Area Development Q3 2015

WEST COAST PORTS UNITE TO SOLVE CHALLENGES

E-COMMERCE DEVELOPMENT & THE “AMAZON EFFECT”

INVESTIGATION OF INDUSTRIAL PROPERTIES

AREADEVELOPMENT S I T E

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F A C I L I T Y

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P L A N N I N G

TOP STATES FOR DOING BUSINESS

PLUS Call Centers

Increasingly Returning Home

Compliance: Where Incentives Are Won or Lost Emerging Clusters Take Up the Technology Challenge

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SPECIAL S PECIAL CIA REPORT:

www.areadevelopment.com

www.facilitylocations.com

LLOCATION OCATION CANADA

A ECON OM IOW IC

D

AND AIR SUPER PARK

Location Northwest Blvd. & I-80 Davenport, IA 52806 Available Acres: 185.6

Location 2800 76th Ave SW Cedar Rapids, IA 52404 Available Acres: 582 Transportation Summary Nearest Interstate: I-380 & Highway 30 - 3.3 miles Nearest 4-Lane Highway: I-380 - 3.3 miles

INDUSTRIAL CENTER

Transportation Summary Nearest Interstate: I-80 - adjacent Nearest 4-Lane Highway: Iowa 130 - adjacent

Nearest Commercial Airport: Eastern Iowa Airport

Nearest Commercial Airport: Quad City International Airport (MLI) - 13 miles

Rail Served: Yes

Rail Served: Yes

Property and Area Description The Cedar Rapids Land and Air Superpark consists of 582 acres of certified development– ready property that will serve a variety of industries including logistics and distribution, light and heavy industrial manufacturing as well as biotech and food production industries.

Utilities Summary Electric & Natural Gas Distribution: Alliant Energy Telecommunications Local Service Provider: CenturyLink Sewer & Water Distribution: City of Cedar Rapids Contact Brian Crowe 319-730-1425 bcrowe@cedarrapids.org

Property and Area Description In a campus-like setting, this park features 188 acres zoned and platted into 10 lots ranging in size from 6 to 44 acres.

Each lot is shovel-ready with cost-effective utilities in place.

All lots are TIF eligible.

Utilities Summary Electric & Natural Gas Distribution: MidAmerican Energy Company Telecommunications Local Service Provider: Central Scott Sewer Distribution: City of Davenport Water Distribution: Iowa American Water Contact Tim Wilkinson 563-884-7559 twilkinson@gotodavenport.com

INDIANHEAD SOUTH

IOWA FALLS / HARDIN COUNTY

MARION

Location 43rd St SW & South Pierce Ave Mason City, IA 50401 Available Acres: 145

INDUSTRIAL SITE

Location Highway 151 & Highway 13 Marion, IA 52302 Available Acres: 130.9

Transportation Summary Nearest Interstate: I-35 - 8 miles

Transportation Summary Nearest Interstate: I-35 - 21.2 miles

Nearest 4-Lane Highway: Ave of the Saints (US 18/IA 27) - 1 mile

Nearest 4-Lane Highway: Highway 20 - 5.1 miles

Nearest Commercial Airport: Mason City Municipal Airport (MCW) - 9 miles Rail Served: No Property and Area Description This 145 acre site is conveniently located within one mile of US 18/IA 27 and easily accessible to Interstate 35.

All major utilities on this site with necessary capacities to meet requirements of major industrial, warehouse & distribution, food processing, etc. businesses.

Utilities Summary Electric & Natural Gas Distribution: Alliant Energy Telecommunications Local Service Providers: CenturyLink, CL Tel, Mediacom

Location JJ Avenue & 140th Street Iowa Falls, IA 50501 Available Acres: 245

Nearest Commercial Airport: Mason City Municipal Airport (MCW) - 58 miles Rail Served: Yes Property and Area Description This land is between the Canadian National and Union Pacific rail lines. Electric service borders north and south boundaries, gas transmission line is also present.

Utilities Summary Electric Distribution: Alliant Energy, Midland Power Cooperative

ENTERPRISE CENTER

Transportation Summary Nearest Interstate: I-380 - 7 miles Nearest 4-Lane Highway: Highways 151 & 13 - adjacent Nearest Commercial Airport: The Eastern Iowa Airport 18 miles Rail Served: No Property and Area Description The premier general industrial park in the Cedar Rapids metro, the certified park features preliminary platted lots, allowing companies to easily select their lot size and location. All infrastructure needs, including electric, water, storm water, dark fiber and natural gas are available and installed.

Utilities Summary Electric Distribution: Alliant Energy, Linn County REC

Natural Gas Distribution: Alliant Energy, Northern Natural Gas

Natural Gas Distribution: MidAmerican Energy Company

Telecommunications Local Service Providers: Mediacom, CenturyLink

Telecommunications Local Service Providers: ImOn, CenturyLink, Involta (Tier 3 Data Center)

Sewer & Water Distribution: City of Mason City

Sewer & Water Distribution: City of Iowa Falls

Contact Chad Schreck 641-423-0315

Contact Cindy Litwiller 641-373-3455

cschreck@northiowacorridor.com

director@iowafallsdevelopment.com

Sewer & Water Distribution: City of Marion Contact Nick Glew 319-743-4724 nick@medcoiowa.org

E

EASTERN IOWA

E R TIFI

CEDAR RAPIDS LAND

risk-free. Iowa’s Certified Sites can deliver, making the

D

decision to locate in Iowa an easy one.

SIT E

NORWALK TECH CENTER

PERRY

VAN METER

WEBSTER COUNTY

INDUSTRIAL PARK

VISION PARK

AG CENTER

ANCELL/KNOX PROPERTY

Location Southeast edge of Perry Perry, IA 50220 Available Acres: 134

Location F90 & R16 Van Meter, IA 50261 Available Acres: 288

Location Highway 7 Fort Dodge, IA 50501 Available Acres: 447

Transportation Summary Nearest Interstate: I-80 - 25 miles

Transportation Summary Nearest Interstate: I-80 - 2 miles

Transportation Summary Nearest Interstate: I-35 - 20 miles

Nearest 4-Lane Highway: Highway 141 - 1 mile

Nearest 4-Lane Highway: Highway 6 - 7 miles

Nearest 4-Lane Highway: Highway 20 - 5 miles

Nearest Commercial Airport: Des Moines International Airport (DSM) - 45 miles

Nearest Commercial Airport: Des Moines International Airport (DSM) - 19 miles

Nearest Commercial Airport: Des Moines International Airport (DSM) - 90 miles

Rail Served: No

Rail Served: No

Rail Served: Yes

Property and Area Description This site is part of the existing Perry Business Park located on Hwy 141. Current park tenants include: Percival Scientific, ITC Midwest and Hy-Line International.

Property and Area Description Located just southeast of the community of Van Meter and only a few miles from the Des Moines Metro. This land is currently agricultural.

Property and Area Description This site is centrally located within the NAFTA corridor.

The site has all of the components for large industrial utility users and infrastructure consumers.

Global leaders such as Cargill, Valero and CJ Bio America are tenants within the Iowa’s Crossroads of Global Innovation.

Location Highway 28 Norwalk, IA 50211 Available Acres: 55.8 Transportation Summary Nearest Interstate: Highway 28 - adjacent Nearest 4-Lane Highway: Highway 28 - adjacent Nearest Commercial Airport: Des Moines International Airport (DSM) - 8.8 miles Rail Served: No Property and Area Description Great industrial development opportunity that sits across the road from a MidAmerican Energy sub-station. Lot is adjacent to the Norwalk Industrial Park and within minutes of the Hwy 5/65 bypass. City incentives available.

Utilities Summary Electric & Natural Gas Distribution: MidAmerican Energy Company Telecommunications Local Service Provider: CenturyLink Sewer & Water Distribution: City of Norwalk Contact Hollie Askey 515-961-1067 haskey@wcedc.com

Utilities Summary Electric Distribution: Guthrie County Rural Electric Cooperative

Utilities Summary Electric & Natural Gas Distribution: MidAmerican Energy Company

Natural Gas Distribution: MidAmerican Energy Company

Telecommunications Local Service Providers: Paetec, CenturyLink

Telecommunications Local Service Providers: CenturyLink, Paetec, AT&T, Prairie iNet

Sewer & Water Distribution: City of Van Meter

Sewer & Water Distribution: City of Perry Contact Linda Wunsch 515-987-2020 lwunsch@dallascounty-ia.org

Contact Linda Wunsch 515-987-2020 lwunsch@dallascounty-ia.org

NT AUTHO ME RI OP TY EL V E

C

READY WHEN YOU ARE.

You’re looking for sites that are development-ready and

Utilities Summary Electric & Natural Gas Distribution: MidAmerican Energy Company Telecommunications Local Service Provider: Webster-Calhoun Cooperative Telephone Sewer & Water Distribution: City of Fort Dodge Contact Kelly Halsted 515-955-5500

WEST METRO INTERSTATE AND RAIL PARK

Location I-80 and Highway 6 Dexter, IA 50070 Available Acres: 255 Transportation Summary Nearest Interstate: I-80 - adjacent Nearest 4-Lane Highway: Highway 6 - adjacent Nearest Commercial Airport: Des Moines International Airport (DSM) - 35 miles Rail Served: Yes Property and Area Description Bordered by I-80, Highway 6 and Iowa Interstate Railroad, this is an ideal site for warehousing, distribution center, manufacturing or other uses requiring rail or interstate access. Large water and electric supply are on site. This site also has access to a large, highly educated workforce.

Utilities Summary Electric & Natural Gas Distribution: MidAmerican Energy Company Sewer Distribution: City of Dexter Water Distribution: Warren Rural Water Contact Linda Wunsch 515-987-2020 lwunsch@dallascounty-ia.org

kelly@greaterfortdodge.com

iowaeconomicdevelopment.com/SiteLocation/CertifiedSite

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CONTENTS 26 Compliance:

FEATURES

63

14 Emerging Clusters Take Up the Technology Challenge

Rivaling the reigning tech hubs, city and state leaders are seizing opportunities to grow their cuttingedge electronic and digital sectors.

Earnest Investigation of Industrial Properties

Area Development presents the results of its 6th annual Top States for Doing Business survey of location consultants.

The results indicate their top state picks for overall Business Environment, Labor Climate, and Infrastructure/Global Access, as well as the sub-factors in each of these categories.

Proper incentives compliance reporting will help a company to ensure that it receives the full value of the incentives it was offered in the application and negotiations process.

29 Call Centers

18 The Importance of COVER STORY

Where Incentives Are Won or Lost

Those acquiring industrial properties need to assess their environmental risks early on and put in place plans for remediation of any problems that surface.

Increasingly Returning Home

Call centers are coming back to America, and flyover country is proving to be the biggest beneficiary in new jobs and overall boosts to local economies.

84 E-Commerce

22 Integrated Project

Development, Industrial Land Pricing, and the “Amazon Effect”

Delivery for Industrial Manufacturing Facilities

Enabled by collaboration software, IPD is helping industrial manufacturers reduce risk, achieve predictable results, and maximize the effectiveness of capital funding.

Exclusive Online Content

The emerging information and services market is a game-changer for the industrial land market.

www.areadevelopment.com

FEATURES NOW ONLINE...

How To Improve Profits While Paying the New Higher Minimum Wages Getting The Best Data For Optimal Decision-Making Location Notebook: TVA Hitching Its Wagon to the Auto Industry Location Notebook: Union County, SC, Moves Forward

Studies • How the Location Decision Affects LEED Certification • Top Airport Locations for Real Estate Investors Area Development® Site & Facility Planning (USPS 345-510) is published five times per year (Q1, Q2, Q3, and Q4 — and Annual Directory in December) at Richmond, VA, by Halcyon Business Publications, Inc., 400 Post Ave., Westbury, NY 11590. Periodicals postage paid at Westbury, NY, and additional offices. Single copies, $10. Yearly subscription U.S. & Canada, $75; foreign, $95.

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FOR FREE SITE INFORMATION, CALL 800-735-2732, EXT.

225, OR VISIT US ONLINE AT www.areadevelopment.com

Volume 51 | Number 3 Q3/2015

Quote:

The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom.

Isaac Asimov (1920–1992), American science fiction and popular science writer and professor of biochemistry at Boston University

10 First Person

4 Editor’s note

As the U.S. Economy Grows, Which States Are Best for Business?

Becca Dernberger Vice President and General Manager, Northeast Division | Manpower

DEPARTMENTS

12 Front Line

6 In Focus How Intelligent Services Can Reduce Building Costs

8 In The Know

92 Ad Index/

• The North American Seaport Outlook • Downtowns Drawing Millennial Workers — and the Companies That Need to Attract Them • Business Location Tracker

89

West Coast Ports Unite to Solve Challenges

Web Directory

EDITOR’S REPORT C1 Location Canada Competitive costs and low taxes help to fuel Canada’s diverse economy.

CANADA

(C1 follows page 30.)

Join Our Newsletter areadevelopment.com/newsletter

Follow Us On twitter.com/areadevelopment

Online Database Resources www.facilitylocations.com

Follow Us On www.fastfacility.com

POSTMASTER: Send address changes to Area Development, Circulation Department, 400 Post Ave., Westbury, NY 11590. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2015 by Area Development® magazine. ISSN: 1048-6534. Printed in the U.S.A. Area Development® is a registered trademark of Halcyon Business Publications, Inc.

AREA DEVELOPMENT | Q3/2015

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EDITOR’SNOTE

Q3/2015

As U.S. Economy Grows, Which States Are Best for Business?

It appears that the U.S. economy is continuing to grow at a modest pace. The Commerce Department reported a 2.3 percent annualized rate of growth for the second quarter of 2015 — albeit below initial projections. The unemployment rate registered just 5.3 percent for the period ending in June 2015, the lowest level since April 2008. And more jobs translated into a 2.9 percent increase in consumer spending.

As the economy continues to improve, Area Development is interested in finding out where companies will continue to grow and add jobs. In order to answer that question, for the sixth consecutive year, we asked a highly respected group of location consultants to give us their picks for the Top States for Doing Business, based on the states’ overall business environment, labor climate, and infrastructure/global access. The results of that survey are presented in this issue. Not surprisingly, as in years past, the states in the South hold the lead, with Georgia, Texas, South Carolina, Tennessee, and Alabama (tied with Florida) in the top five spots, respectively.

