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Chasing the latest flurry of fads may not help business leaders or the communities in which they locate achieve long-term success.
Among the key legal issues to be considered when converting office to life science space are credit enhancements, expansion/contraction options, use segregation, and zoning.
a
Land development is a fluid sector that tends to follow the wave of national trends and demand, creating pockets of positives throughout a troubled marketplace.
Businesses can fulfill their labor requirements by creating a positive company culture where employees are not only well compensated but also provided with training and growth opportunities.
The future of work lies in the hands of leaders who understand what today’s life sciences workers value — and act like it.
Its strong maquiladora program, skilled labor, and favorable geographic location has made Mexico a top choice for nearshoring to the U.S. market.
With concerns about climate change now supplanting pandemic fears, projects to produce EVs — and the semiconductors used by vehicles and other high-tech goods — come to the forefront in this year’s Shovel Awards report.
Over the past decade, our reliable and affordable energy, strong incentives, and Opportunity Kentucky programs have helped increase jobs and investment in our state. By working with companies and partnering with communities, we’re empowering a thriving Kentucky.
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$31 billion in new investments nearly 100,000 new jobs
Margaret Thatcher (1925–2013), Prime Minister of the United Kingdom from 1979 to 1990
As companies weigh the benefits and challenges of increasing automation, local leaders must also evolve their incentives programs.
80 Data Center Sites: What’s Your Connection?
Those seeking a location for a data center need to consider fiber connectivity, access to power, cooling capabilities, risk mitigation, and security, among key requirements.
The picture is becoming clearer for the Inflation Reduction Act tax credits, with further guidance to come.
You and I come by road or rail, but economists travel on infrastructure.
Something’s happening in New York City. The nation’s finance, real estate, and media capital is today a powerhouse of life sciences, one of the nation’s fastestg rowing innovation sectors. Founders, academics, investors, and researchers are finding everything at their fingertips in NYC — access to talent, space, resources, knowledge, and key thought leaders.
Amy Schulman, managing partner at Polaris Partners — an investment firm backing healthcare and biotech companies — argues that New York has a unique set of advantages for life sciences. “Academic medical institutions here are so strong that the translational opportunities are profound,” she says. “And when you couple that with New York’s talent and diversity, it’s impossible to ignore.”
And the growth is real. The New York metro area is now home to 5,100 life sciences companies — 30 percent more than Boston. It also has nearly 150,000 jobs in life sciences: That’s 14,000 more than San Francisco.
But what’s driving the city’s life sciences boom? Experts point to a few key factors that give New York an edge — a sustained commitment to public investment and public-private partnerships, physical infrastructure, and world-class talent.
A $1+ billion public investment in life sciences by the City of New York put NYC on the life sciences map.
LifeSci NYC will invest $450 million to spur new research, $600 million to construct new labs and incubator spaces, and $20 million to build a pipeline of diverse talent. The investment aims to create 40,000
jobs, unlock 10 million square feet of wet- and dry-lab space, and spur the launch of 1,000 new companies.
“As companies specializing in biotechnology, diagnostics, therapeutics, digital health, and more choose the city as their preferred location, we see New York City as the home to future innovative breakthroughs that will support better health for all,” says Claire Pomeroy, President at the Albert and Mary Lasker Foundation.
New physical space has been a key element of the city’s strategy.
From Kips Bay and the West Side in Manhattan to Long Island City in Queens and Morris Park in the Bronx, New York’s life sciences community is defined by neighborhood-based clusters of incubators, accelerators, commercial life sciences startups, nonprofits, and academic and medical research institutions that cross-pollinate, pool resources, generate ideas, and grow together.
“Not long ago, there was no infrastructure that would allow two people in the space to come together,” says Ellen Jorgensen, co-founder of Aanika Biosciences. “We are now part of this movement that is bringing entrepreneurial biotech into the city.”
But it’s not just investment dollars and square feet that set New York apart — it’s people.
New York’s world-class universities and research centers make the city a magnet for life sciences jobs, and that helps root graduates in the five boroughs, with an 89 percent growth in life sciences jobs since 2001.
Sue Rosenthal, Senior Vice President of life sciences and healthcare at w York City Economic Development Corporation, urges that the time to invest and launch in NYC is now. “In NYC, the stage is set like no other city for life sciences companies of all sizes to thrive,” says Rosenthal. “We’re e to help you be a part of it.”
Tap into the growing New York City life sciences ecosystem by visiting
In NYC, the stage is set like no other city for life sciences companies of all sizes to thrive.
A $1+ billion public investment in life sciences by the City of New York put NYC on the life sciences map.
The Federal Reserve continues to raise interest rates in an attempt to cool the job market and inflation, with an effective rate now more than 5 percent, the highest since June 2006.1 As a result, consumers are still focusing more on savings than spending, with consumer confidence falling in April for the third time in four months, according to the Conference Board. However, despite rising costs and the reported lack of consumer confidence in the overall economy, many individuals who need to replace their cars — which were in short supply during the pandemic — are now doing so. And, perhaps not surprisingly, more and more people are looking at electric vehicles (EVs). In fact, in January 2022, EVs accounted for just 4.3 percent of new car sales, but that figure was up to 7 percent in January 2023.2
The auto industry’s push to get to net-zero is illustrated by the number of jobs in the EV and lithium-ion battery sector listed in Area Development’s 18th Annual Shovel report, the results of which are presented in this issue. More than 35 EV/ battery projects across 18 states, representing billions of dollars in investment and thousands upon thousands of new jobs, were reported to us as having gotten under way in 2022.
Those vehicles also utilize thousands of semiconductors, as do tech products like cell phones, computers, household appliances, LED bulbs, and more. So, it’s also not surprising that more than a dozen new semiconductor/chips projects are listed among the states participating in our Shovel Awards report — again representing billions of dollars in investment and thousands of new jobs.
Another sector that saw many projects commence in 2022 was life sciences/ biotech as the sector works on developing new diagnostic devices as well as treatments including new vaccines and antiviral medications. Two features in this issue explore the challenges facing the life sciences industry from converting office space that’s been vacated by remote workers to life science space, as well as meeting the expectations of employees in this sector
It remains to be seen if investment in the above mentioned sectors in 2023 will compare with that of 2022 as persistent inflation is met by higher interest rates and tightening monetary policy. However, analysts believe that manufacturers who continue to invest in technology, implement policies to retain top talent, and diversify their supply chains can navigate these challenging times.
Editor
1 https://www.bankrate.com/banking/federal-reserve/history-of-federal-funds-rate/
2 https://insideevs.com/news/657660/us-electric-car-sales-january2023/
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Second largest FTZ network in the country. EnterpriseFlorida.com
ORLANDO, FLInvestment in workforce training initiatives is essential not only to individual businesses but also to economic development on a local and national scale.
installers and repairers.
BY ALISON NEUMAN, Program Manager of Workforce Development, JOHNSON CONTROLS NORTH AMERICA
The skilled trades are at a pivotal moment in time. More than a decade of understaffing issues remain unresolved as the Great Retirement looms, and current economic uncertainty is shifting budget priorities away from workforce development at many organizations. As for the next decade, the U.S. Bureau of Labor (BLS) is expecting about 10,000 job openings each year1 for electrical and electronics
With job openings within the skilled trades increasing and the qualified hiring pool projected to shrink, the impacts of this gap won’t stop at project development. Organizations across various industries rely on building technology professionals for critical infrastructure maintenance to keep their systems operating optimally for a safe and comfortable environment.
Although the skilled trades candidate pipeline
of the industry by investing in workforce development initiatives such as vocational programs, training labs, or trade education. Inspiring future innovators and leaders to join this essential workforce is critical to not only individual businesses, but also economic development on a local and national scale.
Careers in the technical field offer promising trajectories for individuals of all ages, ranging from recent high school graduates to parents who are re-entering the workforce. Though there is a stereotypical image most have of a trade worker, through expanded awareness and education of the opportunities this career path can provide as
efforts despite financial strain. Additionally, many industry leaders are working together to create solutions to this farreaching challenge.
isn’t as flourishing as it once was, organizations have the opportunity to make a direct impact on the future
a creatively and financially fulfilling option with plenty of opportunity for growth, people from all backgrounds and walks of life will be more inclined to train and apply for technician jobs.
Current budgetary constraints don’t have to put a halt to workforce development initiatives. Between federal and local funding opportunities, such as the DOL Building Pathways to Infrastructure Jobs Grant Program2 or the NYS Workforce Development Capital Grant Program,3 organizations can find the support they need to expand their workforce development
For example, Johnson Controls recently expanded upon its five-year partnership with Lincoln Tech schools to create a program aiming to close the skilled trades gap. Johnson Controls Academy4 is a six-week paid technical program focused on the next generation of installation and service technicians with plans to onboard approximately 130 new technicians or more each year. Once graduated, students who complete the program are placed in full-time careers with Johnson Controls and offered relocation packages to communities nationwide. By creating programs that help identify and train professionals who will join the skilled-labor workforce, organizations have the power to ignite innovation and positively impact the businesses that depend on highly skilled technicians. Through strategic investments in educational programs, we can narrow the skilled-labor gap by preparing tomorrow’s future-ready workforce with the digital and technical know-how to create more comfortable, safe, and sustainable buildings.
1 https://www.bls.gov/ooh/ installation-maintenance-andrepair/electrical-and-electronicsinstallers-and-repairers.htm#tab-6
2 https://www.dol.gov/agencies/eta/ grants/apply/find-opportunities
3 https://esd.ny.gov/workforcedevelopment-capital-grant-program
4 https://www.johnsoncontrols. com/media-center/news/ press-releases/2023/02/06/ lincoln-tech-and-johnson-controlslaunch-new-career-pathwaysprogram-to-close-the-skills-gap
Careers in the technical field offer promising trajectories for individuals of all ages.
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Over the last few years, there has been a heightened focus on abundant access to water for companies seeking new locations.
BY DAN EMERSONAbundant access to water, for manufacturing and other purposes, has long ranked near the top of companies’ site selection criteria — especially in drought-prone regions. Recent weather and climate trends have made it even more of a vital concern. Industries that withdraw large volumes of groundwater include manufacturing, mining, oil and gas, energy generation, engineering, and construction. Those withdrawals sometimes deplete local, public water supplies.
Water consumption was a major concern when Nevada officials assembled a $1.4 billion incentive package to entice Tesla to build its 1.9-million-square-foot (and growing) “gigafactory,” about 12 miles east of Reno. The Tahoe Reno Industrial Center, where the massive plant and several other large corporate facilities are located, has been serving tenants from groundwater wells. It also holds water rights for the nearby Truckee River, with rights being restricted during drought periods. Officials negotiated a solution in which the cities of Reno and Sparks agreed to transfer 4,000 acre-feet per year of treated wastewater to the complex.
For companies seeking new locations, over the last three to five years, water has become a heightened focus, says Larry Gigerich, execu-
tive managing director at Ginovus, an Indiana-based consulting firm. “Clients are asking more questions about it. They are also looking at it as it relates to their employees being in areas where water supply impacts both cost and quality of life.”
For decades, states in the U.S. have had laws to manage groundwater use. But, with increasing urgency, they have been taking a more active role in managing groundwater supplies, especially in the southwestern U.S. “For
of things that need to be considered,” especially impact on area residents, Gigerich notes.
States in drought-prone regions — like California, Arizona, New Mexico, Nevada, and Utah — have had aquifer-recovery programs in place for years. In 2014, California heightened its efforts, passing the Sustainable Groundwater Management Act, to halt aquifer overdraft and manage levels of pumping and recharge.
Overall, the Gateway Water Management Authority (GWMA) — an agency made up of cities and agencies within the Gateway region
In the drought-challenged state of Texas, partly due to legal complexities and competing interests, “not a lot has happened yet, but there is a lot being planned, “ says Steve Young, a project manager and hydrologist at Austin-based consulting firm INTERRA, Inc. Statewide, several large projects are under way to test the feasibility of aquifer storage and recovery processes. “The state is looking at where the hydrological conditions are good to make this happen.” One major focus is figuring out how to better capture and store the large amounts of water dumped by hurricanes and other storms, Young says.
example, Arizona has had a lot of growth and has water challenges, but at the same time, the Tucson region has done a fantastic job, with 50 years of having a strategy around water,” Gigerich says.
In some states, especially in the Western and Mountain States, where water rights are still a part of the law, companies can take ownership of their own, proprietary water supplies from underground aquifers. “We are seeing some private companies in particular that are acquiring water rights.” When doing that, “there are a whole host
of southeastern Los Angeles County serving more than two million people — “has been a success,” requiring agencies to work more closely together to develop solutions, says Tim Parker, a Sacramento-based hydrologist consultant, and a director of the National Groundwater Association. While it will take time to address complex water-related issues, California and other states have been putting more focus on the issue and strategizing to develop measures to better preserve and re-use water and replenish aquifers, Parker says.
For companies seeking to identify water-related issues, Gigerich recommends three steps: First, look at the current situation, i.e., sources of water and how is it processed and generated from area rivers, aquifers, and mountain runoff. Second, consider the strategic plan for water going forward; different types pf technology can help gray water recycling, which is being seen in some places. And, third, Gigerich recommends that companies “do some modeling, including population growth and water consumption, based on expected growth for the next 30 to 50 years.”
With increasing urgency, states have been taking a more active role in managing groundwater supplies.Workers excavating mud and debris from a section of the East Branch Aqueduct, part of the California State Water Project. Photo courtesy California Department of Water Resources.
Why are there not enough skilled construction workers? Are they leaving or just not entering the industry?
Natarelli: You often hear two statistics used to put the shortage into context. The first is that one in four construction professionals is over the age of 55, and the second is that there are not enough young professionals entering the industry to replace those who are aging out.
Older construction professionals are retiring, and they are taking a lifetime of skills with them. At the same time, young adults aren’t entering the industry at a high enough rate. I think we will see that trend reverse as the younger generation realizes the trades represent a great career. These roles are often in demand, financially rewarding, and personally fulfilling.
How has the industrial sector been affected by this worker shortage as compared to residential or other sectors?
Please briefly describe when the construction industry’s skilled labor shortage began and its causes.
Natarelli: Pinpointing the beginning of the labor crunch is difficult, but what is clear is that the pandemic was the catalyst for the severe shortage we’ve seen recently. As the pandemic hit, there was a major but brief recessionary period accompanied by massive job cuts. Then, just as suddenly, economic stimulus and the transition to remote work inspired a huge increase in demand. That meant there were fewer employees on staff as demand boomed. Those factors exacerbated the entrenched labor shortage that had long pre-dated the pandemic.
What is the current situation and future job outlook?
Natarelli: From the perspective of laborers, the job outlook is strong because demand remains high. Across the industry, laborers have used that demand to secure higher pay and better working conditions. From the project planning perspective, the amount of work on the horizon looks too thin, especially when looking ahead to late 2023 and 2024.
Natarelli: Industrial projects may have an advantage when it comes to attracting workers because they are often well funded and highly specialized. If you’re bidding on a very complex facility, the competition is a little lighter; not everyone has the experience and skills to do that work, and knowledge comes at a premium. Industrial interests are likely still feeling the effects of a very competitive labor market in the form of a higher wage bill but may have fewer issues staffing projects.
Natarelli: There are certain regions in the U.S. that have not suffered as severely from the shortage. The Midwest labor market has been particularly resilient. That region (and others like it) are going to be more attractive to developers. And while labor availability is not the only consideration, I would be surprised if we don’t see a somewhat higher rate of development in these less-stressed labor markets through 2023.
