Area Development Q3 Issue 2019 by Area Development

AI: GAMECHANGER FOR CORPORATE SPACE

DESIGN-BUILD FIRMS ADD VALUE

EVER-GREATER INFRASTRUCTURE EXPECTATIONS

ADVANCED MFG. DISRUPTS LOCATION PROCESS

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A N D

FA C I L I T Y

P L A N N I N G

Q3/2019

n e G Z

In The Workforce

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“ MIC H I G A N

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Michigan has always attracted renegades, visionaries and risk-takers. We changed the way the world moves, and we’re doing it once again with our top-tier talent, unmatched resources and strong connections. It’s no surprise so many innovative businesses have found success here. If you want to start or grow your business, this is the place to make it happen. Visit michiganbusiness.org/pure-opportunity

MICHIGAN. PURE OPPORTUNITY.

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CONTENTS Cover Story

16 Gen Z: Shaping Location and Expansion Decisions Companies using artificial intelligence, virtual reality, and other technology are seeking out Gen Zers to fulfill their workforce needs — in places this most tech-savvy cohort of the labor force wants to be.

61 The Ever-Greater Expectations for Infrastructure

Companies providing quality jobs have never been in a better position to ask for the infrastructure and incentives they need in order to locate their facility — or remain — in a community.

features

10 Advanced

13 Artificial Intelligence:

As technological advances fundamentally alter longstanding manufacturing processes and practices, they’re also upending the way advanced manufacturing companies consider locations for their facilities.

Thanks to vast amounts of available data and an evolved computational infrastructure, AI is fundamentally changing the way organizations plan and manage their real estate and facilities.

Manufacturing Disrupts the Location Process

33% 5%

A Game-Changer for Corporate Space

42 Design-Build Firms Add Value to the Location Decision Process With the aid of advanced technology, design-build firms provide valuable capabilities and expertise in the site selection process, reducing risk and providing cost and scheduling certainty.

67 Seaports Coping With Rising Trade Volumes, Tight Real Estate Markets

In order to address the challenges of big-ship congestion, U.S. seaports are turning to rail, barges, and off-terminal facilities.

69 How to Avoid the Fatal Flaws in Site Certification Programs

A “certification” label on a site is meaningless unless all the necessary data has been gathered and thorough due diligence performed with respect to your particular project.

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

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Volume 54 | Number 3 Q3/2019

Economics “Perhaps we should all stop for a moment and focus not only on making our AI better and more successful but also on the benefit of humanity.”

Stephen Hawking (1942 – 2018), English theoretical physicist, cosmologist, and author

special report

SURVEY 2019

The top-ranked states have landed on the radar of today’s site selection consultants because of their low business costs, generous incentive programs, and competitive labor environments, among other probusiness advantages.

departments

4 Editor’s Note

Finding the Labor Force Where It Wants to Be

6 In Focus

Last-Mile Distribution Drives Industrial Demand in Secondary Markets

6 Front Line

Manufacturers Look to Nontraditional Locations

8 First Person

Steve Hess, Vice President of Real Estate Development, DHL Supply Chain

72 Ad Index/Web Directory editor’s report online • All Politics Is Local, Especially for a New Site

Canada continues to be a premier investment destination and is dedicated to protecting its key industries, investing in innovation, and developing its workforce.

location report

63 GEORGIA: AN INTERNATIONAL

BUSINESS DESTINATION Foreign direct investment and global trade have had a huge impact on economic development in the state of Georgia.

• How CFOs Should Address Trade Questions — ASAP LOCATION REPORTS • Arkansas Making Strides in Manufacturing and Technology • Energy and Infrastructure Lead the Way in Louisiana • Building Economic Momentum in Oklahoma

Find these articles and more @ www.areadevelopment.com

POSTMASTER: Send address changes to Area Development, Circulation Department, 400 Post Ave., Westbury, NY 11590. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2019 by Area Development® magazine. ISSN: 1048-6534. Printed in the U.S.A. Area Development® is a registered trademark of Halcyon Business Publications, Inc.

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EDITORS NOTE

Q3/2019

Finding the Labor Force Where It Wants to Be

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n often-cited Deloitte survey says there is a skills gap of around 2.5 million manufacturing workers.1 Manufacturers have attempted to fill that void by targeting millennials — defined as those born between 1981 and 1996 — noting that today’s manufacturing jobs are not the “dirty, dangerous” jobs of yesteryear. Now, that the oldest Gen Zers — defined as those born between 1996 and 2010 — are entering the labor force, manufacturers must double down on their previous efforts in order to attract this youngest cohort of workers. “Every year, the skills gap is an issue for us manufacturers,” says Reid Leland, president and founder of LeanWerks, a precision manufacturer in Ogden, Utah. “Regardless, we have to take responsibility for our workforce. We can’t make excuses for not having good people –– we have to be active in our communities, helping to grow and attract talent.”2 In this issue’s cover story, Reteisha Byrd and Tracy King Sharp of Boyette Strategic Advisors say companies that are progressive in adopting artificial intelligence (AI), virtual reality, and other technology will find that Gen Zers will readily jump in and excel at these new innovations. And today’s manufacturers are increasingly incorporating AI into their operations as well as their supply and distribution chains, realizing it will not only enable machines to do more, but people as well. Of course, millennials and Gen Zers need the knowledge and skills to work with these new technologies, and this is where companies and educational institutions need to work together on training and re-training. Traditional manufacturing hubs have always had an investment in bringing their workforces up to speed but, today, even nontraditional hubs are investing in workforce development, and this has increased company location options. Interestingly, when possible, companies are going where the tech-savvy generations want to live instead of asking the talent to come to them. Our Workforce issue, which comes out at year’s end, will have more on the topics of multigenerational labor and integrating technology into the workplace. The availability of a skilled workforce is — and will continue to be — the top concern of industry across all sectors.

https://www2.deloitte.com/us/en/pages/manufacturing/articles/future-of-manufacturing-skills-gap-study.html https://www.mscdirect.com/betterMRO/metalworking/white-paper-fix-labor-shortage-embrace-millennials-and-gen-z

H. Robert Boehringer, III, Managing Director, Global Location and Expansion Services, KPMG Brian Corde, Managing Partner, Atlas Insight, LLC Les Cranmer, Senior Managing Director, Savills Studley Kate Crowley, Principal, Baker Tilly Dennis Cuneo, Partner, Fisher & Phillips LLP

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Tom Gresham Mark Schantz Steve Kaelble Karen Thuermer

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

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

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

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

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

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

2019 Editorial Advisory Board

Marc Beauchamp, President and CEO, The CAI Global Group

Staff and Contributing Editors Dave Claborn Mark Crawford Dan Emerson Tom Ewing

circ@areadevelopment.com

Josh Bays, Principal, Site Selection Group, LLC

Editor Geraldine Gambale editor@areadevelopment.com

CIRCULATION

Editor

Aaron Ahlburn, Managing Director and Senior Director, Research, JLL

EDITORIAL

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

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

Finance Mary Paulsen finance@areadevelopment.com

Stephen Gray, CEO, Gray Construction

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

Business/Finance Assistant Barbara Olsen (ext. 225) olsen@areadevelopment.com

Minah C. Hall, Managing Director, True Partners Consulting LLC Scott Kupperman, Founder, Kupperman Location Solutions, LLC Dan Levine, Practice Leader, Location Strategies and Economic Development, Oxford Economics, Inc. Bill Luttrell, Senior Locations Strategist, Werner Global Logistics, Werner Enterprises, Inc.

Eric Stavriotis, Senior Vice President, Advisory & Transaction Services, CBRE Margy Sweeney, Founder & CEO, Akrete, Inc.

All correspondence to: Area Development Magazine

Dan White, Senior Economist, Moody’s Analytics

400 Post Avenue, Westbury, NY 11590

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

Phone: 516.338.0900 Toll Free: 800.735.2732 Fax: 516.338.0100

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We’ll see your life and raise it. Business or pleasure? Don’t answer that. Because in Maryland, there’s no need to choose. Move to the center of the busiest U.S. corridor, hire from a diverse and talented workforce and watch your business soar. Where will Maryland take you?

Open.Maryland.gov

IN FOCUS Last-Mile Distribution Drives Industrial Demand in Secondary Markets By Ben Newell, Senior Vice President, Transwestern Development

Retailers are rethinking their supply chain management and locating closer to the end customer to meet their lightning-fast delivery expectations. BEN NEWELL As a member of Transwestern Development Company’s national Logistics Group, Ben Newell is responsible for the implementation, execution, and management of industrial development projects with a focus on the Houston and Austin markets.

Today’s consumers make more purchases online than ever before, and popular merchandise is no longer only small household items and clothing. E-commerce has evolved to include big purchases like furniture, refrigerators, mattresses, and even cars. The challenge is that consumers, accustomed to lightning-fast delivery, still expect to receive these bulkier items in one or two days. To meet those expectations, retailers are rethinking their supply chain management and locating closer to the end customer, which is driving industrial demand in secondary markets that may have taken a back burner to the country’s dense urban metros. For example, major consumer product retailers like furniture distribution companies have historically served Texas from Houston and the Dallas-Fort Worth metroplex. However, to meet delivery expectations

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Southpark Commerce Center V supports an Austin customer base.

for customers in Central Texas, they now need a significant presence in Austin or San Antonio, and in some cases both. In Austin, almost all the bulk warehouse inventory supports e-commerce deliveries to the immediate area, rather than being shipped to other metros. Most recently, two major furniture groups — Wayfair and Four Hands — took 80 percent of the leased space at Southpark Commerce Center V, choosing the 350,000-square-foot center to support their Austin customer base. With a booming job market, Austin has been the fastest-growing large metro in the U.S. for the last eight years,1 highlighting the need for a sophisticated logistics strategy for consumer product companies. However, the trend isn’t limited to Austin or even Texas. Secondary markets across the country with growing populations are seeing similar trends. The nature of the consumer product sector in secondary markets is that inventory is typically consumed in the same market in which it is warehoused, and much of the population growth in these areas is attributed to younger generations that are more likely to shop online. Their needs include many of the purchases being made by first-time home buyers, including furniture and appliances, as well as everyday household goods. No matter the size of the product, consumers are no longer willing to wait a week for delivery. If an appliance or furniture store says delivery will

take a week or more, it will lose the sale four out of five times. Nashville, Tenn., and Charleston, S.C., are two other prime examples of cities attracting young professionals with strong job prospects. In the escalated war for talent, companies are relocating to these cities, which in turn attracts more residents and institutional capital and new development. For example, a new project called Charleston Logistics Center will serve a vital role in the supply chain strategies of many companies serving that market. As both the populations of secondary markets and the popularity of online shopping continue to grow, so will the industrial real estate that serves them. The challenge for retailers that need large industrial warehouse and distribution footprints then becomes balancing the equation of storing product close to the consumer without taking on too much space. 1

https://www.statesman.com/news/20190418/austinregion-fastest-growing-large-metro-in-nation-8-yearsrunning-data-shows

FRONT LINE

Manufacturers Look to Nontraditional Locations By Karen E. Thuermer

As the labor supply tightens, nontraditional manufacturing hubs

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are upping their game by investing in workforce training programs. Newly created manufacturing jobs, which require more skills than those that were lost, are not necessarily going to places where they were eliminated. We’ve heard the political drumbeat: jobs, jobs, jobs! Politicians campaigning in the 2020 elections will beat that drum even louder. President Trump claims that his administration is “restoring jobs” and that states and counties that were depressed under the Obama administration are now experiencing strong growth. Yet a June 13, 2019 article in The New York Times entitled “In the Race for Factory Jobs Under Trump, the Midwest Isn’t Winning”1 points out that the vast majority of manufacturing jobs Trump claims his policies have added are actually in the West and oil-rich areas rather than the industrial Midwest. The article cites the Economic Innovation Group, a Washington think tank that studies regions and advocates for new economic development policies, but “if you don’t look behind the numbers or at different numbers, you aren’t getting the entire picture” warns Michelle Comerford, project director and Industrial & Supply Chain Practice leader at Biggins Lacy Shapiro & Co. “Data in the referenced Economic Innovation Group study actually tells a different story,” she notes. Comerford emphasizes how nearly every part of the country — including “traditional hubs” in the Midwest — is seeing activity. How-

N E W LY C R E AT E D M A N U FA C T U R I N G J O B S , WHICH REQUIRE MORE S K I L L S T H A N T H O S E T H AT W E R E L O S T, A R E N O T N E C E S S A R I LY G O I N G T O PLACES WHERE THEY W E R E E L I M I N AT E D .

ever, manufacturers are increasingly turning to outlying areas for new growth. Site selection decisions are complex. “Some of our clients much prefer to be a ‘big fish in a smaller pond’ as opposed to being in a location where there’s a lot of concentrated, direct competition for workers,” Comerford observes. In short, nontraditional locations are increasingly considered for manufacturing and are seeing growth.

Finding Skilled Labor Today’s manufacturing activity is extremely diverse. Projects run the full gamut from biotech and pharmaceutical to environmental tech and food-processing, to traditional industrial supply and those that are utility-related, and more. But despite this diversity, the number-one common denominator to all site selection decisions today is availability of skilled labor. “It’s not an issue of sheer num-

bers, but needed skills,” Comerford explains. “Manufacturers want to know where they can find the skilled workers that they need to operate or maintain equipment both today and in the future.” For years, traditional hubs have been attuned to developing workforce needs. But today, nontraditional hubs are also investing in workforce training programs to up their game to meet manufacturer needs. This has increased company location options. Driving much of the training is automation. “Manufacturing plants today have a much higher level of automation than even 10 years ago,” Comerford says, but “workforce needs have changed considerably.” This brings us back to political chest-beating over number of jobs created. Manufacturing lost six million jobs from 2000 to 2010 as companies moved low-skilled jobs offshore. About 1.5 million manufacturing jobs have been since added back, but not necessarily in the places that lost them. And with automaton, job creation is not really accelerating. So claims of manufacturing job growth, particularly in the Midwest, are a misnomer. The added jobs aren’t the low-skilled ones that were lost. “Automation is what makes manufacturing viable in the United States today,” concludes Comerford. “Companies are not beholden to low labor wages. But they need people with higher skills and are paying them more.” 1

h ttps://www.nytimes.com/2019/06/13/business/economy/ trump-manufacturing-jobs.html

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FIRST PERSON STEVE HESS VICE PRESIDENT OF REAL ESTATE DEVELOPMENT DHL SUPPLY CHAIN According to a recent report from DHL Supply Chain, there have been transformation changes in companies’ supply chain networks. Can you tell us what effect globalization has had on these networks and explain the concept of “right-shoring”? Hess: Global corporations are finding that geographically extended supply chains are unwieldy, tremendously complex, and risky. Companies are reengineering their production and supply networks, moving away from super long-distance supply chains to “globally localizing” supply chains. This means sourcing and manufacturing closer to customer demand in a strategy referred to as “rightshoring.” Right-shoring provides a number of powerful benefits, including the flexibility and ability to customize products and orders closer to the customer so companies are not sitting on unsold inventory. It also can reduce lead times, lower inventory costs, and allow faster recovery time after supply chain disruptions. Generally, the challenge for real estate developers and owners is finding locations that can be re-purposed and that can meet the changing paradigm. It also means new neighbors which can make obtaining entitlements difficult, particularly given the traffic gridlock encountered as you travel deeper into many cities.

What about the e-commerce revolution? Which industry supply chains is it affecting? Hess: By far, the biggest issue on the minds of many of our customers is e-commerce and its implication on service and ground transportation. The extraordinarily high service expectations born of e-commerce are impacting B2C and B2B business nearly equally. E-commerce has radically and permanently altered the retail landscape for U.S. companies. It is also redefining what it actually means to be a U.S. company. Location is now an entirely relative term. Logistics and shipping represent the final and essential factor in the equation for e-commerce success. In terms of real estate, e-commerce is driving the growing trend of smaller tenants sharing buildings (with the exception of a Walmart or Amazon). These smaller tenants require more flexibility with lease terms and operating agreements. They also tend to be more labor-intensive, which requires more employee parking and amenitized spaces in the facility. Additionally, they often need more cube space with racking to control lease costs.

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How has this affected lastmile delivery strategies? Hess: The most important logistics challenge in front of us involves the complex and oftendiscussed issue of last-mile delivery. E-commerce is putting tremendous pressure on supply chains to perform and is forcing many companies to reconsider or change their last-mile delivery strategies. Surging demand for deliveries and shorter lead times are creating the potential for bottlenecks and delays in the final stage of transit. The difficulties will continue to compound as more people around the globe move to dense, urban areas, and as seasonal demand for e-commerce products expands. According to a study DHL produced with Euromonitor,1 the battle for last mile success will be dependent on localized delivery, flexi-delivery networks, seasonal logistics, and evolving technologies. When it comes to real estate, the lack of sizable site options has paved the way for potential multi-story solutions. Demand is on the rise and many tenants are willing to pay up for this solution, despite the increase cost in rent.

How have technological advances affected distribution/supply chains? Hess: Logistics strategies must evolve constantly and quickly by integrating flexibility and technological innovation in the core of every process. Advanced platforms and tools have already transformed the way products are moved and tracked across the globe today, and new, updated approaches promise important strides down to the last mile. For instance, programs and platforms that are perfecting the collection and analysis of real-time data around delivery are perhaps most important today, since they are helping to boost machine learning. Ulti-

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mately, improved automation through machine learning can expand the use of robotics in warehousing, while refining inventory management and peak planning processes. The ability to collect transportation cost and service data, integrate it into a distribution model, and optimize the network based on total cost to serve across the entire network is essential in e-commerce. The capability of AI and data analytics to manage the order profile and shipping patterns of customers’ increasingly complex operating models, while optimizing cost and service, is no longer viewed as an added benefit. These capabilities are essential services. Overall, technology also has had a generally favorable impact on real estate occupancy costs from the perspective of allowing tenants the ability to maximize efficiencies and, therefore, space utilization in a facility.

How can a company ensure it meets its financial objectives when managing its supply chain? Hess: Companies must be constantly ready to adapt their supply chains to reflect changing market conditions and customer demands. They need supply chains that are smart, can optimize cost and service, and can ultimately provide competitive advantage. Companies should also look at logistics and real estate as a bundled package. This creates the ability to make decisions about shared labor, shared technology, and transportation. It allows them to look at new requirements in the context of important questions like, “Can an existing campus location serve the requirement?” and “What are the drivers for locational decision-making relative to labor, transportation, economic incentives, and operating needs?”

Will partnering with a 3PL — or outsourcing its distribution functions — help a company to meet its goals? Hess: According to a survey of 200 transportation decision-makers conducted in 2018 and summarized in the report “The Logistics Transport Evolution: The Road Ahead,”2 ground transportation is more than a tactical commodity. It now needs to be a strategic component of the business. Partnering with the right 3PL can provide companies with greater predictability, flexibility, and speed in how their goods are warehoused and moved. They can offer a holistic view of emerging technologies that enables companies to confidently and profitably grow their businesses. Many companies also partner with 3PLs for the costsavings and performance improvements. They look to them to leverage productivity-enhancing technologies,

share best practices, and deploy flexible services. Partnering with a 3PL that has capabilities and experience in real estate adds benefits for companies looking for expertise in both logistics and real estate. Taking an integrated approach provides customers a single point of contact and ensures that building design and the racking and building systems are coordinated at the onset of the design process, which results in smoother transitions when operations commence. It’s also critical to ensure your partner has deep industry and market expertise globally so they are equipped to deliver a faster startup and more simplified management.

Is it more advantageous for a company to own or lease its distribution facilities? Hess: We typically find that our customers more often own production facilities and lease distribution centers. This arrangement provides a better overall return on their capital as supply chains are dynamic and can change, where adaptations to product lines are less real estate dependent.