It has been noted by several consultants that it’s difficult to provide generalized rankings — i.e., the top state for a project is primarily based on project-specific needs being met and can change dramatically from company to company and from project to project. Nonetheless, when company CEOs were asked by Chief Executive magazine to name their 2015 “Best States for Business,” the results were markedly similar to those garnered by Area Development’s recent survey of leading consultants to industry. The responding CEOs named Texas, Florida, North Carolina (in the #7 spot in our survey), Tennessee, and Georgia — in that order — as their “Best States for Business.”

The Top States for Business can continue to be optimistic about their chances for landing projects based on the latest economic forecasts. According to Kiplinger, economists are projecting U.S. GDP growth of 3 to 3.5 percent in 2015’s remaining two quarters. The only snag they see is a strong U.S. dollar, which makes goods and services pricier and less competitive in foreign markets. So while demand for U.S.-made goods is growing at home, a slow-growing economy in China and a further slowdown in Europe may dampen export and overall U.S. economic growth. As Michael Gapen, the chief U.S. economist at Barclays, told The New York Times (7/31/15), it “would help…if the rest of the world were doing better.”

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

Editor

Program Manager Annie Gregson (212) 579-4469 annie@areadevelopment.com

2015 Editorial Advisory Board Justin T. Bickle Project Manager, Corporate Real Estate, DHL Global Business Services Christine Bustamante National Co-Leader, Global Location and Expansion Services, KPMG Gregory Burkart Managing Director, Specialty Tax Practice Leader, Duff & Phelps, LLC Les Cranmer Senior Managing Director, Savills Studley Dennis Cuneo Partner, Fisher & Phillips LLP Tim Feemster Managing Principal, Foremost Quality Logistics Larry Gigerich Managing Director, Ginovus Stephen Gray CEO, Gray Construction

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EXECUTIVE OFFICES

Minah C. Hall Managing Director, True Partners Consulting LLC

John Morris Leader of Industrial Services for the Americas, Cushman & Wakefield, Inc.

Scott Kupperman Founder, Kupperman Location Solutions, LLC

Kathy Mussio Managing Partner, Atlas Insight

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

FOR FREE SITE INFORMATION, CALL

Halcyon Business Publications, Inc. President Dennis J. Shea Finance Mary Paulsen finance@areadevelopment.com All correspondence to: Area Development Magazine 400 Post Avenue, Westbury, NY 11590 Phone: Toll Free: Fax:

516.338.0900 800.735.2732 516.338.0100

MEMBER of

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

The road to your company’s profitability and success may run right though central and southern Indiana or southeastern Illinois. And in fact that road may look a lot like a highway, runway, railway or river port. That’s because Hoosier Energy has some of the best sites for distribution and logistical operations that the Midwest has to offer.

If you’re building, expanding or relocating, you should make it a point to talk with us.

Because while supplying you the power you need is job one, getting your product from point A to point B comes second nature. Let’s talk. You’ll find Hoosier hospitality also means Hoosier accessibility.

HOOSIERSITES.COM

812-876-0294

Hoosier Energy Rural Electric Cooperative is an equal opportunity employer.

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INFOCUS

How Intelligent Services Can Reduce Building Costs

By Neil Maldeis, Trane

Trends in smart, connected products are transforming value creation for building owners and managers to allow them to focus on predictive/preventive rather than reactive maintenance.

Intelligent services combine technology, analytics, and expertise in heating, ventilation, and air conditioning (HVAC) systems to continuously collect, interpret, and act upon data from building systems and controls to optimize operational performance. This data gives building owners and managers the tools they need to manage energy consumption, reduce operating costs, minimize their environmental impact, improve building system reliability and uptime, and resolve problems more efficiently.

The Internet of Things Neil Maldeis, professional engineer and Association of Energy Engineers Certified Energy Manager ®, is energy solutions engineering leader for Trane, a leading global provider of indoor comfort solutions and services and a brand of Ingersoll Rand. He has more than 30 years of experience as a mechanical/ project engineer in the building construction and energy conservation fields.

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AREADEVELOPMENT

The HVAC industry is among the adopters of what has come to be known as the “Internet of Things.” Cisco Systems defines the Internet of Things (IoT) as “the intelligent connectivity of physical devices, driving massive gains in efficiency, business growth, and quality of life.” Forrester Research cites a threefold increase in IoT investments since 2012 among companies it surveyed, and ABI Research says that the number of wireless-connected devices will soar to about 41 billion by 2020.

With a well-defined implementation plan, IoT can yield many benefits to a company. These benefits include using data to enhance product quality and performance while improving device/product design, providing real-time user feedback to improve usability, and helping to transform a services business from a reactive break-fix business to a proactive or even predictive outcome-based service business.

Self-Diagnosing Systems HVAC systems have existed within a network of connected devices — which can be remotely monitored and are working to achieve comfort conditions inside of a building — for many years.

By incorporating HVAC systems into IoT, building owners and operators can create self-diagnosing HVAC systems that operate with peak energy efficiency without compromising occupant comfort.

They also can generate early identification of broken or poor performing systems.

For example, when using outdoor air-cooling under appropriate conditions, a broken damper linkage can cause the control strategy to not operate, increasing energy costs for the building owners.

Without IoT, the broken linkage needs to be physically seen or impact occupant comfort in order to have the potential problem diagnosed. With IoT applied to the HVAC system, data can be collected to identify the problem within minutes of its occurrence and the repair can be made before the energy costs increase dramatically — and before a maintenance person observes the failed component.

Self-diagnosing HVAC systems also provide dramatically faster response time from service providers when failures occur, as well as faster time to resolution on HVAC performance issues as problems can be remotely resolved. When a technician needs to be dispatched, the technician can arrive armed with diagnostic information and the right parts and tools to make the repair in a single visit instead of multiple trips.

Condition-based maintenance programs can be implemented to enable maintenance services to align with actual system performance requirements instead of simply based on a date or amount of run hours. This can extend the life of equipment, reducing unnecessary maintenance costs and focusing resources on the more critical actions.

Intelligent services and the data they provide can help building owners reduce their environmental impact, improve building performance, optimize energy spend, and improve the bottom line.

FOR FREE SITE INFORMATION, CALL 800-735-2732, EXT.

225, OR VISIT US ONLINE AT www.areadevelopment.com

ZERO TAXES. GENEROUS INCENTIVES. SUPERB UNIVERSITIES. FOR BUSINESS, NEW YORK HAS BECOME A STATE OF OPPORTUNITY. New York State has reinvented the way it does business, from reducing taxes to cutting red tape.

Today we offer generous incentives and funding programs, including START-UP NY, which offers qualiďŹ ed companies zero taxes for 10 years. And businesses can collaborate with our superb academic institutions in research and development, gaining an edge faster and more affordably.

Let New York State work for your clients.

To learn more, visit ny.gov/business

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INtheKNOW Downtowns Drawing Millennial Workers — and the Companies That Need to Attract Them Why Companies Are Choosing to Locate Downtown

1. Attracting and retaining talented workers 2. Building brand identity and company culture 3. Supporting creative collaboration 4. Gaining proximity to customers and business partners 5. Centralizing operations 6. Supporting triplebottom-line business outcomes

Companies are choosing walkable downtown locations to help them better compete for talent and resources while supporting triple-bottom-line business outcomes.

According to Julia Georgules, vice president and associate director of Office Research at JLL, approximately 25 percent of the overall workforce is under 30 years old (the millennials), and this is projected to rise to 50 percent by 2020. These millennials often prefer to live and work in neighborhoods offering restaurants, cultural venues, shopping, and entertainment and nightlife as well as easy access by public transportation.

With this in mind, Smart Growth America — a coalition that advocates for “smart growth” solutions across the country — and commercial real estate services firm Cushman & Wakefield recently partnered for a large-scale study on companies moving to and investing in walkable downtowns. Their report — Core Values: Why American Companies Are Moving Downtown — released in mid-June, examines the characteristics, motives, and preferences of nearly 500 companies that have made such a move in the past five years.

“The findings reveal an enormous diversity of businesses choosing to locate downtown,” said Cushman & Wakefield’s Paula Munger, director of Business Line Research.

“And the migration is happening across the country, in big cities and small CBDs, and in secondary markets within larger metropolitan areas from coast to coast.”

The North American Seaport Outlook With recent labor as well as congestion issues taking a toll on West Coasts ports, industrial seaport markets may be affected by next year’s opening of the expanded Panama Canal. It is projected that by 2016, 87 percent of the world’s shipping fleet will be able to traverse the Panama Canal, which will be able to accommodate 12,000 to 14,000 TEU vessels.

According to JLL’S 2015 North American Seaport Out-

look, Gulf and Eastern Seaboard ports, which are already leading in TEUs, are anticipated to capture even more West Coast discretionary cargo when the new Panama Canal opens next year; keep in mind, however, that discretionary goods are those not destined for local consumption, and thereby able to move through any entry point of the shipper’s choosing. As JLL notes, it’s a matter of where goods ultimately end up rather than where they enter the continent. Therefore, seaport markets based in notable population centers, e.g., New York/ Select Seaport Industrial Markets in Notable Population Centers New Jersey (40.9 percent increase in TEU volume from 2007 to 2014), are currently farImmediate Seaport Average Seaport Greater Seaport MSA Population Market Size Construction Rent Market Rent Premium ing well. (in Millions) (m.s.f.)

Date Rent vs. Greater Market It’s anticipated that the ports of Long New York/ 23.6 308.5 1956 $6.46 $5.24 23.3% New Jersey Beach and Los Angeles, which have a col13.0 132.1 1977 $7.83 $7.00 11.9% Los Angeles lective TEU volume 2.5 times that of New Oakland 4.6 87.2 1963 $7.76 $6.98 11.2% York/New Jersey, will remain the primary Seattle 3.6 92.2 1973 $6.17 $5.82 6.0% U.S. gateways in the years to come based Miami 5.9 102.1 1982 $7.08 $6.74 5.0% on their infrastructure, automation enhance-

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AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

Track business relocations and expansions on Area Development Online.

Studies/Research/Papers on Area Development Online.

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

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

BUSINESS LOCATION TRACKER New East Chicago, Indiana, Manufacturing Center for Hoist Liftruck

Business Location Tracker

N.D. Headquarters Expansion for Bobcat Co.

Whirlpool To Establish Regional Distribution Center in Chicago Metro Area The new $21 million facility is a full-mix, rail-served warehouse, storing products from all Whirlpool-built major appliance categories and brands.

Hoist Liftruck Mfg., Inc., a manufacturer of high-capacity material-handling equipment, will expand manufacturing operations to East Chicago, Ind., creating up to 500 new jobs by 2022.

Bobcat is investing $9.5 million to double the size of its West Fargo headquarters, where it employs more than 2,000 people.

VariQ Corp. Expanding in Maryland IT and cybersecurity solutions company VariQ Corp. is expanding in Rockville, Montgomery County, Md., and plans to add more than 250 jobs.

Second Phoenix Manufacturing Plant for PAC Worldwide A manufacturer of flexible protective packaging, PAC Worldwide, has opened a second manufacturing plant in Phoenix, Ariz., where it will add more than 50 jobs.

Aircraft Supplier To Expand in North Carolina HAECO Americas’ aircraft interiors unit, HAECO Cabin Solutions, will invest $11.3 million to expand its manufacturing plant in High Point, Guilford County, N.C., resulting in the creation of 127 new jobs over the next five years.

Ryder Supply Chain Solutions Expanding in Spring Hill, Tennessee Ryder Supply Chain Solutions is investing $16.5 million to expand its assembly and warehousing operations in Spring Hill, Maury County, which will result in the creation of 606 new jobs.

New North American Manufacturing Operations in Florida HOERBIGER, a leading player in the fields of compression, drive, and automation technology, will create 420 new jobs at a new North American manufacturing facility in Coral Springs, Fla.

ments, and strong rail connectivity to interior U.S. markets. However, East Coast ports in Savannah, Charleston, and Virginia — which also offer strong rail connections to interior population centers — will likely see more discretionary cargo call on their ports.

“Cost, service and risk are the three perennial drivers for supply chain executives as they develop their logistics strategy. As a result, the East Coast/Gulf seaports are gaining favor among industry veterans because they mitigate some risk, provide access to major population centers, and

ZF Plans $22.5 Million South Carolina Expansion A Germany-based global supplier of driveline and chassis as well as safety technology is expanding its manufacturing and warehouse facilities in Gray Court, Laurens County, S.C., creating 545 new jobs over the next five years.

connect with the optimal inland transportation mode: rail,” noted Mark Levy, managing director and lead of JLL’s Ports, Airports and Global Infrastructure (PAGI) practice group.

As to demand for industrial space at the nation’s seaports, JLL explains it will not directly correlate to a shift in ports of call. There are too many complexities and variables in the movement of goods to portend a macro shift in industrial occupancy. It’s predicted that seaport markets with quality industrial real estate in nearby population centers will continue to see rents outpace greater market averages.

AREA DEVELOPMENT | Q3/2015

9

FIRSTPERSON BECCA DERNBERGER

V.P. & G.M., NORTHEAST DIVISION | MANPOWER

Have you seen an increase in the number of companies utilizing temporary employees?

Dernberger: Yes, there has been a surge in demand for contingent workers in the U.S. In fact, contingent jobs comprise about 2 percent of all U.S. jobs today. In the grand scheme of the entire job market, that’s a small percentage, but it amounts to an all-time high of three million contingent jobs.

What types of companies traditionally use contingent workers?

Dernberger: Historically, contingent workers were most prevalent in the service sector or in clerical work, but we’ve seen a radical transition.

In 1990, 42 percent of the U.S. contingent workforce consisted of clerical workers, while 28 percent were manufacturing and industrial workers.

By 2000, those percentages had flipped, with 47 percent of the contingent workforce consisting of manufacturing and industrial workers, a trend that has remained consistent.

Why do you think there’s been an increase in temporary workers being utilized by manufacturers?

