may not be the case, with the global pandemic

Corporate diversity and inclusion strategy a consideration when clients are assessing new locations: Yes No

57% 43%

Importance of sustainability efforts to your clients: Very important More important than other factors Of equal importance to other factors Of no importance

12% 2% 77% 9%

keeping workers as well as their employers closer to home. And the pandemic has also highlighted the need for corporate diversity and inclusion strategies. Both the Corporate Survey and Consultants Survey respondents seem to be aware of this, with 57 percent of the consultants saying they are a consideration when clients assess new

Type(s) 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, utilityrate subsidies, infrastructure support, etc.)

Importance of a shovel-ready/ pre-certified site in clients’ site searches: Very important More important than other factors Of equal importance to other factors Of no importance

25% 23% 40% 12%

Clients consider whether there are existing businesses performing similar activities to theirs in the area of search: Yes No

54% 46%

86% 89% 30% 63% 77%

Clients consider a location’s history of weather/hazards (flooding, tornadoes, earthquakes, etc.)

in the location decision:

Yes No

91% 9%

locations. ••¬

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SPONSORS

ALABAMA ALABAMA DEPARTMENT OF COMMERCE The Alabama Department of Commerce is the state’s lead economic development agency. In addition to business development activities, Commerce promotes exporting and international opportunities for Alabama companies, assists small businesses, and positions the state for film productions. Commerce is home to the state’s primary workforce development program, AIDT. Greg Canfield, Secretary Alabama Department of Commerce 401 Adams Ave., P.O. Box 304106 Montgomery, AL 36130-4106 800-248-0033 contact@madeinalabama.com madeinalabama.com

FLORIDA ENTERPRISE FLORIDA, INC. From a talented workforce to a strategic geographic location, Florida has the boundless resources businesses need to grow. Freedom from high taxes and prohibitive regulations make Florida the Tax Foundation’s #1 tax climate in the Southeast and a top state for business. Learn how Florida can help your business thrive. Tim Vanderhoof, Senior Vice President, Business Development Enterprise Florida, Inc. 800 N. Magnolia Ave, Suite 1100 Orlando, FL 32803 407-956-5600 tvanderhoof@EnterpriseFlorida.com w w w. f l o r i d a t h e f u t u r e i s h e r e . c o m

GEORGIA GEORGIA DEPARTMENT OF ECONOMIC DEVELOPMENT Georgia consistently earns top rankings for our attractive business climate, Quick Start workforce training program, and global access through the Port of Savannah and HartsfieldJackson Atlanta International Airport. But it’s our partnership approach to business that really empowers a company’s growth and success. Call Georgia home and we’ll thrive together. Georgia Department of Economic Development 75 Fifth St NW, Suite 1200 Atlanta, Georgia 30308 404-962-4000 Georgia.org

KENTUCKY KENTUCKY CABINET FOR ECONOMIC DEVELOPMENT From single-employee startups to century-old brands, Team Kentucky helps businesses of all sizes select, grow, and succeed in Kentucky. With experts in Europe, Asia, and throughout

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the Bluegrass, Team Kentucky responds quickly, builds long-term relationships, assists with workforce training, and assures companies get the resources they need for success. Jeff Taylor, Commissioner, Business Development Kentucky Cabinet for Economic Development Old Capitol Annex 300 W Broadway Frankfort, KY 4060 C E D . k y. g o v

MISSISSIPPI MISSISSIPPI DEVELOPMENT AUTHORITY The Mississippi Development Authority is the state’s lead economic and community development agency, with approximately 300 employees providing services to businesses and communities throughout the state. MDA works to recruit new business to Mississippi and retain and expand existing industry and business. The agency also promotes tourism throughout the state. John Rounsaville, Executive Director Mississippi Development Authority 501 N. West Street Jackson, MS, 39201 P.O. Box 849 Jackson, MS, 39205 601-359-9388 or 1-800-360-3323 jrounsaville@mississippi.org mississippi.org

MISSOURI MISSOURI ONE START Missouri One Start provides a tailored workforce strategy to address your unique business needs. At no cost to eligible businesses, the team at Missouri One Start will customize services ranging from preemployment screening and recruitment to designing job-specific training both during and after the onboarding process. Kristie Davis, Director Missouri One Start P.O. Box 478 301 W. High Street Jefferson City, MO 65102 573-526-9239 MissouriOneStart.com

Economic Development Partnership of North Carolina Wells Fargo Capitol Center 150 Fayetteville Street, Suite 1200 Raleigh, NC 27601 919-447-7777 https://edpnc.com

OHIO JOBSOHIO JobsOhio is the state’s economic development organization charged with driving job creation and capital investment in Ohio through business attraction, retention, and expansion efforts. JobsOhio collaborates with public and private partners across Ohio to address the needs of growing businesses and support them with the resources necessary to succeed. Andrew Deye, VP, Strategy Jobs Ohio 41 S High St #1500 Columbus, OH 43215 1-855-874-2530 JobsOhio.com