Tells us what a company should do in response to supply chain risks. Hess: While supply chain interruptions — whether natural or man-made — are often unavoidable, anticipation and preparation can make all the difference for organizations. The best way to manage supply chain risks is through the use of planning and technology. For instance, in the short-term, companies can be better prepared by prepositioning essential materials in stocks and having a business continuity plan for at-risk locations. From a more long-term standpoint, they can use mapping tools for supply chain risk assessments, diversify locations, establish long-term logistics supplier partnerships, and invest in new technologies that reduce risk.

THE ASSIGNMENT Area Development recently asked Steve Hess, VP of Real Estate Development at DHL Supply Chain, about issues affecting companies’ global supply chains. DHL is the largest global operator of logistics space, having acquired and/or developed over 20 million square feet of industrial space in the last several years alone, providing both internal and external customers with individually tailored real estate solutions, says Hess. 1 https://www.dpdhl.com/en/media-relations/press-releases/2018/dhl-study-reveals-winninglogistics-strategies-for-the-last-mile.html 2 https://www.logistics.dhl/us-en/home/our-divisions/supply-chain/thought-leadership/ research-report/logistics-transport-evolution.html

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SITE SELECTION STRATEGY

Advanced Manufacturing Disrupts the Location Process As technological advances fundamentally alter long-standing manufacturing processes and practices, they’re also upending the way advanced manufacturing companies consider locations for their facilities. By Chris Volney, Senior Director, CBRE Labor Analytics

roadly speaking, advanced manufacturing can be defined as the inclusion of new, more efficient manufacturing methods enabled by technological innovation. The adoption of technology-driven automation in manufacturing has been omnipresent since the dawn of the Industrial Revolution, but the rapid pace of advancements — especially around robotics, artificial intelligence (AI), and 3-D printing/ additive manufacturing — is changing the industrial landscape faster than ever before. When the time comes to select a physical location for a new advanced manufacturing facility, these technological shifts are manifesting themselves in an updated approach to location strategy, specifically when it comes to hiring profiles, the labor pipeline, supply chain access, and economic incentives.

Hiring Profiles Increasing automation has not yet completely disrupted the traditional hiring profiles for manufacturing companies. However, it is creating demand for positions with dramatically different skill profiles. The need for historically commonplace manufacturing roles that focus on one or two discrete, repetitive, and often burdensome tasks — such as assemblers, maintenance mechan-

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AUTOMATION IN THE WORKFORCE OVER THE PAST FIVE YEARS

33% 5%

The number of manufacturing workers tending to more than one robot or machine has increased 33 percent

while employment for assemblers and fabricators overall has decreased by 5 percent

ACCORDING TO

THE BUREAU OF LABOR STATISTICS.

ics, machine operators, drivers, and general production workers — may be diminished slightly over time but will not disappear completely. Yet, these positions will increasingly require a skill set that evolves to support the complex technologies enabling more automated manufacturing operations. For example, at the Toyota Assembly Plant in Georgetown, Kentucky, an advance in technology has made an existing part of the

assembly process more efficient while creating the need to retrain incumbent workers, providing them with new skills. Collaborative robots, also known as “cobots” or robots specifically designed to work sideby-side with humans, have appeared alongside the assembly team that is charged with producing fuel tanks. Nearly the same number of human employees that existed before the cobots arrived are still on the assembly line; however, many of these

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are designers of the new devices, and the other employees’ roles have changed to overseeing the often painstaking tactile and visual inspections required to check for flaws in the fuel tank, including any holes or weaknesses in its connection to the critical fuel line. The cobots have streamlined the assembly process but have not erased the need for humans who are necessary to support and monitor the new, more highly automated systems. Overall, as more machines and robots are integrated into manufacturing, the need to oversee and maintain these has increased. Over the past five years, the number of manufacturing workers tending to more than one robot or machine has increased 33 percent, while employment for assemblers and fabricators overall has decreased by 5 percent, according to the Bureau of Labor Statistics.1 This suggests not only a slightly diminished demand for traditional assembly workers, but also a reskilling of labor to be able to support ongoing automation. Additionally, CBRE Labor Analytics forecasts that over the next 10 years, an additional 23,000 jobs will be created nationally for workers overseeing robots and automated equipment in manufacturing facilities, representing a 21 percent increase over today. As many manufacturing roles are being “up-skilled,” employers are also seeking out qualified candidates with skill sets that were previously not part of the typical manufacturing workforce. These new roles are necessary to support the integration and maintenance of technology into the manufacturing process. They will be responsible for helping to build, program, monitor, calibrate, maintain, and repair the machines and technology that enables automation. In addition to technical acumen, these workers will need to possess many skills that are more akin to those possessed by knowledge workers, including complex problem-solving, mental elasticity, and critical thinking. Changing labor needs will have real impacts on site selection as manufacturing companies begin moving away from a primary focus on hiring almost entirely for general skill sets that are relatively easy to find in most markets. Because of the near ubiquity of traditional manufacturing skill sets, manufacturers have historically tended to focus site searches based more on labor cost than labor availability or quality. This will begin to change as more specialized skill sets are required to operate the highly technical machinery and systems driving advanced manufacturing. Not all markets will possess a deep pool of candidates with the specific technical acumen and cognitive capacity that the new processes require. It’s expected that the ratio of technical to non-technical skill sets needed on the manufacturing floor will only increase over time, favoring those markets that have a workforce trained to meet this need.

Labor Pipeline As technology rapidly evolves and new equipment and processes are added to manufacturing operations, the training (and re-training) of local workforces will be critical to ensure a readily available pool of quality labor. Education providing literacy of new technologies and cognitive capacities such as data analytics and systems thinking will be needed for the advanced manufacturing workforce, and many traditional educational programs at all levels are not currently meeting this need. As a result, the gap between emerging jobs and workers with the requisite skills continues to expand in the manufacturing sector creating an acute labor shortage. In terms of site selection, markets exhibiting a demonstrated ability to re-train existing workers — while concurrently developing a pipeline of new talent coming out of secondary schools, vocational programs, and community colleges — stand to enjoy a competitive advantage in attracting new companies and growing existing ones. Manufacturers, and their site selection consultants, will be seeking to understand the depth and type of workforce training initiatives in individual states and communities. The most attractive locations will possess manufacturing-focused STEM education that has a direct connection and adaptability to the ever-changing skills needed in today’s manufacturing environment. Appropriate education and training should be provided at all levels including elementary through high school, technical training programs, re-training, apprenticeships, and postsecondary education. In addition to the types and subject matter of the education pathways, the total number of trainees passing through these programs will be of the utmost importance during the site selection process to fully grasp the potential size of the talent pool for advanced manufacturing roles. Even the best, most innovative training programs will struggle to attract the attention of manufacturers if their graduate output represents only a negligible percentage of the region’s workforce. Locations can also develop a talent pipeline for advanced manufacturing by actively working to change the perception of manufacturing as a desirable career choice among secondary and postsecondary students. Many young people who stand to benefit from the higher-paying, technically-skilled jobs available in advanced manufacturing are bypassing these opportunities due to outdated presumptions that jobs in this industry remain mostly repetitive, laborious, and low-paying. However, many of the jobs available in manufacturing today have similarities to the highly sought-after jobs of the tech and software industry. In fact, according to the Bureau of Labor Statistics Occupation Employment Statistics database, 10 percent of all U.S. software developers and AREA DEVELOPMENT | Q3 2019

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ADVANCED MANUFACTURING’S SITE SELECTION PROCESS Technology and automation are indeed shaping decisions around where manufacturing companies locate and expand. The following is a sampling of tactics being utilized by site selection teams as their location needs change:

• Skills > Job Title — As advanced manufacturing job roles quickly evolve, a skills-based approach to assessing the local workforce becomes more valuable than measuring only the total count of legacy manufacturing occupations. Occupation-based data is typically slow to adapt to industry changes, and that metric alone is an incomplete barometer of a labor market’s potential that often omits potentially qualified employees in other occupations with relevant skills that can be easily cross-trained.

•C ompetitive Landscape — This allows site selectors to assess which markets have a well-established manufacturing innovation ecosystem and the right mix of supply-chain providers. Understanding which companies a manufacturer historically competes well against for talent helps in formulating a competitive market-entry strategy.

•E ducational Assets — It’s increasingly important to uncover the full picture of the size and relevance of all formal education programs and training pathways that exist in a market to ensure a sustainable pipeline of quality talent trained in the relevant skills.

•M arket Longevity — Statistical forecasting can be utilized to conduct a pressure test of all candidate markets to understand their ability to accommodate continued scaling of the qualified workforce. This is a risk assessment that helps manufacturers “future proof” their location decisions.

•C ommunity Visits — Since many critical location factors for advanced manufacturing are changing rapidly and are more difficult to assess using desktop data alone, it’s increasingly important to spend time visiting each finalist market to empirically collect data and gain a deeper understanding of the nuances of local labor markets, manufacturing clusters, and supply chains.

programmers are presently employed in the manufacturing sector.2 The difference being that, unlike in many other sectors, these technical positions in manufacturing often do not require a four-year college degree. The ability to expand the pool of available talent for manufacturing through these types of perception-changing efforts begins as early as the elementary or middle-school level in many areas in order to educate students, parents, and even school guidance counsellors on the changing career opportunities in advanced manufacturing.

Supply Chain Access Advanced manufacturing supply chains are, in many ways, no different than those for more traditional manufacturing. They include a complex constellation of large and small manufacturers, raw materials producers, logistics firms, and an array of vendors providing other support services. However, access to many of these providers becomes even more critical when considering advanced manufacturing. For example, the advent of additive manufacturing/3D printing has created a renewed ability to cost-effectively focus on small-batch manufacturing. Co-locating near suppliers, for instance, allows companies to be more efficient and flexible in managing the production pro-

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cess, which can reduce risk related to fulfillment times. For 3-D printing, there is often a single source vendor for a variety of parts providing manufacturers with less risk, more control, and greater agility. However, as a still emerging process, the density of quality vendors in this space is not equally dispersed across all markets, thus making access to these partners a critical part of any advanced manufacturing location decision. In addition to seeking access to suppliers and vendors, advanced manufacturing companies are deriving benefits from clustering with other similar entities, including direct competitors, into what could be called manufacturing innovation ecosystems. This agglomeration effect brings together large manufacturers, startup companies, and high-tech enterprises that together can be sources of disruptive innovations generating new products, processes, and business models, and even lead to opening new markets for expansion. In terms of location preferences, this tends to benefit locations with existing and growing advanced manufacturing clusters that have a well-developed supply chain, an existing advanced manufacturing ecosystem, and most likely a deep and qualified pool of labor. Continued on page 15 for free site information, visit us online at www.areadevelopment.com

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FACILITY PLANNING

Artificial Intelligence: A Game-Changer for Corporate Space Thanks to vast amounts of available data and an evolved computational infrastructure, AI is fundamentally changing the way organizations plan and manage their real estate and facilities. By Pranav Tyagi, Founder and CEO, Tango

he competition for Amazon’s second headquarters was fierce. While the exact reasons for the tech giant’s decision to select Queens, N.Y. — a decision that was ultimately reversed — and Arlington, Va., were never officially disclosed, access to a large pool of qualified talent; a superior infrastructure that could accommodate 50,000 employees; the incentives each city was providing; and regulatory considerations were all definitely top of mind. The ability for an organization to select the right locations — and then create the right space to both maximize usage and engage employees — continues to grow more challenging as the cultural paradigm shifts away from the traditional modes of working. Due to the increasing number of employees working from home and the desire by younger generations for streamlined space,

corporations’ approach to how they select and curate the workplaces and workspaces for their employees is not as simple as it once was. What’s more, finding and planning space has been compounded by the myriad sources of data that go into these decisions — from economic, labor force, education, incentive, crime, and cultural data that point to what city is the best fit for an organization’s needs, to the utilization, facilities inventory, sensor, and beacon data that drive decisions about how to optimally plan and use each space. Applying AI to real estate helps companies quickly incorporate new and broader sets of data to uncover non-linear relationships and understand rapidly changing interactions between people and places — or, in the case of office space, employees and their workspaces. In no small way, AI is fundamentally changing the way organizations plan and manage their real estate and facilities. While talk of commercial uses of AI goes back several decades, we are just now finally equipped to harness its power, thanks to the near limitless amounts of data and evolved computational infrastructure — and companies are flocking to it. The rise of AI as a commercial tool continues to grow exponentially, and the numbers don’t lie: the estimated impact of AI totals $3.5 trillion to $5.8 trillion across all industries.1 In the case of commercial real estate, the growth in varieties and types of data across the real estate and facilities lifecycle — whether it’s demographic, geospatial, employee, customer, lease, or asset — has enabled bolder algorithms to tackle more ambitious problems and garner new insights. What does AI bring to corporate real estate that’s such a game-changer? The near real-time flow of available data allows for a continuous recalibration of models and ensures organizations are able to make the best decisions about both where to locate and how to optimize AREA DEVELOPMENT | Q3 2019

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new spaces based on the latest information, rather than information that is six months old. As things change, and as new data becomes available, AIfueled models deliver better performance and interpretability. As for precision, it goes without saying that these types of models are highly accurate because they’re able to discern relationships in these mountains of data that were previously impossible to see through traditional techniques or human observation. Now, all these decisions can be made faster — which appeals greatly to corporations reassessing their physical footprint to reduce occupancy costs and improve worker productivity and employee satisfaction. In the past, analytical solutions for optimizing workspace would take weeks, sometimes months to implement. Now, designing the layout of the workspace of the future can be achieved in a few days — or less. This is particularly exciting when you think about the quantum of problems that we are trying to solve from a real estate perspective. Another driving factor behind AI’s immense popularity as a commercial tool is computational infrastructure speed, availability, and sheer scale. The computational framework that can unlock AI’s full potentiation has a few key characteristics. First, it must be scalable. AI can enable more questions to be asked in a shorter amount of time, so something that takes weeks can be reduced to hours or minutes. Then, the infrastructure must be highly adaptable. Every time there is a new business question about an organization’s workspace needs, there is no need to go back to the drawing board and redo everything that has been done in the past. Instead, the techniques should be adaptable and reusable across multiple business-use cases.

type of location is being sought. Determining what is most important will depend on the utility of the new facility — be it a new headquarters, data center, or warehouse or distribution center. It’s a multi-dimensional problem and thus requires advanced technologies and techniques. So, how is a company supposed to look at these criteria — each with its own unique set of data behind it — and make the best decision? By leveraging traditional knowhow and techniques along with the advanced capabilities of artificial intelligence, models can be combined on an individual criterion based on rank order to help decide whether a new location — or new city — would best meet an organization’s requirements. Starting with macro models to assess individual markets or cities and then honing into individual locations within the specified geography, AI-fueled approaches help organizations make faster, more informed decisions. Once an organization has identified a location, how can it make sure the new space is configured in a way that balances employee requirements and protects the bottom line by ensuring optimal space utilization? Weaving employee satisfaction into the plans is essential as the nature of work and the corporate workplace are undergoing revolutionary changes. Employees are demanding better experiences, which directly affects an organization’s physical footprint. Working remotely, co-working, collaborative workspaces, and hoteling are all contributing to a new perspective on how organizations utilize space.

As things change, and as new data becomes

available, AI-fueled models deliver better performance and interpretability.

What Does This Mean for Site Selection? While not all organizations are the world’s largest online retailer searching for new headquarters, the determination of where to put a new office, or relocate an existing one, involves a complex set of decisions and includes a hierarchy of criteria. Those criteria likely include the labor pool, transportation, crime statistics, the presence of specific educational institutions, incentives offered by a particular city or state, and regulatory issues, among others. If an organization plans to relocate to a new city and hopes its employees will consider the transfer, the cost of living for them must also be considered, including real estate prices. The ranking of the criteria also depends on what

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The New Way of Doing Things Recently, CB Richard Ellis completed their 2019 Occupier Survey,2 and it provides illuminating stats about today’s corporate real estate strategy. According to the CBRE survey, one of the top priorities for organizations is the alignment of corporate real estate with overall corporate goals. Tellingly, the CBRE study reports that 68 percent of the survey respondents see employee engagement as a key part of their real estate strategy. Now, compare these statistics with other findings that show Gen Z and millennial workers overwhelmingly gravitate toward companies that offer them the flexibility to work on their terms, whether that’s working remotely or in an office designed for collaboration and communication, and the necessity for informed workspace design becomes apparent. To create an office space that will attract the best of this new generation of workers, organizations need to understand the space they have — which inevitably for free site information, visit us online at www.areadevelopment.com

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brings them to the time-consuming and costly challenge of polylining their existing space. Whether complying to the BOMA, IFMA, or the more rigorous OSCRE standards, polylining can be a monumental task. The technical requirements make polylining very labor-intensive, becoming more complicated with each new style of building. Typically, a CAD operator can manually polyline 25,000 square feet of space per day. That may seem efficient, but if the new corporate office is one million square feet and requires re-polylining, it will require a significant amount of time and energy to complete this task. Performed manually, it will likely take a month to complete this job, even with a highly trained resource. Currently, there are tools that can recognize spaces and polyline them to 90 percent accuracy — and, because they leverage AI and machine learning, they learn and improve in accuracy over time. This type of AI-fueled software recognizes more than just the boundaries of offices and cubicles; it can discern columns, windows, shapes, specific types of walls, and so on. As the algorithms are fed more and more data, their polylining capabilities evolve and improve. Instead of starting with a blank slate and drawing an entire office building’s polyline by hand, these next-generation systems can dramatically improve speed, accuracy, and productivity. But wait — some organizations aren’t looking to get bigger. As more employees opt to work remotely and companies are left with a landscape of unused cubicles and offices, a space reduction may be in order. For example, if an organization has nine floors in a building and wishes to reduce this to eight floors, AI-based systems can reassess the office’s physical footprint by optimally redistributing employees from floor nine into the lower floors’ space. To achieve this, AI informed analyses may find that a particular department might be best split between floors. Conversely — and this is where the human element comes into play — if achieving maximum productivity and having people co-located as much as possible is the goal, leadership may decide

to keep the department on one floor and reconfigure the algorithm for an alternate solution. The application of AI also helps overhaul traditional wayfinding methods and puts the power of office navigation in the push of a button. Traditional wayfinding has always been based upon a significant level of manual effort and has been difficult to implement. These traditional methods typically required either people walking an organization’s hallways or utilizing a constellation of expensive sensors. Now, thanks to AI, algorithms can quickly and easily decipher the optimal path between two points. Utilizing AI-empowered wayfinding can give a corporation substantial cost reduction and usability enhancement benefiting both their budget and employees. Imagine the savings and benefits to a global organization deploying this algorithm across all their international locations. The concept of space optimization has been around for as long as office space has existed. It is essential for an organization to ask, “What’s the optimal way of distributing my workforce in my available space?” When AI is applied to space optimization, balancing space for current departmental and individual needs is synthesized into one high-powered algorithm. This is becoming even more important as the types of space available continue to diversify. These new modes of working make this problem an even more interesting one, particularly as organizations evolve, grow, and move from one space to another. Leadership must keep answering these questions. And the answers are easier than expected, because the data is already there through the normal work of tracking information in a space planning solution — including information collected through surveying departments about their long-term needs, or other inputs. By leveraging the power of AI, space planning tools can create a variety of scenarios, each optimized for an organization’s critical requirements. n 1

https://www.mckinsey.com/featured-insights/artificial-intelligence/notes-from-the-aifrontier-applications-and-value-of-deep-learning https://www.cbre.com/research-and-reports/EMEA-Occupier-Survey-2019

Advanced Manufacturing Continued from page 12

Incentives Finally, economic incentives play a part in many manufacturing location decisions. The rise of advanced manufacturing is changing the way that site selection consultants are evaluating these opportunities. Especially in the future, new methods of manufacturing may rely less on labor and more on capital investment in high cost equipment, including robotics and industrial-grade 3-D printers. The localities that have updated their incentives programs to accommodate this shift are often more appealing to advanced manufacturers considering new facilities. For example, programs that place a value

on capital investment over total employee count may be more appealing to these companies. Likewise, the previously mentioned shift to a more technically skilled labor force has also led many companies to place a higher value on training grants that ensure access to a qualified talent pipeline and lower a company’s training costs. Ideally, the locality would also be open to developing a partnership that allows for a longer-term training relationship that adapts to a company’s evolving talent needs. n 1 2

https://www.bls.gov/oes/tables.htm https://www.bls.gov/oes/current/naics2_31-33.ht

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COVER STORY

By Reteisha Byrd, Research Manager, and Tracy King Sharp, Chief Operating Officer, Boyette Strategic Advisors

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n e G : Z Shaping Location and Expansion Decisions Companies using artificial intelligence, virtual reality, and other technology are seeking out Gen Zers to fulfill their workforce needs — in places this most tech-savvy cohort of the labor force wants to be.