Dernberger: Part of the increase in contingent manufacturing labor stems from changes in employer behavior that started during the economic recovery in the early part of the decade. As companies started to grow post-recession, they wanted to augment their workforce at the pace of demand. Employers were hesitant to add permanent staff until they saw sustained demand. Many manufacturers turned to contingent workforces to cautiously increase production and start investing in potential future hires, should the business be able to sustain them. We’ve seen that model continue, and many of these contingent employees are among the first to get hired when companies add permanent staff.

Are temporary workers being used in skilled or unskilled manufacturing jobs — or both?

Dernberger: Both. We see strong demand for contingent jobs in both skilled and unskilled roles. Due to manufacturers’ increased sophistication with processes and technology, many of the typical positions now require further education.

Therefore, contingent workers in the manufacturing sector need more training than in the past, whether it’s training on company requirements, welding, forklift driving, or SAP. This requires more of an investment of a company’s time and money.

What are the advantages of employing temps in manufacturing positions?

Dernberger: From the employer’s point of view, contingent

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employees allow businesses to hire seasonally or on a project basis, flexing their workforce to meet demand.

They save money by outsourcing recruiting, screening, and interviewing job candidates, as well as the overhead costs associated with employees, all of which are taken on by the staffing partner. In some instances, especially those labeled as “temp-to-hire” positions, the contingent employee’s time in the role serves as a trial period during which the employer can see if that worker is a good fit — in terms of skillset and culture.

How does the worker benefit from being hired on a contingent basis?

Dernberger: This approach affords the worker the same opportunity to test the waters, while having the flexibility to seek other positions if a job is not a fit. This is particularly attractive for people looking to make a career change or expand their skillset. For experienced workers, contingent positions offer flexibility with commitment and schedule, the opportunity for ongoing work and income, and a chance to keep skills sharp and current. For candidates new to the job market, contingent work makes it possible to establish a foundation of experience, learn the latest skills, work in a variety of roles/companies and build a professional network.

If temporary workers transition to permanent manufacturing employees, at what juncture does that occur?

Dernberger: There are several factors that can motive an employer to offer a contingent employee a permanent role. First, employers don’t want to lose top talent, and they recognize that permanent positions tend to be more attractive to job-seekers and result in better retention. Second, employers want to be sure they have a long-term need for employees before taking on more permanent staff. Employers don’t hire in anticipation of growth, both for their own sake and to protect employees from downsizing that could have been prevented with careful planning. Finally, some roles are temp-to-hire from the start, and the temporary period serves as an on-the-job interview. After a short time, typically 30 to 45 days, a permanent employment offer is extended to someone that proved to be a good fit.

What challenges do manufacturers who employ temps face and how are they being addressed?

Dernberger: An important challenge is ensuring the right skills fit. There is an increasing awareness that for domestic manufacturing to prosper, a different set of skills is necessary to meet companies’ current and future needs. Most of [today’s manufacturing] jobs

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are for skilled production workers in roles like machinists, operators, craft workers, distributors and technicians. These jobs require extensive training and are difficult to fill. Therefore, a key priority in 2015 will be for employers to shift from hiring employees with specific skillsets to focusing on creating an ongoing learning and career culture. Employers must empower employees to become partners in a continuous life-long learning and development process. This will allow employees to keep learning and take on multiple roles in order to bring value to the business more quickly.

What is required for a company to effectively employ a contingent workforce?

Dernberger: In my experience, there are three components to a successful contingent program: rate of pay, hire-in options, and workforce culture (how people are treated). If any one of these components is lacking, then the other two should be more robust to compensate.

There are two models that are successful: (1) a consistent percentage of the workforce is contingent — for example, a manufacturer keeps the workforce 20 percent contingent at all times, allowing flexibility to ebb and flow as business demands change; (2) companies that are confident in their long-term production forecast

will engage an organization like Manpower as an extension of their human resources department to recruit, assess, screen, interview, onboard, and place candidates. Clients look to these contingent workers as their candidates for direct hire.

Is there anything else you’d like to add to the discussion?

Dernberger: Due to the aging North American workforce and a lack of younger talent to fill the pipeline, a “double squeeze” exists in manufacturing resulting in skills shortages at both entry and senior levels. Because of declines in domestic manufacturing, productivity gains, and a weak economy, many companies hired few manufacturing workers of any type over the last couple of decades, so young talent is sparse. In addition, many seasoned employees are nearing retirement. This generational shift will lead to even greater demand for new manufacturing workers for the jobs that remain.

THE ASSIGNMENT One of Area Development’s staff editors recently interviewed Becca Dernberger, vice president and general manager of Manpower’s Northeast Division, about the use of the contingent workforce in today’s more technology-driven manufacturing sector.

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FRONTLINE

West Coast Ports Unite to Solve Challenges

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anufacturers of imported and exported goods between the United States and Asia let out a huge sigh of relief in late May when a five-year contract that governs pay and work rules at 29 West Coast ports was finally ratified. That dispute cost manufactures hundreds of millions of dollars in lost business due to a slowdown in cargo handling that began in November and fell over the major holidays of Thanksgiving, Christmas, New Year’s, and Easter.

“Voyage times between Asia, Australia, and New Zealand are already lengthy. When you add two, four or more days because of delays on the West Coast, it makes a difference to shelf-life requirements for commodities,” says Fred A. Sorbello, CEO of The Mullica Hill Group, part of the AGRO Merchants Group. Mullica Hill Cold Storage is the largest receiver of meat in the United States.

Despite the ratified agreement, manufacturers are certain that strikes and delays will continue at West Coast ports.

Rival Seaports Working Together Executives at the Ports of Los Angeles and Long Beach report that seaports also face other congestion-related challenges, particularly those caused by processing the everincreasing number of supersized ships. Consequently, in an unprecedented step, these rival seaports are working together via an agreement approved by the Federal Maritime Commission (FMC) that allows both ports to cooperate far more strategically on finding new ways to prevent congestion and cargo delays, improve the transportation network, and enhance environmental sustainability and security.

“Essentially, the ports can now talk about everything — except price and terms,” says Phillip Sanfield, Port of Los Angeles spokesperson.

Already a series of meetings hosted by the ports have

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By Karen E. Thuermer

been held between cargo owners, trucking firm leaders, longshore labor, marine terminal operators, and other goods movement industry representatives.

“Now we’re forming seven working groups to focus on improvements in peak season 2015, container terminal optimization, chassis ops, off-dock solutions, key performance indicators/data solutions, intermodal rail, and drayage,” reports Art Wong, Port of Long Beach spokesperson. “Working with us will be our key stakeholders: shipping lines, cargo owners, labor, railroads, trucking interests, equipment owners, and more.”

Similarly, the Seattle and Tacoma port commissions have plans to form a Northwest Seaport Alliance that will unify management of the two ports’ marine cargo terminals and related functions. During a joint public meeting on June 5, both ports voted on the final agreement to be submitted to the Federal Maritime Commission (FMC) “Barring unforeseen circumstances, the agreement should be up and running [this summer],” says Bari Bookout, director of Commercial Strategy at the Port of Seattle.

While both seaports have cooperated on a number of fronts for many years, competition has increased dramatically causing the seaports to look for a more formal way to do business together.

“We have been competitors for a long time,” comments Bookout. “But in reality, shippers and steamship lines look at us as one gateway.”

By combining the two ports’ marine cargo operations, port officials believe the Northwest region would be in an even stronger position to address competitive challenges and create new economic opportunities.

“It will allow us to leverage our investments more strategically and handle the big ships being deployed,” she concludes.

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225, OR VISIT US ONLINE AT www.areadevelopment.com

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economy/market report

Emerging Clusters Take Up the Technology Challenge Rivaling the reigning tech hubs, city and state leaders are seizing opportunities to grow their cutting-edge electronic and digital sectors.

By Dale Buss

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courtesy MTC

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hen it comes to the expansion of jobs and economic impact from the continued American domination of the digital realm, as well as growth in specific new cutting-edge electronic technologies, the rich geographic clusters keep getting richer — and everyone else is trying to bust into their ranks.

The newest drivers of growth in the digital era include wearable devices, the “Internet of Things” (IoT) and driverless cars, and of course the ongoing digitization of nearly every aspect of the economy, which keeps feeding high-tech growth in general. It appears that traditional digital outposts such as Silicon Valley, Austin, and Boston remain the biggest contributors to both types of growth, as well as the main beneficiaries of the preeminence of digital technology in the global economy.

Yet, in the very dynamism and creativity inherent in digital technologies — which bring one wave of revolutionary change after another to the economy as well as to life in general — development leaders in many other cities and states see opportunities to grab significant shares of the evolving specialties, as well as to establish the overall digital bona fides of their local economies.

More of them are making their cases as emerging technology clusters by combining a strong higher-education base with significant established digital capabilities, legacy indigenous expertise and critical mass in relevant industries, and sometimes bets placed on the cutting edge of technological

Aerial view of Mcity, a $10 million, 32-acre research and testing ground for refining automated driving at the University of Michigan’s Mobility Transformation Center

change where other communities simply aren’t willing to risk them.

They’re using such formulas to vie for more attention and investments from companies, government agencies, and public-private partnerships that are fueling the development and expansion of the latest technologies and of the digital realm.

Thriving Strongholds When it comes to new areas of growth, it’s not surprising that thriving digital redoubts can get most of the business and augment their existing domination of this vital part of the economy. Having huge established bases of scientists, engineers, softwarecode writers, free-thinking entrepreneurs, willing financiers, and the other elements that have made them as successful as they are, places like Silicon Valley quite understandably enjoy leFOR FREE SITE INFORMATION, CALL

verage in luring the drivers of adjacent digital technologies to their environs.

“We’re seeing mostly the same [places] in terms of where the investments are going,” says Tom Ciccolella, U.S. venture-capital leader for PricewaterhouseCoopers. “There is talk of pockets elsewhere, and there has been for a while, but in terms of where the spending is going, it’s the same old, same old. And between 50 and 60 percent of the spending in new technologies is in California itself.”

This is entirely understandable, notes Dr. Fariborz Ghadar, Chair of Global Management, Polices, and Planning at Penn State SMEAL College of Business. “Many of these industries sort of depend on each other; hardware and software need to be coordinated and people need to talk to each other,” he says. “Yes, you can pick up the phone from anywhere, but that just doesn’t cut

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it. You need to interact with people. There also is the financing element and even the social element. People around you have to be familiar with the industry; you talk with them and you move forward.”

But the difficulties of breaking into this club of digital havens haven’t dissuaded all comers. Many states and cities are making determined efforts to be the right places at the right times with the right equation of advantages and incentives for companies that are growing up in new technologies, confident that a win or two or three is all they need to establish credibility as an important cluster for that arena. And some locales simply believe their time has come to join the conversation as important overall digital meccas.

Also, some of the wannabe cities haven’t hesitated to depend on the existing corporate giants of digital technology, such as Google, to help fund ventures in evolving new industries that the newcomers hope to capture for their geography, rather than seeing most of the economic development benefits simply flow back to Silicon Valley.

Here’s how several cities have shown promise for tilting digital-industry tendencies enough in their direction that they might be able to rival the reigning tech capitals in overall digital growth or in important rising specialties.

“Silicon Prairie” Chicago is trying to establish a new moniker as the capital of “Silicon Prairie,” leveraging the success of some early homegrown Internet companies — including Groupon, Orbitz, and

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GrubHub — into a greater role as a worthy regional center of digital innovation across the board.

Huge legacy companies like McDonald’s are helping to seed the city’s digital evolution. More than $1 billion in venture capital was invested in Chicago in 2014, and there are tech incubators including one called 1871, and strong universities including Northwestern and the University of Illinois to fuel startups. Add in the fact that Chicago arguably holds the most appeal of any city in the Heartland for the creative class of millennials who must populate any rising tech hub for it to succeed.

“We’re seeing a big trend of young people migrating to or staying in the city,” says Luke Tanen, executive director of the Chicago Innovation Awards, which connects the spokes of the city’s tech hub. In fact, Chicago’s tech employment lately has grown faster than that of Silicon Valley, Boston, or New York.

The city’s industrial heritage gave it an edge in winning the $320 million Digital Manufacturing and Design Innovation Institute that has been established on Goose Island in the Chicago River, one of six public-private partnerships launched over the last couple of years under the Obama administration’s National Network for Manufacturing Innovation. About 80 staffers are expected to be on site this year with the goal of making America the undisputed world leader in digital manufacturing — and they could make Chicago the undisputed global capital of that discipline.

But vestiges of the 20th century economy die hard in this

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town. When the idea of a city tax on cloud-based technology emerged this year as a way to help Chicago out of the deep fiscal hole created by its union-pension obligations and other burdens, Mayor Rahm Emanuel had to reassure the city’s digitalstartup community that they would be spared. That’s not the kind of threat that would even materialize in Silicon Valley.

Joining the Tech-Cluster Big Leagues “The communities that can best facilitate new-edge digital technologies are areas that offer unique opportunities that haven’t been seen in other areas,” says Susan Davenport, interim presi-

dent and CEO of the Gainesville (FL) Chamber of Commerce.

Home to the University of Florida and at the nexus of a high-tech corridor that includes nearly 400 IT employers in biotechnology, computer products, software, digital media and other disciplines, Gainesville is making a bid for the tech-cluster big leagues in part by relying on the leadership of Davenport, who helped make Austin into a digital hub in her 13 years in economic development leadership there.

Already, the university ranks as the fourth-most-prolific commercialization engine of any higher education system in the country, behind only the University of California system, the University of Texas system, and MIT, Davenport says. A main reason for that is the diversity of verticals that birth startups in the area, ranging from agriculture to drones.

The Gainesville area also is increasingly tapping into its huge pool of alumni and “mobilizing that engine and making them aware of the opportunities there are ‘back home’ now after they started their careers in other tech hubs,” she notes.

The Nascent “IoT” Pittsburgh has had to reinvent itself a couple of times already — once after the disappearance of most of the steel industry in the 1980s, and again over the last couple of decades as its once-stellar lineup of Fortune 500 corporations headquartered there has dwindled to just a few.