SOUTH CAROLINA SANTEE COOPER Santee Cooper supports South Carolina’s business community by providing low-cost, safe, reliable, and sustainable power, along with sites and incentives, all designed to improve your bottom line. In addition to residential and commercial customers, Santee Cooper powers 27 large industrial customers, Charleston Air Force Base, and municipalities and electric cooperatives across the state. Bill McCall, Economic Development Specialist Santee Cooper One Riverwood Drive Moncks Corner, SC 29461 843-761-8000 ext. 5381 w m c c a l l @ S a n t e e C o o p e r. c o m w w w. P o w e r i n g S C . c o m

TEXAS

NORTH CAROLINA ECONOMIC DEVELOPMENT PARTNERSHIP OF NORTH CAROLINA 54,000 square miles of endless opportunity — North. South. East. West. No matter where you look, North Carolina is the home of endless opportunity. From the mountains to the coast, everything that makes life fulfilling can be found right here, right now. Ranked #1 for business three years running.

LUBBOCK ECONOMIC DEVELOPMENT ALLIANCE Located in the middle of everywhere, Lubbock, Texas, is home to a thriving and diverse economy, alongside a skilled workforce with grit. Ranked in the Top 25 Best Cities to Start a Business, Lubbock is ideal for optimal worklife balance, short commute times, and a collaborative business climate. Carolyn Rowley Director, Recruitment & Innovation Lubbock Economic Development Alliance [LEDA] 1500 Broadway, 6th Floor Lubbock, TX 79401 806-723-8246 carolyn.rowley@lubbockeda.org https://lubbockeda.org/

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3/5/21 12:29 PM

CORPORATE REAL ESTATE

TRENDS IN OFFICE AND INDUSTRIAL PARKS ACROSS THE NATION, THE DEMAND FOR SUBURBAN OFFICE AND INDUSTRIAL PARKS IS RISING AS MORE SKILLED WORKERS MOVE BACK TO SUBURBS, DUE TO CONCERNS ABOUT HOUSING COSTS AND QUALITY OF EDUCATION. BY MARK CRAWFORD

f course, the big factor impacting office and industrial parks going into 2021 is COVID-19. The pandemic has reduced business production and workforce (through illness, social distancing, and remote working), disrupted the supply chain and cash flow, and brought about significant investments in technology. Across the nation, the demand for suburban office and industrial parks is rising as more skilled workers move back to suburbs, due to concerns about housing costs and quality of education — they also feel safer from COVID-19 and the civil unrest that was happening in some larger cities. “The most notable shift is toward lower-intensity spaces, where getting into and out of buildings can be done without close contact to others,” says Mark Stapp, professor of Real Estate at Arizona State University in Phoenix. This trend is compelling more developers to consider older office parks in suburban areas as attractive opportunities for redevelopment — especially as targets for millennials and businesses that hope to attract millennials. “The pandemic tends to boost this demand,” says Zhou Yang, professor of Economics at Robert Morris University in Pittsburgh, Pennsylvania. “A recent NAIOP Research Foundation study1 shows that developers can attract new tenants and boost profitability by modernizing older parks with new uses and amenities, especially for those buildings with a single large tenant and office parks with large surface parking lots and low occupancy rates.”

Re-Design or Retro-Fit? Before COVID-19, building owners and employers never thought they would have to deal with disease control and prevention. To stay competitive, they must now retrofit older buildings Continued on page 64

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TexAmericas Center: Top-Ranked Industrial Park

ocated in the Texarkana metropolitan area, TexAmericas Center owns and operates one of the largest mixed-use industrial parks in the United States. With roughly 12,000 development-ready acres of land and about 3.5 million square feet of commercial and industrial product, TexAmericas Center services four states (Arkansas, Louisiana, Oklahoma, and Texas). TexAmericas Center is one of the top-ranked industrial parks in the country and is a designated U.S. Opportunity Zone, HUBZone, New Market Tax Credit Census Tract, Foreign Trade Zone #258, and a Texas Enterprise Zone. TexAmericas Center has the operating capabilities of a municipality but functions like a traditional real estate development company, offering customized real estate solutions. It frees up TexAmericas Center’s leaders to eliminate red tape that can hinder growth plans and slow startup. As an example, the vice president of operations approves all land uses and building permits, usually within 72 hours of submission. Companies that launch operations at TexAmericas Center report that their revenue streams stabilize, and they realize their return on investment more quickly. In recent years, TexAmericas Center and its redevelopment partners have invested more than $40 million in improved infrastructure and other activities on the property to advance job and capital creation in the region. TexAmericas Center and the region’s features that are attractive to potential businesses include: ew 150,000-square-foot spec building •N that will be completed July 2021 E nhanced fiberoptic lines • on-site $200 million water treatment plant •A thatnew, is funded and will soon be under construction •Area’s robust transportation system •R egion’s low-cost and abundant sources of power •N ew airport terminal and pending flight expansions exAmericas Center’s third-party logistics •T services division xpansion of training options at all local • Euniversities and colleges, which include seven

institutions of higher education within 30 miles of TexAmericas Center The Texarkana MSA has a manufacturing participation rate of about 18.6%, has a labor surplus, and delivers dramatically lower operating costs than most other locations in Texas.