Corporate and commercial real estate will continue adjusting to a remote workforce, meaning the focus on that side will center on the new outlook on demand, not labor issues.
Natarelli: We need to see even more outreach. Some industry organizations are having success letting kids know the advantages of a trade career. When young people realize they can learn a skill early, become a specialist, and establish a career, the sky is the limit.
JOSEPH NATARELLI, NATIONAL CONSTRUCTION LEADER, MARCUM LLP
If we don’t recover these construction industry jobs quickly, how will that affect America’s economic health overall?
Natarelli: This country needs housing, infrastructure, factories, warehouses, and so much more. The better our construction industry is functioning, the quicker we can have them. For example, we’re onshoring computer chip manufacturing — that means more jobs, more goods, and more value for the U.S. economy. But you can’t manufacture computer chips without a specialized facility, so there’s a real possibility that our economic expansion efforts may become bottlenecked by the construction labor shortage.
Natarelli: It’s been a long time since I’ve been in the shoes of a high school senior, but it seems like the pressure to pursue a college education has never been more intense. There was a time when junior colleges and trade schools were respected “next steps” for recent graduates. However, today four-year degrees are emphasized at literally all cost, without any guarantee
that graduates will secur e a reliable and/or professional job.
Particularly in the wake of the pandemic, the electricians, plumbers, and construction workers who build, manage, and maintain our critical infrastructure are more essential than ever. The labor shortage in the trades is a ripe and ready career opportunity for young people looking to step into the workforce. With near certainty they’ll find steady employment, good compensation and benefits, the chance to develop specialized skills — and possibly even the ability to become entrepreneurs themselves without being burdened by an expensive college tuition bill.
The construction industry continues to face a skilled labor shortage, with worker scarcity worsening since the beginning of the pandemic. With this in mind, Area Development’s staff editor Lisa Bastian asked Joseph Natarelli, Marcum’s National Construction Leader, to share his perspective on this issue.
What’s next? That’s up to you. Make your move at DevelopFlintandGenesee.org.
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Chasing the latest flurry of fads may not help business leaders or the communities in which they locate achieve long-term success.
By Ben Worrell, Credits and Incentives Consultant, McGuire Sponsel“Would you be willing to try this new diet with me?” The question came from my wife one early spring day in March a couple of years ago. “It’s a thing that keeps popping up on my social media and it is supposed to help you get healthy in two weeks!”
I asked her what sort of “diet” we were talking about and she showed me the vegetable soup diet. I later learned that this diet surfaces every 9–12 months on social media and becomes popular for a few months before fading away again. The diet consists of a makeahead and portion-out-for-the-week vegetable soup that is supplemented by a protein option. Feeling supportive, I agreed to give it a try. She lasted three days; I lasted five.
What is it about fad diets that generate so much interest, only to be abandoned so quickly by so many? Further, how are Americans lassoed back in by another fad just a short time later? Fads are created when hype is generated by people getting in on the action and ease of outcome is presented in a persuasive way. In other words, “everyone is doing it” and they “see the results instantly!” These classic marketing strategies capture the attention of consumers and generate a lot of money in a short amount of time.
With a challenging economy and a flurry of activity across levels of government, business growth in 2023 remains uncertain. As business leaders and economic developers strategize for success, fads or trends in economic development are rising and falling across industries and communities across the country. Leaders may be wondering if chasing after the next big trend is all that it is cracked up to be as they strive to build communities of the future. Throughout the first quarter of this year, we have seen returns of fads in economic development from the past, regional influences in trends, and trends influenced by economic shifts in regional and federal governments. These trends have strengths and weaknesses to be considered
when building a sustainable plan for the future. Let’s first look at a few historic economic development trends and their outcomes.
Do we see “fads” in economic development through history? While potentially unfairly named, regions of the country are still known as “Rust Belt,” “Steel Country,” or “Coal Country.” During the times of economic surge in the 1930s through the 1950s, many Midwestern cities were known for these industries, and populations flocked for the jobs that needed to be filled. The same could be said for historic 1800s gold and silver towns or even river towns that sprang up in early American history to support the movement of goods and trades.
One of the earliest economic development plans was the “BAWI plan” or “Columbia Plan” from Columbia, MS, in the mid-1930s. The Balance Agriculture with Industry Program (BAWI) promoted by then Mayor Hugh White, raised money to buy land and factory buildings to offer to companies that would locate manufacturing operations within the community. The first com-
pany to accept this offer was a pajama manufacturing business, Reliance Manufacturing Company, that eventually employed 700 workers in the Depression-hit city. The program would later be used by then Gov. White to attract more than 12 manufacturing companies to the state of Mississippi, all of which were in search of cheap labor and investment costs.1
California is credited with the invention of Tax Increment Financing (TIF) in the mid-1940s, which focused on the creation of financial tools to stimulate redevelopment in “blighted” areas. TIF dollars supported affordable housing, infrastructure needs, and transit-oriented developments in areas particularly hard hit by the shifting economy. By mitigating the “risk” of an investment in a blighted area through financial support from the taxing entities, areas that had been overlooked and continued to deteriorate began to see reinvestment and improvements in their
When economic forces changed across regions, due to domestic economics or external global factors, the industry could not adapt, and large facilities shuttered,
STRONG LOCATIONS &
jobs moved on, and towns and cities struggled. Many old industrial facilities lingered for years, even decades before some sort of redevelopment project could reclaim or repurpose them. And, some remain today. Does this make these boom-bust industries a fad? I would say no, because of the longevity of the industries while the industry was thriving.
At a risk of oversimplifying a complex system like the economy, history, and society at large, we can look at a couple of cautionary fact patterns though: Quick action or snap decisions to wholesale support or “give away the farm” for the promise of large-scale development and/ or job creation for a “new” industry may set up a community for long-term struggle later. On the other hand, diversifying the economic base and a planned, measured approach to economic development policy can help with the weathering of economic changes and challenges that are inevitable to come.
It is important to measure the speed at which decisions are made for outcomes that may be unclear or uncertain. This level of risk tolerance is important for communities across the country to consider.
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If the regional steel and manufacturing industries were not “fads” due to their longevity and continued adaptation, have we seen other industries pop-up more frequently in recent history due to economic shifts in consumer behavior and workforce development preferences within communities? Let’s look at the e-commerce moves in the early 21st century.
In the early 2000s, the Internet brought overnight demand for consumer online ordering needs to the forefront of the American household and, suddenly, fulfillment centers became a huge accelerator of access and speed to possession by the consumer as the economy’s growth supported this type of spending and investment. Quickly, online marketplaces needed massive fulfillment centers and warehouses to meet demand. Large-scale bulk distribution buildings went up, seemingly overnight, in cities across the United States. Then came the demand for hundreds of jobs to work those facilities.
Property tax abatement or exemptions have been a well-used tool to attract development of new real property investment. In many areas, maximizing property tax abatement was a critical tool for attracting a new Amazon-like facility (one million square feet and hundreds of workers). While some of these facilities remain, other facilities may sit vacant for long periods of time, as the leasing companies come and go or move to more of an automated process due to a struggling economy and lack of an available workforce for a low hourly rate. Since the original “boom,” many communities have scaled back their economic development support programs for these types of uses, citing a desire to see higher wage jobs, not just quantity of jobs and largescale development of industrial buildings. Demand may still be strong for these facilities from an industry standpoint; however, community interest in supporting them with valuable economic credits and incentives continues to decline.
Another hype and fervor around economic development fads related to economic growth was the Amazon HQ2 project that introduced “economic development” to the everyday household. News stations and publications displayed the astronomical numbers and lengths to which many towns and cities across the United States would try to woo the tech giant’s investment and job growth. Economic development offers (that we know of) reached into the tens of millions if not hundreds
of millions of dollars in direct and indirect benefit, including free land, property tax abatement, cash for investments and new jobs, even the renaming of the community!
With all of the proposals and potential incentives on the line, even the “winners” in this race for HQ2 struggled to close on the deal with the tech giant, ultimately leading to New York bowing out of its offer and the project slated for Virginia scaled back from its original aspirations. In mid-March of 2023, Amazon announced a further layoff of 9,000+ jobs in their tech and administrative capacities as the company further streamlines due to the uncertainty of the future economy.
The ripple effect created by the short turnaround demand from the e-commerce boom ballooned into adjacent industries. Automotive manufacturers continue to announce and open new manufacturing plants and add onto others as demand skyrocketed in the pre- and post-pandemic years. Consumer demand has driven previously shuttered lumber mills in the United States to come back online, as foreign imports were less reliably shipped due to exporting countries experiencing challenges or importing ports of call having issues in handling shipments. We hope demand remains high and that it encourages manufacturing to re-shore to the U.S., but will that happen? Increases in domestic manufacturing demand would likely see a resurgence in the logistics industry, but more on the driver/operator side rather than warehousing. With worker shortages, this could also drive the demand for more autonomous commercial vehicles.
As the weather turns and the economy attempts to find its footing, we are seeing the latest push for electronic components and the energy industry. Massive federal bills created incentive opportunities for companies considering growth in these targeted sectors. State legislatures subsequently jumped in to create programs that would reflect and support industry growth within their states. Some of the largest economic incentive deals seen to date have occurred to support these types of industries, such as the Intel microchip facility slated for Ohio or the electric vehicle opportunities in Michigan, Ohio, Tennessee, Kentucky, or Texas. With changes in the economy, we have started to see initial deals pulled back, such as the LG-GM batter y facility slated for northern Indiana.
Leaders may be wondering if chasing after the next big trend is all that it is cracked up to be as they strive to build communities of the future.
Communities have always had to keep up with the ever-increasing speed of a global economy. Economic development offices have the challenge of watching for and maintaining sustainable policy despite these rapid changes. If the global pandemic taught us anything, it is that nothing is certain, and circumstances can change in the blink of an eye. It is important for communities to build a long-term plan that includes diverse industries and flexibility in scope to weather regional, economic, and potential trends. Proactive economic development practices, such as business retention and expansion (BR&E) visits, can help communities remain healthy and growing while economic development groups continue to consider new investments within their communities.
Much like the fad diets that we see pop up with regularity, true weight loss or healthy living comes from discipline and a long-term goal for a successful and healthy lifestyle. Building an economic plan that incorporates a variety of industries and supports a diverse population provides a foundation for development. Then, having the proper leadership and teams in place to stick
with the plan yields long-term benefits and outcomes that will lead to successful outcomes for businesses and communities alike.
Short-term solutions typically don’t stick, and the yo-yo effect can put businesses and economic developers in a worse position. The same can be said of economic development policy. Yes, it can be exciting to chase after the next big industry; however, most of the time, this does not work out for those who jump into the fray without considering the long-term opportunity or impact to their current and future business landscape. If leaders have an honest understanding of who the community is today and where they, as the leaders, want the community to be long term, this vision will help shape their economic development policy and temper the snap decisions to jump onto the latest band wagon.
1 https://www.atlantafed.org/economy-matters/regionaleconomics/2018/11/20/from-garments-to-amazon-economicincentive-programs-started-in-mississippi
2 https://opr.ca.gov/docs/20210203-TIF_Tools_Final_Report.pdf
It’s not enough to o er employees a great place to work. Companies that choose New Jersey know they’re in a community where their families can thrive. This is where students shine in nationally ranked public schools. Where children play in safe playgrounds and clean parks. Where people of all ages feel secure enough to dream big and turn those dreams into reality. This is New Jersey. The perfect home for your company and your family.
The future of work lies in the hands of leaders who understand what today’s life sciences workers value — and act like it.
By Kevin Wayer, President, Life Sciences, JLL
Life sciences leaders stand at a critical juncture between the past, present, and future of work. The workplace landscape has experienced seismic change in recent years, rendering it unrecognizable from the past. And the metamorphosis continues, driven by a range of converging trends reshaping the way we collectively think about work.
Despite highly specific and complex real estate needs, the life sciences sector is not immune to the new employee expectations manifesting in all industries. Whether they’re scientists or bankers, today’s knowledge workers demand more flexible work models, and they want to feel good about the organizations they serve in ter ms of both environmental and social principles.
Recent research shows life sciences executives are tuning in to these emerging employee needs.
JLL’s Futur e of Work Survey, 1 which included roughly 100 survey r esponses from those in the healthcare and life sciences industries, reveals that industry leaders expect hybrid to become the dominant model and are looking across their real estate portfolios for fresh opportunity to fuel flexible, collaborative work; sustainability; diversity, equity and inclusion (DEI); and well-being.
Through the height of the COVID-19 pandemic, organizations proved they could pivot quickly to support employees in a changing world. Now, you have a powerful new opportunity to flex those adaptability muscles once more — but this time with more control.
To help shape the future of work for the better in your own organization, build your real estate strategy around the following top trends in life sciences real estate:
1. Hybrid work is here to stay.
2. It’s time for more open, collaborative workspace.
3. Environmental and social outcomes matter more than ever.
4. The future of work is inclusive and human.
Trend #1: Hybrid work is here to stay. Embrace it. The hybrid reality is not only becoming the norm; it’s becoming non-negotiable in many companies. According to the JLL’s survey almost a quarter of life sciences leaders believe that offering remote and/ or hybrid work options will be critical in attracting and retaining talent.
By 2025, roughly 41 percent say their organizations will make remote working a per manent offering for all employees, and 30 percent plan to take an “employeechoice” approach to the question of hybrid work — compared with 7 percent pre-pandemic.
Given so much of life sciences work does need to happen in person, in labs and manufacturing facilities, these responses are clear indicators of an industry embracing flexibility as best it can.
What can your team do about it? Rethink your workplace model and, in turn, the size, shape and functionality of your real estate footprint. Operationalizing hybrid successfully means aligning space, technology, and HR strategy within one cohesive, fit-for-purpose portfolio. This could include ramping up the experiential quality of the space to ensure employees actually enjoy their in-person
time. It may also include reallocating space and increasing the proportion of flexible space to accommodate more dynamic working patterns.
Scientific innovation thrives on collaboration. But in an industry known for its highly regulated processes and procedures, it’s often been difficult to avoid a culture of silos — until now.
To fuel teamwork and peer-to-peer learning, many life sciences companies are working to transform the workspaces they offer into more open, dynamic and experiential environments. Life scientists desire adjacency to one another, even in a lab space.
More than half (60 percent) of life sciences respondents say they plan to do away with dedicated desk space in favor of open and collaborative office spaces. By curating a mix of flexible physical and digital work environments, they can spark connectivity and creativity as well as streamline communication and elevate the employee experience as a whole.
Environmental, social, and governance (ESG) considerations are increasingly important across all industries, including the life sciences sector — because employees are increasingly demanding it. Nearly three-quarters (72 percent) of respondents say their employees will increasingly expect the workplace to have a positive impact on the environment.
Motivated at least in part by employee support, many life sciences companies are taking steps to reduce their environmental footprint, promote social responsibility, and ensure good governance practices. For example, some organizations are investing in renewable energy and reducing their operational and embodied carbon to mitigate climate impact, while others are implementing green building design and reducing water usage and waste.
According to JLL research, the number of life sciences leaders prepared to pay a ‘green premium’ — higher rates to occupy more sustainable spaces — is likely to increase rapidly over the next three years.
Companies are also focusing on social responsibility by promoting diversity and inclusion and supporting charitable organizations and community groups. Whatever your corporate ESG goals may be, real estate is a powerful vehicle for delivering on the positive impacts employees and customers alike increasingly want to see.
By and large, today’s employees crave spaces where diversity, inclusion, and employee well-being are all high on the agenda.