But some city leaders see the chance to create a high-tech niche for the city around the nascent “Internet of things,” which describes the vast movement to connect any device with an on-off switch to the Internet and to one another. This includes anything from cell phones to coffee makers to washing machines to lamps, wearable devices, and components of machines such as an oil rig or a jet engine. The technology research firm Gartner says that by 2020 there will be 26 billion things connected in the IoT. Given that IoT applications are as much in the business-to-business as the consumer arena, the industrial heritage and legacy talent base of Pittsburgh might be an ideal place to build a cluster around IoT technologies. Add in the immense digital expertise resident in one of the nation’s foremost technology schools, Carnegie-Mellon University (CMU),

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FOR FREE SITE INFORMATION, CALL

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com 21/08/15 3:23 AM

and the formula gets much more potent. So CMU is working with the city of Pittsburgh and area foundations and other local entities to build an open-sourced system that (1) connects virtually every eligible device on campus to an IoT network, and (2) begins deploying it in the wider urban area within about a year.

“In the city it could include everything from cameras that are tracking traffic to sensors on bridges to check for vibration and infrastructure, to devices monitoring public transportation to see if new bus lines need to be added or removed, to a sensor network that would be connected to the IoT and make air-quality information more accessible to people,” explains Anind Dey, director of CMU’s Human-Computer Interaction Institute.

Even more important for hopes for an IoT cluster in Pittsburgh would be CMU’s plan to come up with a turnkey IoT software infrastructure that it could sell to other communities, universities, companies, and other entities.

Interestingly Google, based in Silicon Valley, put up the initial funding for the IoT project that was won by CMU in a competition. But Dey notes, “The amount of money [Google] funded will be nowhere near enough to build and deploy the network here.” That’s why CMU is focusing on local sources of funding as well.

Mcity offers unusual features such as an underpass tunnel that blocks vehicles from wireless and satellite signals, a metal bridge that poses challenges to sensors and, of course, a cold-weather setting like that which could present challenges to autonomous driving.

“There is nothing else like it in the world,” Peter Sweatman, director of the university’s Mobility Transformation Center, told The Wall Street Journal. And that, of course, is exactly the point. If the technology clusters really want to take a run at the dominance of the old guard in digital-tech development, they’ve got to be places like none other. ■

MISSISSIPPI STATE UNIVERSITY’s FAA

UNMANNED AERIAL SYSTEMS

UNIVERSITY OF MISSISSIPPI’s

Taking a Run at the Old Guard Detroit is in a tizzy over the threat posed to its traditional role in the auto industry thanks to advances in “autonomous” driving being made

by Google; and traditional car folks also are nervous about the fact that Apple has begun hiring former autoindustry executives to gear up its own effort that could lead to building a car someday.

But local economic interests haven’t exactly sat around and done nothing to counter these developments. Besides the self-driving programs that each of the Detroit Three carmakers has launched, and the fact that a number of non-American auto brands have their major U.S. engineering and research centers in southeastern Michigan, the formidable University of Michigan at Ann Arbor has created a $10 million, 32-acre testing ground at its campus called Mcity — and billed it as the most advanced joint research and test facility to date for refining automated driving.

at the UNIVERSITY OF SOUTHERN MISSISSIPPI

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ASSET MANAGEMENT

The Importance of Earnest Investigation of Industrial Properties Those acquiring industrial properties need to assess their environmental risks early on and put in place plans for remediation of any problems that surface.

By Marv Pearlstein and Peter Duchesneau, Partners, Manatt, Phelps & Phillips, LLP

T

he acquisition of real property for industrial development shares many of the same environmental risks and considerations as other types of development. However, industrial development also presents unique concerns that should be taken into account early in the acquisition process so that the buyer does not unknowingly inherit and become entangled with a property’s problematic environmental legacy. Close and early attention to environmental risks prior to a property’s acquisition affords the parties an opportunity to clearly address such concerns up front, which can result in a beneficial outcome for both buyer and seller alike.

Properties acquired for industrial use often carry a higher risk of environmental impairment. These properties are typically located in industrial areas and can themselves have a history of industrial activity. While current industrial practices and regulatory requirements lessen the risk of releases of hazardous materials, today’s safeguards were not in place in the not so distant past. Sloppy practices and accidental releases, although not as prevalent as they once were, still occur.

Regardless of a lack of involvement, a new property owner can be tarred with liability for such releases from past industrial operations. As a result, to effectively manage potential environmental liability risk for industrial property, a prospective purchaser should conduct thorough environmental due diligence and use the informa-

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tion obtained either to cease pursuing the site or to negotiate purchase terms that clearly allocate the risk and responsibilities for contamination in a manner acceptable to the purchaser.

As a general rule, in most jurisdictions a property owner is liable for cleaning up its property regardless of whether the owner caused the contamination. In addition to burdening the owner with the risk of cleanup liability, environmentally impaired property can interfere with development plans by delaying schedules, increasing costs, limiting uses and sometimes even thwarting development altogether.

Although a property owner may have recourse against those responFOR FREE SITE INFORMATION, CALL

sible for causing the contamination, pursuing responsible parties (provided they still exist and are financially worthwhile to pursue) may involve spending a great deal of time and incurring significant expense. Complicating matters, it may not be easy establishing the culpable party where there is a history of multiple operators, particularly if similar industrial operations were conducted under different ownership. If the responsible party turns out to be the seller, without proper planning, a buyer’s recourse against the seller may unwittingly be precluded under the purchase and sale agreement, which commonly provides that the property is conveyed “as is,” releasing the seller from liability even

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for its own acts causing contamination of the site.

Phase I & II Assessments As with most real estate transactions, a Phase I environmental site assessment is a critical first step for environmental diligence. This nonintrusive exercise is primarily based upon a review of historical records, interviews, and an inspection by a qualified environmental consultant, with an objective of identifying potential releases of hazardous materials on or at the property, known as “recognized environmental conditions.” The performance of a Phase I prior to the acquisition of real property can also serve as a basis for limiting cleanup liability under federal law. A Phase I that meets the ASTM E1527-13 — Standard Practice for Environmental Assessments: Phase I Environmental Site Assessment Process — may be used to comply with the U.S. Environmental Protection Agency All Appropriate Inquiry Rule to ascertain landowner liability protections under the U.S. Comprehensive Environmental Response, Compensation and Liability Act. Nonetheless, such protections on their own rarely prove sufficient to manage the risk, since a new property owner can still face cleanup liability under state law, additional obligations under federal law, and other barriers to developing the property as a result of preexisting contamination.

If recognized environmental conditions are identified, additional diligence in the form of testing soil, soil gas, and groundwater, commonly referred to as a “Phase II environmental site assessment,” may be necessary to determine whether releases have impacted the property. Although the detection of contamination in some situations may lead to the prospective purchaser walking away, the results of a Phase II can also enable the purchaser to weigh the potential costs and liability risks, which do not always prove insurmountable.

In some circumstances, the parties may choose to negotiate terms to allocate the responsibility for remediating contamination after the closing. To effectively address cleanup responsibly as part of a real estate transaction, establishing a baseline of the environmental conditions existing at the time of the sale based upon the Phase II and other available data can play an important role. A baseline can avoid confusion between what may have existed prior to the sale with what may occur afterwards from new industrial operations. This can prove especially useful where the subsequent industrial use involves the same hazardous materials and utilizes preexisting equipment on the property, such as tanks. A baseline can also be used to define the scope of indemnification obligations and cleanup agreements, as discussed below.

Cleanup Agreements A cleanup agreement negotiated as part of the purchase and sale of an industrial property may be warranted and may further aid the prospective purchaser in managing environmental liability. Such agreements can allow the cleanup to occur after the closing. Cleanup agreements should clearly articulate the responsibilities of each of the parties, including identifying who will actively manage the work, who will pay for it, how the contractors will be selected, and how the

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parties will communicate with the regulatory authorities.

It is important for the parties to define the scope of the cleanup and the cleanup standard. The parties will also want to consider how the remediation will be coordinated with the planned use and development of the property to not only minimize interference, but to also allow for more cost-effective remediation, such as potentially excavating contaminated soil in the course of development.

Parties to cleanup agreements who do not play an active role in the cleanup will want to consider rights for overseeing the work, including input into the preparation of cleanup plans and communications with the regulatory authorities.

With regard to addressing who will pay for the cleanup, consideration should be given for securing assurances that adequate funds will be available, such as by establishing an escrow account or letter of credit. On the other hand, the party responsible for payment will want to consider the criteria for acceptable costs and approving payments. Where the seller retains responsibility for performing the cleanup after the sale, access rights to the property and appropriate insurance and indemnification obligations in favor of the new owner will need to be worked out.

In addition to addressing contamination, purchasers of industrial properties need to evaluate whether industrial equipment that remains on-site should be removed prior to the transfer of ownership. This can help the buyer avoid surprises, save costs, and limit liability arising from off-site disposal of contaminated equipment, hazardous materials, and soil.

Some equipment and improvements may be subject to permit terms that require agency approval for its removal and closure, such as underground storage tanks or hazardous waste management units. Where this is the case, it is important that the responsibility for achieving closure be delineated and factored into the closing schedule or postclosing agreement.

An Early, Proactive Approach As companies grow, expansion and the acquisition of industrial property and new facilities may not only be inevitable but should also certainly be a welcomed opportunity.

Nonetheless, such opportunities should be seized with the right planning and forethought as to environmental risks.

The need to assemble the right team of consultants and counsel, while important in connection with any real property acquisition, is even more critical for the industrial user for a site with a legacy of industrial use. An early proactive approach is an important risk management tool that will not only lessen the chances that the prospective property buyer will unknowingly bite off something it does not want to chew, but will also afford the parties an opportunity to tackle environmental impacts and appropriate sales terms head-on to pave the way for a fair transaction. ■ MARV PEARLSTEIN represents some of the most successful and active real estate development companies and investment firms in their acquisition, development, construction, financing, management, and disposition of real property. Peter Duchesneau’s practice focuses on most aspects of environmental law involving litigation, administrative proceedings, regulatory compliance, and business transactions.

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FACILITY PLANNING

Integrated Project Delivery for Industrial Manufacturing Facilities Enabled by collaboration software, IPD is helping industrial manufacturers reduce risk, achieve predictable results, and maximize the effectiveness of capital funding.

By Brian Gallagher, Director of Marketing, O’Neal, Inc.

W

ith aggressive project schedules becoming the industry norm, efficiency is more important than ever. Recently, many industrial manufacturing companies have changed their approach to project delivery, drawing inspiration from the popularity of lean manufacturing processes.

Integrated project delivery (IPD), in particular, is increasingly common. Under the IPD model, the owner, design team, procurement team, estimators, construction team, suppliers, and others come together early in the project. Everyone is a stakeholder and risks and rewards are shared. Collaboration is emphasized, and goals are developed jointly to optimize project results, minimize risks, reduce waste, and improve efficiency.

Collective incentives maximize value for the owner compared to traditional project delivery, in which each participant focuses exclusively on his/her portion without considering the implications on the whole process. An integrated approach aligns process and facility design from the beginning, providing a single solution for production operations and the facilities and utilities that surround it.

IPD focuses on the final value created for the owner — the finished building — and it engages owners very early in the process.

Owners and industrial manufacturers who get their production facilities up

Integrated engineering-procurement-construction (EPC) is becoming a preferred delivery method for industrial manufacturing facilities.

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and running faster can beat their competition to market. This is particularly important today, when many companies are entering new markets or are looking to build their global footprint.

The integrated approach to project delivery can also enhance construction and operational safety. Construction risks can be minimized by reviewing complex project details and developing processes and procedures before construction starts on site.

The Underpinnings of IPD Underpinning IPD are the technological changes that occurred over the last two decades. Communication has become much easier, not only in terms of conversations, but in terms of collaborating and conveying complex ideas.

Improvements in communication among construction team members are enabled by building information modeling (BIM) and other software. More than simply another desktop software, BIM is a set of processes. Whereas project teams formerly depended on independent, two-dimensional renderings, BIM offers integrated virtual models that incorporate technical, physical, graphic, environmental, and operational data. Collaborative websites and mobile devices allow users increased accessibility and the ability to keep all communications, documents, drawings, and other types of electronic files in one place. Through the use of version control, users are able to view and mark up files online without the need for native software.

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approach to project delivery. They integrate overall project Without these types of collaboration software, the pracplanning, design, procurement, and construction to create tical implementation of IPD would be difficult. Disparate cost-effective capital solutions. Since an EPC firm’s design teams and stakeholders would find it time-consuming and and construction professionals are all in-house, clients can costly to share files, drawings, communication, and workbenefit from a true collaboration of disciplines. Ultimately, flows in a controlled, reliable, and auditable way. Technology the integrated approach offers owners competitive pricing, a has evolved to automate many of the processes involved in fully engineered project, and quality construction.

IPD, enabling project confidence, mitigating risk, and accelerating project delivery.

Beyond its use in IPD, BIM has the potential to add Implementing IPD value for owners by providing models to be used for facility Changes to “business as usual” have happened so fast management and operations. As BIM allows easier storage that, despite the efficiencies and improved outcomes associand transfer of information, it can also support a more seamless transfer from the end of the construction phase into long-term facility management and operation. The technology brings the true benefits of collaboration on board at the onset of a project, where it can pay the Winston-Salem and Forsyth County have a biggest dividends to both the owner Healthcare and Life Science workforce of over and the project team.

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Development of IPD The IPD system was created in the mid-1990s and many of its principles were adapted from lean manufacturing processes. The originators of the process believed that by working as one unit, the owner was better served and the construction project was completed faster, cheaper, and without the typical stress.

Development of the IPD system was especially driven by the construction industry, which had been suffering from a productivity decline for decades.

The IPD approach combats industry problems — such as schedule and budget insufficiencies or adverse relations among involved parties — by allowing informed decision-making early in the project where the most value can be created. Collaboration eliminates design waste and allows data sharing between the design and construction teams, eliminating a significant barrier to increased productivity.

IPD lent itself to the delivery of large capital projects in the industrial and manufacturing sectors, and these sectors are seeing some of the greatest gains from IPD today. While typical IPD projects consist of different companies coming together to form a team, industrial manufacturing owners are increasingly turning to a single integrated company to deliver their projects.