INDING QUALIFIED CANDIDATES to fill open positions is a challenge for every employer today. Unemployment rates are at a 19-year low and, for the most part, everyone who wants a job has a job. Workforce availability is a top priority for companies as they consider locating near talent hubs to supply their workforce needs. In Area Development magazine’s 33rd annual Corporate Survey and 15th annual Consultant’s Survey, availability of skilled labor was once again the

number-one factor in the location decision for both groups.1 With Gen Z coming into the workforce, there are now five generations working side by side, and companies will need to rethink their recruitment strategies and adapt their culture to attract these young workers.

WHO ARE GEN ZERS? McKinsey defines Gen Z as those born between 1995 and 2010, with the oldest Gen Zers being 24 years old and the youngest being nine

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years old.2 Gen Zers are tech-savvy or digital natives, having grown up with the Internet and social media at their fingertips. To put things into perspective, Facebook was founded in 2004, and the oldest Gen Zers were 8 years old that year. The iPhone was released in 2007, when the oldest Gen Zers were 11 years. A generation that is constantly scrolling, liking, and sharing on social media has skills like no other generation can bring to the workplace. Gen Zers represent 20 percent of the U.S. population, and while many of them are still in elementary, middle, high school, or college, it is projected that they are on track to become the most educated generation yet. Gen Zers are also risk-averse as a result of the Great Recession and, therefore, financial stability is a priority for all of them. For this reason, Gen Zers are willing to stay at one job longer than their millennial counterparts. They also seek to avoid student loan debt, taking other measures to fund their education. Speaking of finances, Venmo, Cash App, and Apple Pay are the norm for Gen Zers as they split Uber rides, dinner, and rent payments. With their phones glued to their hands, Gen Zers spend approximately 25 to 38 percent of each day online searching for answers to questions, shopping, and scrolling through social media. They use YouTube, help forums, and other online sources to look for solutions to problems.

Gen Z

CORPORATE NEED FOR TALENT AND LOCATION ANALYSIS Companies are taking a blow to their bottom line due to the inability to find qualified talent. There are currently more than seven million open jobs; and finding employees with the talent that matches the skills required is a daunting task.3 In addition, 10,000 baby-boomers are turning 65 each day, adding to the number of unfilled jobs; however, many will work past typical retirement age.

HEN DETERMINING WHERE TO INVEST CAPITAL in a new facility location or expansion, companies must examine not just where the most Gen Zers are living, but what training programs and partnerships are in place to develop their talent. This is especially true for companies located in rural America, where talent is scarcer. Partnerships with local community colleges, other educational providers, and economic development organizations will prove key in developing a talent pipeline.

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The most diverse educated and tech-savvy generation

Site selectors should also analyze the overall growth of the economy in prospective locations to ensure that new talent will continue to enter the market so their company can be successful well into the future.

TYPES OF COMPANIES ATTRACTING GEN ZERS Gen Zers can master any technology, and that is a major reason why employers shouldn’t shy away from hiring them. Gen Zers will be drawn to companies that use advanced technology and software as the primary means of business operations. Having the latest sophisticated technology will keep these young workers happy, productive, and contributing to the bottom line.

EED ASSISTANCE INCREASING YOUR COMPANY’S BRAND AWARENESS? No worries. Gen Zers will be able to help companies increase their digital presence on social media and company blogs, which can, in turn, increase awareness about the company, its services, and products. Not practicing sustainability is out of the question for Gen Zers. These young people want to work for companies that share the same values as they do. Promoting a company’s sustainability efforts will appeal to the environmentalist that is inside every Gen Zer. Due to the tight labor market, Gen Zers can be picky with their job search, and companies will need to promote their “cool” factors to entice them.

HOW TO ATTRACT GEN ZERS Recruiting Gen Zers to work for a company requires unconventional approaches. Gone are the days when posting a job opening in a newspaper or on a website would turn up multiple qualified job candidates. Companies are having to meet job candidates where they are, and the place to

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THEREI SA CRAFTSMAN I N ALLOFUS

TNECD. COM

meet Gen Zers is on social media. According to a LinkedIn study, major companies are using social media platforms such as Snapchat to “get ahead of the curve in recruiting future leaders.”4

OMPANIES ARE ALSO BEGINNING TO PLACE RECRUITMENT ADS ON SOCIAL MEDIA and show behind-the-scenes glimpses of employees in their workspaces. Utilization of short videos to show off a company’s culture is also useful in recruiting Gen Zers. The opportunity to work remotely or access their work via the cloud is a major incentive for Gen Z workers. These young people want flexible work that accommodates their lifestyle and doesn’t keep them tied to a desk for 40 hours a week. Utilization of mobile job applications that are short and to the point is a great way to appeal to Gen Z talent. Job applications that are lengthy, convoluted, and outdated quickly drive away Gen Zers. Companies that offer training in areas where Gen Zers have weaknesses — such as in interpersonal relationship building and communication skills — will allow them to become more comfortable interacting with others in person. Gen Zers also value mentorship, not management, and desire immediate and constant feedback on their work.5 Show Gen Zers how they can advance with your company, and they will put their all into helping your company find new solutions to old problems. On-the-job training will prove beneficial when hiring Gen Zers. Although many Gen Zers won’t have previous job experience, companies must value the hard skills that this generation possesses.

shortage of affordable housing. While convenience is certainly important, most Gen Zers probably don’t want to trade off low rent for longer commutes.

PEAKING OF COMMUTE TIMES, the topic of transportation will surface when looking to recruit Gen Z workers. Many of them have grown up in a world of car-sharing, which includes Uber, Lyft, and others. Studies have shown that many young people are forgoing car ownership, and although they like having access to a ride at the click of a button, they prefer access without ownership. Public transportation options will also be a major factor in attracting Gen Zers, especially in larger metro areas. Shorter commute times will serve as a plus when looking to attract these workers.

IN SUM Companies must adjust their location analysis lens to set talent as a priority. Gen Zers are the most diverse, educated, and tech-savvy generation ever and are acclimated to swiftly changing technology and environments. Because these young people are digital pros, companies looking to recruit them must meet them where they are and be willing to make accommodations. Although negative dialogue exists about millennials and Gen Zers, each generation brings their own set of communication styles and preferences to the workplace. It is up to employers to find a balance that suits the needs of all generations within their company.

S THE LABOR MARKET TIGHTENS, more and more companies will begin investing in their workforce development programs and restructuring their workforce strategies. It may be considerably easier for a company to place a new business near their talent source than for them to try to recruit talent to a place that cannot meet their skills needs. Companies that are progressive in adopting artificial intelligence, virtual reality, and other technology will find that Gen Zers will readily jump in and excel at these new innovations.

EN ZERS ALSO KNOW THE IMPORTANCE OF HEALTH AND WELLNESS. Offering traditional benefits packages will draw their attention, but offering things like free gym memberships and on-site workout facilities will reel them in. With that, quality of life and cost of living are important to Gen Zers as well. Urban areas offer more work-life balance for Gen Zers, as well as amenities such as live music, art, and eateries. Gen Zers like to feel as if they are living their best life, so amenities are definitely important to recruiting them. As more and more Gen Zers enter the workforce and begin living on their own, the topic of affordable housing will become front and center. It has been stated that millennials have postponed buying homes because of the large amounts of debt that they have accumulated, in addition to the

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Gen Z

https://www.areadevelopment.com/Corporate-Consultants-Survey-Results/Q1-2019/33nd-annual-corporate-survey-15th-annualconsultants-survey.shtml 2 https://www.mckinsey.com/industries/consumer-packagedgoods/our-insights/true-gen-generation-z-and-its-implications-forcompanies 3 https://www.bls.gov/news.release/jolts.nr0.htm 4 https://business.linkedin.com/talent-solutions/blog/universityrecruiting/2017/gen-z-is-here-4-things-you-should-know-in-order-torecruit-them 5 https://www.forbes.com/sites/barnabylashbrooke/2019/06/21/ want-more-fromgeneration-z-mentor-dont-manage-them/#1a826c775530

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10th Annual

SITE CONSULTANTS

SURVEY 2019

Top 20 States 1. Georgia

10T. Virginia

2. Tennessee

12. Kentucky

3. South Carolina

12T. Florida

4. Alabama

14. Arkansas

5. North Carolina

15. Oklahoma

6. Texas

16. Arizona

7. Mississippi

17. Iowa

8. Louisiana

18. New York

9. Ohio

19. Michigan

10. Indiana

20. Missouri

The top-ranked states have landed on the radar of todayâ&#x20AC;&#x2122;s site selection consultants because of their low business costs, generous incentive programs, and competitive labor environments, among other probusiness advantages. BY STEVE KAELBLE AREA DEVELOPMENT | Q3/2019

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TOP STATE FOR BUSINESS SIX YEARS IN A ROW!

2014

2015

2016

2017

2018

2019

WORKFORCE TRAINING PROGRAM IN THE NATION

INDUSTRIAL ENGINEERING PROGRAM IN THE NATION

1 MILLION+ NEW COLLEGE GRADS EACH YEAR* *250-mile radius of Atlanta

5.1 MILLION+ LABOR FORCE MOST WOMEN AND MINORITY ENGINEERING GRADS IN THE U.S. FREE TUITION FOR HIGH DEMAND TECHNICAL CAREER PROGRAMS

For an unprecedented sixth year in a row, Georgia has been named the Top State for Business. This achievement is based on survey results from leading site consultants who rank states across 12 different categories such as cost of doing business, workforce development and regulatory environment. It takes a team. These accolades would not be possible without the support from Georgia companies, our industry partners, communities and the citizens of Georgia. Congratulations! Visit Georgia.org/ProBusiness and hear from some of the worldâ&#x20AC;&#x2122;s leading brands on why they choose Georgia.

Methodology site/location consultants and Where will the next highOur 2019 specialists. These are experts profile development project TOP STATES FOR who are well acquainted with land? That’s a bit hard to say. DOING BUSINESS which states have the friendliAfter all, the proverbial crystal est tax or regulatory environball exists only in fairy tales and rankings reflect the results of ments, which lead in workforce a couple of the “Harry Potter” our recent survey asking the development, which have the stories. consultants to give us their top most competitive cost of doing That said, there are plenty state picks in 12 categories that business, and so forth. of good ways to make inimpact companies’ location and It’s a compilation of data formed assessments of the facility plans. The states in each that’s both useful and thoughtvarious American states and category were ranked based on provoking — but the consultheir suitability for big-headline their number of mentions in the tants who had input into the business projects. Just ask the particular category, and total lists shared here will be the first experts who help guide those mentions in all 12 categories to tell you that this isn’t the last businesses in their location were calculated to rank the word on what the very best site decisions. They know what top 20 states overall. is for any given project. Decharacteristics matter, and pending on a project’s specific which places excel in those needs, the ideal location could various traits. be in a place at the top of one of these lists, or further Sum up all of their feedback and some distinct patdown, or not on any list at all. terns emerge. One conclusion is that it’s hard to go Places not listed here are unquestionably perfect for wrong with a site in Georgia. The Peach State sits atop attracting certain types of workers, or for proximity to this year’s Area Development list of “Top States for specific kinds of resources. Places absent from these Doing Business.” Again. Georgia has been ranked first lists may still win the day because of particular supply for six years in a row. Tennessee, in second place, makes chain considerations, or they may have an available regular appearances in the top five; same with thirdbuilding that is unbeatable for the particular need. The place South Carolina. places we spotlight here are impressive and excellent Alabama is a perennial favorite in the upper echoptions — but just about anywhere is the perfect site elons, and ranks fourth this year, and if you look back for somebody’s project. What matters are the details over previous years’ lists, you’ll see that fifth-place about the specific site and project. North Carolina is perpetually well-regarded, too. These overall rankings are determined by crunching assessments in Overall Cost of Doing Business a dozen different attributes. States at Face it, a site simply won’t be viable if the business the top of the overall can’t make money while operating there. Overall cost of Overall Cost list tend to do well in doing business is an essential location factor, and most of Doing multiple categories. of the other categories below have some impact on the Business But it’s worth checkoverall cost of doing business. ing out who excels at Tennessee and Texas trade places this year, with 1. Tennessee what, because each Tennessee atop the list and Texas in second place. For 2. Texas project has its own Tennessee, this factor shines with the help of its low 3. Georgia specific needs when tax burden, its right-to-work status, its reasonable tort it comes to location and workers’ comp laws, and its overall reputation for 3T. South Carolina factors. fiscal responsibility. Texas boasts of a giant and strong 3T. Alabama economy, and some of the factors that help keep busiFirst, A Caveat ness costs low are its lack of corporate and personal 6. North Carolina About income taxes, its generous menu of tax relief, powerful 6T. Mississippi Superlatives business incentives, and a legal system that treats busi 8. Arkansas nesses fairly. Our “Top States” Once again, Georgia and Alabama land in a tie for are determined 9. Florida third, this year joined in the tie by South Carolina. And through a survey 10. Indiana another trend that carries over this year — the entire of well-respected

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TopStatesForDoingBusiness2019.indd 24

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9/13/19 11:16 AM

Corporate Tax Environment top 10 in this category is made up of Southern States, with Indiana the only exception to that rule.

1. Texas

2. North Carolina

3. Georgia

Corporate Tax Environment As the Tax Foundation1 points out, the impact of taxation has to do with both what kinds of taxes are present and how high they are. Many states that are attractive from a tax perspective get that reputation because a particular kind of tax is absent altogether. Others fare well because of the low rates they levy. One example that the Tax Foundation cites: Indiana levies taxes in all of the major areas, but does so at low enough rates that its overall tax climate is favorable. It places seventh on our list for best corporate tax environment. No. 1 in this category, Texas, meanwhile, gets a good jump out of the starting

3T. Florida

5. Tennessee

6. Alabama

7. Indiana

8. South Dakota

8T. Nevada

10. Mississippi

2019 Top States Commentary

STATES WITH IMPROVED ECONOMIC DEVELOPMENT POLICIES RISE TO THE TOP

Similar to 2018, the Southeast continues to lead the way in nearly every category of the survey. This is not surprising as the changes that must be implemented in order to improve these rankings can take several years to achieve the desired effect.

and in 2019 Tennessee is ranked 2nd. Tennessee has taken great steps over the last several years to improve the corporate and personal income tax structure as well as creating the Tennessee Promise program. These types of changes take multiple years after being implemented to produce the desired results and, based upon the rankings and the stateâ&#x20AC;&#x2122;s recent successes, the new policies and structures are having the desired effect.

Tennessee is a great example of this, in the 2018 survey Tennessee was ranked 4th,

It is also interesting to look at some of the states that had incredibly successful

TopStatesForDoingBusiness2019.indd 25

years at the end of 2018 and to date in 2019 and where they ranked within the survey, such as Virginia (tied for 10th), Louisiana (8th), and Arizona (16th), among others. We have seen Virginia take on several aspects of economic development recently, including workforce development and shovel-ready sites programs. Virginia has made some strong investments in both its job training as well as its Business Ready Sites program. Virginia has had several noticeable successes in 2018 and 2019, such as

Merck, Amazon, and Micron. As the state continues to strengthen its programs, I would expect to see Virginia to continue to climb in the rankings. Site selection and economic development are continuously evolving, and those states that continue to evolve will always rise to the top.

BY AMY GERBER, Executive Managing Director, Business Incentives Practice, Cushman & Wakefield

AREA DEVELOPMENT | Q3/2019

9/13/19 11:17 AM

Business Incentives Programs

gate by having no corporate or person 1. South Carolina al income tax at all. It 2. Georgia adds to that featherin-the-cap with an 2T. Tennessee ever-present knife for 4. Alabama further tax cutting. In recent years, there 5. Mississippi have been reductions 6. Texas in the franchise tax 7. Louisiana and property taxes. Second-place 7T. Ohio North Carolina, on 9. North Carolina the other hand, does have a cor 10. Indiana porate income tax, but that tax is seen as among the nation’s most competitive, behind only Wyoming and eighth-ranked South Dakota (which the Tax Foundation places third on its index of State Business Tax Climate 2). Georgia, tied for third on the Area Development list in this category, also is recognized with a low corporate tax rate, along with generous credits that reward businesses that are growing and adding jobs. Also in third is Florida, which can boast of a long list of taxes that it doesn’t levy, including state personal income tax as well as corporate tax on certain kinds of corporations.

Business Incentives Programs A regular leader in this area is the state of South Carolina, which ranked first for its business incentives programs. The state has enacted a host of performance-based tax incentives that pay off for companies that create jobs and invest in their operations. There are ways to totally wipe out the corporate income tax liability, plus sales tax exemptions reducing startup and operating costs, individualized property tax incentives, and other discretionary incentives. On top of that are education and training programs. In Georgia, the incentive picture includes both tax credits that can reduce corporate income taxes and payroll withholding, plus tax exemptions on sales and use taxes as well as inventory taxes in some situations. A major incentive here, as well, is one of the nation’s most robust training programs (more on that later in this article). Tied for second place with Georgia is Tennessee. Its incentives programs include grant funding tied to

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TopStatesForDoingBusiness2019.indd 26

The amount and type of incentives each company can receive are determined by the size of the investment, the number of new jobs, and how much those jobs pay.

economic development, job training assistance, and infrastructure grants. How much of these things each company can receive is determined by the amount of the investment, the number of new jobs, and how much those jobs pay.

Access to Capital and Project Funding An economic development project won’t get far without funding, and money doesn’t grow on trees. But it turns out, there are places where capital does seem to sprout in a pretty healthy way. California and New York top this list again for 2019, as they did last year. Indeed, PwC MoneyTree3 research into the hottest investment activity this year shows a huge volume of activity in California. Three of the top five metro areas for raising capital are in California, while New York and Boston are high on the list, too. Needless to say, all are hotbeds of innovation, and money tends to follow hot ideas. Beyond those two, the vibrant business climates in Georgia and Texas make obtaining project funding comparaAccess to tively smooth. States Capital like these attract the & Project attention of deepFunding pocketed investors, of course, but these 1. California states and their communities also do their 2. New York own investing in a 3. Georgia variety of business 4. Texas funding programs that help smaller 5. Tennessee companies and those 5T. Ohio that aren’t as easily connected with tradi 5T. North Carolina tional funding. 5T. Massachusetts The city of Atlanta, 9. South Carolina for example, promises a host of pro 9T. Virginia grams for businesses 9T. Florida of all sizes.