Close to three quarters (71 percent) of respondents say their employees will increasingly expect their workplace to have a positive impact on society, including increased social value and community engagement. And more than half (53 percent) of life sciences decision-makers report they are accelerating investment into diversity, equity, and inclusion (DEI) programs in their own organizations — compared with 46 percent globally.
At the same time, life sciences leaders are more focused on employee well-being than their peers in other sectors, with 67 percent of respondents considering improving workforce resilience to be a key strategic objective.
Overall, we are seeing the life sciences sector delivering more on well-being from the employee perspective as compared to other industries. In fact, forward-looking organizations are dialing in on holistic well-being strategies that combine social, physical, and mental well-being.
• Social: Workplaces that enable collaboration and socialization help give people a sense of purpose and belonging.
• Physical: Offering healthy spaces with clean indoor air and thoughtful amenities supports physical activity, nutrition, and recovery.
• Mental: Organizing work so that people feel empowered to do their best work contributes to their sense of accomplishment — and per formance.
Organizations can also improve diversity, equity, and inclusion across the workplace and through portfolio operations by adopting responsible procurement principles and localizing supply chains where possible.
From hybrid working models and open space design to ESG and well-being initiatives, the future of work is, above all, human.
The period from 2022 to 2025 represents a crucial window of opportunity for life sciences and other organizations to redefine their workplace strategies for the better. The disruptive forces of the last few years have made us collectively stronger, better equipped to forge a bright new future amid continuing uncertainty. Now is the time to reset and think anew about your organization’s path to the future of work.
This critical decision moment requires connected thinking about work, workforce, workplace, and portfolio. By understanding the role real estate can play, we can together help shape a future where flexible working patterns and responsible social and environmental behaviors are the norm — and people, profits, and planet alike all reap the benefits.
Scientific innovation doesn’t stop. Nor should the real estate strategy behind it.
1 https://www.us.jll.com/en/newsroom/the-future-of-work-for-life-sciences-industry
Driven by a spirit of collaboration, Virginia’s life sciences sector has gained significant momentum in recent years and innovative hubs are emerging and expanding across the Commonwealth. Virginia convenes industry, education, and government to collectively work toward solving the most pressing medical issues and training the workforce to advance these developments.
An essential medicines collaboration developed in Virginia in 2020 with the establishment of Phlow Corp., a public benefit corporation affiliated with the Medicines for All Institute (M4ALL) at Virginia Commonwealth University’s (VCU) College of Engineering. M4ALL develops techniques and processes to make medicines using continuous manufacturing, a largely automated process that offers significant long-term savings and efficiency benefits over traditional batch manufacturing processes. This partnership has established the Richmond region as one of the top places in the country fighting to reduce prescription drug costs. In addition, VCU’s doctoral degree program in pharmaceutical engineering — the first of its kind in the nation — provides a strong workforce pipeline for the industry.
In 2021, Phlow secured a $354 million contract from the Biomedical Advanced Research and Development
Authority to manufacture essential medicines for the Strategic National Stockpile and start the first Strategic Active Pharmaceutical Ingredient Reserve to provide a long-term supply of key ingredients used to manufacture essential medicines. As a strategic partner in the initiative with Phlow, M4ALL, and AMPAC Fine Chemicals, nonprofit drug manufacturer Civica Inc. established a 140,000-square-foot state-of-the-art facility in the city of Petersburg that will convert active pharmaceutical ingredients from AMPAC and Phlow into vials and syringes of finished medications for use in hospitals.
In addition to manufacturing essential medicines hospitals use daily, the plant will manufacture and distribute insulins that will be available at significantly lower prices than insulins currently on the market. Civica recently announced it will manufacture insulins for the state of California’s CalRx Biosimilar Insulin Initiative. The new facility, expected to begin production this year, will ultimately have the capacity to produce a substantial portion of the insulin needed in the United States, with additional space to increase production if necessary.
The critical collaboration between Phlow, M4ALL, Civica, and AMPAC advances the pharmaceutical cluster that has emerged in Richmond-
Petersburg and solidifies Virginia as a significant player in domestic drug manufacturing. In 2022, a coalition led by the Virginia Biotechnology Research Partnership Authority was awarded $52.9 million as a recipient of the Build Back Better Regional Challenge for Biotechnology and Health.
This award is a major boost to pharmaceutical manufacturing in Virginia, enabling investments in wet lab space and expanded R&D, strengthening the community college pipeline for trained technicians, developing a regional supply chain, and providing critical infrastructure upgrades to sustain current and future capacity in Petersburg. The project will also catalyze a new partnership between VCU and Virginia State University to create pathways for underserved residents to high-quality training and jobs in the pharmaceutical industry.
Greater Richmond’s growth trend in life sciences also includes industry giants like Haleon (formerly GSK Consumer Healthcare) and Thermo Fisher Scientific Inc., which is investing $97 million to expand its bioanalytical laboratory operations into three new locations in the region. Recently, Virginia announced a $10 million grant to support a new 102,000-square-foot Innovation Center at the VA Bio+Tech Park in Richmond for life sciences office and lab space and to house startups, as well as $5 million toward the production of basic ingredients for medicine in Richmond-Petersburg.
Crucial collaboration and innovation among higher education institutions, government, and the private sector is advancing the Richmond-Petersburg region as an industry hotbed with global reach.
From crucial collaboration among higher education institutions, government, and the private sector and cultivation of a talent pipeline to establishing pharmaceutical manufacturing hubs and securing domestic supply chains, Virginia’s life sciences innovation is producing major successes that have global implications. In just the last three years, 20 life sciences projects have been announced totaling over 1,400 jobs and $1.2 billion.
vedp.org
Among the key legal issues to be considered when converting office to life science space are credit enhancements, expansion/contraction options, use segregation, and zoning.
By Matthew Weinstein, Chair, Real Estate Lease Structuring, Cozen O’Connor
One of the hottest topics discussed in real estate circles today pertains to whether life science conversions can save the perceived imminent obsolescence affecting large swaths of the office sector. Obsolescence is nothing new. Obsolescence, however, in the real estate world, prior to COVID, typically took years to achieve. The prospect of remote work was, no doubt, a growing trend for years. COVID, however, acted as an accelerant the likes of which the real estate sector and, in particular, the office sector had not observed in the career of most real estate professionals.
While architects and engineers have for years aspired to design the holy grail of buildings with unlimited flexibility, the fact of the matter is that few office buildings can instantly convert to life science uses. While the focus of real estate professionals has gravitated toward addressing design issues in office conversions, and they are undoubtedly important, such design issues are not the only issues to be considered in a life science conversion project. As will be discussed in this article, there are a number of legal issues a typical office lease may not contemplate that should be assessed and addressed in life science conversions.
For purposes of this article, life science space comprises laboratory space, research and development space, and cGMP space. While there may be an office component as well, the requirement of the life science portion of the premises is the true design driver, and, as such, creates unique issues not otherwise found in traditional office leasing.
It is important to change a developer’s thought paradigm when contemplating life science space such that it is viewed as its own asset class of real estate rather than a subclass or derivative use of office space. By way of example only, while floor load may be a factor in office leasing (particularly in server rooms, file rooms, and library areas, such as they exist in the digital age), floor loads of office space have been assumed in the design of a traditional office building. However, a typical life science space may house heavier equipment which increases the floor load, resulting in the need for additional reinforcements. An office building with industrial bones (e.g., an old newspaper building or quasi-industrial site) may facilitate an easier and more cost-effective life science conversion. Below is a discussion of several of the key legal issues surrounding office to life science conversions.
Life science conversions are more expensive than a simple office build out. Whether it be landlord work or tenant improvement allowance, the amount of funds designated to potentially stripping the building, upgrading base building facilities, and related expenditures creates quite a bit of increased costs. The willingness of landlords to fund such costs or of a lender to loan funds toward a conversion may be dependent on the financial viability of the tenant. As many life science tenants are startups or early-stage companies, the need for a credit enhancement is necessary in many cases. Some companies will elect to put up a cash deposit and many more will elect to cause the issuance of a letter of credit.
Until recently, the main reason to request a letter of credit pertained to the tenant’s creditworthiness. However, with the recent string of bank collapses, particularly Silicon Valley Bank and other lenders with considerable life science and tech exposure, the astute landlord will now need to underwrite the liquidity of the bank issuing the letter of credit. The ability to cash out the letter of credit and swap the letter of credit with another bank should be considered. The parties should consider more than simply a tenant default as a trigger for a landlord being permitted to draw on a letter of credit. This is particularly important as many lenders look to the continued existence of a line of credit in underwriting a loan with a landlord.
While developers and life science tenants may aspire to continuously expand their size, the reality is that many life science companies fail, move, or simply require less space in a particular building.
When it comes to the life sciences, Kansas means business. Investment in the fast-growing field is making the state a top place for research, discovery, and production of new technologies to improve the health of people, animals, and other living things.
Kansas Governor Laura Kelly and Lieutenant Governor/Kansas Department of Commerce Secretary David Toland have aggressively targeted growth in the bioscience sector with unrivaled support for world-class research, commercialization, business startups, and expansions. A strategic central location, robust talent pipeline, outstanding universities, and powerful partnerships do even more to bolster Kansas’ reputation as the ideal place to do business.
“Our life sciences sector is experiencing dramatic growth that’s made Kansas a bona fide hub for this important work,” Governor Laura Kelly said. “I’m proud of the infrastructure we’ve put in place that is fostering creative thinking and innovation to address emerging health threats and other critical endeavors.”
Achievements have been farreaching. From the University of Kansas’ nationally recognized drug discovery and development enterprise to the selection of Kansas for the USDA’s National Bio and Agro-Defense Center (NBAF), the bioscience sector is creating historic opportunities for companies in the state. NBAF — a biocontainment laboratory focusing on threats to the U.S. animal agricultural industry and other public health research — is appropriately located in Manhattan, Kan., known as the “Silicon Valley of Biodefense” due to work to predict, detect, and prevent the diseases of tomorrow.
Biopharma companies also are finding Kansas ripe for accelerated development of vaccines, treatments, and related supplies. Among medical and pharmaceutical firms gaining momentum, Scorpius BioManufacturing is building a new 500,000-squarefoot facility in Manhattan. The $650 million business investment will create 500 new, high-paying jobs. The facility will support the development of vaccines that enable an accelerated
currently houses numerous high-tech and bioscience companies and has created several hundred high-wage jobs.
Kansas also is a long-standing lifesciences force in the Animal Health Corridor — the single largest concentration of animal health interests in the world, and home to more than 300 companies researching and producing veterinary pharmaceuticals, specialized food for livestock and pets, and much more. More than 60 percent of the pet food sold in the U.S. is manufactured by companies in the Animal Health Corridor.
Also notable:
Kansas is home to a wide range of brand names and successful startups alike with companies such as Merck Animal Health, Hill’s Pet Food, TriRx Pharmaceutical Services, and Ronawk.
response to global biological threats, as well as provide commercial-level development, manufacturing, and bioanalytical testing services at every stage for biopharmaceutical products to the global healthcare industry.
State partners such as BioKansas are catalysts for this success. Representing more than 140 Kansas bioscience companies, academic institutions, biotech centers and related organizations, BioKansas makes the connections needed to attract and grow bioscience technologies, products, and services in the state.
More enhanced collaboration came recently with expansion of the new KU Innovation Park at the University of Kansas. The new, 70,000-square-foot facility offers fully functional wet labs, offices, and collaborative spaces for its tenant startups. The KU Innovation Park
Universities in Kansas offer numerous life-science degrees in human health science; animal and plant health initiatives; bioscience; and medical applications.
More than 16,000 Kansans are employed in the biosciences.
“Thanks to our extraordinary talent pool, technologies, and academic centers, Kansas is a world leader in life sciences research and development,” Lieutenant Governor and Secretary of Commerce David Toland said. “We are showing time and time again that Kansas has what it takes to attract these highly innovative companies, and further improve our state’s cutting-edge life sciences ecosystem.”
To learn more about the exceptional assets Kansas has to offer companies in the life sciences industry, please visit kansascommerce.gov.
The success of life science companies is more volatile than are traditional office tenants. While much focus is on the possibility of a collapse of a life science tenant, there should also be emphasis on the success of life science tenants. This plays into the conversion processes specifically. A more holistic, cradle-to-grave analysis is necessary with a life science tenant.
For example, a traditional law firm or bank tenant can project their needs and organic growth over 10 or maybe 15 years based on historical growth. Life science companies have no baseline. There is a need for flexibility in the conversion of the building to ensure enough floors and/or the entire building is converted or can readily be converted to life science use such that the life science tenant can grow into its needs. Whether it be expansion options, rights of first refusal, or rights of first offers for additional space, or even relocation rights to new space, landlords and tenants need to have an honest discussion about potential growth and take into account those needs as necessary.
While developers and life science tenants may aspire to continuously expand their size, the reality is that many life science companies fail, move, or simply require less space in a particular building. As important as contemplating possible expansion of a life science space when assessing conversion related issues, the concept of contraction and how such a reduction in space may affect partial buildings and partial floors must also be addressed by the parties. While it may be more incumbent for a tenant rather than a landlord to raise the possibility of a contraction, it is important that both parties have an honest discussion about space needs going forward and when designing the re-use of converted space, taking into account how a reduction in space may impact building systems.
Conversions of an entire building allow for an upgrade of entire systems, particularly when the entire property is stripped and rebuilt; however, partial building conversions (e.g., street level retail, life science, and residential floors) require unique considerations. From a design perspective, there may be a need for elevated HVAC requirements in life science spaces, fire safety considerations, elevator usage requirements, soundproofing, and vibration mitigations that are not necessary in other uses.
There are costs for such uses that may not be allocable in a simple operating expense proration. The developer may need to look at “condominiumizing” the building in a multi-tenant and multi-use building to ad -
dress the asymmetrical use of facilities and to ensure that costs are properly allocated between the various uses. While there will certainly be quite a bit of discussion among the design professionals as to how that use segregation will occur, how that will occur legally (e.g., condominiums, cross easements, and similar items) will require quite a bit of advance legal planning.
The rules and regulations may similarly need finetuning to account for the different uses in the building. By way of example, a new pet policy makes sense in a traditional office setting or even a residential setting (or at least limiting the building to certain domesticated pets). Such a restriction does not work when housing a vivarium. The presence of animals of all types must be permitted in the premises (and disposal must also be addressed). So too, gyms or other vibration-creating uses may not be permitted within life science areas as they create noise and vibration issues that can affect the calibration of equipment. While such an amenity for residential tenants may be a plus, the proximity of such amenities to life science space can create issues.
Office use is not necessarily zoned the same as life science usage. Certain cGMP and other uses may fall into industrial and light manufacturing zoning uses that, in turn, may require the converted property to obtain a variance or special exception rather than be permitted to operate as of right. Prior to embarking on the life science conversion journey, the legal team must ensure that an audit of the zoning for the project is thoroughly vetted. Single-use buildings and multi-use buildings may trigger different facets of the zoning code. Additionally, issues regarding subtle differences between industrial, manufacturing, and warehousing uses as part of the life science premises may be as of right or need a variance which can add time, cost, and additional work in connection with a life science conversion.
The above conversion-related legal concepts are not intended to be exhaustive. This area of law is dynamic, with new issues and challenges arising on a monthly, weekly, and — at times — daily basis. Just as architects, civil engineers, and developers are modifying their proformas, preconceptions, and thought processes as they contemplate whether and how a building can be converted, so too will legal professionals need to adjust to the vibrant life science asset category as they contemplate future conversions.
Life science conversions are more expensive than a simple office build out.