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Texarkana is a major Union Pacific rail head; TexAmericas Center owns 36 miles of rail and a 350-car classification yard. Both the UP and the TNER, a short-line, serve the industrial park; a 12-spot transload facility is on-site.

Recognizing that companies often wish to build quickly, TexAmericas Center has invested millions in preparing Sites That Are Ready (STAR) for development. Its 101-acre Texas Economic Development Council-certified site became the first STAR site in the state of Texas. With infrastructure and its impressive transportation corridors, incoming businesses routinely comment how impressed they are with the Texarkana community — particularly its leadership, development opportunities, and cooperative efforts. For more information about TexAmericas Center, visit TexAmericasCenter.com.

Eric Voyles Executive Vice President Chief Economic Development Officer TexAmericas Center 107 Chapel Lane New Boston, TX 75570 Cell: 903-306-8923 • Office: 903-223-9841 Eric.Voyles@TexAmericasCenter.com https://TexAmericasCenter.com

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Now Leasing | For Sale

150,000 sq ft grey, box, multitenant spec building Subdividable; 3 docks per 13,600 sf 32’ ceilings (52’x 50’ columns) 7 reinforced floors (4000 si), 2 drive-in doors Reliable industrial quality utilities (Fiber, 3-Phase) 230+ parking and trailer slots

2020

1-30 < 1.5 miles; 1-369 <10 miles, 1-49 < 20 miles 25 minutes to Texarkana Regional Airport Tenant build out allowance Purchase; Build-to-Suit – Lease, Reverse or Turnkey FTZ #258, Opportunity Zone, Texas Enterprise Zone, HUBZone, NMTC, PILOT, Goods-InTransit, Freeport, Texas Reinvestment & Defense Readjustment Zone, USDA B&I qualified

About TexAmericas Center - Located in the Texarkana metropolitan area, TexAmericas Center owns and operates the 8th ranked industrial park and one of the largest mixeduse industrial parks in the United States. With roughly 12,000 development ready acres of land and about 3.5 million square feed of commercial and industrial product, TexAmericas Center services the four states (Arkansas, Louisiana, Oklahoma, and Texas) markets.

For Site Location, Everything Is Better in Person!

erson County is part of the Research Triangle Region of North Carolina. Uniquely situated between Raleigh-Durham, the Piedmont Triad, and southern Virginia, we offer the benefits of the highly favorable N.C. business climate, while drawing skilled workers from two states with nationally recognized workforce training programs.

Industrial Sites PERSON COUNTY MEGA PARK is 1,350 acres and N.C.-certified with globally unique power capacity delivered through multiple 230 kV transmission lines. Other features include a 12-inch waterline with an existing capacity of 2 MGD; 288 strands of countyowned, open-access dark fiber; wastewater and natural gas designed for industry needs; USACE-permitted for fast-track development; and proximity to two thirds of the U.S. population within two days. NORTH PARK SITE is 26 acres, county-owned, and being developed for a 60,000–100,000-square-foot manufacturing facility for mid-sized projects requiring quick speed-to-market, affordability, and a strong manufacturing workforce. A GULFSTREAM-CLASS CORPORATE HANGAR with office is under construction at the Raleigh Regional Airport at Person County — a 6,005-foot runway general aviation airport ready to support cargo delivery, corporate travel, and other aviation needs. There are 3,700 manufacturing/distribution companies with employment of 20 or more within a 100-mile radius of Person County, speaking to the vast network available for industry support, viability, and collaboration.

Workforce Within a 50-mile radius is a workforce of 1.2 million, multiple Tier 1 universities, award-winning community colleges, industry-focused technical institutions, and workforce-focused K-12 programs, North Carolina is a right-to-work state and home to eight military and two Coast Guard bases. Combined with a rapidly growing population, this means thousands of trained and disciplined veterans enter the workforce each month, alongside skilled workers migrating from other areas.

Incentives Person County is part of Foreign-Trade Zone 93. Nearly half of our county falls within a federal Opportu-

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Person County, NC – mid-point of the eastern U.S., allowing access to 60% of the U.S. within two days

nity Zone, and our area boasts low construction costs, affordable quality of life, and the lowest corporate tax rate in the country at 2.5 percent. Person County enjoys a Tier 2-county designation for grants and incentives offered by N.C. Commerce and supports robust local incentives for projects bringing jobs and investment. Piedmont Community College provides customized training and facilitates internship and apprenticeship opportunities. On-the-job training support is available through NCWorks, all providing additional value. These benefits make Person County an ideal location for target sectors, including semiconductor, advanced manufacturing, technology/data center, clean energy, aerospace/defense, agtech, and more. Contact Person County Economic Development to schedule a site visit and to explore more of what our beautiful, business-friendly region has to offer.