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9/13/19 11:21 AM

pany e w

Competitive Labor Environment

Competitive Labor Environment Our overall top-ranked state, Georgia is tops when it comes to a competitive labor environment. A number of things make it that way. The population trends a bit younger than the national average, and Georgia is a draw for talent (for 2017/18 is was ninth in the nation for net migration4). Atlanta is among the five most attractive cities for millennials, in fact. The state’s educational institutions turn out a remarkable number of eager graduates every year, and the specific needs of any given location or expansion project are the top priority of Georgia Quick Start, the oldest program of its kind in the country. It provides free, customized training for companies and the people they want to hire — and its expertise has boosted the careers of more than

1. Georgia

2. Texas

3. Tennessee

3T. North Carolina

5. South Carolina

5T. Alabama

5T. Indiana

8. Ohio

9. Virginia

9T. Arizona

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TopStatesForDoingBusiness2019.indd 27

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a million people through the years. Texas, last year’s leader in this cat 1. Tennessee egory, ranks second this time. To begin 2. Georgia with, it has a huge 3. South Carolina labor pool, second 4. North Carolina in the nation.5 It also has a vast educa 5. Alabama tional system con 6. Ohio stantly turning out new members of the 7. Texas labor force, and its 7T. Kentucky development fund 9. Virginia supports customized job training. 9T. Mississippi Tied for third is 9T. Missouri Tennessee, which has earned headlines in 9T. Iowa recent years for its investments in the workforce (its audacious goal is to put certificates or college degrees in the hands of 55 percent of Tennesseans within the next few years, and generous tuition programs put that dream within reach of anyone in the state). Also in third in this category is North Carolina, which has been ranked first for its manufacturing sector, 6 and has top-notch universities, a community college system with 58 campuses, and more than 22,000 STEM degrees awarded every year. Among other things the top 10 states on this list have in common — all but one (Ohio) are right-to-work states.

Shovel Ready Sites Program

Shovel-Ready Sites Program Getting a new development up and running is often a slow and complicated matter, but the needs of business these days evolve and change more quickly than ever. It can sure help matters if a site is ready to roll ASAP. That’s why so many states pay a lot of attention to building a list of shovel-ready sites. Such programs go by a variety of names — many are “certified” or “shovel-ready” or “ready” in some other way. Ranked first, Tennessee offers a roster of “certified sites” all over the state, from 20 acres to hundreds. Georgia’s “certified sites” are part of its Georgia Ready for Accelerated Development program, which ensures that there’s already been plenty of due diligence done in such areas as environmental and geotechnical assessment, investigations into endan-

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TopStatesForDoingBusiness2019.indd 28

Being truly responsive goes beyond having a helpful attitude — it takes very intentional process-building and red-tape cutting by a state’s government.

gered species, wetlands and utility services, and other pertinent topics. Kentucky calls its sites “Build-Ready,” and you’ll find plenty of “Business Ready” sites in Virginia, and in Ohio they’re “Job Ready.”

Cooperative and Responsive State Government To be sure, there’s not a state government that would turn down a phone call from a potential employer looking for a good place to land. Every state government is eager to promote job growth and will cooperate to the best of its ability. But being truly responsive goes beyond having a helpful attitude — it takes very intentional process-building and redtape cutting. Those that put in the effort ultimately build a solid reputation in this area. Tennessee and Georgia top the list this year (a tie). Both have strong programs in place to support the various needs of businesses considering locating in their states, as well as those already operating there and striving to succeed. The work begins from the start of a prospect’s interest, with assistance locating an ideal place, making local connections, securing approvals, Cooperative and building custom& Responsive ized incentive packages and training State programs. Government Different states 1. Tennessee achieve these aims in different ways that reflect both their philosophies and the characteristics of the state. Georgia, for example, last year created a division with a specific focus on helping rural communities promote development projects. And it puts the Technical College

1T. Georgia

3. South Carolina

4. Alabama

5 North Carolina

6. Texas

7. Virginia

7T. Mississippi

7T. Indiana

7T. Arkansas

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Favorable General Regulatory Environment

1. Alabama

2. Texas

3. Georgia

4. South Carolina

5. Tennessee

6. Mississippi

7. Arkansas

8. North Carolina

System of Georgia in charge of customized training, through its Georgia Quick Start program. Arkansas, one of the states tied for seventh place in this category, stresses its single point of contact to make the process as easy as possible and its philosophy of seeking and removing burdens and hurdles from the path.

Favorable General Regulatory Environment

8T. Kentucky

8T. Louisiana

8T. Iowa

A favorable regulatory environment is, in a sense, part of the overall cooperative and responsive climate discussed above, though the regulatory world is often at least partly beyond the purview of state government. Multiple parties have a hand in painting this picture, including environmental regulators, workplace safety and workers’ compensation authorities, zoning officials, and others. There are plenty of places red tape can slow or stall a project, meaning that there are lots of places for states to differentiate

2019 Top States Commentary

LONG-TERM PERSPECTIVE SHOWS SOUTHERN STATES AS “GO-TO” PLACES FOR BUSINESS

As we are coming to an end of this decade, we realize that location selection consulting is approaching 100 years as an active professional service. Over that time period, there have been maybe four or five generations of advisors who have come into this business — bringing fresh ideas, differing approaches, and new perspectives to the clients they serve. Now that the most recent feedback has been received from these consultants, out of curiosity, one must ask, how have things changed over time and has

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TopStatesForDoingBusiness2019.indd 30

the importance of those factors suggesting “Best States” varied with the times? Most importantly, we should all recognize that although survey results from a single year may provide some valuable insights into the latest thinking of location advisers, the thing of most value is how the findings have changed over a longer period of time. Although these survey submissions are the opinions of the advisers, one cannot help but think the responses are a direct result of shared reasoning garnered through client collaboration (therefore influenced by corporate opinions), as well as recent experience gained through working deals with the various states. In sum, there are no surprises. The

Southern States, perhaps from as far back as the 1950s, continue as the “Go-To” places for business. Taking a long-term perspective, six of this year’s top-10 states — Georgia, Tennessee, South Carolina, Alabama, North Carolina, and Texas — have been in the top 10 for all of the last 10 years; three states — Mississippi, Louisiana, and Indiana — have been in top 10 for nine of 10 years; and Ohio and Florida were included in four of 10 years. Not surprisingly, states in the Northeast, Rustbelt States, and others with onerous worker regulations and high operating costs remained in the lower rankings. However, several states with favorable business climates (low taxes, low operating costs, appropriate labor supply) received low

scores simply because they are not “top-of mind” locations. We believe the survey results capture what we have been experiencing — including client feedback over the past few years. Those factors being weighed are the paramount considerations and have not varied much over time. Additionally, these states rate very well in terms of attractiveness to relocating employees, quality of life, travel convenience, and other considerations not mentioned in this survey.

BY LES J. CRANMER, Senior Managing Director, and ART WEGFAHRT, Corporate Managing Director, Savills

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9/13/19 11:26 AM

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themselves. In Alabama Speed of (ranked first in this Permitting category), for example, the state’s De 1. Georgia partment of Environ 1T. Alabama mental Management says its “one-stop 3. South Carolina permitting” is fa 4. Tennessee cilitated by a Permit Coordination and 4T. Mississippi Development Center. 6. North Carolina That gets one hurdle 6T. Arkansas out of the way in as simple a fashion 8. Louisiana as possible. North 9. Virginia Carolina has also streamlined prac 9T. Texas tices, pursued tort reforms, and made sure its business courts and litigation don’t stand in the way of progress.

Speed of Permitting This category, in turn, is a subset of the favorable regulatory climate. Businesses don’t want undue regulatory burdens to cloud their success, but quite frankly, the speed at which permitting happens is nearly as important as the potential height of any hurdle. They’re ready to jump, but they want to jump quickly. One key in this area is simply making it easy to get in contact with a human being who can help. For example, Tennessee’s Department of Environment and Conservation operates field offices across the state staffed with technical experts who can help with permitting needs. North Carolina recognizes that there are many different ways a company will need licensure or permitting, depending on the nature of the business, so it pulls the information together to provide guidance and help expedite the process. And as mentioned above, Alabama tries to create a one-stop service in an effort to be as speedy and hassle-free as possible.

Favorable Utility Rates How big a deal-maker or deal-breaker is the cost of utilities? It depends, of course, what activities are planned. Data centers have a big appetite for energy, as do numerous other sectors, such as chemicals and petrochemicals, steel manufacturing, paper mills, and other wood products. Big water users

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Determining which jurisdictions are most favorable with regard to utility rates is not an open-and-shut case because big users are often able to get their own special deals and incentives.

include manufacturers of textiles, paper and paint, among others. Determining which jurisdictions are most favorable with regard to utility rates is not an open-andshut case, though, because big users are often able to get their own special deals and incentives. That said, our consultants named some of the best bets for energy as Tennessee, Georgia, South Carolina, and Washington. The U.S. Energy Information Administration 7 keeps its own tally, and while its state rankings reveal residential rates rather than commercial or industrial, they’re a good yardstick to start with. Indeed, all of the top 10 states on our list for favorable utility rates do quite well on the EIA list — in fact, Washington State is best on its ranking, and Idaho is not far off the pace. Water rates can vary even more dramatically than electric rates, according to research from the U.S. Department of Energy, 8 and some of the places with the lowest electric rates may simultaneously have high water rates. Again, how much that matters depends on the facility use.

Leading Workforce Development Programs This pretty much sums up the biggest issue keeping executives and site consultants up at night as they plan for a new location or expansion: “A main concern, the X factor, is the human factor, the workers. Are they going to be available? Are they skilled? What’s their work ethic?” That’s Rodger Brown speaking, the executive director of Marketing and Strategic Media

Favorable Utility Rates

1. Tennessee

2. Georgia

3. South Carolina

3T. Washington

5. North Carolina

6. Kentucky

6T. Louisiana

8. Alabama

8T. Idaho

8T. Mississippi

8T. Texas

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9/13/19 11:27 AM

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“We are excited about this significant investment in the Lubbock Business Park. This speculative building gives our city an immense advantage in helping businesses grow in Lubbock.”

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TopStatesForDoingBusiness2019.indd 34

JOHN OSBORNE, CEO Lubbock Economic Development Alliance

1. Georgia

2. South Carolina

3. Louisiana

4. Alabama

5. North Carolina

6. Tennessee

7. Virginia

8 Ohio

9. Kentucky

10. Oklahoma

for Georgia Quick Start. As the economic development arm of the Technical College System of Georgia, the Georgia Quick Start program is exactly what its name suggests — a fast jump toward success, from the perspective of a well-prepared workforce. Georgia Quick Start has been in this business for more than five decades and, says Brown, “We have teams with decades of experience in a wide range of industry types.” The organization points out that it has trained workers in everything from making doughnuts to building cars. Its efforts have put a winning edge on thousands of projects and earned Georgia top ranking in this category. In South Carolina, the ReadySC program is part of the South Carolina Technical College System, and it has trained about 300,000 people since the early 1960s. It focuses on customized recruiting and training for companies locating or expanding in the Palmetto State, which lands second on this list. Louisiana places third with a strong commitment toward helping both businesses and job-seekers make connections and, as needed, arrange the training necessary to succeed through its LED FastStart program.

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9/13/19 11:27 AM

Most Improved Economic Development Policies

Most Improved Economic Development Policies Finally, the best businesses know that they can’t stand still; they must always be working toward improving. That philosophy rings true in state economic development policies, too. The environment is supercompetitive, which makes staying ahead an ongoing challenge. Improvements in the economic-development climate can take many forms. States are often seeking ways to lower the tax burden, for example, as in North Carolina9…or build upon infrastructure, such as in Arizona… or focus on specific economic development challenges, such as rural development in Georgia or Tennessee…or to streamline regulatory processes or upgrade training programs. Indeed, progress is a moving target, and the most successful states are keeping their eyes on that target.

https://taxfoundation.org https://taxfoundation.org/publications/state-business-tax-climateindex/ 3 https://www.pwc.com/us/en/moneytree-report/assets/moneytreereport-q2-2019.pdf 4 https://en.wikipedia.org/wiki/ List_of_U.S._states_by_net_domestic_migration 5 https://www.bls.gov/news.release/ laus.t01.htm 6 https://chiefexecutive.net/the-top10-states-for-manufacturing/ 7 https://www.eia.gov/state/rankings/#/series/31 8 https://www.energy.gov/sites/prod/ files/2017/10/f38/water_wastewater_escalation_ rate_study.pdf 9 https://www.nfib.com/content/ news/north-carolina/n-c-personalcorporate-tax-rates-will-be-lowerin-2019/ 2

•••

1. Ohio

2. Georgia

2T. Alabama

4. North Carolina

4T. Arizona

6. Tennessee

6T. Virginia

6T. Kentucky

6T. Indiana

10. Michigan

2019 Top States Commentary

SOUTHERN STATES CONTINUE TO LEAD THE PACK; MIDWEST GAINS GROUND

While the top five states are not surprising — as the South continues to dominate in corporate location — it is interesting that the top five states are all adjacent to each other geographically from North Carolina to Alabama. This proves that the South continues to have the reputation of being business-friendly, as well as having strong economic development tools. One of the items that comes to mind with all five of these states is that they have strong

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economic development teams from the state level down to the locals as well as utilities and workforce partners. The one category where the South generally has the most room for improvement is access to capital and project funding. Georgia once again comes in first and, interestingly, the lowest it was ranked in any category was third. Site selection projects are comprehensive and consider many factors such as property, workforce, cost, and business climate. Georgia understands this and has developed its programs and policies to be comprehensive and probusiness, but they are also consistent and stable year

after year. Having the biggest southern city, a strong eastern deepwater port, and one of the world’s busiest airports adds to Georgia’s attractive traits. The state has the whole package and is able to compete for various types of projects including manufacturing, distribution/logistics, and headquarters. Over the years, the Southern States have established policies and programs to ensure that they are competitive and pro-business, but other states are beginning to catch up. While Southern States still dominate the list, the Midwest and Central States are gaining ground, with Ohio and Indiana staying in the top

10, but others such as Oklahoma, Iowa, Michigan, and Missouri making the top 20. Looking forward, the Southern States must continuously adapt their strategies to the changing site selection environment in order to maintain their competitive position and reputation. If they don’t adapt, then the Midwest and Central States will move up the list more quickly, as they are creating policies and tools that are business-friendly and focused on promoting economic growth.

BY LINDSEY CANNON, Director, Quest Site Solutions

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9/13/19 11:28 AM

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ALABAMA AIDT The Mission of AIDT is to provide quality workforce development for Alabama’s new and expanding businesses, and to expand the opportunities of its citizens through the jobs these businesses create.

Georgia Ports Authority Georgia’s ports provide greater scheduling flexibility and market reach with direct links to I-95 and I-16, on-terminal rail, and 37 weekly container ship calls. The Savannah market features a deep inventory of industrial sites and parks, while the state of Georgia offers a businessfriendly tax structure and targeted workforce training.

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GEORGIA Georgia Department of Economic Development The Georgia Department of Economic Development is responsible for attracting new business investment and encouraging the expansion of existing industry. Consistently ranked as the “top state for doing business,” Georgia provides the world’s leading brands with a skilled workforce, an unparalleled logistics ecosystem, and a highly competitive tax climate. Scott McMurray Deputy Commissioner of Global Commerce Georgia Department of Economic Development 75 5th Street NW, Suite 1200 Atlanta, Georgia 30308 404-962-4000

Georgia Ports Authority P.O. Box 2406 Savanah, GA 31402 912-964-3879 Fax: 912-964-3869 swatson@gaports.com www.gaports.com Georgia Quick Start Georgia Quick Start, the nation’s oldest and most successful work force training organization, provides comprehensive, customized training free of charge to qualified companies locating or expanding in Georgia to ensure the highest quality work force required for business success. Rodger Brown Executive Director, Marketing and Strategic Media Georgia Quick Start 75 Fifth St. NW, Ste. 400 Atlanta, GA 30308 404-253-2815 rbrown@georgiaquickstart.org www.georgiaquickstart.org Putnam Development Authority Eatonton and Putnam County, Georgia, boast a very diverse economic mix ranging from manufacturing to agriculture to technology to film. Situated in the center of Georgia between Atlanta, Augusta, Athens, and Macon, Putnam County offers a business-friendly environment with abundant labor, low operating costs, tax incentives, and a low-cost of living with a relaxed lifestyle. Terry Schwindler, CEcD Economic Development Director Putnam Development Authority 117 Putnam Drive Eatonton, GA 31024 706-816-8099 tschwindler@PutnamDevelopmentAuthority.com www.PutnamDevelopmentAuthority.com

SMcMurray@georgia.org www.Georgia.org

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SPONSORS continued

KENTUCKY

OHIO

Kentucky Cabinet for Economic Development Kentucky helps new and existing companies of all sizes meet their workforce needs. Kentucky fosters growth through a variety of services designed to raise capital, increase business, and encourage investment within the food processing and other industries. Explore the many advantages of the commonwealth and you’ll find Kentucky will go the extra mile to exceed your needs.

JobsOhio JobsOhio is the state’s economic development organization charged with driving job creation and capital investment in Ohio through business attraction, retention, and expansion efforts. JobsOhio collaborates with public and private partners across Ohio to address the needs of growing businesses and support them with the resources necessary to succeed.

Erran Persley Commissioner of Business Development

Andrew Deye Managing Director of Strategy, Business Development & Research

Kentucky Cabinet for Economic Development Old Capitol Annex 300 W. Broadway Frankfort, KY 40601 502-564-7670

JobsOhio 41 S. High St. #1500 Columbus, OH 43215 855-874-2530

1-800-626-2930 www.ThinkKentucky.com

MICHIGAN Michigan Economic Development Corporation The Michigan Economic Development Corporation markets Michigan as the place to do business. The MEDC assists businesses in their growth strategies, fosters the development of vibrant communities, and enhances Michigan’s image as a business and travel destination. MEDC business assistance programs connect companies with resources, partners and access to capital. For more information, visit michiganbusiness.org

deye@jobsohio.com www.JobsOhio.com

SOUTH CAROLINA Santee Cooper For over 80 years, Santee Cooper has supported South Carolina’s business community by providing safe, reliable power that helps your bottom line and ultimately improves the quality of life for South Carolinians. In addition to delivering electricity directly to 27 large industrial customers, Santee Cooper directly and indirectly powers 13 municipalities, Charleston Air Force Base, and electric cooperatives in all 46 counties of the state.

Nicole Whitehead

Bill McCall Economic Development Specialist

Michigan Economic Development Corporation 300 N. Washington Sq. Lansing, MI 48913 517-719-3157

Santee Cooper One Riverwood Drive Moncks Corner, SC 29461 843-761-8000 ext. 5381

whiteheadn@michigan.org www.michiganbusiness.org

wmccall@santeecooper.com www.PoweringSC.com

MISSISSIPPI

TEXAS

Mississippi Development Authority Consistently ranked as a top state for business, Mississippi’s portfolio of national and international industry leaders continues to grow. The state’s dedicated, skilled workforce and supportive business environment enable more companies to gain a competitive advantage and consistently exceed their goals in Mississippi. Discover why Mississippi works at mississippi.org.