These engineering, procurement, and construction (EPC) firms are capable of offering a collaborative and integrated

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T O TA L P R O J E C T D E L I V E R Y

ENGINEER – PROCURE – CONSTRUCT PLAN Site/Facility Master Planning • Capital Estimate Basis • Process Performance Criteria • Site Adaption Requirements • Project Definition Rating Index

DESIGN Preliminary Building Utility and Infrastructure Design Detail Design/ Engineering Fixed Price for Design

PROCURE Equipment Procurement

CONSTRUCT Process Installation on n Checkout/Startup

PLUS Vendor Coordination

Scope of Work/ Project Execution Plan

COMPLETED PROJECT

• Process Performance Requirements • Building Criteria

ated with IPD, company cultures sometimes have a hard time adapting quickly enough to fully leverage these advantages. There are, however, concrete steps that can be taken to pave the way for a more successful transition to the IPD method.

The first step is placing value on trust. As parties are united through contracts and an equal, shared commitment to the project’s success, trust is a key component in working together successfully and minimizing conflict.

A second element is the desire to consistently analyze projects for opportunities to eliminate waste, identify savings, create efficiencies, and improve the facility’s lifecycle performance. Examining similar projects that could have benefited from the IPD method helps provide the motivation to implement IPD for future projects with similar scopes.

Further, helping internal parties understand the differences between IPD and other delivery methods will help to ease some of the discomfort that occurs when adopting a new process. By understanding participants’ concerns and involving them in discussions, the various parties will better understand how collaboration can be used to improve the delivery of capital projects.

Sometimes the transition to IPD can be undertaken in stages. If a project does not lend itself to full-fledged IPD, or a company is looking to “test the waters,” there are opportunities to integrate elements of IPD without the full delivery method. This type of implementation considers IPD as a philosophy, not a delivery method, and it reflects an owner’s interest in collaboration and its inherent benefits. A crucial consideration in this situation, however, is to carefully define the collaboration so all parties clearly understand the expectations.

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IPD in Practice At the nexus of the IPD process is a project delivery team that engages with the owners early in the planning phase and works with them throughout the capital expansion program. An EPC firm has an integrated staff that includes engineers, estimators, procurement, preconstruction, and construction professionals who can help industrial manufacturers with front-end planning and develop a road map for a successful project. This planning can include help with process design, facility, utilities, site analysis, cost estimating, procurement planning and sourcing, operations, and even maintenance and facilities management planning. The owners always benefit from this planning whether they use internal resources or an EPC firm. The important thing is that a qualified team with relevant expertise is engaged early to establish a viable plan for delivering the project.

The traditional approach to project delivery, with its separate workflows and hierarchies, kept the flow of communication manageable in a pre-electronic work environment. But the days of keeping each aspect of a capital project separated are a thing of the past. IPD is helping industrial manufacturers reduce risk, achieve predictable results, and maximize the effectiveness of capital funding. It can be successfully used for grassroots projects, facility expansions, major upfits, and relocation projects. ■ BRIAN GALLAGHER is director of Marketing for O’Neal, Inc., a Greenville-based integrated engineering and construction firm that specializes in the design and construction of manufacturing, chemical, and pharmaceutical facilities. He can be reached at bgallagher@onealinc.com or 864-298-2037.

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taxes & incentives

Compliance: Where Incentives Are Won or Lost Proper incentives compliance reporting will help a company to ensure that it receives the full value of the incentives it was offered in the application and negotiations process.

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

An Example

As reported in The Oklahoman,1 Oklahoma Governor Mary Fallin signed legislation in April 2015 that requires government evaluation of incentives effectiveness at least once every four years, and it requires future business tax incentives projects to have measurable goals. Oklahoma believes that these measures will evaluate the performance of incentives more accurately and will increase the likelihood of success for Oklahoma’s investment in incentives.

According to a report by Oklahoma Watch,2 only 25 percent of companies approved for the Oklahoma Quality Jobs Program (QJP) According to Oklahoma Watch, the Oklahoma City Air Logistics Complex is the largest recipient completed their incentive compliof Quality Jobs Program payouts at $37 million. Shown here is the F-108 engine maintenance for KC-135 Stratotankers ance. The QJP is a payment of up to 5 percent of payroll for up to 10 years.

An applicant must meet either the county or state avivalries between state governments to attract new jobs erage wage, whichever is lower, and offer basic healthcare and capital investment continue at a steady pace, and to employees. The applicant must also meet a $2.5 million discretionary incentives remain a primary tool used threshold of new payroll within three years. The compliby state and local governments to attract business investance reporting requires quarterly reports of qualifying ment. However, many states are under increased scrutiny employees and the amount of payroll paid. The majority of regarding their handling of the discretionary incentives proapproved companies that did not receive the QJP either had cess; as a result, there have been increasing calls for greater their contracts terminated or voluntarily withdrew from the government transparency and consistency in the handling program. of incentives programs.

Many factors may contribute to a company’s decision This assessment extends through the application, apto discontinue their participation in an incentive program. proval, and agreement phases, as well as through reviews of Non-performance during the compliance period is certainly compliance reporting, internal upward reporting to senior one of the reasons why so many companies fail to receive government officials, and the clawback of incentives that the benefit. Companies pursuing and accepting incentives are in default. This scrutiny is leading to a trend of more program benefits must thoroughly understand the incentives stringent procedures of state and local incentives programs, commitments and diligently manage their responsibilities requiring incentive recipients to put forth a greater effort to and potential liabilities under incentive programs to ensure monitor their progress to meet incentives commitments and they receive the full benefit. to satisfy compliance requirements.

R

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Clearly Define the Project Plato once said, “The beginning is the most important part of the work.” While many factors play into decisions that impact incentive commitments, a clearly defined project profile at the onset of a project lays the foundation for not only developing the negotiation strategy, but also augmenting the potential to strategically maximize the incentive value over the incentives term with a plan and process for reaching an achievable and successful end result.

Incentives compliance validates incentives commitments agreed upon during the negotiation process. Ideally, a detailed project profile that accurately defines the specific project characteristics — such as the locations under consideration, capital investment breakdown of asset investments and costs, number of existing full-time employees associated with the project, projections of new full-time jobs to be created as a result of the project, wages of employees, and any other unique project-related facts — will lead to project results that align with earlier profile details.

Incentives compliance periods may total 10 to 15 years.

For instance, New Jersey’s Grow New Jersey program is a maximum 10-year incentive with a 15-year compliance period. As a result, several different report preparers may participate in annual compliance reporting over the full compliance period, so the project profile becomes a resource for each preparer to understand the company’s project details and expectations at the time the incentives were secured.

Know the Requirements With the project fully defined, yet prior to applying for incentives and entering into incentives agreements with state or local government agencies that bind a company to incentives commitments, companies would benefit by conducting a detailed review of the requirements surrounding the incentives programs. This includes eligibility requirements, program limitations, and reporting requirements to ensure their project profile aligns with incentives qualifications and commitments. The term of the incentives commitment is another important consideration. Will the company’s use of the facility and incentives commitments outlast the compliance period?

In addition, it is important to develop a project file that includes all project-related documents, including: • Capital investment budgets; • Employee detail; • Training budgets; • Incentives research including statutory provisions; • Incentives program guidelines, incentives offer letters, and submitted applications; • Application support detail, approval letter(s) and incentives agreements/contracts; and • Real estate lease or sale contract.

All of these documents become reference material during future compliance reporting.

Create a Timeline for Reporting A significant component of a compliance plan is a calendar of incentives reporting due dates. The calendar will hold

28

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the due dates for each incentives report submission and allow the administrator to create a timeline for data collection and review, identify and rectify any discrepancies, complete the report, and allow time for senior officers to review and certify the findings. Any timing misunderstandings in the process of data collection and dissemination may jeopardize meeting the compliance reporting deadlines.

With a timeline in place, the focus should turn to the collection of project-related data that satisfies the requirements for the compliance report. Information requests should be in the same format as governing agency formats to minimize data manipulation and potential for errors. Identify in advance the company person managing the data, and build into the calendar the time needed to collect the requested data.

Unforeseen Circumstances What happens when the data does not meet the commitment? Assessing risks tied to an incentives commitment is an important consideration for any company. Unforeseen circumstances may arise over time that impact the ability to satisfy an incentives commitment, including: • Merger or acquisition; • Sale of a division or subsidiary; • Change in C-class leadership; • Operational change; • Re-organization; • Economic conditions; • Natural or man-made disaster; and • Inaccurate project data at application These situations impact job counts or capital investment projections and lead to non-compliance of incentives commitments. Companies may control their incentives destiny better by visiting project-related data tied to incentives commitments periodically throughout each year to ensure the company is on-track with its incentives commitments, and especially when any of the events above are planned.

Government agencies administering incentives programs have greater flexibility in handling some compliance matters versus others. An open, communicative approach with government officials is the best practice when project data indicates a shortfall in satisfying a commitment. Solutions for non-compliance may include a pause in the incentives payments until compliance is restored, a re-grading of the incentives to a lower amount, or a partial repayment of the incentives received.

Understand the Use of Personal Data and Privacy Laws Compliance reporting typically includes the submission of personal identifiable information (PII) such as employee social security numbers, partial or full employee home addresses, and employee salary information. Incentives recipients should ensure privacy laws and company confidentiality policies and safeguards to protect confidential company information throughout every step of the compliance process. In addition, Continued on page 87 800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

location analysis

Call Centers Increasingly Returning Home Call centers are coming back to America, and flyover country is proving to be the biggest beneficiary in new jobs and overall boosts to local economies.

By Dale Buss

Reshoring Trend

A

s major U.S.-based operators of call and contact centers increasingly sour on relying on foreign voices to deal with American customers, they are reshoring some of their work to the United States. At the same time, as expansion needs arise, the industry now more often is turning first to the possibility of domestic sites rather than canvassing locales abroad.

In the process, the Southwest, Southeast, and Midwest have gained the most new facilities and jobs, as call center operators gravitate toward major cities in the Heartland where workers and real estate are plentiful and labor rates are reasonable. Texas, Kansas, Michigan, and Ohio have become major winners. Meanwhile, both coasts increasingly are losing out in this particular economic development derby.

Otherwise desirable markets on the East and West coasts are already saturated with contact centers, and competitively priced and adequate workers aren’t available — while both real estate and labor are available at more reasonable costs in the Midwest and South, and those regions enjoy certain productivity advantages.

An estimated five million Americans now are employed in about 66,000 contact centers, which typically provide online help in various forms as well as the telephone assistance that gave rise to the industry. Many companies staff contact centers for their own brands, but others outsource the functions to a handful of huge contractors.

For decades, these jobs streamed abroad to the Philippines, India, Mexico, Bulgaria, and other countries where English was dominant or prominent, low labor costs beckoned, and telecommunications technology could make the connections seamless. But in the last few years, this success formula began falling apart. Labor-cost differentials dwindled as workers in these developing markets pressed to join the middle class, and as the Great Recession and endemic underemployment made U.S. workers more affordable.

“Throw in the highly improved economy in the United States with minimal to no wage inflation in call center wages, and it makes this country look very opportunistic for expansion,” says King White, CEO of Site Selection Group, based in Dallas.

Another factor has been the surge in merger and acquisition activity in the United States, involving many companies that rely on contact centers, says Raleen Gagnon, director of market intelligence for ManpowerGroup

Solutions, a unit of the Milwaukeebased staffing solutions giant that recently studied reshoring trends related to call center investments in the United States and advises companies that are establishing new facilities. She explains, “They have a lot of redundancy in their real estate assets, so now is the time to consolidate” contact center operations, often in a new place.

Perhaps most important, American customers tired of talking with foreigners who could, strictly speaking, converse in English, but where communication was lost because of their accents and because they couldn’t create the cultural understanding that so often is necessary even for mainly technical conversations.

“Some of our key customers have said they want to bring work back to the States, and we help them with that,” notes Scott Wilson, senior vice president of shared services for Alorica, an Irvine, Calif.-based operator of outsourced business services including contact centers. “Maybe five years ago, we helped some move that same business offshore.”

Labor, Real Estate, and Incentives When companies want to return, expand or establish contact centers in the United States these days, they typically are looking for sites where they can hire 300 to 500 people, though sometimes they can be looking for 1,000 operators or more. Relocation experts and the companies themselves say primarily they’re seeking three AREA DEVELOPMENT | Q3/2015

29

things: an ample supply of trainable workers to fill those jobs, reasonably priced real estate, and the right incentive packages.

Unlike with heavily industrial facilities such as manufacturing plants and distribution centers, call centers require minimal capital expenditures. So the biggest lure is cash incentives, training grants, and other highly labor-related lures that states and municipalities can offer for the creation of jobs. Typically such incentives amount to $1,000 to $5,000 per job in some markets, usually including “clawbacks” if a given number of jobs don’t actually materialize within a period of years.

At the same time, some local economic development officials hurt their cause in luring contact centers because they require some sort of minimum wage, such as one that matches the county average. “If they do that they could be missing out on a large workforce of potentially thousands of people,” Wilson says. “They’re not getting a look at that business because they’re putting a wage structure in place that is unobtainable, because we’re generally an entry-wage business.”

Costs vs. Supply In terms of labor supply, in their new surge of investing domestically, contact center operators have been favoring urban markets over the mid-sized and small cities that once held allure for them.

“They have to have availability of labor over a sustained period of time,” says Bob Tenzer, senior vice president of Human Resources for C3, a Plantation, Fla.-based call center operator. “Even if you keep your turnover low, the reality is that this is an industry that still has a high percentage of turnover. So you have to have a large enough labor supply to sustain that turnover, which typically means large cities.”

Yet, as ManpowerGroup’s Gagnon notes, labor rates tend to be highest in large cities, and so do other costs such as taxes. Meanwhile, although many small and even rural cities once supported call centers because of low wage rates, site location experts say such places have fallen into disfavor with center operators because they don’t offer big enough labor pools. “Lowest-cost markets won’t be the best, either, because you don’t have enough talent there,” she says.

Call center operators building new U.S. locations are “honing in on more markets with 500,000 plus in population,” notes White of Site Selection Group. “They are after scale and after quality, and higher education levels, and in markets that big they can interview far more applicants and find the candidates who are the right fit.”