Sherry Wilborn, CEcD, Director Person County Economic Development 304 S. Morgan St. Roxboro, NC 27573 336-597-1752 swilborn@personcountync.gov www.personcountyedc.com

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PERSON COUNTY

ROANOKE 85

DANVILLE

NORFOLK

PERSON COUNTY

MEGA PARK GREENSBORO

DURHAM RALEIGH

40 74

INDUSTRIAL SITES

PERSON COUNTY MEGA PARK 1,300+-acre, NC Certified site; globally-unique power capacity & quality supplied by multiple 230 kV Duke Energy transmission lines onsite 2MGD water capacity, wastewater designed with excess capacity of 3MGD, 288 strands of open access, dark fiber onsite US Army Corps of Engineers permitted

CHARLOTTE

MOREHEAD CITY

PERSON COUNTY NORTH PARK 26 acres, Speculative Construction Underway for 60k - 150k sf ManufacturingSpace, County-owned

BOTH ready for mid-to-large-scale development BOTH located in a Federal Opportunity Zone and Foreign Trade Zone

EVERYTHING

IS BETTER IN PERSON

PRO-BUSINESS ENVIRONMENT

Raleigh Regional Airport at Person County – a 6-005’-runway General Aviation airport with new Corporate Hangar construction to be completed in January 2022 4-lane US Hwy 501 connecting to Research Triangle to the south and VA to the north Central east coast location, proximate to international ports (Port of Virginia at Norfolk and Port of NC at Wilmington) and airports (Raleigh Durham (RDU) and Piedmont Triad International (GSO) Customized training through Piedmont Community College and 3 Tier 1 Research Universities in the Research Triangle Workforce of 1M+ within a 50-mile radius, including Research Triangle North Carolina has the Lowest Corporate Tax Rate in the US Home to GKN Driveline, Eaton Corporation, Duke Energy, Polywood, CenterEdge Software, Dialight, Louisiana Pacific, Spuntech and more

For more information, contact Sherry Wilborn, CEcD, Director 336.597.1752

swilborn@personcountync.gov

@BetterNPersonNC

TREMENDOUS

QUALITY OF LIFE

2 recreational lakes 6 acres of park land per 1,000 people Vineyards, wineries, and craft breweries Vibrant Uptown Roxboro with unique dining and boutiques, Kirby Cultural Arts Complex, The Shops at Hall’s Way, and local art displayed throughout All the amenities of Raleigh-Durham in under an hour Cost of living 13% lower than the US average

www.personcountyedc.com

Trends in Office and Industrial Parks – Continued from page 59

or design new buildings that create safe space for tenants or employees. As a result, real estate developers are making changes to new/proposed and existing buildings. “Many buildings still in design or pre-construction have been reassessed to accommodate public health concerns,” says Stapp. Most redesign is interior and involves specifying systems such as a fully touchless environment, including doors/openings, bathrooms, and lighting. Interior spaces have been reconsidered to accommodate social distancing and separation as well as HVAC systems to increase filtration. “WELL building certification is becoming an important consideration for marketability reasons,” adds Stapp. However, office buildings still need to allow people to socialize and collaborate. Shared spaces that fulfill this goal can bring energy and growth to the workplace. In the wake of the pandemic, architects and designers are considering innovative ways to bring the outdoors in to achieve better health and well-being. For example, architects have integrated biophilic designs in modern workplaces to promote productivity and creativity. “The desire for improved air quality, less-dense environments, and better ways to prevent the spread of the disease is prompting developers to rethink design fundamentals,” indicates Yang. “These include configuration of elevators to safely and efficiently move workers to their offices, sheltered balconies or rooftop decks, and meeting rooms with large windows that can be opened.”

Less Space, Lower Terms Office vacancy rates have increased significantly as employees socially distance and work at home. This trend will likely continue to rise as new waves of COVID-19 sweep across the country. “In places such as New York City, the impact has been substantial,” states

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IN THE WAKE OF THE PANDEMIC, ARCHITECTS AND DESIGNERS ARE CONSIDERING INNOVATIVE WAYS TO BRING THE OUTDOORS IN TO ACHIEVE BETTER HEALTH AND WELL-BEING.