Lubbock Economic Development Alliance Located in the middle of everywhere, Lubbock serves as the hub for more 700,000 people. With access to Interstate 27, air service at Lubbock Preston Smith International Airport, a highly skilled workforce, affordable cost of living, and a vibrant cultural scene, Lubbock is the ideal place to grow your business. Carolyn Rowley, Director of Recruitment & Innovation

Glenn McCullough Jr. Executive Director Mississippi Development Authority Post Office Box 849 Jackson, MS 39205 800-360-3323 • Fax: 601-359-4339 gmccullough@mississippi.org www.mississippi.org

AREA DEVELOPMENT

TopStatesForDoingBusiness2019.indd 40

Lubbock Economic Development Alliance 1500 Broadway, 6th Floor Lubbock, TX 79401 800-687-5330 carolyn.rowley@lubbockeda.org www.lubbockeda.org

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9/13/19 11:29 AM

Providing the Necessary Tools NV Energyâ&#x20AC;&#x2122;s Economic Development Team is your resource for relocation and business expansion information. We can assist you with site selection, labor force resources, training programs, information on Nevadaâ&#x20AC;&#x2122;s tax advantages and any other intelligence you may need to make an informed decision about living and working in Nevada. With extensive economic development experience and strong relationships with state and local development officials, we can help you manage every step of the site location decision process. Our services are complimentary and confidential.

www.nvenergy.com/econdev Our team is here to help current and future customers, site consultants and real estate firms identify the perfect location for your business. Nevada offers affordable, large-scale commercial real estate with advantageous access to the West Coast market. To search for available buildings and land within Nevada, please visit our comprehensive GIS based database.

www.nevadasitelocator.com NV Energy AD Ad Dec 2017.indd 1

10/12/2017 5:20:57 PM

PROJECT PLANNING

Design-Build Firms Add Value to the Location Decision Process With the aid of advanced technology, design-build firms provide valuable capabilities and expertise in the site selection process, reducing risk and providing cost and scheduling certainty. By Thomas Gresham

Courtesy of Clayco

esign-build firms manage both the design and building components for construction projects of all kinds. And yet companies routinely turn to design-build firms only after one of the most critical phases of a major construction project is already complete — site selection. As a result, design-build firms sometimes arrive onto a project only to discover the existence of preventable challenges that they could have helped resolve earlier and at much less of a cost to their clients, says Mark Da Gama Rose, virtual design and construction director for Clayco, a full-service, turnkey real estate, architecture, engineering, design-build, and construction firm with clients across North America. “The key thing is that you can’t get time back – once it’s gone, it’s gone,” Da Gama Rose notes. “There’s a lot of important work we can do at the beginning of a project that can save valuable time and money later on.” Da Gama Rose says design-builders are more equipped than ever to help shepherd site selectors and location consultants through the site selection process and ensure every key detail is considered when deciding

upon a location for a new facility. Aided by an abundance of advanced technological tools, design-build firms can serve as essential partners to new construction projects from the outset, providing critical input to the site selection decision and putting the elements in place to properly prepare sites for an efficient construction process. Alex DeMartini, a project executive for Clayco, says a design-build firm can serve as a central source of truth during site selection and ease pressure on companies, giving them confidence that they are making a fully informed and optimum site choice. “It’s just a better way of site selection,” DeMartini explains. “It leads to better facilities and a better value for companies.”

A Strong Partner From the Start

DeMartini says those looking to open new sites sometimes treat the process of siting and constructing a building as though they are purchasing a car. However, he says, the process requires a more customized approach from the beginning. “We like to tell people that the earlier we can do the constructability analysis the better,” DeMartini says. “Sometimes we get a customer who comes to us and says they’ve already picked their site, and then we have to be the bearer of bad news that their site has construction issues or permitting issues or utility issues that weren’t exposed before. Whereas if we’d been involved earlier, and we had two or three sites to compare for them, then we could have raised those issues and helped them take 3D fabrication coordination models are accessible via the cloud by all teams.

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

9/12/19 2:51 PM

a different view of their potential sites and get ahead of A Tech-Enabled Approach any issues.” Advanced technology is central to the capability of a The involvement of a design-build firm early in the design-build firm to smooth the road for both the site process can reduce risks for those with building projselection and construction processes. Technology can ects and give them increased cost certainty and a clear help uncover issues that traditional methods cannot schedule, DeMartini says. identify, while integrating teams in a smart construction Design-build firms also can help with site selecworkflow, and sharpening transparency and collaboration decision-making “beyond the walls” of the facility tion. It is through technology, notes Da Gama Rose, that itself, analyzing not just the site, but the context and a design-build firm can help integrate advanced design broader landscape of the site, explains Ron Jones, programs and practices with early procurement and set senior principal at Lamar Johnson Collaborative, a up of construction activities, thereby shortening schedfull-service design and architecture firm that is part ules and accelerating speed to market. of Clayco. That means investigating the strengths Some of the advanced technology Clayco uses as part and weaknesses of a location in components such as of its smart construction workflow includes drones, 3D logistics capabilities and the local workforce. “The earth work, 4D design capabilities, renderings and availability of workers is a huge lean scheduling, augmented reality/ part of site selection,” Jones says. reality capture for team collaboraAccording to Jones, Clayco tion, and estimates and initial budIt is through emphasizes collaboration and gets using cloud-based platforms. technology that transparency from the outset in The use of technology once cara design-build firm its projects to make sure voices ried with it the risk of communican help integrate are heard and perspectives cation problems and challenges advanced design are considered before major integrating data from different programs and practices decisions get made. “We get platforms, but “now it’s very seamwith early procurement constructability input from the less,” says Jones. The translation and set up of construction construction group and operaof information across platforms activities, thereby tions/maintenance input from happens quickly and efficiently. shortening schedules stakeholders, then the architects Technology also makes complex inand accelerating and engineers can better comformation easier to comprehend. speed to market. municate their ideas,” says Jones. “For instance, we start very early “It’s really important that most of with 3D representations of facilities these discussions and decisions and designs that help stakeholders, are made early, while it’s still just who aren’t accustomed to looking electronic bytes in a model before you get into the at traditional construction drawings, understand what field and you’re actually building things that might they’re looking at,” Jones explains. “Getting that type of need to be moved because the right decisions weren’t view of a project helps the entire team.” made early on.” The cloud has simplified the sharing of information Establishing project milestones and objectives in the within the disparate teams — including clients and subinitial stages of site selection can set the tone for an contractors — involved in major construction projects. entire project, he says, targeting critical areas such as Through the use of cloud-based technology, internal and permitting, design, procurement strategy, and construcexternal systems can be integrated and then made availtion execution. able to anyone who needs to access the information. “That’s absolutely key with all of our clients,” Jones “With cloud tools, you can share with the owner, with adds. “They need to know very early on what that facilthe design team, with anyone; they can be in a differity is going to cost, and they need to have some level of ent location — it doesn’t matter,” Da Gama Rose says. confidence that cost isn’t going to change dramatically “People don’t need to have heavy computers to open as the project progresses. So it’s critical to make those models. A lot of it is web-based and you can just open decisions early.” it on an iPad. There’s such a big difference in how you DeMartini explains that the early involvement of a consume information — how you are able to merge and design-builder creates the certainty that clients crave: overlay things. It’s very powerful when you can take a “They’re going to get a good working budget for the projdaily drone flight and overlay it with how existing condiect and a specific schedule, and that really ticks a lot of tions are laid out or how new utilities are being placed boxes for folks.” and then make it accessible to anyone.” AREA DEVELOPMENT | Q3 2019

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9/12/19 2:52 PM

Courtesy of Clayco

Digital collaboration allows models to be kept securely on the cloud and shared in real-time.

The “Art and Science” of Building Clayco characterizes its design-build work as encompassing both the “art and science” of building. In addition to the precision and sophistication of its tech-enabled study and analysis, the firm takes pride in bringing creativity to the inevitable challenges that arise with individual projects in areas such as site and building requirements, and value engineering. “We are problem-solvers for our clients,” says

DeMartini. “Sometimes they see things as a negative that we know we can make a positive.” Clayco’s attention to the art and science of building relates to its desire to focus on how a facility will perform for a client over its lifespan: “It’s not just necessarily about making widgets — there are people who spend their entire careers inside these facilities,” Jones says. “It’s also about how pleasant a place is in which to work; how efficient is it for helping people get their jobs done. That soft aspect of the facility is — at the end of the day — as important as the functionality of being able to turn out X number of pounds of product a year. It takes creativity and an understanding of our client’s business to make sure that’s part of a project.” Da Gama Rose says that commitment to the longterm success of a project helps explain the desire of Clayco to play an integral role in site selection: “When we’re brought in early to the process, we can focus not just on the site but on the customer’s needs,” he says. “We know we’re going to be able to build the best building on the best site possible, but we also know that we’re going to be able to add value to teams and help with major decisions so that our customers will get everything they deserve out of their new facility.” n

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9/12/19 2:52 PM

FDI Surges Ahead

in Canada

CANADA CONTINUES TO BE A PREMIER INVESTMENT DESTINATION AND IS DEDICATED TO PROTECTING ITS KEY INDUSTRIES, INVESTING IN INNOVATION, AND DEVELOPING ITS WORKFORCE.

BY MARC BEAUCHAMP, PRESIDENT AND CEO, THE CAI GLOBAL GROUP

f you follow foreign

and 10 percent for

direct investment

Italy, whereas Japan,

trends in Canada,

the United States, the

you may have heard

United Kingdom, and

in recent news that

Germany saw their

although global FDI

FDI inflows decrease.1

flows decreased by

More specifically, non-

27 percent, Canada

U.S. FDI in Canada

saw the highest FDI

increased by more than

inflow increase among

300 percent.2 This is, of

G7 countries in 2018.

course, great news for

In fact, Canada’s FDI

Canada — there is no

inflow increased by

doubt that Canada is

60 percent in 2018,

and has been a premier

compared to 13

investment destination

percent for France

over the past few years. AREA DEVELOPMENT | Q3 2019

FDISurges.indd 45

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Canada saw the highest FDI inflow increase among G7 countries in 2018 Canada +60% France +13% Italy +10% -5% Japan -8% United States -36% United Kingdom -64% Germany

Source: FDI in Figures, OECD, April 2019

Canada is showing signs of a healthy economy that is attractive for foreign direct investments. According to the Organization for Economic Co-operation and Development (OECD), Canada’s average annual real GDP growth in the past 10 years (1.8 percent) ranked first among the G7 countries and will rank second at 1.8 percent in 2019–2020 behind the United States at 2.4 percent.3 Furthermore, Canada’s corporate income tax rate remains one of the lowest in the G7 at 26.8 percent, just below Italy at 27.8 percent and slightly above the United States at 25.8 percent.4 Finally, the Economist Intelligence Unit (EIU) predicted that among the G7 and G20 countries, Canada will be the best country to do business over the next five years. According to the same source, “The country ranks well for its infrastructure, market opportunities, foreign trade and exchange, and low tax rates.”5

• SNAPSHOT OF FDI IN CANADA The West Coast of Canada distinguishes itself by the large total CAPEX number of US$35.37 billion for 64 projects. The Greater Toronto Area (GTA) and the St. Lawrence Corridor both show a high number of jobs created by FDI projects in the past five years, most notably in Toronto (14,003 jobs) for the GTA region and in Montreal (11,594 jobs) for the St. Lawrence Corridor. The two regions also stand out in terms of the number of projects, each having hosted more than quadruple the number

AREA DEVELOPMENT

FDISurges.indd 46

of projects of the West Coast.6 The concentration of FDI in Canada’s most internationally recognized cities — Vancouver, Toronto, and Montréal — is mainly due to their highly qualified workforce, modern infrastructure, and industrial clusters. This pushes smaller cities to promote their differentiating factors to get a share of the investments. For example, Waterloo in Ontario has “the world’s highest concentration of mathematical and computer science talent”7; and Brampton, also in Ontario, has the youngest community in the Toronto CMA, a valuable asset considering how Canada’s aging population is leading to a decline in labor force participation. In terms of industries, the software and IT services industry created the most jobs through FDI projects over the last five years, while the automotive OEM industry showed the highest number of average jobs created per project at 236.8 As a matter of fact, during the same period of time, “Toronto and Vancouver have recruited more technology workers than San Francisco and Seattle combined.” Despite the recent sharp decline in oil prices in Canada, the coal, oil, and gas industry received the most CAPEX through FDI projects in the last five years combined, notably through Shell Canada’s US$30 billion liquefied natural gas project in Kitimat, British Columbia. Finally, investments in the manufacturing sector rose 450 percent since 2016.9 Although last year’s investments from the U.S., representing 42 percent, were significantly lower than the 10-year average of 53 percent, Canada’s strong economy

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9/13/19 12:11 PM

Canada, Your Investment Oasis The world is a tumultuous place and, now more than ever, global investors are looking for the calm in the storm. As you read through this issue of Location Canada, you will discover that Canada is that place — the oasis in a desert of chaos. And investors have taken notice. At a time when global FDI flows to developed economies are down 40 percent, Canada continues to draw investment from around the world. In fact, inflows to Canada have increased 70 percent since 2017. So, why are investors choosing Canada? We have the right mix to help companies make money and reduce risks — and we make it easy. How do global companies make money in Canada? Through the best talent, the most innovative R&D, the lowest business costs, the lowest taxes and the least red tape. Canada also offers access to more free trade markets than anywhere else. As the least expensive G7 country to live in, Canada is great for your business and your talent! Want lower risk? In addition to our sound banking systems, #1 ranking for ease of investor protection and safety, Canada is the happiest country among G7 nations, with the top-ranked quality of life. As for easy, Invest in Canada brings together our federal, provincial, and city partners to provide tailored, confidential, and coordinated support for your expansion project. We work with you every step of the way, bolstering your team’s efforts and ensuring that no question goes unanswered, that no stone is left unturned. Our services include developing a business case with unique offerings, data, and insights; identifying partners with links to education, government, and business; designing custom site visits; and supporting your business opening in Canada. By connecting you with the right people in the right places across the country, we make it easy for you to invest in Canada.

OPPORTUNITY “Parts come from all corners of the globe to Leduc to be repaired by us, and then sent back to those districts.” Doug Hamre

R&D Manager, Apollo-Clad Laser Cladding

INNOVATION “The speedy permit process, better taxation rate and excellent location have been invaluable to a small business like ours.” Jacqueline Shan

President & CEO, Polar Bear Genome BioPharma

GROWTH “the City of Leduc has been fantastic. From the economic development office to the permitting office to the fire office, we have had nothing but help.” Curtis Hrdlicka

General Manager, Enerpan Building Systems LTD.

...LIVES HERE

Ian McKay Chief Executive Officer Invest in Canada

W W W. L E D U C . C A AREA DEVELOPMENT | Q3 2019

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Business Environment of the G7 Countries Rank for Forecast Period 2019–2023

1st 2nd 3rd

steel and aluminum.”11 The SIF continues to invest in innovative Canadian business through its other streams, including the newest National Ecosystems stream announced in June 2019.

4th 5th Rank

6th 7th

Canada Germany U.S. France U.K. Japan Italy

Source: Economist Intelligence Unit, March 2019

remains closely intertwined with its neighbor’s, the United States.10 In early 2018, the Trump administration imposed new tariffs on steel and aluminum imports from many countries, including a 25 percent tariff on steel and a 10 percent tariff on aluminum from Canada. Although the U.S. recently agreed to lift those tariffs from Canada and Mexico, Canadian consumers and workers were deeply hurt by that measure as the United States is Canada’s number-one customer in the industry; local steel and aluminum businesses will have work to do to get back to their pre-tariff state. In the past year, the government of Canada took many measures in response to these tariffs, including retaliatory tariffs on various American-made products. An example of a measure taken to help local businesses during the Canada-U.S. trade war is the creation of new streams to the Strategic Innovation Fund (SIF), a program dedicated to stimulating innovation, thus ensuring that Canada remains a prime destination to invest, grow, and create jobs. On June 29, 2018, the SIF announced $250 million in new support to “help bolster the competitiveness of Canadian manufacturers and better integrate the Canadian supply chain of

FDISurges.indd 48

AREA DEVELOPMENT

• TOP EMERGING BIG CITIES It’s not surprising that the three largest metropolitan areas — Montréal, Toronto, and Vancouver — are at the top of the list when it comes to the number of FDI projects, total CAPEX, and total jobs created by FDI in the past five years. With the record-high labor shortage across Canada, we expect that investors will be looking at cities with large labor pools for their future projects. In fact, a recent study by the Business Development Bank of Canada (BDC) stated that these labor shortages are not expected to get better for at least a decade; therefore, availability of workforce will likely stay put at the top of decisionmakers’ investment criteria.12 Cities with large and growing populations will become prime investment destinations for FDI. The top five Canadian big cities with the highest population growth are Edmonton, Alberta; Brampton, Ontario; Calgary, Alberta; Surrey, British Columbia; and Winnipeg, Manitoba.13 To ensure that the working population continues to grow, Immigration, Refugees and Citizenship Canada (IRCC) announced the government’s increased immigration targets for 2019 and 2020 and an extension of the plan through 2021, with a focus on economic immigration through the federal Express Entry economic system, designed to select skilled workers, and Canada’s Provincial Nominee Programs (PNPs), which allow for the provinces and territories to nominate candidates for immigration. Under this plan, 1.3 million immigrants will be welcomed to Canada, 60 percent of whom will come through Canada’s Economic Class programs.14

• WHAT’S NEXT?

Major events that could have a direct effect on FDI in Canada will be taking place in the next few months.

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9/13/19 12:12 PM

Total FDI Projects in Canada (2014â&#x20AC;&#x201C;2019) 45

35 30 25 20 15 10

Total CAPEX over five years in billions USD

40 West Coast, 11,184*

St. Lawrence Corridor, 22,141

GTA, 24,437 Southwestern Ontario, 6,189 *Circle diameter indicates the total number of jobs created for every broad area over the last five years

5 Prairies, 5,236 50

Total number of projects over five years

100 150 200

Source: The CIA Global Group

For one, the Canadian federal election will be held on October 21st of this year. In addition, with the U.S. House of Representatives having gone on their five-week break without ratifying the new NAFTA deal, otherwise known as the U.S.-Mexico-Canada Agreement (USMCA), Prime Minister Justin Trudeau announced that Canada will delay the ratification of the deal until the fall. Canadian workers and businesses will be paying close attention to how both the elections and the USMCA ratification will unfold. Canada stayed strong during the difficult NAFTA renegotiation and U.S.-imposed tariffs that ensued, and it will continue to make it clear that it is dedicated to protecting its key industries, investing in innovation, and developing its workforce.

http://www.oecd.org/investment/FDI-in-Figures-April-2019.pdf https://www.theglobeandmail.com/business/commentary/article-why-canada-saw-a-60-increasein-foreign-direct-investment-last-year/ 3 https://www.oecd.org/eco/outlook/interim-economic-outlook-march-2019/ 4 https://www.international.gc.ca/economist-economiste/assets/pdfs/invest/invest_investir_ENG.pdf 5 Ibid. 6 https://www.fdiintelligence.com/fdi-markets 7 https://www.fdiintelligence.com/index.php//Special-Reports/Canada-s-smaller-cities-show-bigambitions 8 https://www.fdiintelligence.com/fdi-markets 9 https://www.theglobeandmail.com/business/commentary/article-why-canada-saw-a-60-increasein-foreign-direct-investment-last-year/ 10 Ibid. 11 https://www.canada.ca/en/global-affairs/news/2018/06/canada-stands-up-for-our-steel-andaluminum-workers-and-industry.html 12 https://www.bdc.ca/en/documents/analysis_research/labour-shortage.pdf 13 https://www12.statcan.gc.ca/census-recensement/2016/rt-td/population-eng.cfm 14 https://www.cicnews.com/2018/11/canada-extends-immigration-targets-into-2021-with-prominent-roles-for-express-entry-pnps-1111368.html#gs.w3vmo4 2

AREA DEVELOPMENT | Q3 2019

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It’s Time to Change Attitudes Over

THE NORTHERN LATITUDES CANADA’S ABILITY TO SERVE AS A PLATFORM FOR GLOBAL TRADE INTO AND FROM NORTH AMERICA, WHILE DEVELOPING A SERIES OF INNOVATIVE TOOLS FOR NEXT-GENERATION GROWTH, IS ONE OF ITS GREATEST STRENGTHS. BY DAN UJCZO, PRACTICE GROUP CHAIR, CANADA-US, DICKINSON WRIGHT PLLC

GLOBAL MARKET ACCESS Canada is the only G7 country that offers investors preferential market access to over 1.5 billion consumers in 51 countries. CUSMA

The Canada-United States-Mexico Agreement (CUSMA), signed in November 2018, modernizes NAFTA.

nvesting and

shelter from the storm.

expanding into

More than just a safe

Canada rarely

harbor, companies seeking

conjures up visions

to expand and develop

of tropical seas or

new markets would be

expectations for exotic

hard pressed to find

growth. However,

better global opportunity

given the turbulent

networks than those

tides of global trade,

presented by Canada.