Still, in the ideal market, the contact center operator “becomes a fairly major employer in their own market,” Wilson of Alorica says. Thus, as Tenzer of C3 put it, “Medium-sized or smaller markets can work when you’re the biggest name in town. But markets like that have become fewer and far between. There aren’t many markets left where you can be the only game in town.”

Actually, some of the best local markets are cities that may have hosted call centers before operations were moved offshore or were shut down by the Great Recession. “People

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are looking at those markets again,” says Tenzer. “They have trained work forces and operations can be gotten back on track on relatively good terms.”

In any event, the trend toward underemployment of millennials has played into the needs of contact centers for relatively low-priced workers who nevertheless are comfortable with live chatting, email, texting, and other forms of digital contact with a customer base that previously could only be reached by telephone.

“Call centers don’t necessarily need people with years of experience,” Gagnon explains. “They can take advantage of people just coming out of school, and of people who are still in college and need flexible schedules, and then blend in more experienced supervisors. Plus, [millennials] get the technology.”

The Hotspots Texas remains the leader in landing call center jobs in part because its cities offer “very attractive” cash incentives, White says. Rising Western states include Utah and Nevada.

Southeastern hot spots include North Carolina and Georgia.

“The Southwest and Southeast are the hottest markets for big projects, and there is a lot of activity in the Midwest,” says White. “In the Northeast, there is little to no activity, and the West Coast is being hurt because of labor laws.”

Gagnon agrees: “The Midwest has become the best area of opportunity from a competitive perspective, and we don’t see that shifting any time in the near future.”

For example, the Plains States of Kansas, Nebraska, South Dakota, and Iowa, as well as Missouri, have become attractive. In Lawrence, Kansas, for example, USA800 plans to open a 20,000-square-foot multi-channel call center to support a number of customers, investing more than $3.5 million to create 333 new jobs. The Kansas City-based company evaluated a number of midwestern locations but chose nearby Lawrence because the area’s “history in telemarketing gives it a leg-up on call center location competition,” says Bob Marcusse, president and CEO of the Kansas City Area Development Council.

And the industrial Midwest is rising in part because of idle real estate in factory towns in Ohio, Michigan, and elsewhere. Additionally, the very recent decision of Michigan, Indiana, and Wisconsin to provide the “right to work” has helped “ease labor conditions in some of those markets,” White says.

“Michigan has been very aggressive, so there would be a natural tendency for some companies to locate there,” Tenzer explains. Some native employers in Michigan are bulking up in the region, as well. When General Motors decided a few years ago that it would insource its call center operations, for instance, the auto-making giant decided to fashion a new “customer engagement center” with more than 300 jobs on the campus of its Technical Center in Warren, Mich.

The old-fashioned midwestern work ethic also is having an influence on site decisions, in part because many Continued on page 87 800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

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CANADA

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CANADA L ET T ER F R OM THE

MINIS T E R OF INT E R N ATI O N AL TR ADE On behalf of the government of Canada, it gives me great pleasure to welcome readers of the 2015 edition of Location Canada magazine.

With a strong economy and solid business fundamentals, Canada remains one of the best places in the world for international business and foreign direct investment. Canada’s combined federal-provincial corporate income tax rate is among the lowest in the industrialized world. Over the past decade, Canada has continually outperformed most of its G-7 peers in the growth of its economy, employment, and per capita income. Our sound economic policies have drawn high praise from some of the world’s most influential financial organizations. According to KPMG’s 2014 Competitive Alternatives report, overall business costs in Canada are the lowest in the G7, 7.2 percent lower than those in the U.S. Forbes and Bloomberg both rate Canada as the best country in the G-20 to do business, and for the past seven years, the World Economic Forum has rated our banking system as the soundest in the world. We are also among just a handful of nations with a triple-A credit rating. Our government is proud of these accolades, which provide assurance to business investors for the success and security of their investments in Canada.

Canada’s economy is already well integrated into key global economies. Through the North American Free Trade Agreement, we offer businesses

established in Canada preferential access to a North American market of more than 480 million consumers. This number will increase to nearly one billion consumers when the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) enters into force. Additionally, the Canada-Korea Free Trade Agreement (CKFTA), which came into force on January 1, 2015, provides a gateway into the dynamic and fast-growing Asian marketplace. CETA and the CKFTA are major achievements for Canada under our government’s pro-export and pro-investment Global Markets Action Plan (GMAP). We are confident that they will deliver profound benefits to the Canadian economy and to those who invest here.

Investing in Canada clearly makes excellent business sense. We offer a strong, stable financial system; low taxes; one of the highest standards of living in the G-20; a business-friendly environment; world-class infrastructure; easy access to markets; and a workforce that is highly educated, innovative, and fully committed to economic success.

I invite you to learn more about Canada’s worldleading business advantages — and why Canada continues to be a top destination for investment — within these pages and at www.investincanada.com.

The Honourable Ed Fast MINISTER OF INTERNATIONAL TRADE LOCATION CANADA | 2015 C3

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CANADA

THE CANADIAN ADVANTAGE Competitive costs and low taxes help to fuel the diverse economy on display in Canada’s 10 provinces and three territories.

By STEVE STACKHOUSE-KAELBLE

W

hy pick a location in

operations. According to KPMG’s report, in addition to

Canada? There are

federal R&D tax incentives, “most Canadian provinces

numerous factors that

also offer provincial R&D tax incentives at rates that vary

regularly vault the

from 10 to 20 percent, with some of these tax credits being

nation toward the top of

refundable.” Meanwhile, according to KPMG, “Canada

international rankings

ranks first for digital services operations, primarily due

of business-friendly

to significant provincial incentives that provide financial

environments — from

support to video game producers and other digital media

Forbes to Bloomberg and beyond. Right at the top of the list are Canada’s competitive business costs, starting with taxes.

One KPMG report — which added up a range of

industries.”

Labor-related advantages also attract a lot of attention.

Among members of the Organization for Economic

business expenses from statutory labor costs to sales

Cooperation and Development, Canada has the most highly

taxes — lauded Canada’s tax structure as the most

educated workforce. It’s also a very diverse workforce,

business-friendly in the developed world. Tax-related

Mair adds. “Multilingual capabilities are a strong asset in

costs in Canada were 46.4 percent lower than in the United

the major cities in Canada,” he says.

States, according to KPMG’s “Focus on Tax,” which also

And the business environment also smiles upon those

listed Toronto, Vancouver, and Montreal as the most tax-

employers that feel the need to import certain types of

competitive of 51 major international cities.

expertise if necessary, he adds. “One advantage is the easier

That fact comes as a surprise to a lot of people, notes Glenn Mair, director at MMK Consulting Inc. in Vancouver.

ability to bring in talented people from overseas to operate in Canada, compared to the U.S.”

“It’s an advantage that is often not understood or perceived,” he says. “The tendency is to view Canada as being a high-tax jurisdiction, which certainly is not the case.”

Though its tax advantages are not always widely

ONTARIO — AN AUTOMOTIVE POWERHOUSE Growth is in the air in the most populous province, Ontario, home to 13.7 million people. The bullish economic

appreciated, Canada definitely has a reputation for being

outlook produced by the Ontario Chamber of Commerce

technology-friendly, Mair says. “A real strength we see is

cites a variety of positive factors, from growth in the

the support for R&D activities, with permanent R&D credits

neighboring United States to the decline in the value of

both federally and in most provinces.”

Canada’s dollar to falling oil prices (the National Bank of

KPMG certainly noticed, declaring that Canada is best-in-class when it comes to the tax structure for R&D

C6 LOCATION CANADA

Canada earlier this year referred to the decline in oil prices as a “$5 billion tax cut” for the residents of Ontario and

Quebec). The chamber expects economic growth this year to

America, and its R&D operations produce advances in

be up by about 40 percent over 2014 and double what it was

everything from composites to connectivity.

in 2013, and the outlook is just as rosy for 2016.

It’s not just automotive connectivity that’s advancing in

The forecast calls for growth across the province, and

Ontario — the province is home to North America’s second-

across a broad swath of industry sectors. Most types of

largest cluster of information technology. Ontario is a tech

manufacturing, for example, are on the upswing in Ontario,

hub in general, employing nearly half of the nation’s R&D

and agriculture and tourism have strong outlooks as well.

personnel and home to the headquarters of half of Canada’s

Ontario and neighboring Michigan are rivals for the

top 10 corporate R&D spenders.

title of the continent’s leading automotive producer. The

Ontario is Canada’s leader in life sciences. It has a thriving

province’s auto sector includes assembly operations for five

food and beverage manufacturing sector, an aerospace

major auto producers, plus more than 700 parts suppliers.

industry with more than $5 billion in revenues, a significant

In fact, about one in seven Ontario jobs is directly or

mining sector, and one of the continent’s leading financial

indirectly tied to the auto industry. Ontario plants have

sectors, which provides work for some 350,000 people.

turned out about 16 percent of the continent’s vehicles in the past five years, and the auto sector pumped $16 billion into the Ontario economy last year.

QUEBEC — A LIFE SCIENCES & AN AEROSPACE LEADER The second-most-populous province is Quebec, which

Hoping to build on that prominence and further promote Ontario’s auto sector, the province last spring joined forces

8.2 million people call home, according to Statistics Canada.

with the Canadian Automotive Partnership Council and

Like Ontario, it’s a leader in life sciences, with major players

the federal government to create a new subcommittee. The

including nearly a dozen of the world’s most prominent

group will offer strategic advice on boosting investment and

pharmaceutical companies. Needless to say, it’s a hotbed of

ensuring the sector’s long-term success. Already, Ontario’s

research expertise, making it an attractive spot for an R&D

auto plants produce some of the highest-rated cars in North

location.

Percentage of Individuals Aged 25–64 Having Attained Post- Secondary Education – To Top 10 OECD Countries 60

53.0 47.0

50

47.0

44.0

43.0

42.0

41.0

41.0

41.0

%

40

40.0

40.0

30 20 10 0

a

ad

n Ca

l ae Isr

n pa Ja

A US

ea or K S.

UK

rg d d lia ay ra an ou rw t lan l s b o e n Ir N m Fi Au xe Lu

Source: OECD, Education at a Glance, Interim Report, January 2015

LOCATION CANADA | 2015 C7

CANADA O N TA R I O ’ S I N V E S T M E N T- R E A D Y C E R T I F I E D S I T E S Companies are increasingly looking to get their new facilities up and running as quickly as possible in order to gain a competitive edge.

With that in mind, Ontario’s Investment Ready: Certified Site Program (InvestInOntario.com/CertifiedSite), the first province-wide program of its kind in Canada, was launched in December 2013.

Since the program’s launch, seven sites have been certified. The criteria were designed in partnership with Deloitte Consulting Canada to ensure they meet the standard information requirements of site selectors and companies looking for their next strategic location. Each certified site undergoes a comprehensive review process with a committee comprising government departments responsible for land use planning, development, and environmental oversight in the province.

Certified site in Johnstown Industrial Park, Edwardsburgh Cardinal, Eastern Ontario, Canada

The certified sites must be a minimum of 10 acres in size; are designated and zoned to permit a range of industrial uses; fully serviced (electricity, gas, water, wastewater, telecommunications, at or 100 meters to the property line); free of major development constraints, including restrictions on title, identified flood zones, and the presence of significant natural environmental features. A certain level of due diligence has also been completed at the certified sites, including environmental, archaeological, species at risk, and heritage/cultural assessments.

Providing proactive information, removing unknowns, and reducing development constraints for industrial land simplifies the site selection process for potential investors and minimizes risk for unforeseen delays. According to Brad Duguid, Ontario Minister of Economic Development, Employment and Infrastructure, “Ontario has ranked number one in North America for foreign capital investment for two years in a row1, highlighting the fact that businesses are choosing Ontario as a destination to grow and expand their business. Businesses want to minimize uncertainty, and by providing information such as zoning, ownership, transportation access, utilities servicing, and details of completed assessments, we can help investors make informed decisions.”

1

http://www.ftbsites.ft.com/forms/fDi/report2015/files/The-fDi-Report-2015.pdf

The province’s aerospace sector accounts for nearly half

accounting for roughly $6 billion in annual exports each

of Canada’s aerospace sales, and Montreal is considered one

year. And the province’s technology sectors are respected,

of the world’s top three aerospace centers. Local, provincial,

active, and growing — microelectronics expertise is

and federal governments aim to keep it that way — recent

building, information and communications technologies

evidence of that included a spring 2015 announcement of

provide work for 176,000 people, and the province has a

$11 million in funding for aerospace projects at more than a

growing multimedia sector. Those into Wii gaming have

dozen local companies. The funding is expected to generate

Quebec’s workforce to thank for such titles as “Assassin’s

more than $78 million in investment. Ground transportation

Creed” and “Prince of Persia.”

also is highly active in Quebec, with more than 600 companies working on advancements in areas ranging from commercial transportation to electric buses.

Food and agribusiness operations are strong in Quebec,

C8 LOCATION CANADA

BRITISH COLUMBIA — NATURAL RESOURCES ARE KEY Across Western Canada, natural resources are a key

The Canadian Advantage

to the economy, which means the global collapse in oil

turnaround from the growth of 4 percent or more that it had

prices has not been welcome news. Be that as it may, the

been enjoying in recent years. The government’s forecasters

Conference Board of Canada reports that British Columbia

do expect some GDP growth for 2015, but just half a

could still see some of the country’s most robust growth this

percent. Subsequent years should be brighter, at least if oil

year, thanks in part to the diversity of its economy. Factors

gradually recovers, as many economists predict.

include healthy consumer confidence, U.S. growth, and a

Though oil is expected to remain a drag on Alberta’s

solid housing market.

economy for at least a couple of years, all is not lost. U.S.