Timothy H. Savage, a professor at the Schack Institute of Real Estate at New York University in New York City. “Current occupancy — albeit with existing leases — may be as low as 10 percent or 20 percent, implying vacancy of 80 percent.” Remote working may become part of the “new normal” for some businesses, which means they will need less office space. Future market conditions will remain highly volatile, depending on economic and public health conditions. At the beginning of the pandemic, notes Yang, landlords and tenants studied their leases to see if there were stipulations that protected tenants during the pandemic. As the pandemic carries on, rental income for commercial property owners continues to decline, threatening the viability of their assets. “To avoid litigation, landlords and tenants are seeking short-term as well as long-term solutions that will work for both parties,” says Yang. “Tenants have been seeking rent relief with modified leases including rent abatements, rent deferments, or lease restructuring. Tenants — hoping to have the ability to scale up quickly — are looking for shorter and less costly leases so they can readjust their square footage much faster in response to changes in the market.” Tenants also seek improvements and upgrades that will make their offices safer — these, however, are expensive for building owners to add, especially as their rental incomes fall from increased vacancies. “It’s harder to amortize those costs, so longer-term leases are desired by owners, but tenants are shrinking space and looking for more flexibility, which includes shorter lease terms due to uncertainty,” explains Stapp. “These conflicting needs make negotiation interesting.” “The industry has recognized the option value of short-term leases,” Savage adds. “Such leases provide tenants with valuable flexibility, in terms

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of space and time, and landlords with the ability to use real-time pricing to reflect the scarcity of space.”

Effect on Manufacturers Manufacturing operations have been greatly affected by the pandemic. “According to the Census Bureau, more than 70 percent of small businesses in the manufacturing sector reported large or moderate negative impacts resulting from the pandemic between late April and mid-September in 2020,” says Yang. “With disruptions in supply chain and an urgent need to remotely coordinate teams and keep operations running smoothly, manufacturers are seeking technology to optimize the means of production.” For example, in addition to basic safety precautions, manufacturers are paying more attention to traceability of equipment uses. This helps improve supply chain visibility in the future as more manufacturers track their activities throughout the manufacturing process. Regarding enterprise resource planning (ERP) systems, manufacturers are adding agile applications that allow them to respond rapidly to changes in work environment; other improvements allow them to consolidate data platforms and add tangent functions on top of their existing model, allowing quicker reactions to future disruptions. The pandemic has also prompted a renewed interest in both reshoring and near-sourcing to mitigate supply chain disruptions. Investment in digital, real-time Industry 4.0 technologies will help manufacturers achieve these goals much more quickly.

Moving Ahead to 2021 One of the trends that will likely continue, even post-coronavirus, is the migration away from big cities, which will impact where business is done. “Employers will need to follow work-

Located in the Texarkana metropolitan area, TexAmericas Center owns and operates one of the largest mixed-use industrial parks in the United States.

THE PANDEMIC HAS ALSO PROMPTED A RENEWED INTEREST IN BOTH RESHORING AND NEAR-SOURCING TO MITIGATE SUPPLY CHAIN DISRUPTIONS.

ers, and if those workers want places that are more spacious, rely more heavily on car travel, and [desire] ample access to single-family housing, then that is where business will be conducted,” says Stapp. Low density, new infrastructure, and lack of dependence on public transit will also be attractive features.” The full impact of new employment practices such as remote working has yet to be determined — some companies will likely continue the practice, even after they are comfortable bringing employees back to the office. In turn, maintaining more workers off-site will reduce the need for space, which will likely lead to higher vacancy rates. Changes in government policies, especially macroeconomic policy, will also play an important role in shaping future office-space trends. Behavioral changes in consumption and work habits driven by the pandemic will likely have longterm impacts on the demand for office and industrial spaces. The longer COVID-19 persists, the more transformative and lasting the changes in business practices will become, where some are elevated to “standard operating procedure” and become part of the corporate culture. n 1

https://www.naiop.org/Research-and-Publications/Reports/ Profiles-in-the-Evolution-of-Suburban-Office-Parks

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DATA CENTERS REPORT

Pandemic Fuels Data Center Growth With employees working remotely, school being held virtually, and everyone being entertained via the Internet during the COVID-19 crisis, growth of these mission-critical facilities accelerated and will continue to do so. By Dave Fanning, Executive Managing Director and Practice Leader, Data Center Advisory Group, Cushman & Wakefield

n a year full of turmoil and strife caused by an unexpected pandemic, data centers were quickly recognized for their crucial presence in all lives, for maintaining communication and knowledge during a period of sudden change for humanity. Data center operators and major services held fast throughout the troubled, early days as they were identified as truly mission critical. Companies large and small rapidly scaled up workloads with cloud service providers so employees could access their normal applications; schools and universities moved online as students attended classes remotely; and all people looked to the Internet for entertainment as they stayed home for days at a time. Several trends that were beginning prior to the year accelerated rapidly throughout 2020. Businesses were forced to continue their IT transformation with a suddenly fully remote workforce, and many moved workloads straight to major cloud services. While most of this will remain in the public cloud environment, costs and regulatory concerns may lead to some moving to a colocation or even on-premises situation. As a result, increased cloud

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adoption and hybrid IT scenarios are fueling growth in the data center sector for both established and emerging markets.