With Mayo Clinic at its heart, Destination Medical Center (DMC) is the largest public-private economic initiative in Minnesota and the catalyst for growth in Rochester, Minnesota.
Two Discovery Square has 125,000 square feet of WiredScore-certified, turnkey lab space located across the street from the #1 hospital in the nation, Mayo Clinic.
Learn more at dmc.mn or contact Michael Flynn at: 801-891-5755 or michaelflynn@dmceda.org
Chris Schad at: 507-269-4954 or chrisschad@dmceda.org
More than its monuments and museums, Washington, DC, is a global tech hub and a force in innovation, developing cutting-edge research across the life sciences, engineering, and data science sectors. The city is ranked #3 in the U.S. for tech talent by CBRE,1 with access to an industry-leading workforce of about 260,000. The local innovation ecosystem is supported by top-tier educational institutions like Georgetown University, George Washington University, and Howard University; active venture capital; and opportunities to closely engage with decision-makers shaping the regulatory landscape for new technologies.
Washington, DC, offers several competitive advantages to businesses in the tech and R&D industry clusters. With increased public-private partnerships, investments, and talent development in these sectors, the District is a thriving ecosystem for funding, developing, and bringing new inventions and products to market.
With more than 50 percent of adults in the region holding a bachelor’s degree or higher and over 100 colleges and universities within 100 miles, the DC region offers a highly skilled workforce and a robust talent pipeline. The region’s workforce also offers superior concentrations in high-demand tech occupations, with significant specialization in computer and information analysts and research scientists, operations research analysts, and database and network administrators and architects. Its
diverse and inclusive workforce has also made it the #2 City for Women in Tech2 and #1 for Black Entrepreneurs.3 DC’s growing access to venture capital funding broke records in 2021, with $4.9 billion in funding going to companies across the region.
Major employers in the region have capitalized off these advantages and include Accenture, Amazon, Capital One, CACI International, Consilio,
Research and Development Authority, and National Institute of Standards and Technology.
Locating in DC provides access to several incentives and resources, including the Vitality Fund, a discretionary “closing fund” administered by the DC government to assist businesses in target sectors to relocate, expand, or stay in Washington, DC, and the Creative Open Space and Modernization tax rebate designed to support the growth of large technology companies.
To support companies’ workforce development goals, the DC Department of Employment Services offers a variety of services to help employers, including the Work Opportunity Tax Credit, onthe-job training, and apprenticeship programs.
CoStar Group, General Dynamics, MapBox, and Microsoft. Recent expansions in DC include Google’s new 130,000-square-foot downtown lease, Boston Consulting Group’s 98,000-square-foot office, and a 71,100-square-foot lease for TikTok.
As home to the federal government, Washington, DC, also offers unparalleled proximity to key U.S. government agencies and funders, such as the Department of Health and Human Services, Food and Drug Administration, National Institutes of Health, National Science Foundation, Defense Advanced Research Projects Agency, Biomedical Advanced
DC provides the right talent, funding, and supportive ecosystem for companies to expand their operations in an innovative and vibrant landscape, and the Washington DC Economic Partnership is available to support businesses on the path to expansion. For more information on how your company can secure its future in DC, visit wdcep.com or contact Audrey Polk, VP of Corporate Attraction at apolk@wdcep.com.
1 https://www.cbre.ca/insights/books/scoringtech-talent-2022
2 https://www.yahoo.com/lifestyle/best-citieswomen-tech-2022-110042977.html
3 https://www.blackenterprise.com/incfilewashington-d-c-is-the-best-city-for-blackentrepreneurs/
Companies looking to expand their operations will find the talent, funding, and support they need in the DC region.Washington DC, The Wharf. Courtesy of “The District Wharf”
With concerns about climate change now supplanting pandemic fears, projects to produce EVs — and the semiconductors used by vehicles and other high-tech goods — come to the forefront in this year’s Shovel Awards report.
By Steve Kaelble
If there’s one thing that has been consistent with our Shovel Awards from year to year, it’s the fact that nothing gets in the way of progress and good news. Even amid challenging times such as the COVID pandemic, lots of positive developments move forward. The uncertainty we all felt during the worst parts of the pandemic in 2020 and 2021 didn’t stop location and expansion projects from blossoming.
In 2022, the pandemic was fading, the economy was sizzling, and growth was continuing to generate exciting economic development headlines. And interestingly, many of the headlines were linked to a different critical challenge as daunting as the pandemic, potentially even more so. That would be the challenge of climate change. Concerns about the environment are accelerating the shift to electric transportation, and in 2022, that shift was a catalyst for huge projects across the country.
The latest Shovel Awards reflect this in a big way. Many of the biggest recent projects involve the manufacture of electric vehicles or the batteries that power them — check the sidebar online for more info. Meanwhile, many other projects driving this round of Shovel Awards reflect the increasingly active
Area Development’s annual Shovel Awards recognize states for their achievements in attracting high-value investment projects that will create a significant number of new jobs in their communities. We asked for information from all 50 states about their top jobcreation and investment projects initiated in 2022. Based on a combination of weighted factors — including the number of new jobs to be created in relation to the state’s population, the combined dollar amount of the company investments, the number of new facilities, and the diversity of industry represented — five states achieving the highest weighted overall scores were awarded Area Development’s Gold Shovels in five population categories: fewer than 2 million, 2+ to 4 million, 4+ to 6 million, 6+ to 10 million, and 10+ million. The runners-up in each of the above population categories earned Silver Shovels. This year, just one state was given our Platinum Shovel award in recognition of the fact that the state went beyond the Gold standard for job creation and investment.
domestic semiconductor industry, fueled in part by federal incentives and in part by an ever-increasing hunger for chips that has driven painful shortages. And as noted in the related sidebar online on that sector, some of those shortages can be linked to the impact of the COVID pandemic.
Our Shovel Award honors are based on information shared with us by state economic development officials. The info was current at the time it was provided, though it goes without saying that from time to time, plans are later revised or delayed by unforeseen circumstances.
We’ve spotlighted states whose project activity has been exceptionally strong by bestowing Gold Shovel and Silver Shovel awards. And like last year, we’ve put a Platinum Shovel spotlight on one state with job creation and investment activity that is even further above and beyond. Read on for the latest good news!
The Magnolia State has been a key player in the automobile manufacturing industry since Nissan established its 3.5 millionsquare-foot assembly plant in Canton in 2003. Since then, Toyota and PACCAR also have established plants in Mississippi. Additionally, Mississippi is home to three of the nation’s largest tire makers, Continental, Yokohama Tire and Cooper Tire.
SEE WHERE MIGHTY MISSISSIPPI CAN TAKE YOU. Visit MISSISSIPPI.ORG/automotive to learn more.
There are many ways for businesses to fuel growth. A favorable tax structure ranks right up there. At just 2.5%, North Carolina’s corporate tax rate helps businesses across industries expand, invest, compete, attract talent and create jobs. The advantages of this rate are only going to get more advantageous. By 2030, the corporate income tax will be phased out completely. If 2.5% spurs growth, just imagine what 0% will do.
Read the KPMG and Tax Foundation study.
North Carolina earns another Platinum Shovel with a list of major projects that covers most of the economic bases. Leading the way is one of our Manufacturing Project of the Year awards, which happens to be one of the many related to the manufacture of electric vehicles, or EVs. A Vietnamese newcomer to this sector, VinFast plans to hire as many as 7,500 people at a plant in Moncure, North Carolina, which is slated to be operational by 2025.
VinFast is to be a $4 billion investment. Semiconductor maker Wolfspeed one-ups that news with a $5 billion deal to manufacture silicon carbide wafers in Siler City. The wafers are used to form semiconductors, and the company’s chip-related products will help make EVs go — Wolfspeed has partnerships with General Motors, among other automakers. The Siler City plant is to create about 1,800 jobs.
Nearly as many jobs are promised in Greensboro by Boom Supersonic, which is gearing up to make supersonic airliners that go by the name Overture. The company boasts more than 130 orders for Overture aircraft already, and beyond the ability to fly twice as fast as the average commercial airliner, the Overture runs on sustainable aviation fuel, so there’s yet another environmental angle. The company’s Greensboro investment is about half a billion dollars.
North Carolina has covered most of the bases with its recent economic news — with another sector being retailing. Macy’s intends to create 2,800 distribution jobs in China Grove, with an investment of more than half a billion dollars in an automated fulfillment center, earning the project one of our NonManufacturing Project of the Year awards.
The pharmaceuticals sector shows up big-time, too. Eli Lilly and Co. has promised to spend nearly a billion dollars and hire nearly 600 people at a brandnew manufacturing facility in Concord that will make injectable products and devices. The company cited local manufacturing technology experience and the proximity of science-focused universities among its decision points.
Also, in pharmaceuticals, BestCo is expanding in Mooresville. The company makes over-the-counter drugs and supplements and has promised a $177 million investment that’ll create nearly 400 jobs. Another life sciences win is the $188 million FUJIFILM Irvine Scientific facility in Research Triangle Park that will make cell culture media and create about a hundred jobs.
The state’s success spreads to food processing. SOPAKCO, which specializes in shelf-stable combat rations for the military (among other customers), plans 440 jobs in Laurinburg, while Believer Meats will make what’s known as cultivated meat in Wilson at the world’s largest facility of its type. The state’s other major announcements are in the fields of steel, specialty chemicals, and nuclear power.
Automotive manufacturing is nothing new in Ohio, where Chevy, Honda, Ford and Acura models roll off assembly lines in large numbers. So, it’s hardly surprising that the state would take home a Gold Shovel Award with the help of lots of automotive announcements related to EVs. The biggest new deal involves Honda and LG Energy Solution partnering to make lithium-ion batteries for Honda EVs. It’s an investment of more than $4 billion with a job count that could exceed 2,500.
The need for EV batteries is also driving the creation of nearly 1,200 jobs in Sidney, where SEMCORP Advanced Materials Group is investing nearly a billion dollars. The factory will make separator film, a component in EV batteries. Ford, meanwhile, is spending a billion and a half dollars at its Ohio Assembly Plant in Avon Lake. The plan would add 1,800 jobs making electric commercial vehicles.
Ohio boasts two of the Projects of the Year this time around. One is truly a megadeal — a $20 billion, 3,000 job semiconductor plant announced by Intel Corp. is recognized as a Manufacturing Project of the Year. That Intel plant is still under construction but its spot on the map is fast becoming a hot property — already, other tech companies are planning their own nearby projects. And the $150 million Medpace Inc. expansion in Cincinnati is recognized as a Non-Manufacturing Project of the Year. The clinical contract research organization offers development services in the biopharmaceutical and medical device sectors and plans to add 1,500 jobs.
Arizona takes home a Gold Shovel Award that also owes a lot to semiconductor and EV developments. In Queen Creek, LG Energy Solution announced a $1.4 billion investment to create its first U.S. cylindrical EV battery plant, where production is to begin in 2025. And, as if that 1,500 job project wasn’t enough, the company followed up this spring by upping its
COMPANYCITY/COUNTY N/E # JOBSINV. AMT. INDUSTRY
# JOBSINV. AMT. INDUSTRY
TSMC PhoenixN2,500$28 billion Semiconductors/ Chips
LG Energy Solution Queen CreekN1,500$1.4 billionAutomotive/Battery
American Battery Factory TucsonN1,000$1.2 billionAutomotive/Battery
Nestle USA GlendaleN350$675 millionBeverages
Procter & Gamble CoolidgeN500$500 millionConsumer Products
XNRGY MesaN900$300 millionHVAC Systems
KPCT Advanced Chemicals Casa GrandeN65$200 million Semiconductors/ Chips
Chang Chun Arizona Casa GrandeN300$300 million Semiconductors/ Chips
Nucor KingmanE140$100 millionSteel Production
Corning GilbertN250$100 millionFiber Optic Cable
FrameTec Camp VerdeN180$40 million Building Products/ Hdqtrs.
Sendoso PhoenixN1,000$40 million Tech/Software Hdqtrs.
(pop. 7.36 million) States with populations 6+ to 10 million Manufacturing Project of the Year
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planned investment to $5.5 billion, adding a lithium iron phosphate battery facility that’ll open in 2026. Meanwhile, American Battery Factory pledged a $1.2 billion lithium iron phosphate battery plant in Tucson that will employ a thousand people once it scales up between 2026 and 2028.
Chip-related projects are in the works from Taiwan Semiconductor Manufacturing Co. (TSMC) in Phoenix, worth $28 billion with a boost of 2,500 jobs (a Manufacturing Project of the Year), along with semiconductor chemical suppliers Chang Chun Arizona and KPCT Advanced Chemicals, both of which are coming to Casa Grande. Chang Chun promises as many as 300 jobs in its $300 million facility that should begin production in 2024, while KPCT is investing $200 million in a 65 job plant that will open by 2025.
Still, the Arizona story is wellrounded, with announcements in a number of other sectors. That includes a Corning fiberoptic cable plant in Gilbert, Nestlé USA creamer production facility in Glendale, a Nucor steel expansion in Kingman, a Procter & Gamble consumer products production operation in Coolidge, XNRGY’s U.S. headquarters and production of air handling equipment in Mesa, and FrameTec production of roof and floor trusses as well as wall panels in Camp Verde. And Sendoso, a tech company, is moving headquarters and a thousand jobs from California to Phoenix.
Hyundai Motor Manufacturing Alabama, LLC Montgomery, ALE200 $300 million
Mobis North America Electrified Powertrain, LLC
LG Energy Solution
Montgomery, ALE400 $205.1 million
Queen Creek, AZN1,500 $1.4 billion
American Battery Factory Tucson, AZN1,000 $1.2 billion
Hyundai Motor Group Ellabell, GAN8,100 $5.5 billion
FREYR Battery
Dieomatic Inc.
T/CCI
Newnan, GAN700 $2.6 billion
Williamsburg, IAE521 $46 million
LG
Inc. Holland, MIE1,200 $1.7 billion
Our Next Energy (ONE) Novi, MIN2,112 $1.6 billion
Magna Electric Vehicle Structures St. Clair, MIE1,224 $196.4 million
Piston Automotive Wentzville, MON204 $10 million
Nissan Canton, MSEN/A $500 million
VinFast Moncure, NCN7,500 $4 billion
Redwood Materials, Inc. Storey, NVN701 $1.1 billion
Electrovaya Elliott, NYN250 $75 million
GM Components Lockport, NYE230 $117 million
Li-Cycle
Rochester, NYE270 $359.3 million
Hondal/LG Energy Solution Jefferson Township, Marysville, Anna, East Liberty, OH N/E2,527 $4.2 billion
Ford Motor Company Avon Lake, OHE2,000 $1.5 billion
SEMCORP Manufacturing USA
Sidney, OHN1,199 $915 million
Crane Carrier Corporation New Philadephia, OH E434 $15 million
Redwood Materials
Ridgeville, SCN1,500 $3.5 billion
BMW Manufacturing Woodruff, SCE300 $1.7 billion
Envision AESC
Kontrolmatik Technologies
Florence, SCN1,170 $810 million
Walterboro, SCN575 $279 million
BMW Greer, SCE200 $200 million
Ultium Cells LLC
Duksan Electera America, Inc.
GreenPower Motor Co.
Spring Hill, TNE400 $275 million
Shelbyville, TNN101 $94.6 million
Kanawha County, WV N200 $6.7 million
The future is firmly rooted in Arizona as the home to cutting-edge manufacturers and suppliers from around the world. One of these companies is Taiwan Semiconductor Manufacturing Company (TSMC) whose recent $40 billion investment helped Arizona reach #1 in the nation for foreign direct investment. TSMC’s commitment to pushing the boundaries of chip making earned them the 2023 Manufacturing Project of the Year Award . Arizona also has received the 2023 Gold Shovel Award , marking the third and fi fth time the state has won each respective award.