British Columbia has a long history in forestry, mining,

economic growth is expected to boost the province’s

and fishing. Its liquefied natural gas sector has been riding a

non-energy industries, including agriculture, forestry,

growth wave, and though it has seen its struggles, there are

and manufacturing. For example, plastic and chemical

still growth prospects for the export of LNG, including to

manufacturing has been healthy, with strong levels of

expanding Asian markets. The prospects for exports to Asia

investment and increased exports on continued boosts in

go far beyond LNG, in fact. Stronger ties with Japan, China,

industrial capacity. And even as the petroleum outlook

Korea, and India have helped British Columbia strengthen

became increasingly glum last year, Calgary enjoyed such

its status as a global transportation and trade hub for all

positive headlines as the 200-job opening of a Sears Canada

kinds of goods and people from across North America.

fulfillment center and plans for a Compass Compression

Home to 4.6 million, British Columbia is a forward-

fabrication facility.

thinking place, particularly in and around Vancouver.

Opportunities are growing in such areas as green technology, digital media, and life sciences. It’s one of the

SMART TALENT

world’s top video gaming industry hubs, and more than 1,100 digital media companies are innovating not just in gaming but also in digital film, television, and interactive advertising. Among recent highlights, Sony Pictures Imageworks officially opened its new headquarters in

Nova Scotia produces more post secondary graduates per capita than any other province with 1 in 4 residents having a degree.

downtown Vancouver this past summer. Also new to the picture is the Microsoft Canada Excellence Centre, a training and development operation.

The many efforts aimed at growing the area’s

SMARTER LOCATION

prominence in green technology include the Greenest City Action Plan, with a goal of making Vancouver the world’s greenest city and boosting its reputation for green enterprise. There were roughly 20,000 “green jobs” in 2013,

We’re the gateway to North America.

and the effort is expected to boost that past 30,000 by 2020.

ALBERTA — OIL-DEPENDENT This province, home to 4.1 million people, is particularly oil-dependent, and as such has been particularly hard-hit

Make a smart business choice.

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by the fall in oil prices — they’ve dropped by more than 50 percent since mid-2014, according to the provincial government. The Conference Board of Canada suggested Alberta’s economy could shrink in 2015, quite the

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7:14 PM

CANADA MANITOBA — ECONOMICALLY DIVERSE A variety of researchers examining Manitoba have all reached similar conclusions — this province of 1.3 million

fuel clusters active in such things as agriculture, life sciences, and mining technology, along with information technology.

people benefits from economic diversity. That’s one reason it has fared so well in Conference Board of Canada forecasts, which indicate that Manitoba will exhibit some of Canada’s most robust growth in 2015 and 2016. The organization

ATLANTIC PROVINCES — NATURAL RESOURCEBASED ECONOMIES The four provinces along the Atlantic range in

expects Winnipeg to have the strongest growth of any city

population size from the 942,700 residents of Nova Scotia

in the western half of Canada, other than Vancouver.

to 146,300 on Prince Edward Island. Some 753,900 call

That economic diversity shows up in the list of

New Brunswick home, while 527,000 reside at addresses

prominent industry sectors, including food processing,

in Newfoundland and Labrador. A common denominator

agricultural technology, heavy vehicle manufacturing such

of these provinces is a strong reliance on natural resources,

as buses, aerospace, green technologies, information and

including oil and forest products. Food processing is big,

communications technologies, mining and petroleum,

as well, from seafood to Prince Edward Island potatoes.

and financial services. The province has enjoyed healthy

In the latest Conference Board forecast, Newfoundland

investment, according to the Manitoba Bureau of Statistics,

and Labrador was one of just two provinces expecting an

even during the most recent economic downturn.

economic decline in 2015.

That holds true across the private sector, including in manufacturing.

Keeping the winning streak alive is the goal of a $60

Among the manifestations of the area’s determination to foster growth and build upon its business-friendly environment are the Department of Business and Office of

million National Research Council facility announced

Regulatory and Service Effectiveness created recently by the

recently in Winnipeg. It’s a “Factory of the Future”

Nova Scotia government. The aim is to align public, private,

facility intended to spark development and testing of new

and social enterprise sectors across neighboring regions,

manufacturing technologies and processes.

and promote a common agenda of economic growth.

Meanwhile, there are ongoing efforts to boost existing

SASKATCHEWAN — THE “BREAD BASKET” Home to 1.1 million, Saskatchewan is sometimes referred to as the “Bread Basket of Canada” or even the “Bread

industries — for example, the New Brunswick and federal governments earlier this year announced new financial support to strengthen the oyster industry.

Basket of the World,” which offers a strong clue to the importance of agriculture in its economy. In fact, more than 40 percent of Canada’s farmland lies within Saskatchewan,

THE THREE TERRITORIES — PRISTINE BEAUTY Among the largest but least populated parts of Canada

and the province typically grows half of the country’s

are the three territories stretching to the north of the 60th

wheat, among other crops. Livestock farming is prominent

parallel toward the Arctic Circle. About 43,600 reside in

as well, and as one would expect, the province relies on a

the Northwest Territories, and given that its economy is

variety of agricultural support industries.

tied strongly to such resources as gold, diamonds, oil, and

Minerals and other resources also play a role in this

natural gas, it’s not surprising that it has had Canada’s

province’s economic picture. It’s a world leader in the

highest per-person gross domestic product. The resource-

export of potash and uranium, and oil production is

focused picture is similar in the Yukon and Nunavut

significant as well. Meanwhile, there are significant

territories, each of which is home to between 36,000 and

initiatives that aim to diversify the economy, including

37,000 people. And the territories also benefit from tourist

Saskatchewan Opportunities Corp.’s support of the

dollars, drawn by the pristine beauty across the northern

technology sector. Its Innovation Place technology parks

portion of Canada. ••

C10 LOCATION CANADA

CANADA

FDI IN CANADA CONTINUES TO ADVANCE Federal and provincial tax cuts and new investment programs have proven a strong draw for foreign investors in machinery, equipment, and facilities in Canada.

By HOWARD SILVERMAN, President & CEO; and MARC BEAUCHAMP, Vice President & Partner; The CAI Global Group

I

n 2015, Canada remains an attractive FDI destination with tax cuts on an already highly competitive corporate rate and with new investment programs in its largest provinces. Canada continues to feature an advantageous environment for research and development by fostering links between subsidiaries, educational institutions, and clusters. With the potential implementation of trade agreements such as the Comprehensive Economic and Trade Agreement (CETA) with the European Union or the TransPacific Partnership (TPP) with Asia, Canada will position itself even better for FDI as a market neighboring the United States with export, logistics, and supply chain integration potential. Also in recent months, updates to corporate tax rates and investment programs have been presented following the latest budgets at the federal level and in the largest provinces, Ontario, Quebec, and British Columbia (BC).

The federal government’s 2015–2016 budget delivers tax cuts for corporate and small business income rates. According to numbers for 2015, Canada ranks as the

second-lowest corporate income tax rate for OECD members, behind only Switzerland, at 15 percent. In the 2015–2016 budget, the federal small business rate decreased from 13.12 percent to 11 percent. Moreover, Canada ranks first in the G-7 countries for ease of tax payment and ninth in the world, according to a joint PwC-World Bank study.

Additionally, starting in 2017, the government will implement the seven-year break-even Employment Insurance (EI) premium rate-setting mechanism,

LOCATION CANADA | 2015 C11

CANADA which will ensure that EI premiums are no higher than needed to pay for the EI program over time.

Under the proposal, any cumulative surplus recorded in the EI Operating Account will be returned to employers and employees through lower EI premium rates once the new mechanism takes effect.

TRADE AGREEMENTS AND TARIFF-FREE ZONES Once CETA comes into force, foreign investors in Canada will have guaranteed preferential access to both the European and North American markets; this represents nearly 980 million consumers with a combined GDP of US$37 trillion, or nearly one half of the world’s output of goods and services.

Canada’s major free-trade negotiations, with the Trans-Pacific Partnership and bilaterally with India and Japan, mean further enhanced market access is on the way for firms investing in Canada. Through tax and tariff export-related programs, Canada provides benefits to businesses comparable to those found in foreign trade zones (FTZ) in other countries, while having the advantages of not being site-specific.

In 2015, Canada became the first country in the G-20 to offer a tariff-free zone for industrial manufacturers. Canada’s initiative applies across the entire country, making Canada one large FTZ for firms importing equipment, machinery, and

manufacturing inputs. This allows importing of goods necessary for added productivity and free of duty charges, further contributing to lowering production costs for businesses.

The implementation of the FTZ as of January 1st offers corporations the ability to establish their facilities anywhere across Canada, not only in specific FTZs as in other countries. This creates an undeniable advantage for Canadian site location for FDI. A MANUFACTURING INVESTMENT DESTINATION Canada’s combined federal and provincial income tax rates are lower than in the U.S. And, along with zero percent tariffs on equipment and machinery as of 2015 with the implementation of the national tariff-free zone, Canada has established its leadership as an investment destination for the manufacturing industries.

In order to support continued investment in machinery and equipment and help bolster productivity, the government of Canada’s Economic Action Plan 2015 proposes to provide manufacturers with an accelerated capital cost allowance (CCA) at a rate of 50 percent on a declining-balance basis for eligible assets acquired after 2015 and before 2026.

Providing the new incentive for this extended period of time will help to provide businesses with planning certainty for larger projects, where the investment may not be completed until several years after the

G-7 RANKINGS ECONOMY

RANK

TAX PAYMENTS

TIME TO COMPLY (HRS)

TTR (%)

Canada

9

8

131

21.0

UK

16

8

110

33.7

U.S.

47

11

175

43.8

Germany y

68

9

218

48.8

France

95

8

137

66.6

Japan p

122

14

330

51.3

Italy y

141

15

269

65.4

Source: PwC — Canada tops all G-7 nations in ease of paying corporate taxes, Jan. 20, 2015

C12 LOCATION CANADA

FDI in Canada Continues To Advance

investment decision is made, and for longer-term investments with multiple phases.

By allowing a substantially faster write-off of eligible investments than the usual 30 percent declining-balance rate, this measure will defer taxes and allow businesses to recover the cost of capital assets more quickly. After four taxation years, more than 90 percent of the cost of the asset will have been deducted. In the absence of the accelerated CCA, lower annual deductions would have meant that it would take seven taxation years to deduct 90 percent of the cost of the asset. The deferral of tax associated with this new accelerated CCA is expected to reduce federal taxes for manufacturers by $1.1 billion over the period from 2016–17 to 2019–20.

The most recent federal budget also proposes to provide $100 million over five years, starting in

2015–16, for the creation of the Automotive Supplier Innovation Program to help Canadian automotive suppliers gain a competitive edge through new innovative products and processes. Of this amount, $50 million over three years, starting in 2015–16, will be reallocated from the Automotive Innovation Fund, and new resources of $50 million over two years will be provided starting in 2018–19. The program will help research and development projects to become commercially viable by supporting product development and technology demonstration on a cost-shared basis with participating firms.

The Automotive Supplier Innovation Program will complement existing initiatives supporting the automotive sector, such as the Automotive Innovation Fund, by strengthening Canada’s parts supply base and creating a favorable environment for automotive

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LOCATION CANADA | 2015 C13

CANADA FEDERAL AND PROVINCIAL TERRITORIAL RATES FOR INCOME EARNED BY A GENERAL CORPORATION (EFFECTIVE JAN. 1, 2015 AND 2016) PROVINCIAL RATES

M&P INCOME

ACTIVE BUSINESS INCOME

INVESTMENT INCOME

British Columbia

26.0%

26.0%

26.0%

Alberta

25.0%

25.0%

25.0%

Saskatchewan

25.0%

27.0%

27.0%

Manitoba

27.0%

27.0%

27.0%

Ontario

25.0%

26.5%

26.5%

Quebec

26.9%

26.9%

26.9%

New Brunswick

27.0%

27.0%

27.0%

Nova Scotia

31.0%

31.0%

31.0%

Prince Edward Island

31.0%

31.0%

31.0%

Newfoundland and Labrador

20.0%

29.0%

29.0%

Source: KPMG, Income Tax Rates for General Corporations, 2015

research and development, while providing firms with new opportunities to enter global supply chains.

PROVINCIAL STRATEGIES The three largest provinces — Ontario, Quebec, and British Columbia — account for an important part of FDI into Canada. They offer many new investment perspectives for the coming years with updated or recently launched strategies for FDI attraction including the following: Ontario — Ontario’s Jobs and Prosperity Fund was launched in 2015. It is a 10-year, $2.7 billion fund to support a dynamic and innovative business climate, and improve productivity and market access for Ontario companies and sectors. The Jobs and Prosperity Fund includes three streams: • New Economy Stream is available for projects with at least $10 million in eligible project costs. It is aimed at projects in Ontario’s key sectors, including advanced manufacturing, life sciences, forestry, and information and communications technologies.

• Food and Beverage Growth Fund is available for food, beverage, and bioproduct processing projects

C14 LOCATION CANADA

across the province with more than $5 million in eligible costs.

• Strategic Partnerships Stream provides funding for industry partners that develop enabling technologies for Ontario’s priority sectors. This stream is available for partnerships with at least $10 million in eligible costs. It focuses on technologies with the potential to transform multiple industries across Ontario.

Quebec — Two new investment plans were launched by the government of Quebec in 2015: The Stratégie maritime (or Maritime Strategy) is a project to develop the St-Lawrence River’s potential in Quebec with investments in logistics, the maritime industry, and tourism, while the Plan Nord seeks to develop northern Quebec and its abundant natural resources.

In the next five years, Quebec is to invest $1.5 billion in the Maritime Strategy and $1.3 billion in the Plan Nord strategy.

Quebec has also made changes to its business tax rate for corporations and small businesses in its latest budget. The general tax rate will be gradually reduced by 0.4 percentage points from 2017 to 2020. These rate

FDI in Canada Continues To Advance

reductions will come into force on January 1 of each of these years.

new mine allowance by four years to include eligible expenditures incurred before 2020.

British Columbia — The province’s 2015–2016 budget does not change corporate tax rates; however, certain business tax credits were extended or enhanced, including entertainment and media industry tax incentives, training tax credits, the small business venture capital tax credit, and the BC Mining FlowThrough Share Tax Credit. Additional incentives have been created or extended for the aerospace, agriculture, and maritime industries.

The budget provides a one-year increase of $3 million to the small business venture capital tax credit program. This will allow for up to $10 million in additional equity financing for qualifying new corporations in 2015.