Development Pipeline An active development pipeline is a useful indicator of market strength, as it signifies continued local demand leading to the creation of ever-greater supply. Development under way shows that local authorities are willing to approve new builds, that power and fiber were obtainable at the site, and that project financing is available. Few developments in the data center realm are launched speculatively. More often an anchor tenant has signed on for a significant portion or all of an initial phase. Signing a major hyperscale, corporate or government tenant also assists in the creation of the local ecosystem, as entities with similar requirements often follow. While the recent pandemic has caused construction difficulties across all sectors of commercial real estate, data centers have been less affected than most, as their early designation as essential operations indicates. Construction continued at most locations, and although supply chains occasionally tightened, most projects saw minimal disruption. This is reflected in the overall increase in construction from our previous study to this year.1 Our 2020 report tallied 1.6 gigawatts in progress across the 38 markets re-

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3/2/21 4:32 PM

TOP TEN

350 300 250

ACTIVE DEVELOPMENT (MW)

200 150 100 50

Northern Virginia Singapore London Sydney Silicon Valley Frankfurt Dublin Chicago Atlanta Nashville

DC-

Nor

the

rn SinVirgin gap ia Lon ore S do Bayydneyn Fra Area nkf u D rt Chiublin c A ago Nastlanta hvi Seolle T ul M u o k yo Las mb V ai Jakegas Beiarta j P o Am rtlaing st e n d r T dam Queoront Hon reta o g ro Sha Kong ngh Joh ai SalannesParis t La bur ke g Cit Sao Osak y Pa a NYC Dalulo -No Pho las rth eni ern x N Me Zuric J lbo h Muurne nic h Ma Lagos rs e ille Mi Berlan Ma lin d Los Warsrid Ang aw Deneles S ver Mo eattle Col ntrea um l b VanBost us cou on ve Rey Oslor kja vik

Source: Cusman& Wakfield Research

viewed, while this edition totals 2.9 gigawatts across 48 markets. Organizational needs and the move to modernize information technology have pushed both operators and hyperscalers to action. Markets leading the charge in terms of active development include many of the global primary markets: Northern Virginia, Singapore, London, Sydney, and Silicon Valley round out the top five, with Frankfurt, Dublin, and Chicago following. Several of these markets are experiencing shortages of potential sites (London, Sydney, Silicon Valley), power (Frankfurt, Dublin), or both (Singapore), and it remains to be seen if local concerns over further builds will lift throughout 2021. Of note are the number of secondary markets where the colocation sector continues to blossom, including Seoul, Mumbai, Jakarta, Portland, and Queretaro. These fast-growing regional hubs are emblematic of the smaller market expansion that began in earnest in 2020, and expectations are high for similar growth worldwide. Access to the Internet has now exceeded half the global population with no end in sight. Between increasing demand from existing users, the increase in corporate cloud demand, and new geographies adding access, we expect strong demand to continue for data centers around the world. n 1

https://cushwake.cld.bz/2021-Data-Center-Global-Market-Comparison/10/

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BUSINESS GLOBALIZATION

Challenges of Moving Manufacturing Out of China When moving manufacturing out of China, there’s a lot to consider, e.g., employment contracts, retrieval of tooling and molds, IP protection, and taxes and fees. By Rosemary Coates, Executive Director, The Reshoring Institute; and President, Blue Silk Consulting

here is plenty of manufacturing capability around the world for consumer goods, PPE, testing equipment, medical devices, consumer goods, and other industrial products. So why are companies reshoring their manufacturing operations now? The Tax Reform Act of 2017 helped. The 301 China penalty tariffs gave a little push. But the global pandemic made executives acutely aware of their global supply chain risks and vulnerabilities and provided an opportunity to rethink their global manufacturing strategy. New strategies typically include at least some capacity for manufacturing and sourcing critical goods in America. Pharmaceutical manufacturers were among the first to consider reshoring in an attempt to reduce America’s dependence on basic ingredients coming from China and India. Other industries are now actively following, including automotive, plastics, and machinery. But how easy is it to extract your manufacturing from China or end your relationships with suppliers and contract manufacturers? It’s not so easy.

Global Supply Chains Sourcing from China Global supply chains are part of the problem. Much of the production in

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China includes consumer products, finished goods, and parts that go into other finished goods around the world. This is because, over the past 20 years or so, China has become the low-cost production leader, particularly for high-touch, high-laborcontent processes such as electronics assembly and sewing. This production cost profile (high-touch, high-labor-content) is well suited to low-cost countries such as China, Vietnam, Bangladesh, Mexico, and others. From a market economy perspective, this is appropriate. But strictly economic decisions have not served the markets very well in this pandemic emergency, with so many human lives at stake. Having no capacity for producing products such as PPE, medical devices, and pharmaceuticals in our home country leaves us vulnerable and completely dependent on China. The pandemic has been a wakeup call and a catalyst for reshoring, or at least for considering a multicountry manufacturing strategy. The U.S. government has also started to consider an industrial policy that supports critical industries and may even offer incentives for reshoring. But leaving China to return production to the U.S. is likely to be complicated and expensive.