Arizona is a premier location to catalyze advanced technologies and o ers a lifestyle that allows employees to achieve their personal goals with endless outdoor activities, vibrant arts and culture, and a ordable living. It’s this perfect balance that makes life better here—and provides the winning combination for global innovators.
Kentucky earns a Gold Shovel with a characteristic blend of automotive, logistics, and local adult beverage flavor. It, too, rakes in the EV-related jobs, with the Envision AESC facility in Bowling Green leading the way with an expected 2,000 jobs, and recognized as a Manufacturing Project of the Year. Ascend Elements will be recycling EV batteries and making engineered cathode active materials in Hopkinsville, a billion-dollar deal worth about 400 jobs. In Louisville, Ford’s Kentucky Truck Plant is expanding to the tune of $700 million and 500 jobs, preparing for production of the F-Series Super Duty truck.
Another project driven by climate change is the EnerVenue facility planned in Shelby County. About 450 people will make energy storage equipment there. Mayfield Consumer Products is recovering from severe tornado damage with a project that could create nearly 500 jobs. Catalent’s flagship pharma operation in Winchester is growing, and there are logistics projects involving Trader Joe’s in Franklin, Amazon Air in Hebron, and longtime Louisville logistics player UPS. As for the adult beverages, Beam Suntory’s expansion in the Kentucky community of Boston will make more Jim Beam while producing fewer greenhouse emissions, while bourbon-maker Sazerac is investing $600 million to build bourbon-barrel warehouses and expand its cooperage in the community of London.
As mentioned in the online sidebar on EVs/batteries, Gold Shovel winner Kansas lands on the EV map in a big way with a Panasonic Energy Co. lithium-ion battery plant in De Soto worth as many as 4,000 jobs, which is recognized as a Manufacturing Project of the Year. That’s definitely a big deal, especially in a smaller state. But the state also records logistics wins that reflect its central location and a host of food processing and agribusiness deals that tap into its agricultural heritage.
COMPANYCITY/COUNTY N/E # JOBSINV. AMT. INDUSTRY
Micron BoiseE2,000$15 billionSemiconductors
Meta KunaN100$850 million Data Center
Suntado BurleyN104$123 millionFood Processing
The Stow Company NampaN139 $115.4 million Consumer Products
Matern (Go Go Squeeze) NampaE150$108 millionConsumer Products
Wild Rye KetchumE28N/AHeadquarters
Love’s Mountain HomeN65$25 million Distribution/ Warehousing
Seeler Industries KunaN35$4 millionConsumer Products
Trimjoist Corporation KunaN50$400,000Raw Materials
Northwest Fourslide LewistonN49$5 millionPrecision Stamping
Black Market
Gelato BoiseN12$2 millionFood Processing
Equifax BoiseE60N/ABusiness Services
(pop. 1.94 million) States with populations under 2 million Manufacturing Project of the Year
On the logistics side, a Clorox distribution project in Olathe is worth as many as 250 jobs. Simmons Pet Food is creating 175 jobs in Edgerton for warehousing and distribution of its private-label pet products, a nice complement for the planned $115 million production expansion at its Emporia facility that will add 177 jobs. Other food processing announcements include Cargill Meat Solutions in Dodge
City, JTM Foods in Wichita, and a $326 million state-of-the-art Heartland CocaCola production campus in Olathe. Other expansions include projects at Goodyear Tire & Rubber Co. in Topeka, Pratt Industries in Park City, McCarty Dairy in Rexford, Kubota/ Great Plains Manufacturing in Salina, and at pharmaceutical maker Hospira in McPherson.
The Gold Shovel for the smallest states, population-wise, goes to Idaho, where the good news is led by the 2,000-job, $15 billion Micron expansion in Boise, a Manufacturing Project of the Year, mentioned in the online sidebar on semiconductor production. The remainder of Idaho’s list of projects is a diverse assortment of plans that foretell a healthy economic future.
In Nampa, for example, The Stow Co. plans to make its custom closet organizers and home organization systems, and Materne is expanding its GoGo Squeez production facility that makes healthy foods in easy-to-tote packaging. Suntado will be making shelf-stable milk and other beverages in Burley, a big boost for area dairy farmers. And in Boise, Black Market Gelato is investing in production of gelatos and sorbets that it claims are “so good, hard to believe it’s legal.” Idaho also boasts such wins as a new, $850 million Meta data center in Kuna, an Equifax expansion in in Boise, and growth at the headquarters of Wild Rye in Ketchum, maker of women’s outdoor apparel.
Continuing the high-level theme for this year’s honors, EV and battery projects are all over the Silver Shovel states, too, and tend to be among the biggest deals that brought Shovel honors.
Georgia landed one of the biggest, the Hyundai project in Ellabell, which is recognized as a Manufacturing Project of the Year. It’s a $5.5 billion plant that is expected to employ more than 8,000 people and turn out as many as 300,000 cars a year. But it’s not the only game of this kind for Georgia — Norway’s FREYR has a $2.6 billion battery plant in the works in Newnan that will employ about 700. This plant is slated for energy storage in general, not just for cars, but the company says it has gotten lots of interest from EV manufacturers.
In Silver Shovel winner Michigan, General Motors is spending $4 billion in Orion Township where it will build full-size EV pickups. Add to that the $2.5 billion Ultium Cells project in Lansing, the $1.7 billion LG Energy Solution project in Holland, the Magna Electric Vehicle Structures expansion in St. Clair, and the $1.6 billion Our Next Energy project in Novi (a Manufacturing Project of the Year), and that’s a whole lot of EV-related jobs in an automotive state.
Though there aren’t any deals related to EVs on the top projects list from Silver Shovel honoree Texas, there’s plenty of growth tied to semiconductors, resources, and petrochemicals. The community of Sherman’s economic future is ensured by the massive Texas Instruments $29 billion deal that will create 3,000 jobs, a Manufacturing Project of the Year, along with a $5 billion, 1,500-job GlobiTech expansion.
A promising resources-related development is in Amarillo, where CVRM (Texas) Inc. is dropping $1.5 billion into critical mineral refining and planning to hire a thousand people in early phases, then more than double the payroll in future phases. Meanwhile, though the job counts are lower, the investments are also impressive in Gregory, Texas, where Cheniere Energy is spending $8 billion to expand its LNG plant, and in Beaumont, where OCI is spending a billion dollars on an ammonia plant.
Of course, the economies of these three Silver Shovel states, which large populations, are driven by much more than just EVs, chips, and chemicals. There’s food, for example. Jack Link’s will be hiring as many as 800 people to make beef jerky in Perry, Georgia. Tropicale Foods will be making the frozen treat known as paleta in Lubbock, Texas, with a plan to hire 500 people. Meanwhile, a Greece-based maker of natural snack foods, Unismack, is on the way to Kentwood, Michigan.
Then there are the thousand aerospace jobs on the way at Archer Aviation in Covington, Georgia, and 400 at Killdeer Mountain Manufacturing in Kerrville, Texas. Also, in Texas, TIAA plans 2,000 financial services jobs in Frisco, while CelLink Corp. has a similar number of electronics jobs on the way in Georgetown. And Norma Precision Ammunition is moving its U.S. headquarters, manufacturing, and distribution to Georgia, where it will create 600 jobs.
billion Critical Mineral Refining
OCI Beaumont BeaumontN70$1 billionMethanol-Ammonia
FUJIFILM Diosynth Biotechnologies College StationE150$300 millionLife Sciences/Biotech
Chick-fil-A HutchinsN325$275 million Distribution/ Warehousing
Expansion Industries
CelLink Corporation
HooksN400$150 millionAmmunition
GeorgetownN2,000$130 millionElectronics
TIAA FriscoN2,000$58 millionFinancial Services
Texas Instruments ShermanN3,000$29 billion Semiconductors/ Chips
Killdeer
Mountain Manufacturing (KMM)
Tropicale Foods LLC
KerrvilleN400$8 million Aerospace/Wire Harness Assemblies
LubbockN500$66 millionFood Processing
(pop. 30 million) States with populations 10+ million Manufacturing Project of the Year
With more than 20 years experience creating authentic Mexican frozen treats, Tropicale Foods, the No. 1 Hispanic frozen novelty company in the U.S., announced its new location will be in Lubbock, Texas. This expansion brings with it 500 new jobs and $66.8 million of capital investment to West Texas.
For more tasty details on this announcement, scan the QR code below.
Three states with populations 6+ to 10 million earned Silver Shovel honors. They, too, will be adding lots of jobs related to EVs, batteries, and semiconductors. But just because we can, we’ll talk first about toys.
One of our Manufacturing Projects of the Year is the LEGO Group’s plan to spend a billion dollars and hire nearly 1,800 people in Silver Shovel winner Virginia, making the distinctive building toys that kids can’t get enough of. The company liked the nearly shovel-ready site with room to grow, and the fact that an Amazon fulfillment center will be a neighbor was very attractive.
Virginia’s Silver Shovel honor isn’t just fun and games, though. The state is tallying hundreds of new jobs in distribution, at World Class Distribution, Amazon, AutoZone, Lowe’s, and MS International. A DroneUp expansion will fly high in Virginia Beach, and Plenty Unlimited is spending $300 million
Chesterfield and Timmons Group congratulate the LEGO Group on being a Manufacturing Project of the Year!
Founded in 1932, the LEGO Group’s global brand is a fixture for many adults and children alike. The company is expanding its global brand with a 1.7M SF production facility at Meadowville Technology Park in Chesterfield, Virginia. The Denmark-headquartered company’s $1 billion factory will be carbon-neutral run and will employ more than 1,760 people. The project will be located on a roughly 340-acre industrial site bordering the James River.
The LEGO Group has committed to provide an initial $1 million to charitable organizations that support local children from disadvantaged backgrounds with learning through play programs. That’s in addition to $300 thousand the company has already provided in support of the Museum of Richmond and the Science Museum of Virginia in 2022 as part of the ongoing LEGO® Playful Learning Museum Network initiative.
Timmons Group provided essential and valuable consultation services to Chesterfield Economic Development for this transformational project.
Chesterfield is grateful to have fantastic companies like the LEGO Group and Timmons Group as corporate citizens partnering to build a better community in our region.
to build the world’s largest vertical farm campus, where millions of pounds of strawberries will grow.
Three billion-dollar deals helped seal the Silver Shovel for Indiana. The biggest is the StarPlus Energy announcement of a $2.7 billion, 1,400 employee lithiumion battery plant in Kokomo, which is recognized as a Manufacturing Project of the Year. The batteries will power vehicles made by Stellantis, the auto giant created by the 2021 merger of Fiat Chrysler and the PSA Group of France. Indianapolisbased pharmaceutical giant Eli Lilly and Co. has expansion plans in the suburban community of Lebanon worth $2 billion or more, while SkyWater Technology is planning a $1.8 billion semiconductor R&D and manufacturing facility in West Lafayette, as a partnership involving the state and nearby Purdue University.
Indiana enjoyed another semiconductor announcement, Nhanced Semiconductors in Odon, and another pharmaceutical deal, the Evonik expansion in Lafayette. RollsRoyce is adding jobs at its Indianapolis aerospace engine facility, and Andretti Global is building a motorsports headquarters facility in suburban Fishers — all projects worth hundreds of millions in investment dollars each.
In Silver Shovel honoree Tennessee, EV batteries are creating the biggest headlines. Leading the way is the $3.2 billion LG Chem America cathode plant announced in Clarksville, where 860 people will manufacture a component for EV batteries — enough to power more than a million new cars a year. Piedmont Lithium is also planning to make a building block for EV batteries in Etowah (where it’s investing nearly $600 million) and so is Duksan Electera America in Shelbyville. And the Ultium Cells battery plant that Tennessee announced back in 2021 is already expanding and adding 400 jobs — it’s intended as a supplier for the General Motors Spring Hill assembly plant.
Jobs-wise, the biggest Tennessee announcement is the Franklin expansion of the Landmark Recovery business services/ headquarters facility, where 1,300 new
jobs are on the way for this drug and alcohol addiction treatment services firm. In the world of consumer products, hundreds of new Tennessee jobs are being created by 3M and Georgia-Pacific.
In Alabama, aluminum is one of the keys to Silver Shovel designation. Atlanta-based Novelis is building a $2.5 billion aluminum mill in Bay Minette, which made our Manufacturing Projects of the Year list and will lead to a thousand jobs after it opens in 2025. Watch for another thousand new jobs in Mobile, where Airbus is spending $700 million to add another final assembly line to boost production of the A320 passenger aircraft. Speaking of flying, United Launch Alliance is expanding in Decatur to accommodate a contract with Amazon to build three dozen rockets that will send Internet-delivering satellites into orbit.
The impact of climate change is also creating jobs in Alabama, as First Solar spends more than a billion dollars on a photovoltaic solar module manufacturing facility that will create about 700 clean energy jobs. Of course, the EV impact is felt here, too, through the expansion of the Hyundai plant in Montgomery and the launch of the Hyundai Mobis battery module plant nearby. Two separate beverage facilities are planned in the same part of the state, as well — Diageo and Manna Beverages & Ventures.
South Carolina earns a Silver Shovel with a host of projects tied one way or another into EVs and the auto sector in general. The biggest is one of the Manufacturing Projects of the Year, the $3.5 billion Redwood Materials battery operation creating 1,500 jobs. But that’s just the start. Envision AESC is investing $810 million in a state-ofthe-art battery cell gigafactory that will employ 1,170, BMW is building a $200 million press shop in Greer, and Bosch will be producing fuel cells in Anderson that will drive hydrogen-powered trucks.
Another South Carolina project sparked by an interest in climate change is the Kontrolmatik Technologies project in Walterboro that will create more than 500 jobs. The facility will make lithiumion batteries for energy storage systems that can pair up with renewable energy generation or serve as backup power during outages.
Lots of companies are expanding in Wisconsin, enough to warrant a Silver Shovel. Leading the way is a Non-Manufacturing Project of the Year, the Exact Sciences headquarters expansion in Madison that will add some 1,300 new jobs. The company makes Cologuard, the heavily marketed at-home colon cancer screening test, along with tests that doctors can use to individualize cancer treatment.
The state has a pair of expansions related to watercraft — yacht-maker KCS International and shipbuilder Fincantieri Marine Group. Plenty of new jobs are being fed by expansions in the food industry, too. Salm Partners makes
sausages and hot dogs, McCain Foods processes appetizers, Masters Gallery Foods packages cheese, and Phelps Pet Products makes jerky treats for dogs.
Food processing is also big business in Silver Shovel winner Arkansas. Tyson Foods is expanding in Bentonville, Hostess Brands in Arkadelphia, and together they’re adding a thousand jobs to the state’s economy. Distribution provides growing employment possibilities in Arkansas, too, including new operations from Tractor Supply, Dollar General, and Lowe’s that together will create nearly a thousand more jobs.
Other projects add to the diversity. Italy-based Fiocchi USA picked Little Rock for an ammunition primer facility that will supply the ammo manufacturing sector. Highbar LLC, a new operation focused on sustainable scrap metal recycling and steel production, will build a rebar steel mini-mill in northeast Arkansas worth a couple hundred jobs and more than $450 million in investment. AFCO Steel is expanding in Little Rock, and Lifeplus International is expanding its Batesville holistic well-being products operation.