Canada is now an oasis

The time is now to give

for companies seeking

Canada a fresh look.

AREA DEVELOPMENT

It’sTime.indd 50

C E TA he Canada-European Union Comprehensive T Economic and Trade Agreement (CETA) ensures nearly 99 percent of EU tariffs are duty-free for Canadian goods and guarantees market access to both the EU and North America. No other top investment destination in the Americas can offer access to all 28 EU member states.

CPTPP he Comprehensive and Progressive Agreement T for Trans-Pacific Partnership (CPTPP) gives companies operating in Canada preferential access to one of the largest trading blocs in the world, including key markets in Asia and Latin America. w

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9/13/19 12:14 PM

• NOT THE CANADA OF YORE Site selectors traditionally have viewed Canada as a “slow and steady” expansion destination given the country’s strong domestic market and proximity to the insatiable consumer appetites in the U.S. The fiscal and monetary belt-tightening that Canada directed throughout the 1990s and early 2000s rendered it the most stable Group of Seven (G-7) country in which to conduct business and allowed the nation to emerge from the Great Recession in a strong position. Additionally, boom periods spurred growth in the oil sands regions of Alberta; technology centers such as Kitchener-Waterloo, Ottawa, and Vancouver; startup cultures in Winnipeg; and green-energy clusters in Ontario. Along the way, Canada maintained its longstanding corporate tax advantage over its southern neighbor with Canada-U.S. tax arbitrage strategies being the “bread and butter” of corporate expansions into Canada. Nevertheless, recent headwinds have left corporate executives less than enthusiastic over Canada. The various boom periods resulted in busts, with challenging energy circumstances in Alberta, difficulties in keeping technology companies from fleeing to the U.S. to scale up and secure capital, and high energy costs for manufacturers resulting, in part, from shortcomings in green energy programs. Tax reform in the U.S. potentially has tipped the balance, removing one of the largest incentives for expanding into Canada. However, the march to managed trade in the U.S., and the resulting turmoil for the global economy, has revealed one of Canada’s greatest strengths — namely, Canada’s ability to serve as a platform for global trade into and from North America. Canada has creatively negotiated in a way that maintains preferential access to and from the U.S. market through the new NAFTA, known as the Canada-United States-Mexico Agreement (CUSMA), while expanding trade relationships with Asia through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with Europe through the Comprehensive and Economic Trade Agreement (CETA), and via various trade agreements with nearly 40 other countries. Indeed, Canada is the only G-7 country with trade agreements with all other G-7 members. These networks provide the rope-bridge for companies seeking to navigate the ever-changing landscapes of tariffs, quotas, subsidies, and export restraints that create chasms for sourcing, pricing, and costs.

”

CANADA IS WELL ON ITS WAY TO BECOMING THE SKILLS HUB FOR THE WESTERN HEMISPHERE.

• CAPPROACH ANADA’S “MAINTAIN-AND-GAIN” TO GLOBAL TRADE An inventory of key provisions in Canada’s trade portfolio reveals that Canada has maintained its traditional access to key markets such as the U.S., while developing a series of innovative tools for nextgeneration growth. This “maintain-and-gain” approach provides significant opportunities for companies desiring to utilize Canada’s trade cloud to network around the globe.

• • CUSMA-Automotive/Advanced Manufacturing Rules of Origin • • Canada, the U.S., and Mexico entered into CUSMA in late 2018 and, while ratification faces challenges in the U.S. Congress, there is not any “No New NAFTA” movement in the U.S. comparable to “No Deal” Brexit. In short, companies operating in Canada will have NAFTA or CUSMA throughout the foreseeable future. Once ratified, CUSMA has the potential to spur manufacturing growth in Canada through new rules of origin in the automotive and the advanced manufacturing sector. Contrary to the rhetoric, large assemblers will not be pulling up stakes in Mexico and returning to Canada (nor the U.S.). However, CUSMA’s new automotive rules of origin — which were largely designed by Canada — do provide strong incentives for original equipment manufacturers (OEMs) to source from Canadian suppliers. For example, these rules require nearly 40 percent of the vehicle to be produced with labor earning at least $16.00/hour, which will have the practical effect of creating opportunities for Canadian

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ENERGY AT HEART Fort Saskatchewan, Alberta is the heart of Canada’s largest Petrochemical Processing region – Alberta’s Industrial Heartland. With over 1,000 acres of industrial land available for development and a large and highly skilled labor force, Fort Saskatchewan is the ideal location for: • Advanced Manufacturing • Petrochemical Production • Fabrication and Construction • Transportation and Logistics • Food Processing

For everything you need to know about starting or relocating your business in Fort Saskatchewan, Alberta visit our website or contact our Economic Development team at 780.992.6231

investfortsask.ca

suppliers throughout the supply and value chains. These rules of origin also provide credits for research and development, which again will provide opportunities for autonomous vehicle and mobility ventures in Canada. Similarly, enhanced rules of origin in other manufacturing verticals, such as paints/coatings, polymers, and chemical, eliminate disadvantages that companies faced in the outdated NAFTA, making Canada a state-of-theart locale for these sectors.

• • CUSMA-Digital Trade • • CUSMA also includes the best-in-class digital trade standards that prevent jurisdictions from placing customs duties on digital transactions, prevent data localization (such as that witnessed in France), and address notice and take-down issues. These provisions are critical for technology companies and suppliers to have predictable regulatory environments. Such predictability will foster the further growth of Canada’s thriving artificial intelligence (AI) competitive advantage in areas such as the Greater Toronto Area (GTA) and assist in addressing the scaling/venture capital challenge that has confronted Canada.

• • CUSMA-Border Issues • • CUSMA’s customs and trade facilitation chapter, aka the “border” chapter, incorporates more than a decade and a half worth of efforts since September 11, 2001 to address Canada-U.S. border management, facilitation, and security. CUSMA enshrines a technology-driven, risk-managed approach to North American trade that will ensure the sustainable and consistent movements of goods between Canada and the U.S. The two governments advanced this process in August 2019 by announcing enhancements to pre-clearance protocols that will provide companies with future opportunities to more predictably move commercial goods throughout North America. The border is no longer a barrier to goods trade in North America and may even be a “plusup” given security uncertainty in other markets around the globe.

• • CUSMA, CETA, CPTPP Services Advantages • •

provisions regarding services/movement of business professionals. In short, the outdated NAFTA immigration system will continue due to unwillingness in the U.S. to address migration issues in trade discussions. Yet, the United States’ loss is Canada’s gain as Canada has implemented innovative services provisions in CETA and CPTPP that make Canada the most-sought after destination for highly skilled workers. In a global talent economy, Canada is well on its way to becoming the skills hub for the Western Hemisphere.

• • Canada’s Trade Cloud • • One understated gain for Canada is that the country’s focus on international trade over the past two decades has fostered a level of consistency between trade agreements such as CUSMA, CPTPP, CETA, and others. No other country in world has created a similar cloud of compatible trade agreements where companies can use common terms, forms, and methodologies to connect with customers and clients in North America, Asia, Europe, and other significant markets. Companies need only connect to Canada’s trade cloud to have diversified markets and growth.

• MORE TO COME… The key change in attitude regarding Canada is that these northern latitudes are no longer stable yet saturated markets — Canada is now one of the most dynamic global trade and skills hubs on the planet. And there is more to come. Canada has structured its trade deals to include competition and regulatory cooperation provisions that will permit these agreements to evolve as business needs change. Similarly, Canada is emerging from some of those “busts” scenarios with renewed visions to develop energy and transportation infrastructure that will complement its efforts to establish a trade cloud. Further, there is still work for Canada to do on tax and internal trade barriers that, if resolved, will unleash even more dynamic growth. Yesterday’s Canada is certainly over your shoulder, so don’t look back for too long. There’s just too much to see in front of you; you can’t go wrong with Canada.

A major “miss” in CUSMA is the lack of any tangible

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HIGH-QUALITY TALENT: The Not-So-Secret Ingredient in Canada’s Economic Recipe for Success CANADA’S EDUCATION SYSTEM AND IMMIGRATION APPROACH ATTRACT TALENT THAT STRENGTHENS ITS LABOR FORCE AND BUSINESS MARKETS.

BY VIC FEDELI, ONTARIO MINISTER OF ECONOMIC DEVELOPMENT, JOB CREATION AND TRADE

ou don’t have to be Warren Buffet to

should come as no surprise for a country with a total

understand that high-quality talent

of 2.8 million STEM graduates in the labor force.3

equals strong businesses, more jobs and,

ultimately, economic growth. To that point, Canada boasts one of the most educated workforces in the world with over 55 percent of Canadians having graduated from postsecondary institutions.1 The province of Ontario surpasses the national average, with 68 percent of Ontario adults possessing a postsecondary education — a rate higher than any OECD country. Ontario is home to some of the most highly skilled, highly educated minds across the science, technology, engineering, and math (STEM) disciplines. In fact, the province is a top producer of STEM graduates with over 40,000 entering the workforce annually2 — which 54

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Canada’s highly skilled labor pool across tech and AI continues to draw in titans of industry.

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

9/13/19 12:08 PM

Industry is at a Crossroads. It’s called Woodstock, Ontario, Canada The City of Woodstock is a rapidly growing, industry based community, centrally located in Southwestern Ontario’s manufacturing corridor. Uniquely positioned at the crossroads of super-highways 401 and 403, Woodstock boasts one of the most optimal ground transportation systems in the province. Quick and easy access to international airports, shipping ports and rail systems, further add to Woodstock’s logistical excellence.

With these attributes Woodstock has attracted more than $2 billion in new investment and created more than 4500 private sector jobs over the last decade. At the intersections of industry, productivity and sustainability, it’s not surprising why economic powerhouses such as Toyota, Sysco & General Motors continue to invest in the City of Woodstock. (519) 539 2382 x2115 information@cityofwoodstock.ca

www.cometothecrossroads.com

There will always be a healthy competition to attract and maintain the lion’s share of the skilled labor pool. Canada is the world’s 10th largest economy,4 and we know the only way to maintain and surpass that ranking is to continue to grow our talent base.

• WHERE DOES HIGH-QUALITY TALENT COME FROM, AND HOW DO WE GET MORE?

The strength of the Canadian economy and the rate at which we produce and attract talent increasingly depend on our ability to leverage our: •A cclaimed educational system (open to both foreign and domestic students); and •P olicies and programs designed to encourage the immigration and permanent residency of foreign talent. Between Canada’s programs and policies put in place to increase immigration, our quality of postsecondary education, and our overall appeal as a study destination, we have earned ourselves a big “X-marks-the-spot”

on the world map for talent and innovation.

CANADA’S UNIVERSITIES BOAST A GLOBAL APPEAL. The renowned University of Toronto is a top 20 global university, with five other schools in Ontario cracking the top 300 in the world. And the graduates of these schools aren’t just simply getting a piece of paper — they are well set up to enter the workforce in the digital age. The University of Waterloo holds the 15th top global computer science program, and its graduates are the second most frequently hired students by Silicon Valley companies.5 The University of Toronto’s computer science program also joins the esteemed global ranking in the number 25 spot. These rankings are no secret, as the number of international students enrolled in Canadian postsecondary institutions has been on the rise for two decades, with international students now representing 12 percent of overall enrollments.6 International enrollment helps institutions fulfill their public mission to positively affect economic impact.7

Reach world-class markets at a fraction of the cost—from the heart of Ontario, Canada. A strategic location between Montreal and Toronto and close to the US border, lower cost building sites and supply chain assets from agriculture, packaging to warehousing, shipping and more.

INDUSTRY WORKS HERE

Add an industry focused workforce and support from our economic development team—and you have a rare combination poised to deliver your success.

Discover the advantages, incentives and opportunities — call today! 1-866-961-7990 QUINTEDEVELOPMENT.COM info@quintedevelopment.com

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

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economy. We are committed to having our skilled foreign workers become permanent Canadian residents. We want the best and brightest to be able to call Canada home.

Last year, Toronto’s tech “brain gain” (57,600) surpassed the Bay Area (54,700) by 3,000 workers.

For example, the University of Toronto contributes $15.7 billion to the economy every year.8 International students make up over 20,000 of the 91,000 students enrolled.9 And then consider the even greater value to the economy if these students stay to live and work here after their studies.

• TALENT IS THE LIFEBLOOD OF OUR ECONOMY. As someone who grew up in North Bay, Ontario, I know that wherever the labor pool is smaller, there are more opportunities to attract talent, grow businesses, and develop a thriving economy. It is no coincidence then that last year, when foreign direct investment (FDI) into developed economies dropped 40 percent, FDI into Canada increased 70 percent.10 Ontario views talent as the lifeblood of our economy. That is why our province works with the federal government to implement immigration programs to help companies recruit and retain highly skilled international talent — and to do so at the speed their business operates. For example, the Global Skills Strategy offers work permits in just 10 business days. Open work permits for spouses and study permits for dependents will also be processed in two weeks — this way, families can stay together. It’s another reason why the Ontario Immigrant Nominee Program (OINP) was developed. The program allows foreign workers, international students, and others with the right skills, experience, and education to apply for a nomination for permanent residence in Ontario. Our government recently implemented some important improvements to the OINP to make it an even more effective labor market tool — such as making it easier for international entrepreneurs to start a new business in Ontario or buy an existing Ontario business. These programs benefit the province, helping us to meet labor market and economic development needs. With almost a third of Ontario’s 14 million people born outside of Canada, we know that international talent is essential to building business and building a strong

• IT’S CLEAR — CANADA’S ON THE CUTTING EDGE. Canada is the 5th most attractive country for highly skilled talent,11 and I believe the nation’s welcoming approach to immigration expands our talent pool further, while producing different perspectives that enrich the culture of innovation.12 That innovation is a big reason why Canada remains one of the top places in the world to start a business, as well as to locate a global headquarters.13 Canada’s highly educated and diverse population, along with policies geared toward attracting the top talent, has made Canada essential to technology companies’ growth plans. Multimillion-dollar industry giants across sectors like technology, life sciences, and automotive continue to draw from our deep labor pool. Big data, artificial intelligence, and autonomous vehicles are just a few of our innovative areas drawing in titans such as Amazon, Google, Facebook, Microsoft, and more. With heavyweights in the tech sphere setting up shop to take advantage of our skilled labor force, even more talent is coming north of the border. Last year, Toronto’s tech “brain gain” (57,600) surpassed the Bay Area (54,700) by 3,000 workers.14 As areas like STEM continue to grow, so will the province’s programs to leverage those skills. Our goal is to be ahead of the curve and challenge the digital shift with breakthrough ideas and technologies — a tough task, as tech is disrupting every industry and creating competition where competition didn’t exist before. But we’ve got the talent to compete on the cutting edge — to keep us learning and earning. And that’s why Canada keeps its doors open to international students, open to talent and, truly, open for business and open for jobs. •• 1

https://www.investcanada.ca/why-invest https://www.investinontario.com/why-ontario#stem https://www12.statcan.gc.ca/nhs-enm/2011/as-sa/99-012-x/99-012-x2011001-eng.cfm 4 https://databank.worldbank.org/data/download/GDP.pdf 5 https://www.investinontario.com/why-ontario#skilled 6 https://www150.statcan.gc.ca/n1/daily-quotidien/181128/dq181128c-eng.htm 7 https://www.bloomberg.com/news/articles/2019-01-02/canada-says-give-me-your-mbas-yourentrepreneurs 8 https://www.utoronto.ca/about-u-of-t/quick-facts 9 Ibid. 10 https://www.investcanada.ca/why-invest 11 https://www.oecd.org/migration/talent-attractiveness/ 12 https://www.investinontario.com/why-ontario#talent 13 https://www.investinontario.com/why-ontario#how-we-live 14 https://www.theglobeandmail.com/business/commentary/article-does-toronto-have-what-ittakes-to-lead-tech-innovation/ 2 3

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CITY OF FORT SASKATCHEWAN: AN INVESTMENTATTRACTION LEADER

As the gateway to the largest hydrocarbon processing center in Canada, Fort Saskatchewan is home to worldclass companies such as those pictured here: Dow Chemical, Sherritt International, Nutrien, Plains Midstream, and Keyera.

The City of Fort Saskatchewan

••

With over $40 billion dollars of investment within the region to date, a thriving industrial-based economy, and over 1,000 acres of available industrial land, Fort Saskatchewan offers an attractive location for your next project.

Mark Morrissey Director of Economic Development ••

CITY OF FORT SASKATCHEWAN 10005 – 102 Street Fort Saskatchewan, AB T8L 2C5 +1 780 992 6231 •• mmorris sey@ for tsa sk .ca www. inves tf or tsa sk .ca

••

is a small city that has consistently punched above its weight class when it comes to investment attraction. Located just 15 miles (25 km) northeast of Alberta’s capital city of Edmonton, Fort Saskatchewan is the heart of the largest hydrocarbon processing region in Canada — Alberta’s Industrial Heartland, which produces over 40 percent of the nation’s base chemicals and is home to a number of world-class facilities including Dow Chemical, Shell, Nutrien, and Sherritt International.

Decades of world-scale development have fueled unprecedented growth in Fort Saskatchewan. The city has grown at an average pace of 4.6 percent per year for the past 10 years and is home to more than 26,900 residents. It is also part of the metro-Edmonton region, which has a population of 1.4 million and growing. Fort Saskatchewan boasts a young

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population (average age of 36.6) that is well educated; 64 percent of the population 25 years and older possess an apprenticeship trade certificate, college diploma, or university degree. Our long industrial history ensures access to a large and highly skilled workforce, drawing workers from within the city and broader metro-region. With an average commute time of under 25 minutes, major employers in the region have no trouble attracting top-notch talent. Our proximity to multiple world-class post-secondary institutions — such as Canada’s largest polytechnic; the Northern Alberta Institute of Technology; and one Canada’s top Universities, the University of Alberta, which has over 400 degree-granting and professional programs — ensures that employers have constant access to skilled workers and first-rate applied research facilities. In addition to a young and talented workforce, companies in Fort Saskatchewan also enjoy a competitive tax structure. With no provincial or municipal sales or business tax, and an announced reduction in the provincial corporate tax rate from 11 percent to 8 percent, locating in Fort Saskatchewan ensures your operating costs remain low. Combine this with access to an integrated transportation network — including multiple major federal and provincial highways and two Class I railroads to move products across Canada, into the U.S., and beyond, as well as low-cost serviced land — and you can see why Fort Saskatchewan is a desirable location for business and industry.

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

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CITY OF WOODSTOCK, ONTARIO The Crossroads of Business

businesses. Woodstock is capable of servicing a 100-acre industrial site for large-scale manufacturers.

THE CITY OF WOODSTOCK is a dynamic and growing community of 45,000 located in the heart of southwestern Ontario at the crossroads of super highways 401 and 403. The city’s progressive actions have made it a leader in the region for conservation, environmental initiatives, and long-term commitment to managed growth.