Leaving China Even if some industries are deemed critical and incentives are

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provided, there are still difficult hurdles in leaving China and redirecting supply chains to a third country or toward reshoring to America. Companies cannot expect to simply pack up shop, lock the doors, turn out the lights, and move back to the U.S. It’s complicated. The decision to leave China isn’t an easy one. With nearly 350 million people in China’s middle class and growing, China is likely to be a company’s biggest target market over the next 20 years. As the Chinese middle class grows, so do its disposable income and the desire for all kinds of products, particularly those with Western brand names. To serve this market, many manufacturers are deciding to leave at least some of their production in Asia. Further, America’s relationship with China has deteriorated significantly over the past four years. Not only has the anti-China rhetoric ramped up in America, but also the anti-America rhetoric is equally as bad in China. The Chinese government and the Chinese Communist party have made no secret of their unhappiness with American trade and sanctions policy. They aren’t going to make it easy for companies to move manufacturing out of China. Let’s examine the various facets of the Chinese operation:

• • The Chinese Employees — In China, most work-

ers are hired under employment contracts lasting one to two years. If a company closes its factory in China, the expectation is that all employees will be paid until the end of their contract. This is often a costly surprise to Western companies. Before deciding to leave China, companies should carefully check their responsibilities outlined in their employment contracts. It’s best to consult with an attorney familiar with Chinese employment law — perhaps one with offices in the U.S. as well as China. In-country local Chinese law firms may not have your best interest in mind. It’s best to use a multinational law firm with deep China experience.

• • Tooling and Molds — Packing up and shipping

or trying to retrieve tools and molds from a Chinese manufacturing site can also be problematic. In the past, a Western manufacturer would send machine tools or molds to a Chinese original equipment manufacturer (OEM), or to their own Chinese manufacturing site. These tools and molds, sometimes worth hundreds of thousands of dollars, are needed to produce products. If a company does not take steps to clearly identify ownership — and signs an agreement to that effect, including serial numbers positively identifying each item — it may never see the tools and molds again. This is because the Chinese believe that they have been given

the equipment, and it becomes part of the plant’s assets and infrastructure. The Chinese government may not allow the machines, tooling, and molds to be exported. Your contract, that you thought clearly defined ownership, may not be honored in a Chinese court. Blueprints and molds that are made in China for your production line are yet another issue to consider. If a Chinese manufacturer has your blueprints and they outsource the mold-making to a subcontractor, it’s a sure bet that they will continue to produce your goods long after you are gone. The Chinese mold-maker is likely to claim ownership of the mold, even though you paid to have it made. In fact, the Chinese company may have registered your brand and logo in China without your knowledge.

• • Manufacturing Methods Intellectual Property — When a company leaves China, it also leaves behind its manufacturing intellectual property if the Chinese have been taught confidential production methods. We’ve all heard the horror stories about IP protection, copying, and counterfeiting in China. To protect their IP, most Western companies now register their patents and brands in China. But production methods and raw materials aren’t always as well protected. A company may have taught the Chinese factory how to make its product — methods the Chinese factory is likely to continue to use to produce the same product under a different name. In addition, the Chinese factory now knows all of your raw materials and parts suppliers and potentially could source the same materials from the same suppliers after you are gone.

• • Taxes and Fees — In addition to paying out employment contracts, there may be other regulations that must be considered. China’s Commerce Department has issued guidelines for withdrawal from China by foreign investors. China’s law requires that foreign investors inform creditors of the closing, settle all outstanding taxes, pay all pending debts, liquidate property, and de-register the business. In addition, companies may be required to pay closure taxes. All this takes time and money, and often comes as a surprise to Western companies in the process of reshoring. Obtaining a permit to leave may be yet another hurdle. Depending on your industry, the Chinese government may not want you to leave the country. High-tech companies, in particular, may be subject to extended exit permit times. Anything that would be considered a strategic industry or strategic technology is likely to experience delays in the permitting process. Continued on page 71 AREA DEVELOPMENT | Q1 2021

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ENERGY/INDUSTRIAL DEVELOPMENT

Cultivate a Second Life for Decommissioned Power Plants As the need for industrial development grows and requirements for coal-fired decommissioning increase, land repositioning can offer a mutually beneficial solution. By Courtney Dunbar, Site Selection and Economic Development Leader; Jeff Pope, Facility Decommissioning and Demolition Services Manager; Burns & McDonnell

he generation landscape for utilities is in a state of constant change. The decarbonization movement is driving difficult decisions as coal-fired power plants close amid the transition to renewable generation. But there is opportunity within that disruption. Decommissioned power plant sites offer industrial developers a great deal of opportunity — specifically, decades of well-maintained assets. The majority of these facilities were built more than 50 years ago with access to everything they needed to operate — connections that would require extensive time and capital investments to put in place today. Rather than seeking greenfield locations, industrial developers should take a closer look at repositioning these sites.