The story in Silver Shovel honoree Connecticut is led by two $200 million projects. One involves General Dynamics Electric Boat, a submarine builder that’s the biggest employer in Connecticut and Rhode Island and is adding 1,500 jobs in Groton. The other is AMSL, a semiconductor equipment maker adding a thousand jobs in Wilton. A diverse list of projects bolsters the good-news story, including financial services jobs at Mirador and Apollo Global Management, aerospace jobs at Polamer Precision, distribution jobs at BJ’s Wholesale Club, and careers in biotech at Arvinas.
To the south in Mississippi, a Manufacturing Project of the Year leads the way — the expansion of Steel Dynamics in Columbus. It’s a $2.5 billion deal promising a thousand new jobs. In Canton, Nissan Motors is spending $500 million to retool its assembly plant and upskill 2,000 jobs. Nissan and Infiniti EVs will start rolling off the line there in 2025. Sustainable wood bioenergy is fueling the $250 million investment that Enviva Inc. is making in the community of Bond, where 100 new employees will produce wood pellets. CLAW Forestry plans 131 jobs at its $200 million sawmill in Gloster. And there are several hundred new distribution jobs on the way, courtesy of Walmart, Baxter, and Standvast Fulfillment.
Another Non-Manufacturing Project of the Year helped Utah take home a Silver Shovel. LiveView Technologies is investing a third of a billion dollars at its Orem headquarters and plans to hire another 3,400 people. The company’s cloud platform gathers data from cameras aboard portable trailers, offering safety and security. The state’s growth is spread across multiple sectors, including some 800 new financial services jobs through expansion at Morgan Stanley, food processing jobs at Frulact and Blue Core Labs, biotech jobs at an expanding Cytiva, and energy storage manufacturing work at Jabil in Grantsville.
South Dakota is home to just under a million people, so it’s not surprising that most of its Silver Shovel projects are smaller. But they are just as vital to local economies. You can bet the Manitou Group expansion plans in Madison and Yankton will have quite an impact, with some 400 new jobs in heavy machinery. The 130 new jobs created through expansion of Valley Queen Cheese in Milbank are rather tasty, too, for those working directly in the plant as well as the dairy farmers expected to add 30,000 cows to their herds. And a new pet food production line at Royal Canin in North Sioux City will add another 150 jobs.
Nucor is adding a $3.7 billion steel mill with 800 jobs to the economy of Mason County, West Virginia, helping to earn that state a Silver Shovel. Precision Castparts plans a $500 million titanium melt facility that will run on renewable energy and supply aerospace and other industries, creating 200 jobs. CMC Metals plans a metals micro mill with another 235 jobs, GreenPower Motor Company is adding 200 jobs in the manufacture of electric school buses, and Mountaintop Beverage is brewing up nearly 300 beverage-making jobs in Monongalia County, representing a $280 million investment.
For information on the Sponsors of this report, see the Ad Index on page 87.
Although EV and semiconductor projects seem to dominate this report, there’s no shortage of projects in the life sciences, food processing, logistics/ distribution, and other industrial sectors.
Land development is a fluid sector that tends to follow the wave of national trends and demand, creating pockets of positives throughout a troubled marketplace.
By Matt Davis, Senior Director, Capital Markets; John McWilliams, Senior Research Analyst; and Andy Slowik, Managing Director Land Brokerage; Cushman and Wakefield
The development land market across the United States is inherently diverse and complex, shaping our cities and communities while playing a vital role in job creation, investment opportunities, and the country’s overall economy.
Just as topography varies across the country, so do market trends and land values. Largely a regional business, development land sales are often linked to the local economy and driven by population growth, with values varying widely depending on the location,
size, zoning, and potential for development. And yet, despite today’s current economic headwinds, the sector has proven its resiliency, with many markets across the Unites States thriving in a time of economic unpredictability.
The Sunbelt’s ongoing rapid population growth — particularly from non-Sunbelt businesses and individuals seeking to take advantage of the growing economic
opportunities, lower cost of living, and refuge from high tax states — has been a key driver for maintaining the positive momentum seen in the region’s land sales and development. This surge in population coupled with lower taxes has investors and developers keen to place their capital into development opportunities. With nearly 50 percent of the country’s population living across the Sunbelt’s 18 states, it’s no wonder multifamily development has maintained its momentum.
Texas and Florida are both experiencing unprecedented residential development of multifamily and singlefamily homes to support these fast-growing states. And while multifamily has recently slowed a touch due to the market’s current uncertainty, it’s more a pullback on the sector’s accelerated expansion, bringing it back to historical norms.
In the three years preceding the pandemic, 4.4 million new multifamily units were delivered across the U.S. Over the past three years, new construction deliveries increased by 16 percent to over 5.1 million units. The increase is even greater in parts of the country with particularly strong net domestic migration patterns: deliveries in Florida and Texas are up 43 percent and 20 percent, respectively.
The region has also seen an influx of tech firms, startups, biotech, pharmaceutical, and renewable energy companies relocating to the sunny states to take advantage of the lower taxes, favorable business and regulatory environments, proximity to ports and transportation hubs, and access to top talent, all of which has been driving significant industrial and life science development.
In 2022, there was 505.0 million square feet (msf) of new industrial deliveries. One-fourth occurred in just four markets: Dallas/Ft. Worth, Atlanta, Chicago, and Indianapolis. Nearly half of all industrial space currently under construction is in the South region, led by Dallas/ Ft. Worth at 75 msf, Atlanta at 36 msf, and Houston at 33 msf, with these three locations together accounting for 22 percent of the national pipeline.
Life sciences markets are more clustered and lab space construction continues to be driven by a handful of large hub markets. Currently, there is 32 msf of lab space under construction in the nine largest life sciences markets, led by Boston at 14 msf, the San Francisco Bay Area at 6.6 msf, San Diego at 4.7 msf, and RaleighDurham at 2.2 msf.
Renewable energy has further benefitted from the Fed’s Inflation Reduction Act, driving momentum for this alternative asset class. The IRA expanded tax credits for a range of clean energy projects:
• Solar generation projects saw investment tax credits grow from 22 percent in 2023 to 30–50 percent for 2024–2033, depending on emissions measurements.
• Wind generation projects will see production tax credits rise from historical levels of 60 percent back to 100 percent.
• The IRA also added standalone energy storage facilities as a category eligible for investment tax credits, ranging between 6 percent and 30 percent.
Further, the IRA also expanded funding by the government’s Loan Programs Office (LPO) by $11.7 billion to support new loans for renewable energy infrastructure projects. Additionally, the LPO’s existing loan program for renewable projects will increase by $100 billion, while there will also be a $5 billion program for updating or replacing existing energy infrastructure. Ultimately, this results in over a sevenfold increase in the typical annual budget for LPO renewable energy loans.
With national attention and growing concern around affordable housing, this niche asset class is also gaining traction in spite of the current economy. Regulatory changes and monies are becoming available from the Feds to support improved zoning, enabling more density and removing hurdles to develop housing.
Over the past three years, 160,000 affordable units have been constructed, up 29 percent from the 124,000 completed in the three years prior to the pandemic. All regions have seen significant upticks in affordable deliveries, led by the 35 percent increase in the South region, where 51,000 units have been constructed since Q2 2020.
However, like anything else there’s always a tipping point, and in today’s unpredictable economy, even development land is facing its own set of challenges. There are several factors impacting land today, most notably interest rates.
Stable interest rates provide certainty in underwriting and inform the cost of development and how much it can sell for once completed. But in the present interest rate environment, it’s difficult for developers, homebuild-
As interest rates continue to rise, the pool of developers able to weather this turbulent market is shrinking, leaving only the most experienced and well-positioned developers.
ers, and even individuals, to make informed, long-term decisions to commit to large investment opportunities. Developers are having to make concessions, drop prices, and get creative in their financing, plus be in constant communication with their lenders because as interests rates rise, so do the debt coverage ratio and yield required to achieve outcomes that make a project financeable and worthwhile.
In a typical market cycle, land would be the first to feel the market downturn and the last to recover. Instead, it’s the office sector and especially obsolete buildings that are feeling the immediate wave of distress. Driven in part by the troubled financial environment, changing workplace dynamics, and aging office product, this era of uncertainty is creating new opportunities.
In a recent study, Cushman & Wakefield uncovered an unprecedented imbalance between supply and demand, predicting a surplus of 330 million square feet of vacant space by the end of the decade. This imbalance, supported by hybrid working and accentuated by a growing quality gap among office assets, is exposing new, alternative opportunities for a path forward, including valuating the land of outdated assets for potential redevelopment opportunities.
Also, as interest rates continue to rise, the pool of developers able to weather this turbulent market is shrinking, leaving only the most experienced and wellpositioned developers. These seasoned buyers have deep pockets, years of experience and expertise, access to capital and borrowing power, and a long track record of success. These are the players in the marketplace today who are gaining market share and winning the bulk of the deals — and will continue to do so until inflation and interest rates stabilize.
On a site-by-site basis and depending on municipality, zoning, and what the future land use will permit, the underlying land value of many of these outdated assets, particularly in the suburbs, will determine the viability for redevelopment into one of the more thriving sectors such as multifamily, industrial, or even mixed-use.
Despite the economy’s current instability and recent banking turmoil, industries will continue to grow, people will require homes, and development of land will inevitably persist and be viewed as a smart hedging strategy in an inflationary environment. It’s ultimately about having staying power, and for those who can weather the storm, reaping the benefits of the sector’s long-term growth potential.
The Sunbelt’s ongoing rapid population growth has been a key driver for maintaining the positive momentum seen in the region’s land sales and development.
Businesses can fulfill their labor requirements by creating a positive company culture where employees are not only well compensated but also provided with training and growth opportunities.
By Andi Brownell, Managing Director, Maxis AdvisorsAccording to the Bureau of Labor Statistics most recent report released on March 10, 2023, the unemployment rate for March was 3.5 percent. 1 The unemployment rate has hovered at this level over the last 12 months, ranging between 3.5 percent and 3.7 percent, except for in January 2023 where it dipped to 3.4 percent, which was the lowest rate since 1969. During times of low unemployment, employers may struggle to meet their hiring and retention needs for a skilled workforce. Without a skilled workforce, industries find themselves struggling to maintain production levels to meet customers’ needs and sales or growth goals.
As an economic development consultant, there are so many interesting things we get to experience and learn about when working a project. I always enjoy conducting labor analysis studies, interviewing existing industries, and chatting with company representatives to better understand what they are struggling with and ways they have overcome obstacles to be successful.
The current low unemployment rate and tight labor market is a large obstacle that companies are currently working hard to overcome. There are so many innovative things that companies are doing to ensure that they are identifying, recruiting, and hiring the best labor available, improving the workplace environ-
ment and culture to help retain their existing workforce, providing employees opportunities for growth, and utilizing technology to operate as efficiently as possible during lean times. Following are some of the key steps that companies can take:
Offer competitive wages and desirable benefits: Offering competitive wages and benefits helps with job recruitment and retention in a tight labor market. It is important to conduct regular wage and benefit studies to ensure your company is offering competitive wages and desirable benefits. A labor study may help a company determine that it needs to pay wages in the 75th percentile of the market to recruit more effectively and prevent turnover. The cost of
hiring is significant, so putting measures in place to help hire AND retain quality employees is important and can help protect the investment and training you have poured into existing employees in the long run.
A strong benefits package geared toward the characteristics and values of the local workforce can be just as valuable as paying above average wages. I met with an employer who was struggling with high turnover. Company leadership expressed frustration since they were paying above average wages and offered what they deemed to be a solid benefits package that covered 90 percent of their employees’ health insurance costs. Most of their workforce is in their 20s and do not go to a doctor’s office
To IDENTIFY the underemployed, HUMAN RESOURCE DEPARTMENTS should look beyond an applicant’s CURRENT POSITION and analyze the candidate’s WORK EXPERIENCE over a longer period.
on a regular basis. Their employees do not consider high healthcare coverage a game changing benefit. While conducting employee interviews, it was discovered that their labor pool valued nontraditional benefits such as pet insurance, more paid time off, and a flexible work schedule over high medical coverage. This is just one example of how simple adjustments to a benefits package can help target employees in a tight labor market and increase employee retention by offering benefits that competitors may not offer.
Create a positive work culture: Company culture is becoming significantly more important in recruiting and retaining employees. Companies that create a culture that offers opportunities for personal and professional growth are more successful in attracting employees who want to be challenged and invested in their jobs. Your company should set clear core values and a mission statement and share them with job candidates. State these values in the employee handbook and post them around the workplace as a constant reminder of the company’s desired culture. Leadership can help create a positive work culture by holding regular performance reviews to create an environment of support and improvement. In return, leadership can provide its employees with opportunities to provide their thoughts and ideas on issues and ways to improve operations and the working environment.
Tap the underemployed: The underemployed is a great, untapped pool of candidates that can help meet a company’s workforce needs. Historically, there has always been a portion of the workforce employed in jobs below their skill level, or part-time workers who would prefer a full-time job. Many employees were laid off during Covid and re-entered the workforce in a position lower than their skills and experience level based on market conditions.
To identify the underemployed, Human Resource departments should look beyond an applicant’s current position and analyze the candidate’s work experience over a longer period. Look for and identify signs of career progression. Candidates with specialized experience such as educational credentials and certifications they are not utilizing in their current jobs may be underemployed. A deeper level of evaluation can help identify candidates that are currently working in a position they are overqualified for based on prior work and educational experiences.
Institute automation: Automation is also a solution that addresses labor shortages. For example, in the material-handling industry, employers have been able to utilize automated material-handling equipment to improve production capacity and meet delivery deadlines with a reduced workforce. Automation enables employers to reallocate employees, who were working in repetitive jobs that can be automated, to other, more specialized positions that need to be filled by humans. Automation technologies not only increase productivity but also allow workers to move into more technical, higher-paying positions.
Automation can also help with job retention by improving the workforce environment and workplace safety. This year, I toured a heavy manufacturing operation that required employees to engage in repetitive, hands-on tasks involving close contact to heavy industrial equipment. The company has plans to upgrade this manufacturing line with high-tech, automated equipment that will require less manual labor and reduce the risk of accidents. Employees will have opportunities to be trained to run the high-tech equipment, which will lead to job progression and higher wages.
Provide training: I conducted an existing industry labor interview with the head of a staffing agency that specialized in filling positions for his clients in a market with a 2.9 percent unemployment rate. We discussed what hiring and retention issues his clients were facing in the current market. He emphasized that his clients that were offering above market wages, competitive benefits, a safe workplace, and training and growth opportunities were not having significant issues hiring and retaining workers compared to his clients that were paying average or below average wages or had an environment that required heavy manual labor in less than ideal conditions. He shared additional thoughts on the importance of training first-line supervisors to help retain workforce.
Lower-level employees have the most interaction with first-line supervisors. It is important that first-line supervisors, especially employees that have recently been promoted into these roles, receive adequate soft skill training to be successful managers. Soft skills such as communication, adaptability, development and mentorship, conflict resolution, and problem-solving are not always innate but can be taught. A company’s first-line supervisors can set the tone for all operations level employees and help create a positive, productive work environment.
AUTOMATION can also help with JOB RETENTION by improving the workforce ENVIRONMENT and workplace SAFETY.
To continue with the topic of training, a solid, well-communicated training plan is a valuable tool for job recruitment and retention efforts. Training is a sign of a company’s investment and commitment to its employees’ growth and success within the company. It is an opportunity for employees to continually improve their skills and knowledge base so they can transition to higher-skilled, better-paying positions. In return, well trained employees tend to be more confident, motivated, and engaged in their work. These qualities can lead to increased productivity and retention of an existing workforce, especially if the company has a precedence for promoting qualified workers from within.