••

Len Magyar, Development Commissioner ••

CITY OF WOODSTOCK 500 Dundas Street, P.O. Box 1539 Woodstock, ON N4S 0A7 519-539-2382, ext. 2112 •• lmagyar@city ofwood stock .ca www. cometothecr ossr oa d s.com

••

Woodstock has roots in both agriculture and manufacturing and is recognized as the dairy capital of Canada. The Friendly City is home to a number of Canadian food manufacturing facilities including Sysco Canada, and agribrands Purina Canada Inc., Cargill, and Kerry Canada Inc. With a skilled workforce, affordable housing, and a new community hospital, Woodstock truly is a growing city with a lot of rural, small-town charm. In Woodstock, just-in-time delivery is a part of daily life. With an excellent supply of serviced and zoned industrial land, the community is eager to meet the needs of new and expanding

The City of Woodstock currently owns and maintains four industrial business parks, all located in close proximity to the Highway 401/403 interchange. The Pattullo Ridge Business Park is located at the Highway 59/401 interchange, while the Bysham Park Business Community is located just off Highway 2, approximately five kilometers from the Highway 2/401 interchange. A third business park, CommerceWay, opened in 2005 and is located along the north side of Highway 401. And the newest North East Business Park fronts the crossroads of the Hwy 401 and 403. Industrial land prices start at $145,000 per acre, depending upon proximity to the Highway 401/403 corridor. All of our business parks are fully serviced. Woodstock also maintains a businessfriendly environment through such policies as no development charges on industrial construction. Our people know how to work hard, and they have attained the skills to ensure the success of well over 140 manufacturers who make Woodstock their home. Combine all this with a relaxed lifestyle and real affordability and you’ll see why Woodstock continues to attract more than its share of new business.

If you want to know more about Woodstock, visit our website at www.cometothecrossroads.com or call us at 519-539-2382, ext. 2115. AREA DEVELOPMENT | Q3/2019

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QUINTE ECONOMIC DEVELOPMENT COMMISSION The City of Leduc’s business parks, adjacent to the CANAMEX Trade Corridor and Edmonton International Airport and its 24-7 cargo service

The competitive location at

the crossroads of air, highway, and rail transportation makes Leduc strategically located for strategic business. Leduc, one of Alberta’s fastest growing cities, is situated along the CANAMEX Trade Corridor (Highway 2), and beside Edmonton International Airport (EIA). Oil and gas supply and services, value-added agribusiness, and logistics-related enterprises form the core sectors, elevating Leduc as a dynamic center of sustainable economic growth and a natural hub for globalization. The city is home to both Canada’s largest food processing development center and largest energy services business park. Leduc’s nonresidential tax rate and existing industrial, light industrial, and commercial business parks make it one of the most competitive and attractive markets to do business in the province. Region-leading permit approval processes have been lauded by companies such as the Ford Distribution Center, and Polar Bear Genome BioPharma this year as a distinct advantage. With a fiveyear average growth rate of 4.8 percent, Leduc businesses have access to an ever-growing young and highly skilled workforce.

LEDUC IS READY TO TALK BUSINESS EXPANSION WITH YOU.

McKesson Canada’s 520,000-square-foot facility in the Bay of Quinte region, Ontario, Canada

“Companies come here because of our market access; they expand here because of the innovation and friendly business climate.” The Bay of Quinte region, a Canadian logistics, food processing, and advanced manufacturing hub, is home to multinational companies and innovative SMEs. The region is located between Toronto and Montreal along Ontario’s highway 401, just an hour from an uncongested U.S. border crossing. The Bay of Quinte’s access to major

••

Chris King, CEO Quinte Economic Development Commission •• PO Box 610 284B Walbridge Loyalist Rd., Belleville, Ontario, Canada K8N 5B3 613-961-7990 Toll Free 1-866-961-7990 Fax: 613-961-7998

••

Harold Wilson

chris@quintedevelopment.com

Manager, Economic Development •• 1 Alexandra Park Leduc, Alberta, Canada T9E 4C4 +1-780-980-8438 •• hwils on@ledu c.ca www. leduc. ca

w w w . q u i n t e d e ve l o p m e n t . c o m

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••

Canadian and U.S. markets, robust support services and industrial supply chain lowers your ongoing operational costs and makes it easy to run worldwide logistics. The Bay of Quinte’s low-cost investment-ready land and available buildings, zero industrial development charges, and fast tracked development process lower your startup costs. Our region has attracted investment and reinvestment from companies like Procter & Gamble, Hain Celestial, Nestle, McKesson, and Kellogg’s. A regional economic development office, the Quinte Economic Development Commission represents the Bay of Quinte Region in Ontario, Canada, which consists of the City of Belleville, the City of Quinte West, and the Municipality of Brighton. Our experienced team provides confidential project support, assistance with accessing government incentives, industry and supply chain connections, and ongoing operational support. Reach out to our office and discover the advantages, incentives, and opportunities in the Bay of Quinte region.

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

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INFRASTRUCTURE

The Ever-Greater Expectations for Infrastructure Companies providing quality jobs have never been in a better position to ask for the infrastructure and incentives they need in order to locate their facility — or remain — in a community. By Warren C. Matthews, Managing Partner, Burr & Forman

ver the past 25 years, my law firm has advised on more than 130 industrial startups and expansions that have created more than 33,000 jobs and more than $24 billion of investment in the Southeast. We have advised companies in deals that have brought in world-class firms with internationally recognized brands — such as Mercedes, Honda, ThyssenKrupp, Brown-Foreman, Airbus, and others. While no two businesses have the same decision matrix, infrastructure always is a key factor in location decisions. Taxes and incentives receive a lot of attention, but our clients don’t even waste time on these discussions if a community doesn’t meet the requirements for hard infrastructure. We live in an era when technology companies such as Amazon get frontpage press for every twitch that they make in their location decisions. Amazon’s search for a second headquarters and the drama of its jilted courtship with New York City may have been the biggest story ever in corporate location. With Amazon, and many other tech or service company courtships, we hear about access to urban transit and parks and whether an office will be within walking distance of world-class baristas. If you are a manufacturing company focused on whether a community has hard infrastructure such as highways, railroads, electrical power, sewers, and water, the Amazon sweepstakes may seem like something that occurred in a different universe. Still, I think there are lessons to be learned from the Amazon experience.

The unprecedented transparency of Amazon’s RFP created a healthy competition, with more than 200 cities sending in detailed proposals. In their efforts to get Amazon’s attention, many of the proposals centered on creating infrastructure that served Amazon’s needs, mostly involving transit and housing. I think sometimes companies narrow their searches too much and avoid unnecessary disclosure of their plans, usually for understandable competitive reasons. The Amazon experience shows that communities will be enormously resourceful in their bids, given the opportunity. Away from the big metro areas, smaller communities that are alert to opportunities have red carpets they want to roll out for jobs. If you don’t see the infrastructure you need, don’t assume they won’t find a way to create it. Most infrastructure challenges can be resolved through additional capital investment. State economic development agencies and communities have become sophisticated about evaluating the economic value a company brings to a community, and they usually are good partners in these location decisions.

People are still the most important infrastructure — We tell local and state governments that the most important infrastrucAREA DEVELOPMENT | Q3 2019

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ture they can create is an educated and skilled workforce. Modern manufacturing requires STEM skills, critical thinking, aptitude for working with software and computer-assisted machinery, teamwork as well as the ability to make independent decisions. Most of the states we work with in the ever-more-competitive manufacturing plant location sweepstakes have postsecondary job training programs. Georgia, Alabama, and South Carolina all have designed programs to get their workers ready for these jobs. Companies tend to focus on the availability or willingness to build hard infrastructure, but they should demand more help from states and communities in training workers. This isn’t about improving high school graduation rates, although that certainly should be a goal for any state. Learn how Germany uses apprenticeship programs to train workers for skilled manufacturing and trade jobs. This would be a sea change in our current education model, and it will only happen if manufacturers take the lead in pushing for such programs.

hard infrastructure and project-ready greenfields. It didn’t hurt that they were not burdened with zoning and land-use restrictions.

SOME OF THE MOST PRESSING ISSUES ARE

LACK OF ACCESS TO A LOCAL SEWER SYSTEM & AVAILABILITY OF WATER FOR MANUFACTURING

PROCESSES AND FIRE

We know that most of our industrial clients are looking for geographical sweet spots. In the cities, you hear a lot about live-work-play, all of which is created by mass transit and urban infrastructure that supports density. For most of our projects outside the big cities, that’s just not a consideration. Employees at an auto or steel plant don’t want to live next door to where they work. They want to live in a suburb of a city or in a nearby small town where the schools are good and the neighborhoods are safe, and a 25-minute drive is expected. Our manufacturing clients typically look for a sweet spot — close to a workforce, but not too close. Vance, Alabama, a town of fewer than 2,000 people, is the closest municipality to North America’s only Mercedes passenger vehicle plant. Most workers come from the neighboring Tuscaloosa area and other local communities (Birmingham, Hoover, etc.), about a half-hour drive. Lincoln, Alabama, a community of about 6,000 people, is near Honda’s plant, and it is about a half-hour drive southwest from the Birmingham metropolitan area. If you are a big manufacturer, these may be ideal locations. The number of sites that can accommodate a large project such as an auto plant are not plentiful. These communities had the good fortune to be near interstate highways and had the foresight and ability to provide the AREA DEVELOPMENT

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Some of the most pressing issues we see in hard infrastructure are the lack of access to a local sewer system, the availability of water for manufacturing processes as well as fire protection, and timely emergency medical response. Those geographical sweet spots that are within reasonable driving distance of larger communities are more likely to have this infrastructure or be able to build it. Regrettably, all three of these issues may stack the deck against small rural communities that are far from the cities.

PROTECTION.

Close — but not too close — to the job —

Sewer, water, and emergency response —

Kick the tires — I always tell my clients not to end their due diligence with an examination of infrastructure. Come to the community anonymously and get a feel for the people. Would the company be a good fit, or would there be tension because of what the company makes or the local leadership personalities? One thing I do that probably isn’t on anyone else’s checklist is I read back issues of the local newspaper. What is in (or not in) the newspaper will tell you a lot about a community.

Higher expectations — Everyone is always trying to land the next big thing — This is what I call the “whale” project. Over the past five years, we have seen many more communities recognizing that their best prospects may already be in their backyard. Companies that already are providing jobs are in a strong position to ask for infrastructure improvements and incentives for jobs created. Make your needs known. Companies providing quality jobs away from the big cities have never been in a better position to ask for the infrastructure and incentives they need in order to partnership with a local community. n WARREN C. MATTHEWS is the managing partner of Burr & Forman’s Montgomery office and co-chair of the firm’s Manufacturing Industry Group, where he specializes in economic development and state and local taxation. He represents foreign and domestic companies that are locating and/ or expanding their business operations in the U.S. He can be contacted at warren.matthews@burr.com. for free site information, visit us online at www.areadevelopment.com

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Georgia

SPECIAL LOCATION REPORT

Georgia: An International Business Destination

Courtesy: thyssenkrupp Elevator

Foreign direct investment and global trade have had a huge impact on economic development in the state of Georgia.

thyssenkrupp Elevator has started construction on its Innovation and Qualification Center, a 420-foot-tall building in Atlanta that will be the tallest elevator test tower in the U.S.

Georgia has a global reputation as a place for doing business, thanks to low taxes, modern infrastructure, skilled productive workers, fiscal responsibility, and a state government that supports collaborative economic development. In fact, Area Development has named Georgia the top state for business for six consecutive years.1 These attributes garner attention from domestic and foreign companies alike. In 2018, investment in Georgia from foreign companies totaled about $3 billion, or 41 percent of all investment in the state for that year. Over the last five years, from 2013 to 2018, 429 foreign investment projects were launched that accounted for $8.63 billion in investment and 32,644 jobs created.2 Key reasons behind this impressive economic development are Georgia’s modern infrastructure, access to global markets, and well-developed logistics B y M a r k C r a w f o rd

and distribution networks. Georgia is located at the intersection of major north-south and east-west travel routes, which help move shipments quickly and efficiently via air, highway, rail, and port to global markets. About 80 percent of all U.S. consumers are located less than a two-day drive from Georgia. The state is also top-ranked for its distribution and supply chain hubs. Hartsfield-Jackson Atlanta International Airport is the busiest airport in the world, with total cargo warehouse space of 1.3 million square feet. Not far away is the Port of Savannah, the largest single container terminal in North America and the second-busiest U.S. container port.3 AIT Group, a Spanish firm, is constructing its first U.S. manufacturing operation in Augusta. The 220,000-square-foot plant will manufacture and distribute its heavy-duty brake systems to customers within the North American automotive market. “We chose to locate in Georgia for several reasons, including proximity to our customers and potential markets and accessibility through the airport, the Port of Savannah, and the state’s highway network,” notes Antonio Pomés, president of AIT Group USA Inc.4

World-Class Workforce Draws Investment Plentiful and highly skilled labor is always a top consideration in any location decision. Georgia provides a deep pool of talent, including 95,000 new professionals who graduate each year from Georgia’s 85 universities, colleges, and technical institutes across the state. Georgia Institute of Technology offers one of the top industrial engineering programs in the nation, and the collaborative biomedical engineering program between Emory University and Georgia Tech consistently ranks AREA DEVELOPMENT | Q3 2019

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SPECIAL LOCATION REPORT

among the top three. Workers with technology skills are in high demand, especially for certain industries, such as financial technology (fintech). In fact, it’s estimated that nearly 70 percent of all financial transactions on a global scale pass through companies headquartered in metro Atlanta.5 In May 2019 Invesco, a leading investment management firm, announced plans to undertake a $70 million expansion of its global headquarters in Atlanta, adding 500 jobs — confident it will find the fintech talent it needs. However, one challenge that Georgia faces is that outside of the Atlanta area, “economic growth is constrained by low workforce participation and a lack of access to opportunities in high-growth sectors,” according to a recent report from McKinsey and Company.6 “Since regions typically prosper when they are easily connected to major economic hubs, investing in high-potential sectors and connecting them to both in-state and wider markets can create positive economic effects,” the report further notes. Customized workforce training is one way to stimulate economic growth and create regional connections. Georgia’s Quick Start program is consistently ranked as one of the top training programs in the country. The program is available to qualified companies that meet or exceed predetermined thresholds for new job creation. This is especially beneficial for large facilities (often manufacturing) that hire hundreds or even thousands of workers, often in rural areas. Working with local colleges, Quick Start creates customized training for new workers that is delivered 64

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“

Georgia’s Quick Start program is consistently ranked as one of the top training programs in the country. It’s available to qualified companies that meet or exceed predetermined thresholds for new job creation.

in classrooms, mobile labs, or company facilities. More than one million employees in Georgia have been trained by Quick Start. The training is provided at no cost for qualified companies — another benefit for foreign companies that may not be familiar with hiring and training practices in the U.S.

Big Investments Roll In Key industries in Georgia are agribusiness, automotive, aerospace, advanced manufacturing (machinery, electrical equipment and components, and fabricated metals), medical devices, food processing, and logistics and transportation. Agricultural exports held steady at $4.2 billion. Aerospace remained the leading export industry in Georgia with exports totaling more than $9.1 billion in products. Exports of medical devices and pharmaceuticals grew 13 percent to a record $1.7 billion. Combined advanced manufacturing sectors contributed $61.1 billion in output. Georgia’s advanced technology sector continues to attract big, foreign-based investment projects. For example, SK Innovation, a South Korean firm, will invest $1.67 billion to build an electric vehicle battery factory in Jackson County, Georgia, with operations scheduled to start in 2022. The facility will be the company’s first electric battery factory in the U.S. and is one of the largest job-creating initiatives in Georgia’s history, creating more than 2,000 jobs.7 And thyssenkrupp Elevator has started construction on its Innovation and Qualification Center, a for free site information, visit us online at www.areadevelopment.com

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SOUTH EATONTONPUTNAM COUNTY INDUSTRIAL PARK 420-foot-tall building in Atlanta that will be part of its new North American headquarters. With 18 shafts, the test tower will be used to test new elevator designs, including high-speed elevators, an elevator system that features two cabins working independently in one shaft, and an innovative “ropeless” and sideways-moving elevator system. When completed in 2021, the center will be the tallest elevator test tower in the U.S.8

Export/Import Relationships Many of the foreign investments in Georgia are the result of relationships with foreign countries that Georgia has developed through trade missions and other methods of outreach. Georgia has strong representation in Brazil, Canada, Chile, China, Colombia, Europe, Israel, Japan, Korea, Mexico, Peru, the United Kingdom, and Ireland. These long-term relationships have built trust and facilitated international understanding, collaboration, and economic development. Not only do these foreign partners invest in Georgia, they buy Georgia goods — in fact, 60 percent of Georgia’s total exports are sold in these countries. The Georgia Department of Economic Development’s (GDEcD) International Trade Division works hard to develop export/import relationships and assists Georgia companies to understand global markets and diversify their customer bases. The results have been impressive — Georgia’s 2018 international trade numbers set a new state record. Trade between Georgia and 223 countries and territories reached a new high of $139.3 billion.9 “Global trade has a truly statewide impact and companies in every region of the state contribute to Georgia’s

• 121 Acre Industrial Site • 3 Pad-Ready Sites (completed in Oct 2019) • 5 year $3,500/Employee Job Tax Credit Incentive • 67,775 Workers in the labor draw area • 100% Freeport Exemption • Low Property Taxes • Low Cost of Doing Business • Located 65 Miles East of Atlanta • 22 Miles South of I-20 on US Highway 441 • Nestled between Lake Oconee and Lake Sinclair

Contact Terry Schwindler today! 706-816-8099

tschwindler@putnamdevelopmentauthority.com AREA DEVELOPMENT | Q3 2019

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“

Georgia’s 2018 international trade numbers set a new state record. Trade between Georgia and 223 countries and territories reached a new high of $139.3 billion.

export growth,” says Pat Wilson, commissioner of GDEcD. “I am extremely proud of the efforts of our international trade team, which works closely with companies, communities, and economic development partners statewide to ensure Georgia’s continued competitiveness.”

ttps://www.areadevelopment.com/Top-States-for-Doing-Business/Q3-2019/overall-resultsh georgia-ranked-top-state-by-site-selection-c.shtml 2 https://www.georgia.org/sites/default/files/2019-06/intl_investment_one_pager.pdf 3 https://www.georgia.org/competitive-advantages/infrastructure 4 https://buzzon.biz/2019/05/spanish-company-to-open-first-u-s-facility-in-augusta/ 5 https://www.forbes.com/sites/tomgroenfeldt/2016/12/05/atlanta-boldly-claims-globalfintech-lead-status/#2805e39f57c5 6 https://www.mckinsey.com/industries/public-sector/our-insights/expanding-the-economicpie-in-the-peach-state 7 https://transportationtodaynews.com/news/12271-sk-innovation-to-invest-1-67b-intogeorgia-electric-vehicle-battery-factory/ 8 https://www.globalatlanta.com/thyssenkrupp-to-build-200-million-hq-and-elevator-testtower-in-cobb/ 9 https://www.albanyherald.com/news/local/georgia-sets-trade-record-in-with-exportssurpassing-billion/article_6375b34b-8184-5787-97dd-e928b07d96ac.html

Sponsors Georgia Department of Economic Development The Georgia Department of Economic Development is responsible for attracting new business investment and encouraging the expansion of existing industry. Consistently ranked as the “top state for doing business,” Georgia provides the world’s leading brands with a skilled workforce, an unparalleled logistics ecosystem, and a highly competitive tax climate. Scott McMurray Deputy Commissioner of Global Commerce Georgia Department of Economic Development 75 5th Street NW, Suite 1200 Atlanta, Georgia 30308 404-962-4000 www.georgia.org Georgia Ports Authority Georgia’s ports provide greater scheduling flexibility and market reach with direct links to I-95 and I-16, on-terminal rail, and 37 weekly container ship calls. The Savannah market features a deep inventory of industrial sites and parks, while the state of Georgia offers a business-friendly tax structure and targeted workforce training.