Revealing Exceptional Value Coal-fired power plants are sprawling sites, teeming with invaluable assets. To establish a buffer between facilities and the communities served, these plants were often placed on hundreds of acres with distribution lines and substations installed to transmit the power generated. Infrastructure to accommodate water and wastewater needs was constructed, and multimodal transportation connections were established to bring materials in and out of the plant. Industrial developers can take

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advantage of these well-maintained, high-value assets and breathe new life into their purpose. For example, distribution lines that sent power out can be reversed to bring power into a new industrial facility, and a rail or barge connection that brought coal to the plant can be used to take products and materials in or out of a facility. Developers can take advantage of the permitting and regulatory hurdles that had been overcome by the utilities in years past, generating a potential savings today in both time and money.

Repositioning of expansive decommissioned sites also offers multiuse possibilities. Most industrial facilities don’t require the hundreds of acres that former power plant sites offer. Therefore, a campus arrangement could position several viable solutions within one site, such as a solar field for the utility or developer as well as multiple locations for different facilities — offering load gains for the utility and a costeffective green approach for industrial developers.

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Mapping Out the Possibilities To optimize a property and its correlating repositioning benefits, a utility should develop a master plan for a future industrial campus on its site before any decommissioning begins. This approach would commence with an assessment of the site to determine what should remain after decommissioning, and what may be lacking when complete. It is then advised to undergo a thorough analysis of both natural and built-environment attributes to achieve a vision of property diligence and any potential impediments to development. Once existing conditions are understood, a general regional market review can determine local- and statelevel tax advantages, industrial cluster presence, and any high-level property assets that might align within specific markets. From there, the property can be decommissioned to meet the design requirements through development of a master plan to directly position it to specific industrial audiences. This robust review and flexible development plan is thorough and granular in its details, which is essential. After all, not every asset will appeal to every industry, and not every industry that needs a certain asset exists in a region. For example, grain unloading in agricultural areas would use the site differently, and require different assets, than a sand and gravel mining area. Therefore, a thoughtful master plan can cast the widest net based on the site location, assets, and market. Including the master planning upfront in the decommissioning process can also help pinpoint potential challenges and adjust the design or business case accordingly. For instance, aging plant facilities might require asbestos or subsurface remediation or be located on protected wetlands — situations that could increase liabilities and costs that could exceed the value of the property. Or an existing rail connection might be viewed as an asset but is so outdated that the rail line no longer serves the area. By identifying these possible limitations early in the process, a utility can have confidence in

the direction of its approach, making decommissioning more cost-effective and focused on its end goal. Due to the broad potential markets and industries for repositioning, a utility should involve its economic development staff — either internally or from the local and/or regional level — to discuss the goals and targets for the site. It wouldn’t be surprising for the site development to include a marriage of public and private investments; thus, economic development insight is vital. The utility should also consider partnering with a full-service firm to provide preferably both the decommissioning and master-planning services. If a firm can offer guidance and continuity from site and facility assessments, environmental remediation, design, construction, and more, the utility will be able to secure the optimal solution.

Establishing Benefits for Everyone Repositioning of decommissioned power plant sites is a win-win for utilities and industrial developers. Utilities can convert unused sites, with their potential safety and environmental hazards, into increased load capacity and a boon for their local communities. Doors closing on coal-fired power plants are eliminating jobs nationwide. By bringing established assets like these sites to market, utilities can be part of generating industrial growth in their regions and reinvigorating their communities’ labor opportunities. At the same time, industrial developers can streamline cost-effective site development by utilizing existing sites that boast valuable assets. Already ideally positioned efficiently for operations, decommissioned power plant sites allow industries to start fresh — but with the most essential connections already in place from the start. Repositioning offers a unique, mutually beneficial opportunity for utilities, developers, and communities alike. Rather than removing everything during decommissioning, take the time to understand the value of existing assets and put them back to work. n

Challenges of Moving Manufacturing Out of China – Continued from page 69

The Way Forward There is a lot to consider when designing a new global manufacturing strategy. Many things are now in flux, including the global trade wars, domestic industrial policy, and incentives. With the U.S. presidential election of Joe Biden and Kamala Harris, changes in policy will affect global relationships. Katherine Tai has been nominated as the next U.S. Trade Representative, and with her significant background in China relations and negotiations, the U.S. relationship with China is likely to improve. But so much damage has been done during the

past four years that improving and changing the ChinaAmerica relationship now is a daunting task that will surely take time. So many companies make the mistake of simply comparing labor costs when determining their reshoring pathway. But there is so much more to a reshoring decision, especially within the context of a global pandemic and the resulting global recession. There is no sweeping correct answer applicable to all enterprises in all countries. Microeconomics of the firm will drive the final decision to reshore or not. n

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