Employers can offer customized training plans based on their workforce needs and preferences. Training plans can include several options such as on-the-job training, classroom-based training provided by internal instructors and/or external vendors, or web-based learning that employees can participate in at their own desired pace. Employers may also want to offer tuition reimbursement that will encourage and reward employees that are interested in furthering their education at a technical school, college, or university.
Another avenue to help employees gain experience is through attending trade-related conferences where they can learn skills related to their jobs and network with peers. A company’s goal when developing a training plan should be to make sure that everyone has an opportunity to continually learn in their current roles and be ready to grow into new roles.
With creativity and commitment, businesses can overcome the challenges of meeting workforce and production needs during periods of low unemployment. Improve recruiting and hiring practices. Create the best workplace environment you can. Develop an environment where employees feel physically safe and are committed to providing feedback and contributing to making the company a better, more successful place. Invest in production efficiencies. And finally, provide training and growth opportunities for your employees so they are committed to you for years to come.
1 https://www.bls.gov/news.release/pdf/empsit.pdf
Here, innovation meets a oradbility. From startup to global operation, there’s nowhere better to create, scale and thrive.
Its strong maquiladora program, skilled labor, and favorable geographic location have made Mexico a top choice for nearshoring to the U.S. market.
By Maribel Gaytán, Strategic Consultant, Cushman & WakefieldThe 2020 crisis, compared to the 2008 crisis, had a different impact on the world’s economy and greatly disturbed global supply chains by affecting the three major factory regions: China, Europe, and North America. The crisis initially hit the factories in China, where the COVID-19 pandemic started, then spread to Europe and eventually to North America. The pandemic intensified the ongoing obstruction in global supply chains by making evident their fragility due to their very extensive geographical scope and the difficulties in managing the problem, leading to the relocation of investments in different parts of the world.
When I look back on the last two and half years, I can’t help but think how this phenomenon has impacted Mexico’s economy, which I have personally experienced with at least 50 percent of my projects as a consultant in a public commercial real estate firm. There are several reasons why foreign investors are considering Mexico as a viable option, both in general and specifically in the context of nearshoring (or ally-shoring) and I will cover some of them in this article.
Besides its neighborship to the U.S., another element that makes Mexico a top choice for nearshoring is the maquiladora or IMMEX program. According to the Mexican Ministry of Economic Affairs, the maquiladora program allows the temporary import of goods that are used in an industrial process or service to produce, transform, or repair foreign goods for subsequent export or provision of export services without the payment of general import tax, value-added tax and, where appropriate, countervailing duties.1
This program was originally implemented by companies operating mainly in the electronics and textile industries, carrying out simple assembly operations by low-skilled workers. We are not only talking about U.S. companies but also those from other countries such as Japan, Germany, Korea, and China; this technically falls under the nearshoring category as these investments are primarily driven by a market-seeking objective. Currently, the companies supported by those programs jointly represent 85 percent of Mexico’s manufactured exports.2
Mexico’s proximity to the U.S. and its maquiladora program are undoubtedly excellent attributes to attract foreign investment; yet one of the main concerns I see with my clients is finding qualified labor. However, as a manufacturing based-economy, Mexico’s labor has risen above these concerns and revealed to companies that there is outstanding skilled labor in Mexico. A considerable pool of skilled workers, particularly relevant to maquiladora operations, has been developed over 50 years. This has resulted in a large and diverse workforce with different levels of expertise, all trained in the maquiladora work culture and international standards.
Furthermore, Mexico has a young population with an average age of 29 years, according to INEGI3, that will take advantage of the robust system of higher and technological education, along with a vast network of public and private research centers that continually contribute to the development of qualified labor in science and innovation. In the last 10 years, Mexico has seen significant growth in STEM education and graduates an average of 130,000 engineers and technicians annually.4
Logistics chains reinforce the idea that Mexico’s proximity to the United States is a significant factor that contributes to the country’s appeal for foreign investment. Transportation of raw materials, components, and final products between both countries is mainly by truck — no need to use containers and seaports.
I lived in China for seven years, and I was part of the logistics world there, as a general manager of a Mexican freight forwarder. In early 2020, I was still in Shanghai handling the shipments for my Mexican clients, and I saw the great supply chain disruption happening in front of my eyes, causing a huge turmoil for many companies whose biggest market is the United States. There is no doubt the pandemic showed how vulnerable all shipping is, and now businesses are looking for better alternatives to serve their clients. Mexico appears to be a great choice to accomplish this, relying on its strong logistics network with more than 25 commercial border ports of entry and eight railroad crossing points from Tijuana to Matamoros, 117 seaports, 64 international airports, 27,000 km of railways, and 172,000 km of highways.5 In addition, Mexico has much lower freight costs per cubic meter compared to China, according to Global Value Chains Disruptions.6
Another benefit of nearshoring in Mexico and utilizing its logistics chains is the assistance it provides to companies in fulfilling their corporate social responsibility and sustainability objectives. Companies are becoming more concerned about the ecological and social impact of the firms they engage with, and nearshoring provides several advantages. For instance, reduced transportation times result in lower carbon footprints and lower supply chain disruption risks. Furthermore, having manufacturing facilities located closer to the parent company and in a comparable time zone enhances communication and responsiveness, while also allowing for greater transparency and the capacity to verify suppliers and ensure equitable working conditions.
On the other hand, Mexico does face challenges when it comes to utilities. According to Enrique R. Portillo, executive director for Industrial Services at Cushman & Wakefield Mexico, power is a big issue in the entire country. He highly recommends companies coming to Mexico avoid the temptation to buy a greenfield or piece of land without the zoning and infrastructure in place for industrial activities, even if it is offered at a very good price and is in a good location. If properties don’t have the supporting infrastructure — i.e., power, water, natural gas, fiber optics, sewage treatment, etc. — Portillo advises companies to try to avoid these types of properties because they will be investing a lot of time and
additional resources to make the land work; additional time and cost can make their project become unfeasible or delay the start of its operation.7
To fully progress on nearshoring investments, Mexico needs to ensure the prompt development of its electricity sector to provide access to the grid and the necessary energy supply for industry. The need to shift to clean energy has been emphasized due to the effects of the climate crisis. Many major multinational companies, as well as countries and industrial sectors worldwide, are setting ambitious targets to reduce greenhouse gas emissions. As a result, there is a growing demand for renewable energy to meet the increasing energy requirements of industries globally, including those in Mexico.
The COVID-19 pandemic has brought significant changes to the world economy, particularly in the manufacturing sector. This has highlighted the impor tance of proximity to the market, the availability of a skilled labor force, and reliable logistics networks, making nearshoring an attractive option for companies looking to secure their operations.
Mexico, with its strong maquiladora program, skilled labor, and favorable geographic location, has become a top choice for nearshoring, offering competitive advantages that can help companies navigate the challenges of the post-pandemic world. However, the challenges regarding utilities and power supply should not be overlooked, and investors should carefully consider infrastructure before purchasing land for industrial activities.
As the global economy continues to recover, it is likely that more companies will consider nearshoring as a long-term strategy to build resilient and agile supply chains that can adapt to future disruptions, which leads me to believe Mexico is North America’s next factory.
1 https://www.snice.gob.mx/cs/avi/snice/progfom.immex.acercade.html
2 http://www.2006-2012.economia.gob.mx/industry/foreign-tradeinstruments/immex
3 https://www.inegi.org.mx/app/tabulados/interactivos/?pxq=Poblacion_ Poblacion_04_bb9a3db4-4c69-4231-aaaf-abef21dda472
4 https://mexicobusiness.news/talent/news/mexicos-stem-talentopportunity-investors
5 https://www.gob.mx/cms/uploads/attachment/file/563298/Chicago_ TMEC_25_06_rev.pdf
6 https://mexicoindustry.com/noticia/impacto-del-nearshoring-en-mexico
7 https://www.linkedin.com/feed/update/urn:li:activity:7018940028659580929/
Mexico has a young population with an average age of 29 years, according to INEGI, that will take advantage of the robust system of higher and technological education.
As companies weigh the benefits and challenges of increasing automation, local leaders must also evolve their incentives programs.
By Katie Culp, CEO, KSM Location AdvisorsThese days, almost any consumer can tell you that our country has a workforce problem. From daily, negative retail experiences to delays in consumer product shipping, even my 72-year-old mother knows that businesses are challenged to find the employees needed to meet demands. (And boy, does she verbalize that frustration frequently!) This current workforce problem extends from the retail to the commercial and industrial sectors, and site selectors and corporate executives are feeling the pain and pressure in very real ways.
Every corporate executive involved in a site selection assignment bears the burden of trying to find the perfect location, which used to be defined by cost-effectiveness, likelihood of hiring success, low cost of doing business, and ready infrastructure so that a brand-new operation could be opened in half the time it used to take. Experienced site consultants used to spend (and continue to spend, to some degree) hours upon hours digging through data in order to identify candidate communities with the lowest risk and highest probability of success. Information like available workforce, occupational codes, and levels of employment growth and unemployment provided good support for a more detailed analysis that came from a lot of data and a little bit of hope.
But things have quickly changed. It’s a brave new world out there for site selection. The data that used to provide confidence and reassurance is no longer sufficient and is only a small part of understanding a candidate community’s potential workforce. Believe it or not, it is the anecdotal information about workforce — in addition to the standard research — that increases confidence about a potential location. Can local employers find people to show up every day? What is retention and turnover like? Can employees pass drug tests? Do they job hop over 50 cents an hour? Can any of the local employers actually fulfill their hiring needs, even if it requires paying a premium? Or can employers pay 120 percent of median wages and still end up with an insufficient workforce? Is everyone in the same, rather empty boat?
These and other considerations are prompting — and sometimes forcing — many employers to evaluate operational efficiencies, including automation. Automation frequently yields increased productivity by replacing jobs (typically jobs
with lower skill requirements) with “robots.” Many elected and appointed officials struggle to respond to this new reality because for so long job creation was the primary goal and emblem of successful economic development. Now they have to consider new projects with smaller job-creation numbers and must react to existing incentives recipients who pivoted toward a model of automation and more modest job creation.
Oftentimes investing in automation is a huge capital expense, taking many years for a firm to reach a break-even point of covering the initial cost. And while many progressive, tech-savvy industries dive deep into this solution, most of the executives I work with are reluctant to head down a fully automated path. They are seasoned enough to know how well a facility might run if the right workforce can be motivated and compensated to perform capably. They also know that although fancy equipment may be able to replace certain types of workers, it comes with its own risk (the death knell of deals). These executives are betting on a technology that they hope pans out the way their consultants advised them, but personal experience tells them that qualified workers are the safer bet — if they can be found.
The reality of these industry changes is something that economic developers and elected officials need to absorb and absorb quickly. Here are some suggestions:
• They need to find new ways to evaluate the merits of a potential economic development project. Job creation is and should be an important part of the equation, but are there other components of a deal that can make it appealing? Firms embracing new technology and operational efficiencies may create fewer jobs, but this is often happening because they simply cannot find workers for some of the lower-skill positions.
• On the topic of an evolving workforce, local and statelevel officials also need to acknowledge that many employers now allow workers to perform their jobs from the comfort of their homes instead of being physically present every day. Many incentives programs are currently crafted to penalize operations like this.
• Anecdotal workforce data is increasingly important. Local employers may be less likely to speak with prospective employers coming to town since they are viewed as competition for prospective employees. But strong economic developers have their thumbs on the pulse of the local economy and have regular dialogue with existing employers. Understanding which employers are struggling and why can be an essential factor in winning new projects.
• In general, I’d like to encourage public officials to revisit not only their statutes but also their policies that may have become outdated and no longer pragmatically support the very economy they are charged with protecting. Many incentive programs have been slow to evolve, and our team has seen more penalties and economic incentives clawbacks for companies that pivot their operational model to a leaner, more automated approach. Are masses of lower-skilled, lower-paying jobs really better than more successful operations that employ fewer workers but with higher skill levels and at higher wage rates?
Corporate executives who find themselves charged with site selection decisions should try to understand the changing landscape through the eyes of public officials and should provide a robust explanation of their operational model and the many merits of a new or expanded operation. They should try to quickly assess what elements of their project are appealing to officials and what elements need careful explanation. Understand the why behind their reactions and how the economic incentives programs are designed. If these programs do not align well with a company’s planned operations, it is best to problem-solve up front and collaborate with economic developers before location decisions and announcements are made.
I see no reason to fear the trend of automation or to imagine a world where robots have replaced significant levels of humans. What I do see is a challenge for communities and employers to work together to facilitate needed skills training so that those at risk of being replaced by automation are prepared to learn new skills and earn higher wages.
The demand for data among the U.S. population is growing at a rapid pace. The proliferation of smartphones, cloud-based services, IOT, and increased use of video and streaming services such as Netflix and YouTube has U.S. users consuming vast amounts of data to watch videos on their devices. According to a report by Cisco, 1 the U.S. annual IP traffic alone was expected to reach 3.3 zettabytes (ZB) by 2022, up from 1.2 ZB in 2017.
Data centers bring high-paying jobs with specialized labor such as data analysts and scientists, engineers, maintenance technicians, and facilities managers. They are typically large investments that often attract ancillary tech companies to an area. Additionally, data centers help strengthen critical infrastructure, are coveted utility customers, and they generate robust property tax revenue through high assessed personal property values and short equipment life cycles.
Therefore, as states and communities look to cash in on data center developments’ massive growth and economic benefits, it is important for those seeking a location for a new data center to understand their unique site requirements. For this article, we examine some key site selection characteristics of a successful data center location. Though not comprehensive, here are several factors that should be considered when choosing a potential site for a data center facility:
Fiber connectivity: Fast and reliable fiber, as well as access to other networks and data centers.
Access to power: Data centers require a lot of power, so a site with a stable and redundant power supply is crucial.
Climate and cooling capabilities: Data centers generate a lot of heat, so a site with good climate conditions and access to cooling resources is important.
Geographic risk mitigation: A site with a low natural disaster profile, minimal electromagnetic interference, and other favorable environmental conditions are preferred by data center site analysts.
Security: Data centers store sensitive and valuable information, so a site with low area density, generous site buffers, healthy setbacks, and access control are critical.
Data centers require ultra-fast and reliable connectivity, so a site’s access to powerful, high-capacity fiberoptic networks is a critical factor for success. The proximity to major fiber routes, as well as the availability of diverse paths, will impact the quality and resiliency of a data center’s network to its customers or consumers. Sites with direct, unimpeded access to major fiber trunks will be an enormous benefit.
Access to dark fiber can be a significant advantage for a data center site. Dark fiber refers to unused or “dark” fiberoptic cables that are available for lease or purchase. By leasing or purchasing dark fiber, data centers can have direct access to high-speed, low-latency connectivity to other data centers, Internet service providers (ISPs), cloud providers, and other networks. Leasing or purchasing dark fiber can also give data centers greater control over their network infrastructure, allowing them to optimize network routing and reduce reliance on third-party providers.
Connectivity can also pertain to users as well as infrastructure. The geographic location of a data center can impact its accessibility and latency to end-users. For example, a data center located in a densely populated urban area may provide faster connectivity to end-users, while for certain data centers, a remote rural location may offer more physical security but unwanted increased latency.
Data centers require large amounts of electrical power to run the computing equipment and cooling systems, so access to reliable and redundant power sources is important. A data center may require tens, or hundreds, of megawatts — or even more. The availability and capacity of utility power should be evaluated when considering a site for a data center site.