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Stacy Watson Director of Economic & Industrial Development Georgia Ports Authority P.O. Box 2406 Savanah, GA 31402 912-964-3879 Fax: 912-964-3869 swatson@gaports.com www.gaports.com Georgia Quick Start Georgia Quick Start, the nation’s oldest and most successful work force training organization, provides comprehensive, customized training free of charge to qualified companies locating or expanding in Georgia to ensure the highest quality work force required for business success. Rodger Brown Executive Director, Marketing and Strategic Media Georgia Quick Start 75 Fifth St. NW, Ste. 400 Atlanta, GA 30308 404-253-2815 rbrown@georgiaquickstart.org www.georgiaquickstart.org Putnam Development Authority Eatonton and Putnam County, Georgia, boast a very diverse economic mix ranging from manufacturing to agriculture to technology to film. Situated in the center of Georgia between Atlanta, Augusta, Athens, and Macon, Putnam County offers a business-friendly environment with abundant labor, low operating costs, tax incentives, and a low-cost of living with a relaxed lifestyle. Terry Schwindler, CEcD Economic Development Director Putnam Development Authority 117 Putnam Drive Eatonton, GA 31024 706-816-8099 tschwindler@PutnamDevelopmentAuthority.com www.PutnamDevelopmentAuthority.com

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

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LOGISTICS/INFRASTRUCTURE

Seaports Coping With Rising Trade Volumes, Tight Real Estate Markets In order to address the challenges of big-ship congestion, U.S. seaports are turning to rail, barges, and off-terminal facilities. By Walter Kemmsies, Managing Director, Economist and Chief Strategist, U.S. Ports, Airports and Global Infrastructure Group, JLL

hree years after it opened, the expanded Panama Canal continues to reshape U.S. seaport real estate and its infrastructure. During the same timeframe, cargo ships have grown larger to meet ever-growing consumer demand and seaports in the U.S. are getting busier. To try and ease congestion, they are adopting new strategies. And while all this is unfolding, vacancy rates in warehouse space near the ports have reached historic lows and rents have climbed by more than 25 percent since 2010, according to JLL’s 2019 Port, Airport and Global Infrastructure (PAGI) Report.1 Also, trade agreements have enabled manufacturers to expand abroad, creating better-paying jobs around the world. As a result, the global middle class has grown from 1.8 billion people in 2010 and could rise to 3.8 billion by 2020, according to the Organization for Economic Co-operation and Development (OECD)/Brookings Institute.2 This growth means increased purchasing power, a surge in demand for

consumer goods, and ultimately an uptick in trade. And more trade means shipping companies are deploying large container vessels filled to capacity, creating economies of scale that reduce the cost per container. Since the third set of locks in the Panama Canal opened in 2016, currently capable of handling 14,000 TEUs (twenty-foot-equivalent units), ocean carriers have grown to carry as much as 25,000 TEUs in cargo on other trade routes. But carriers are also becoming more focused on issues beyond each port’s capacity to accommodate large container ships. They are also analyzing the cost of industrial warehouse space; the availability and cost of labor; the location transportation nodes near the seaports; and the time and cost to reach the destination from each port. Fuel regulations will likely further drive demand for big ships — those able to carry 14,000 TEUs or more. By January 1, 2020, the United Nations International Maritime Organization will require all oceangoing vessels to use low-sulfur fuel, which currently is 35 to 40 percent more expensive than the high-sulfur fuel that container ships typically use — and prices are expected to rise.

Ocean carriers are likely to shift freight volumes to larger ships to spread the higher fuel costs among more containers.

New Approaches to Congestion and Transportation Concerns While growing trade volume is good news, megaships are creating congestion around U.S. ports and making it difficult for container terminal operators to move goods in and out of their facilities. Ocean carriers are seeking to call at more ports, too, especially those that are capable of handling large vessels and are less congested than the major ports. Shippers have traditionally relied upon long-haul truckers to transport goods from seaports to distant inland points. However, the U.S. trucking industry is facing a shortage of 50,000 long-haul truck drivers, according to American Trucking Research Institute.3 One reason is age. With the average age of drivers at around 50, many are nearing retirement, and the industry has struggled to recruit younger drivers who don’t want to spend days away from home. To help alleviate the long-haul driver shortage, some ports are developing rail-served inland ports. AREA DEVELOPMENT | Q3 2019

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According to JLL research, inland hubs in such markets as Atlanta, Chicago, Dallas, eastern and central Pennsylvania, and Kansas City have benefited from direct express rail service from major seaports. Atlanta, Chicago, and Dallas, for example, have seen industrial property inventory grow between 3 and 12 percent in the past five years from their rail connections and inland hubs. Another emerging alternative to trains and trucks are “short sea” strategies, in which containers are hauled on barges or smaller vessels to inland ports. Virginia Port Authority, for instance, launched a container-on-barge operation between its terminals in Norfolk on the coast and its inland Port of Richmond facility on the James River, and is slated to increase frequency and number of locations served. Empty containers are currently being barged from Memphis to New Orleans, where they are loaded with agricultural goods and petrochemical resins/plastics for export. As these volumes and practices increase, economies of scale will improve.

Rising Volumes at East Coast Seaports As JLL research previously anticipated, the expanded Panama Canal has brought increased shipping traffic to East Coast seaports with the capacity to accommodate today’s megaships bringing goods from Asia. TEU volumes in East Coast ports have increased by a whopping 46.8 percent since 2008, leading to tight industrial real estate markets around these logistics gateways. West Coast ports — particularly the Port of Oakland, Calif., have also seen growth, albeit at a slower rate of 18.4 percent. But rents in the port have increased by nearly 101 percent since 2010 — more than at any other seaport market. Given the rise of e-commerce and that two-thirds of the U.S. population lives east of the Mississippi River, demand for industrial real estate will likely continue around key Eastern seaports. In New Jersey, for instance, rents have increased by 17 percent year-overyear and vacancy remains at a record low of less than 3 percent.

Strong Demand for Port Facilities Diverse tenants are driving demand for warehouse, cold storage, and transloading space close to the ports. In Baltimore, e-commerce distributors, third-party logistics companies, and food and beverage companies continue to seek big-box space. Houston’s port activity is largely driven by petrochemicals and the downstream

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energy industry. Demand in Oakland is coming from logistics and distribution, along with food and beverage industries. Retailers like Article and Home Depot have led seaport leasing demand in New Jersey, while e-commerce demand has kept Los Angeles port real estate vacancy below 2 percent for more than five years in a row. As industrial property demand near major ports continues to grow, speculative developments are commanding the highest industrial property rents in most markets. Vacant land parcels are scarce near the ports, driving up land prices and pushing development of offsite transload and storage facilities to neighboring submarkets. In the Southeastern markets, Jacksonville saw nearly 3.5 million square feet of new space delivered from 2016 to 2017, and 10 new projects totaling 2.4 million square feet are under construction for a total of nearly seven million square feet of new product hitting the market in the past two years. In Savannah, Ga., nearly 86 percent of new developments are pre-leased. Similar to Jacksonville, the Savannah market has close to 6.7 million square feet under construction, and 4.2 million square feet of new supply was added at the start of 2019.

“

BIGGER SHIPS mean growing property demand and climbing rents at U.S. seaports.

The Question Mark of Tariffs and Trade The question is, will tariffs and trade disputes ultimately disrupt the volume of shipping and industrial real estate activity? Already, tariffs have increased the cost of many raw materials, creating concerns for supply chain managers. Also, the U.S. trade deficit has increased to nearly $600 billion annually, despite the country becoming a net exporter of oil and natural gas for the first time in 50 years. So far, the impact of uncertain trade policy on the industrial real estate sector has been minimal. Trade and political turbulence could cause a slowdown in decisionmaking, but JLL research indicates substantial pent-up demand for industrial real estate. However, it’s in the best interest of all parties to resolve differences, remove tariffs, and conclude trade agreement negotiations so that everyone can get back to the business of international trade. We will be watching developments closely over the coming months. 1

https://www.us.jll.com/en/trends-and-insights/research/seaport-outlook https://www.brookings.edu/wp-content/uploads/2017/02/global_20170228_ global-middle-class.pdf 3 https://www.trucking.org/ATA%20Docs/News%20and%20Information/Reports%20Trends %20and%20Statistics/ATAs%20Driver%20Shortage%20Report%202019%20with%20cover.pdf 2

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

9/12/19 3:12 PM

PROJECT PLANNING

How to Avoid the Fatal Flaws in Site Certification Programs A “certification” label on a site is meaningless unless all the necessary data has been gathered and thorough due diligence performed with respect to your particular project. By Taylor Gravois, PE, PLS, PMP, Principal; and Ron Crum, Practice Leader – Industrial Site Selection; CSRS Inc.

ertified used cars, certified organic products, certified wild caught seafood: More than ever before, consumers are obsessed with the idea of purchasing certified goods — goods that we are led to believe are of a higher quality than their non-certified competitors and, therefore, justify a higher price. In the site selection world, the illusion is the same. In corporate site selection, almost every state in the union has some form of “site certification program,” vehemently pushing their site or “certified product” to you, the corporate location team. As a result, an unwitting selector can easily be led to believe that the “certified site” is of superior quality to an uncertified site. But is this truly the case? Unfortunately, it depends on whom you ask and who is certifying the site. Since no national standard exists for the certification of a site, certifying agencies — typically state and/or

regional EDOs — are left to their own devices to develop their site certification standards. Herein lies the problem. State, regional and local economic development agencies come in all shapes and sizes and lots of them tend to focus their resources on marketing, branding, and incentives rather than a technical staff to run a certified sites program. This leads to a wide variety of site certification programs that tout “shovel-ready” or “development-ready” sites across the country. Unfortunately, EDOs more focused on marketing and branding may have a site certification program with very little due diligence and/or technical requirements to achieve the certification status. In this case, the certified site may initially resonate with the corporate buyer but will quickly drop out of any serious bid to land a project. On the other hand, EDOs that have invested the time and effort to develop stringent certification criteria specific to their local geographic, regulatory, and entitlement conditions will typically have readily available all the due diligence and technical data required for the corporate buyer to make a well-informed, timely location decision.

What constitutes a quality “certified site”? Truly understanding if a site is high quality, or meets your needs, requires several things. First, lots of data. If the EDO can readily produce a site package with recent studies and site due diligence reports addressing topics such as environmental, geotechnical, wetlands, traffic impacts, local land entitlement process, cultural resources, title abstracts, utility service capacities, and infrastructure upgrades, then you know the EDO is prepared and the site certification means something. These technical studies and engineering reports are not cheap and typically require lots of field investigations. Even if you as the corporate buyer could care less about reading or understanding these reports, seeing this level of AREA DEVELOPMENT | Q3 2019

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“

IN CORPORATE SITE SELECTION, ALMOST EVERY STATE IN THE UNION HAS SOME FORM OF “SITE CERTIFICATION PROGRAM,” VEHEMENTLY PUSHING THEIR SITE OR “CERTIFIED PRODUCT” TO YOU, THE CORPORATE LOCATION TEAM.

due diligence should give you comfort in the value of the certification.

What should you look for? Even though no national standard exists for certification of a site, technically sound certification programs will share some basic key criteria: Site control agreement — Can the EDO readily produce a site control document proving the site is available for purchase for a fixed price? FATAL FLAW AVOIDED: Sellers suddenly demand a lot higher price once they know a Fortune 500 company is interested. Title review — Does the site have any existing encumbrances or deed restrictions that will preclude use for the intended purposes? FATAL FLAW AVOIDED: Long-term mineral leases reserving both subsurface and surface rights for drilling will typically preclude any surface use for economic development. ocal land entitlement process — Does the site have the L proper zoning and land use controls in place for the intended use? FATAL FLAW AVOIDED: Typically, land entitlement is a political process. For most heavy industries, it is better to have the property entitled correctly before anyone knows the ultimate end-user. Phase I environmental review — Does the site carry any potential environmental liabilities? FATAL FLAW AVOIDED: When you buy a site, you buy the environmental liability as well. You don’t want to be stuck with a bill to clean up someone else’s toxic waste dump. J urisdictional wetland determination — Does the site have wetlands? If, so will they conflict with the intended use?

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FATAL FLAW AVOIDED: Jurisdictional wetland impacts require extensive permitting and sometimes costly compensatory mitigation. A site with a lot of jurisdictional wetlands, especially within the facility footprint, will add time and money to the project. eotechnical investigations — Can the site soils supG port my facility? FATAL FLAW AVOIDED: Poor soil conditions can lead to costly foundation systems and unwanted long-term facility stability issues. ultural resources — Is the site free and clear of C archeological artifacts? FATAL FLAW AVOIDED: Uncovering a burial ground or dinosaur fossils will bring your project to a screeching halt, ultimately costing you time and money. egulatory process — Does the certification address R whether the site can receive the necessary federal, state, and local permits? FATAL FLAW AVOIDED: A site may not be able to obtain a permit you need for your facility for any number of reasons. tility service capacities — Does the site have utility U service readily available? FATAL FLAW AVOIDED: The site may not have nor be able to acquire the utility capacity for your project. I nfrastructure upgrades — Are infrastructure upgrades required? FATAL FLAW AVOIDED: Offsite and onsite infrastructure improvements will add costs to your project.

Don’t buy on label alone; read the ingredients. A quick search of most any economic development agency’s website will enable you to find tons of sites with fancy “certified site” labels purporting to be the gold standard for a quality site. Don’t be fooled by the label. Take the time to read the details and ask the EDO questions about the site. With a little effort, you will figure out if you have a quality site or just a site full of fatal flaws with a shiny “certification” seal on it. As a corporate buyer, you rarely have the time, energy, or breadth of expertise to identify every fatal flaw the potential site may have. Employ an in-house expert with a sufficient technical background in real estate or engineering to head up your site selection team or utilize an outside site selection consultant. Either way will provide you a level of assurance so that you can understand what constitutes the “certified site” label. As you embark on the search for your next corporate facility, you will find no shortage of “certified sites” for sale across the country. So, remember, don’t buy based just on the label alone. Take the time to truly understand what is in the site package. n for free site information, visit us online at www.areadevelopment.com

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Vital. Useful. Updated Daily. The best information on site selection and facility planning available online •C urrent News: Real estate & industry news, and economic indicator reports updated throughout the day

•V aluable Resources: Tax and incentive information, development contacts, and insightful surveys

•R eviewable Archives: Search the Area Development archives for content, opinion, and reports spanning the last five years from the top industry minds

• T hought Leadership: Knowledge derived from the experience of leaders in the economic development field

Visit – www.areadevelopment.com

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Providing What Others Don’t ADOVitalUsefulFullPg2019.indd 1

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ADINDEXWEBDIRECTORY

Advertiser

Page Advertiser

Page

ALABAMA

IDAHO

AIDT 35 ecastile@aidt.edu www.AIDT.edu

Emsi C3 Santee Cooper www.EconomicModeling.com Economic Development wmccall@santeecooper.com www.PoweringSC.com KENTUCKY

CONNECTICUT

Kentucky Cabinet for Economic TENNESSEE Development C4 www.KYOZ.com Tennessee Department www.ThinkKentucky.com of Economic & Community Development 19 www.TNECD.com MARYLAND

Cheshire Economic Development Corporation 7 JSitko@CheshireCT.org www.CheshireCT.org

FLORIDA Enterprise Florida tvanderhoof@EnterpriseFlorida.com www.EnterpriseFlorida.com

Georgia Department of Economic Development 22, 23 SMcMurray@georgia.org www.Georgia.org

Georgia Quick Start rbrown@georgiaquickstart.org www.GeorgiaQuickStart.org

Maryland Department of Commerce www.Open.Maryland.gov

MICHIGAN

GEORGIA

Georgia Ports Authority swatson@gaports.com www.GAPorts.com

SOUTH CAROLINA

Putnam Development Authority 65 tschwindler@ PutnamDevelopmentAuthority.com www.PutnamDevelopmentAuthority.com

Michigan Economic Development Corporation whiteheadn@michigan.org www.MichiganBusiness.org

C2, 1

TEXAS Lubbock Economic Development Alliance 34 carolyn.rowley@lubbockeda.org www.LubbockEDA.org

CANADA ALBERTA

MISSISSIPPI Mississippi Development Authority gmccullough@mississippi.org www.Mississippi.org

NEVADA Nevada Energy www.NVEnergy.com

City of Fort Saskatchewan mmorrissey@fortsask.ca www.FortSask.ca

City of Leduc hwilson@leduc.ca www.Leduc.ca

ONTARIO

OHIO JobsOhio 37 deye@jobsohio.com www.JobsOhio.com

Quinte Economic Development Commission 56 chris@quintedevelopment.com www.QuinteDevelopment.com City of Woodstock lmagyar@cityofwoodstock.ca www.ComeToTheCrossroads.com

Statement of Ownership, Management and Circulation. Publication Title: Area Development. Publication Number: 345-510. Filing Date: 10/1/2019. Issue Frequency: 4x. Number of issues published annually: 4. Annual Subscription Price: $75. Complete mailing address of known office of publication: 400 Post Ave. Westbury, NY 11590-2226. Contact person: Dennis J. Shea. Telephone: (516) 338-0900. Publisher name: Dennis J. Shea. Editor name: Geraldine Gambale. 400 Post Ave. Westbury, NY 11590-2226. Owner: Halcyon Business Publications, Inc. 400 Post Ave. Westbury, NY 11590-2226. Stockholders owning or holding 1% or more of total stock: President Dennis J. Shea and Secretary Randi S. Shea. 400 Post Ave. Westbury, NY 11590-2226. Known bondholders, mortgagees and other security holders owning or holding 1% or more of total amount of bonds, mortgages or other securities: None. Publication title: Area Development. Issue date for circulation data below: Q2 2019. Extent and nature of circulation: corporate real estate executives. Average number of copies of each issue during preceding 12 months: Total number of copies: 43,337. Legitimate paid/requested distribution: Outside country paid/requested mail subscriptions stated on PS 3541: 21,777. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/ requested distribution outside USPS: 0. Requested copies distributed by other mail classes through USPS: 0. Total paid/requested circulation: 21,777. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 20,113. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 675. Total non-requested distribution: 20,778. Total distribution: 42,555. Copies not distributed: 782. Total: 43,337. Percent paid/requested circulation: 51.4%. Number of copies of single issue published nearest to filing date: Total number of copies: 43,253. Legitimate paid/requested distribution: Outside county paid/requested mail subscriptions stated on PS 3541: 21,555. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/ requested distribution outside USPS: 0. Requested copies distributed by other mail classes: 0. Total paid/requested circulation: 21,555. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 20,543. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 500. Total non-requested distribution: 21,043. Total distribution: 42598. Copies not distributed: 655. Total: 43,253. Percent paid/requested circulation: 50.6%. Publication of Statement of Ownership for a requester publication is required and will be printed in the Q3 2019 issue of this publication. I certify that all information furnished on this form is true and complete: Dennis J. Shea, Publisher.

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KENTUCKY THE RED TAPE REDUCTION STATE Every day, Governor Matt Bevin and Kentucky government officials wear Red Tape Reduction lapel pins to demonstrate their resolve to eliminate burdensome, job-killing regulations. So far, they’ve cut or simplified more than 1,200 regulations, with more to come. Together, we are creating the most pro-business state in America, catering to the needs of business and cutting red tape in the process. Our pro-business initiatives resulted in record investment and job creation. And we’ve only just begun. When you locate in Kentucky, We’ll cut through red tape – and roll out the red carpet. Contact us today. (800) 626-2930 • ThinkKentucky.com

MAKING BUSINESS STRONG. CUTTING RED TAPE.