Pre-planned and an engineered redundant power supply from independent electric grid sources ensures continuous operations in the event of a power outage or other disruptions. This typically means having multiple power feeds from the utility accessible and in close proximity to the site. An adjacent electrical substation, with high-voltage transformers, switchgear, and distribution panels will ultimately be necessar y to serve the end-user. Being prepared with how and where this will be achieved is helpful and necessary.
Buried electrical cables should be considered as they are less susceptible to damage from weather events, such as high winds or ice storms, which can cause power outages. Additionally, buried cables are less likely to be damaged by accidental contact with heavy equipment, and are also less susceptible to electromagnetic interference (EMI) that can degrade signal quality or cause data transmission errors. The entire infrastructure system will ultimately be backed up by on-site generators and uninterruptible power supply (UPS) systems.
At a rapidly increasing rate, data centers are seeking locations with access to renewable energy sources — such as wind, solar, or hydro power — or utilities with a defined plan to provide such sources, which can help to reduce energy costs and minimize their carbon footprint. Sites should have a blueprint to meet a data center’s carbon-neutral requirements.
As a result of these factors, it is imperative that the appropriate utility partner be part of the team identifying a potential data center site for development from inception. Professional utility maps and definitive time, cost, and capacity service plans should be documented in advance of the first site visit.
It’s worth noting that the power requirements of a data center are not just determined by the computing equipment, but also by the cooling infrastructure needed to keep that equipment within the proper temperature range. In general, cooling can account for up to 40 percent of a data center’s power usage.
A data center requires a significant amount of cooling infrastructure to maintain the optimal temperature and humidity levels for computing equipment. The climate and weather patterns of a site location can affect the energy efficiency and cost of operating a data center. Sites with cooler temperatures and lower humidity levels can reduce the need for cooling. Generally, data centers prefer cooler climates with temperatures ranging from 64–75 degrees Fahrenheit (18–24 degrees Celsius) as higher temperatures can lead to overheating and equipment failure. Humidity levels between 40 percent and 60 percent are preferred to prevent the buildup of static electricity and to minimize the risk of equipment corrosion. Water is most often used for cooling purposes to remove heat generated by the IT equipment. This is carried out using air-conditioning units, chillers, and evaporative cooling systems. The amount of water used for cooling depends on the type of cooling system used, as well as the local climate and humidity levels. Recent shifts toward more water-efficient cooling technologies, such as air-side economizers, which use outside air for cooling instead of water, have improved water use efficiencies. However, areas with abundant water resources, such as large bodies of water or areas with ample rainfall, can be effective locations for data center sites, providing affordable water while minimizing the impact on local water resources.
Data centers should avoid areas prone to extreme weather events, such as hurricanes, tornadoes, wildfires, earthquakes, or floods, which can cause power outages, equipment damage, and other disruptions. Data centers typically avoid locating near sources of vibration, such as train tracks, highways, or airports, as they can negatively impact the performance and reliability of the sensitive equipment within the data center. Vibrations can cause equipment to shift, which can lead to data corruption, hardware failures, and downtime. To mitigate the risk of vibration, states and communities must evaluate the surrounding environment of a prospective site for potential sources of vibration before a site decision is made.
In addition to vibration, data centers also avoid locating near sources of electromagnetic interference (EMI), such as high-voltage power lines or radio towers, as they can cause electrical disturbances that can interfere with the performance of sensitive equipment.
Risk factors come in many forms and may include fire suppression, regulatory, and zoning restrictions too. Careful examination should be given to a community or area’s own ratings and policies regarding fire suppression rating (ISO/ FSRS) specific to a site, facility height restrictions, industrial zoning requirements for large infrastructure development, and other factors that add time or uncertainty to a company’s site and facility development schedule.
Data centers store sensitive and valuable information, so a site that has natural privacy and buffer attributes can be more attractive. Unlike many industrial and distribution operations which crave interstate visibility, data centers generally eschew obvious recognition of identity and even operational purpose. Individual user sites with spare acreage upfront and developable acreage in the rear are generally more favorable choices. Sites with a controllable
single-entrance access from a secondary road off a fourlane highway may be ideal.
Data center security preferences will vary depending on the specific needs and requirements of the data center and its clients. Physical security measures are implemented to prevent unauthorized access to a data center. This includes measures such as perimeter fencing, a manned security entrance, and other access controls, surveillance cameras, and biometric identification systems and more. As great an economic gem as a data center might be for a state and community, it should be recognized that it may come with a “no public announcement” tag attached to it for security purposes.
Overall, siting a data center requires careful consideration of a wide range of factors, including access to fiber optic networks, reliable and redundant power, climate and cooling capabilities, geographic risk mitigation, and secure environments. A comprehensive evaluation of these factors and more can help ensure the optimal location for a data center to meet its specific needs and requirements.
1 https://www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/ annual-inter net-report/white-paper-c11-741490.html
The picture is becoming clearer for the Inflation Reduction Act tax credits, with further guidance to come.
By Sean P. Byrne, Of Counsel; and Scott J. Ziance, Partner; Vorys, Sater, Seymour and Pease LLPThe Inflation Reduction Act of 2022 (IRA), signed by President Biden on August 16, 2022, changed a wide range of tax laws, and includes some $369 billion in new and expanded incentives for energy efficiency, renewable and clean energy investments, fleet decarbonization, infrastructure improvements, and other sustainability-related investments. While many of the changes have gone into effect, the regulations and guidance are still unfolding.
Among the most substantial changes are the increased rates for the production and investment tax credits. The IRA utilizes a tiered credit structure with base rates and increased rates. The increased rate (up to 5x the base rate) requires the taxpayer to meet prevailing wage and apprenticeship requirements. There are also bonus credit opportunities for Internal Revenue Code (IRC) § 45 and § 45Y and IRC § 48 and § 48E credits based on the project location (in an energy community) and domestic content for the project. In addition, there are bonus credits available for smaller solar and wind facilities in low-income communities under IRC § 48(e) and § 48(h).
In the eight months since enactment, more information and guidance continues to be provided for these five possible “bonus” credit requirements. With notices released in November, February, and April, developers and investors have gained more information about the IRA tax credits and the requirements needed to maximize their value.
On April 4, 2023, the U.S. Treasury Department (Treasury) and the IRS released Notice 2023-29 (Energy Community Notice), providing information about energy communities and how to claim bonus credits for investments in energy communities. Shortly after the initial release, on April 7, 2023, Treasury clarified that the Energy Community Notice applied to projects beginning construction after January 1, 2023.
The Energy Community Notice applies to developers and investors with qualifying energy projects eligible for a 10 percent “bonus” credit under IRC § 45 and § 45Y (the production tax credits) and 10 percentage points for § 48 and § 48E (the investment tax credits). The Energy Community Notice provides rules for defining what is an “energy community” and whether a project is located or placed in service in an energy community.
There are three categories of energy communities: (1) brownfields — real property for which expansion, redevelopment, or reuse may be complicated by a hazardous substance and certain mine scarred land — but not land that has been cleaned up or otherwise excluded under 42 U.S.C. § 9601(39)(B); (2) statistical areas that have certain levels of fossil fuel employment or tax revenue related to coal, oil, or natural gas industries and have above average unemployment; and (3) census tracts (or adjoining tracts) in which a coal mine has closed since December 31, 1999 or a coal-fired electric generating unit was retired after December 31, 2009.
The Energy Community Notice includes Appendices A and B (Appendix A1 and Appendix B2), which delineate all
of the MSAs/non-MSAs that qualify as eligible statistical areas (with annual unemployment rates for a calendar year released each April for the period May–April of the following year). Also included is Appendix C,3 which lists all of the coal closure census tracts (Appendix C). Moreover, a searchable map, like the one for opportunity zones, is now available at Energy Community Map.4
The bonus for meeting certain domestic content requirements for steel, iron, and manufactured products likewise
applies to § 45, § 45Y, § 48 and § 48E of the IRC. Under the IRA, those sections reference various other provisions, including the Buy America regulations. Here, we expect future Treasury guidance, but it appears that 100 percent of the iron and steel (for those components made primarily of iron and steel) and 40 percent of the total cost of all manufactured products have to be produced in the United States to qualify (see § 45(B)(9)(b)(ii-iii) for most qualifying energy projects (20 percent for an offshore wind facility)). However, it’s hoped that Treasury guidance will be available soon to further clarify this provision.
The Energy Community Notice provides rules for defining what is an “energy community” and whether a project is located or placed in service in an energy community.
Treasury also issued Notice 2023-17 on February 13, 2023, establishing the Low-Income Communities Bonus Credit (“LIC Bonus”) program under IRC § 48(e). The LIC Bonus program provides for an increase of up to 20 percentage points to the investment tax credit for solar and wind energy projects in low-income communities. The LIC Bonus program will allocate 1.8 gigawatts of capacity available in 2023 across four categories for solar and wind projects with maximum output of less than five megawatts (MW) in lowincome communities (700MW), on Tribal land (200MW), for federally subsidized residential buildings (including housing supported by the LIHTC and Section 8) (200MW), and facilities where at least 50 percent of the financial benefits of the electricity produced go to households with incomes below 200 percent of the poverty line or below 80 percent of area median gross income (700MW).
The application process for the LIC Bonus program opens in two phases, with low-income residential buildings and those that benefit low-income households accepted first during a 60-day application window expected in calendar Q3 of 2023, with applications for other projects to follow.
Notice 2022-61, released November 30, 2022, provides initial guidance for the prevailing wage and apprenticeship provisions in the IRA. The guidance is applicable to projects with construction beginning January 30, 2023 or later, and re-confirms the rules for determining when “construction begins” — either when physical work of a significant nature begins or, under the safe harbor, when 5 percent or more of the total cost of the project or facility is incurred, subject to continuous construction or efforts requirements.
The guidance in Notice 2022-61 is primarily a review of the IRA provisions. However, the guidance does indicate that the Treasury and IRS may issue regulations and additional guidance about the prevailing wage and apprenticeship requirements. In the interim, the IRA provides that laborers and mechanics employed by the taxpayer (the owner of the project when placed in service) and all contractors and subcontractors engaged by the taxpayer must be paid prevailing wages of the locality for the specific profession and classification during construction, alteration, or repair of a covered facility. Wage determinations are published by the Department of Labor (DOL) at www.sam.gov, 5 and if the information needed is not listed there, taxpayers can request a wage determination or rate from the DOL via email at IRAprevailingwage@dol.gov.
The text of the IRA itself allows a taxpayer to cure a failure to satisfy prevailing wages through catch-up payments, with interest, to each worker paid below the prevailing wage and penalty payments to the IRS that amount to $5,000
per affected worker. Higher payments to workers (3x the difference between actual and prevailing wages) and higher penalties ($10,000 per affected worker) apply where the failure to pay prevailing wages is the result of an intentional disregard of the regulations.
The apprenticeship provisions generally require that (1) a certain percentage of the total labor hours for construction, alteration, or repair of a covered facility must be performed by qualified apprentices; (2) taxpayers (and their contractors and subcontractors) who employ four or more individuals must also employ at least one qualified apprentice; and (3) taxpayers must maintain the required ratio of journeymen to apprentices for the duration of the project (for example, construction that begins during 2023 requires 12.5 percent, and after December 31, 2023, it requires at least 15 percent qualified apprenticeship labor). The guidance notes that taxpayers must employ apprentices through a “registered apprenticeship program,” meaning one registered under the National Apprenticeship Act or by the DOL. A good-faith effort exception exists under the Notice if the taxpayer requests qualified apprentices from a registered program and either the request is denied or the program fails to respond to the request within five (5) business days. A taxpayer can only rely on this exception if they maintain sufficient records documenting the request.
Among the most important provisions, the IRA authorizes the one-time cash sale of certain 2023 and later federal tax credits to other parties pursuant to § 6418 of the IRC without the use of tax equity structures. The seller notifies the IRS of the sale by filing an “election” with its tax return. Sellers do not have to report the sales proceeds as income, and buyers cannot deduct the purchase price.
There remain open questions about the transfer of credits and, for instance, requirements for buyers of credits. Additional reporting or registration rules are expected from Treasury, as well as guidance on issues such whether passive activity credit rules apply to purchasers on energy credits under § 6418.
An overview of commercial tax credits/deductions in the IRA can be found on our website at insert bit.ly/ira-credits, as well in the White House’s IRA guidebook released earlier this year. We encourage you to contact a Vorys attorney or advisor with questions about these new provisions.
1 https://www.irs.gov/pub/irs-drop/n-23-29-appendix-a.pdf
2 https://www.irs.gov/pub/irs-drop/n-23-29-appendix-b.pdf
3 https://www.irs.gov/pub/irs-drop/n-23-29-appendix-c.pdf
4 https://arcgis.netl.doe.gov/portal/apps/experiencebuilder/ experience/?id=a2ce47d4721a477a8701bd0e08495e1d
5 http://www.sam.gov
The rapid transition of the auto industry from internal combustion engine vehicles (ICEs) to electric vehicles (EVs) has set off a rush of new investment in new EV assembly plants and battery cell plants. Over 20 multibilliondollar EV-related plants have been announced over the past two years in the United States. With the passage of the Inflation Reduction Act and proposed new vehicle emissions standards, additional EV assembly and battery plants will likely be required — but not all communities will have sites large enough to host these projects.
Most of the sites that host new EV assembly and battery plants are in excess of 1,000 acres. Economic development agencies at the state and local level face real estate and related issues in trying to assemble suitable sites. Putting together a 1,000+ acre site with requisite utilities and logistics is not an easy or cheap task.
The good news for economic developers is that the industry is experiencing a second wave of EV investment, such as battery component plants, which require less land and still offer huge economic development opportunities. For example, Entek recently announced a $1.5 billion battery component plant in Terre Haute, Indiana, that will produce battery separator materials. The plant, which will employ 642 people, will be located on a 340-acre site in an industrial park. Similarly, a $3 billion battery cathode plant will be built by LG Chem on a 420- acre site in Clarksville, Tennessee, and will create 860 new jobs.
To be sure, even though these battery component projects may re-
quire less acreage, site selectors will be looking for sites that are shovelready, or close to shovel-ready. That means a site that:
• Is under public ownership or with an option-to-purchase;
• Has all the requisite environmental, wetlands, archeological, and similar studies completed, with any required mitigation in place;
• Is zoned for heavy industrial use, with no nearby conflicting uses, such as residential;
• Has the necessary utility capacity (high voltage electricity, natural gas, water, wastewater, fiber) and adjacent hookups that will be in place before the plant’s start of production;
• Is in close proximity to an interstate or interstate-quality highway, with
plans, easements, and budget for access roads (and some projects may require direct rail access);
• Has sufficient workforce availability and skills within a 60-minute commute;
• Is close to a city with amenities to attract a management team;
• Is within an hour’s drive of a commercial airport that offers regularly scheduled airline service to one or more airline hubs; and
• Has a competitive state and local incentive package.
To be in the hunt for this second wave of EV-related projects, communities need shovel-ready sites. The process of assembling such a site takes time and resources. For those communities that score a billion-dollar project, the economic payoff is huge.
•RELIABLE SERVICE.
• COMPETITIVE RATES.
•RENEWABLE ENERGY.
• ENVIRONMENTAL PROTECTION.
• INVESTMENT IN OUR COMMUNITY.
At NV Energy, our economic development experts work strategically to facilitate business location and expansion within Nevada. The dedicated team can assist with energy pricing and renewable tariffs, site visits, and all the critical data needed to make an informed decision for business investment in Nevada. Our team will help you manage every step of the site location decision process.
Learn more at nvenergy.com/econdev
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