The British Columbia budget also extends the new mine allowance for four years to Dec. 31, 2019.

The new mine allowance is intended to encourage investment and new mine development in BC, and permits an operator to claim an additional allowance equal to one third of the capital cost of a new mine or an expansion of an existing mine commencing production in reasonable commercial quantities after 1994 and before 2016. The budget also extends the

CANADA, A LEADER IN MANUFACTURING FDI FOR YEARS TO COME The level of foreign direct investment in Canada advanced by $40.3 billion to $732.3 billion in 2014.

U.S. direct investors increased their holdings by $19.5 billion to $361.4 billion, accounting for almost half of all direct investment in Canada. Furthermore, the foreign direct investment position in the Canadian manufacturing sector was up from $11.2 billion to $215.7 billion in 2014.

Moreover, in the last year, the value of the Canadian dollar has gone from 0.93 USD to 0.79 USD as of July 10th, representing a 15 percent drop. This has made Canada more attractive for multinationals, as some manufacturing costs have reduced proportionately. Attracted by its advantages in fiscal policy, taxation, exchange rates, as well as availability of skilled workers among other factors, investors have viewed Canada as an optimal choice for industrial FDI in equipment, machinery, and structures. Now, with a lower currency value and new investment programs, Canada is bound to continue as a leader in FDI for years to come. ••

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LOCATION CANADA | 2015 C15

CANADA

CANADA IS READY TO HELP YOUR COMPANY FEED THE WORLD International agri-businesses looking for a talented labor pool, market reach, incentives for R&D, and other tax credits are locating and expanding in Canada.

By BRIAN MORRIS, Chair, Ontario Food Cluster; Business Development Consultant, City of Hamilton, Ontario

F

rom nutritional shakes to breads to fresh pasta and pizza and organics, international companies are showing a healthy appetite for investments in Canada’s agriculture and agri-food sector.

They are attracted by a wide variety of agricultural products, a robust inspection regime that meets or exceeds most global standards, currency valued more than 20 percent below the U.S. dollar, a strong talent base, and forward-thinking provincial and federal governments.

Due to the North American Free Trade Agreement (NAFTA), Canada enjoys access to over 460 million consumers and a combined GDP of $18.7 trillion across Canada, Mexico, and the U.S. When the historic Canada and European Union Comprehensive Economic and Trade Agreement (CETA) comes into force in 2016, almost 94 percent of EU agricultural tariff lines will be duty-free for Canadian agri-food companies.

In an era of climate change and drought that is dramatically impacting many agricultural regions of the world, it is well worth noting that Canada contains the world’s largest renewable fresh water resources to support its nearly 70 million hectares (170 Canada Bread Company facility

C16 LOCATION CANADA

million acres) of farmland.

Additionally, successive reductions in the U.S. cattle herd over a prolonged period due to drought and high feed prices resulted in extremely tight supplies and record prices in 2014. Hog prices also increased significantly as the spread of Porcine Epidemic Diarrhea virus (PEDv) led to a high level of mortality in piglets and reduced U.S. supplies by around 2 percent.

Canadian livestock producers benefitted from these conditions. Total Canadian livestock receipts increased by 19 percent in 2014 to reach a record $25.5 billion, largely due to the price impact of declining herds and low slaughter animal availability. Prices for slaughter animals increased by 25–30 percent.

In tandem with a declining cost of feed grains, this translated into sharply higher average incomes for Canadian hog and cattle farms.1

BY THE NUMBERS By the numbers, the Canadian agriculture and agrifood sector:2 • Generates $106.9 billion, accounting for 6.7 percent of Canada’s GDP • Provides one in eight jobs in Canada, employing over 2.2 million people • Is the largest of all manufacturing industries in Canada, accounting for 16 percent of the total manufacturing sector’s GDP in 2013, and 16.7 percent of all manufacturing jobs • Is focused on U.S. exports, with the United States accounting for 50.8 percent of total exports; China accounting for 11.2 percent; and Japan, the EU, and Mexico accounting for another 17 percent combined • Is seeing strong export growth, with an increase of 10.8 percent in 2013 to $23.4 billion to the U.S., while exports to non-U.S. markets grew by 6 percent to $22.7 billion • Enjoys government R&D investment of $643 million, and a further $130 million from the private sector • Is supported by Agriculture and Agri-Food Canada’s “Growing Forward 2” program to enhance the competitiveness of agri-food sectors (A federalprovincial-territorial initiative, the program will provide $3 billion of funding between 2013 to 2018.)

• Is on a sustained growth trajectory, with the value of food processing shipments more than doubling between 1992 and 2013 to $98.8 billion CANADA’S FOOD INDUSTRY DRAWS FDI Ontario offers Canada’s largest concentration of agri-food companies — 3,200 strong — that choose to invest in what’s called the “Ontario Food Cluster” for its easy proximity to the U.S. market and unmatched diversity of 200 agricultural commodities from 57,211 farms, including 669 certified organic farms.

Those farms are bolstered by a provincial talent base of 740,000 researchers, industry employees, and

agricultural innovators who have built a reputation for reliable, sustainable sources of raw materials, state of-the-art automated food-processing methods, and food safety standards.

Five recent foreign direct investments in Ontario underline Canada’s appeal for international agri-food companies: In 2013, Canada Bread Company Ltd. sold Olivieri Foods, its fresh pasta and sauce business, to Spain’s Ebro Foods in a $120 million deal. The next year another foreign company came shopping for the Canada Bread Company, with its sale to Mexico-based Grupo Bimbo for a blockbuster valuation of $1.8 billion.

Also in 2014, Germany’s Dr. Oetker GmbH opened a $135 million frozen pizza plant, warehouse, and distribution center in London, Ontario3 — its first in North America — capable of producing 27 million pizzas per year. Dr. Oetker then promptly purchased Canada’s McCain Foods’ pizza business to further its strategic goal of establishing itself as a leader in Canada as well as expanding its position in the U.S. Northeast, with the goal of manufacturing 50 million4 pizzas per year.5 Not to be outdone by Dr. Oetker, Aryzta AG, a Swiss-based global food business, purchased Oakrun Bakery, and its 237,000-square-foot plant that produces fresh and frozen products, for $340 million.6 Such investments are happening elsewhere across Canada. After its investments in Ontario, Grupo Bimbo purchased the iconic Canadian snack cake brands Jos. Louis and May West, along with the bakery division of Quebec-based Saputo Inc. for $120 million in late 2014.7 Then in June of this year, America’s WhiteWave Foods Co. acquired Vega, a British-Columbia-based maker of plant-based nutrition products like powdered shakes and snack bars, for $550 million.8 R&D TALENT AND INNOVATIONS International agri-businesses appreciate the

LOCATION CANADA | 2015 C17

CANADA Canadian talent story. Canada invests more in higher education R&D as a share of the economy than does any other G7 country, and it offers one of most favorable tax treatments for R&D among the G7. The Canadian system of tax credits and accelerated tax deductions covers eligible costs including agri-food business salaries, overhead, capital equipment, and materials. Canadian tax credits can reduce the aftertax cost of $100 in R&D to less than $41.9 As an example, the Ontario Food Cluster is the nexus for strong talent links between industry and public sector R&D via networks and organizations including the Advanced Foods and Materials Network (AFMNet); Soy 20/20; Ontario AgriFood Technologies (OAFT); Program in Food Safety, Nutrition and Regulatory Affairs; and the Guelph Food Technology Centre. Each year the center consults with over 1,500 businesses in the food and beverage industry, trains more than 3,000 professionals, and provides services that reach across the globe to 26 countries in eight languages.

The University of Guelph is a Canadian agrifood innovation powerhouse. U.S. News and World Report ranks Guelph 12th in the world, fifth in North America, and first in Canada in its survey of the Best Global Universities for Agricultural Sciences, based on the respective reputations and research in the field University of Guelph science complex

C18 LOCATION CANADA

including horticulture, food science and nutrition, dairy science, and agronomy. The University of Guelph has produced a host of products and technologies including:10 • Omega-3 fortified eggs, milk, and cheese • Nearly 100 varieties of soybeans, many destined for Asian markets for tofu, natto, and soymilk, based on numerous partnerships with companies and organizations • Cattle vaccine against shipping fever Bovine Respiratory Disease (BRD) complex, recently licensed to Boehringer Ingelheim Vetmedica Inc. • Human immunotherapies against Clostridium difficile (C. diff) licensed to Stellar Biotechnology • The world’s first edible, organic, monodisperse nanomaterial derived from corn with applications in personal care and nutraceuticals • Mars Horsecare Perform’N Win electrolyte drink for racehorses • Yukon Gold potatoes OTHER ADVANTAGES While Canada has a reputation for vast expanses, it’s a little-known fact that most Canadian cities are within a two-hour or less drive from the U.S. border.

Recent multibillion-dollar investments in port, rail, road, and air transport offer supply-chain efficiencies.

Canada’s welcoming approach to international companies is reinforced by the fact that one in five Canadians has a mother tongue other than English or French; Asian and European languages are spoken extensively. And Canada leads the G7 for the administration of justice and offers equal opportunities for all individuals.

Given that the agriculture and agri-food sectors generate $106.9 billion or 6.7 percent of the national GDP and provide one in eight jobs in Canada, that welcoming approach is particularly responsive to business expansion in these sectors. Canada offers an uncapped number of work permits available to foreign workers, a fast and straightforward process for intra-company transfers, and special programs to help recruit required R&D talent.

Are you hungry yet?

Canada’s ready to help your company feed the world. •• (Endnotes) 1 2015 Canadian Agricultural Outlook, Agriculture and Agri-Food Canada 2 An Overview of the Canadian Agriculture and Agri-Food System 2015 3 http://www.theglobeandmail.com/report-on-business/droetker-builds-ontario-plant/article18748722/ 4 http://www.lfpress.com/2014/05/20/how-about-50-millionpizza-pies-a-year 5 http://metronews.ca/news/london/1131720/dr-oetker-sayslondon-plant-is-key-after-mccain-foods-takeover/ 6 http://www.thespec.com/news-story/4910290-oakrunacquired-by-swiss-food-giant/ 7 http://business.financialpost.com/investing/saputos-snackcake-business-being-bought-up-by-mexican-ownedgrupo-bimbo?__lsa=e873-96e8 8 http://www.foodprocessing.com/industrynews/2015/ whitewave-to-acquire-vega-maker-of-powdered-shakesand-snack-bars/ 9 http://www.ontariofoodcluster.com/why-ontario/ 10 http://guelph.ca/wp-content/uploads/Agri_Food_Value_ Prop_Final.pdf

78% of global CEOs rank human capital as the #1 priority*

The competition for highly-skilled, motivated people is on.

That puts your business in a human race. And Mississauga, Ontario – Canada, is where you win it. Talent, networks, a world of cultures, easy and fast access to major markets.

Right here. What else do you need to know?

VISIT WINTHEHUMANRACE.CA TO START NOW.

*Source: PwC 15 th Annual Global CEO Survey 2012

LOCATION CANADA | 2015 C19 AREA0450.indd 1

05/08/15 9:35 PM

CANADA

CANADA LEADING THE SMART GRID CHARGE

Smart grids and smart buildings work together to save energy and keep the production line moving.

By JIRI SKOPEK,

T

Managing Director, Energy and Sustainability, ECD JLL

he electricity grid has been called the single most important engineering achievement of the early 20th century.

How ironic it is that our present digital society — even as demand for electricity skyrockets — still relies on an infrastructure that draws much of its legacy from the era of horse-drawn

carriages.

Thankfully, in Canada, we are entering a new era for the electrical grid, and that’s good news for Canadian manufacturers. Across the country, there is increasing awareness of the need for a smarter electrical grid system, and both the public and private sectors are contributing toward that goal.

THE GRIM REALITY FOR MANUFACTURERS Blackouts and brownouts come at a tremendous cost to the economy in general — but to manufacturers, when the production line stops, there are immediate and profound consequences to the bottom line. And that’s as true for our clusters of clean technology companies working on cutting-edge devices and software, as it is for our many traditional manufacturers in the aerospace, automotive, and other traditional manufacturing sectors.

Even so, consistent access to reliable power is only one problem resulting from our antiquated system. Another concern is our vulnerability to the

C20 LOCATION CANADA

effects of climate change; the unpredictability of storm events, peak demand for air conditioning due to unprecedented heat waves, and security issues because of the grid’s centralized structure stand out as liabilities as a consequence of the interdependency of grid components and risk of cascading failure.

The existing system across Canada and all of North America, with its reliance primarily on coal, is also bad for climate change. There are additional concerns about falling behind in terms of global competitiveness as we see Asia and the European Union embrace advanced electrical grid technologies such as renewable energy, automated distribution, and advanced battery storage.

CANADIAN BUILDINGS AND THE GRID: READY FOR A MORE SYMBIOTIC RELATIONSHIP? One beacon of change in Canada comes from the province of Ontario, which has recently accomplished moving to a coal-free electrical grid. While coal-free may not make sense for every province, the move has helped move other advances — like smart grid innovations and the use of renewables — from “good idea” to an installed reality.

Meanwhile, just as the utilities sector hasn’t greatly changed since Thomas Edison, the building industry has not evolved much in the past three quarters of a century. Our buildings still tend to be built for the long term, are unresponsive to the changing

needs of the occupants, and often require expensive upgrades and redesigns to accommodate end-user requirements. Many new buildings still do not install energy management systems that can integrate with smart grid functionality, even for jurisdictions that offer it.

So how can we provide more electricity to meet rising demand, increase reliability and quality of power supplies, increase energy efficiency, and integrate low-carbon energy sources into power networks? And on the other side of the coin, how can we make our buildings more efficient and more responsive to the needs of occupants? The answer is

“smart grids” and “smart buildings.”

SMART GRIDS FOR SMART CANADIAN MANUFACTURERS Smart grids consist of interconnected loads and distributed energy resources — including renewable energy — that act as a single controllable entity with respect to the grid. Within a smart grid system, advanced communications and controls integrate the different energy sources, energy loads, and energy storage and make “smart” decisions in collecting the energy and move it around in any direction — when and as needed. Within a smart grid, discrete elements

LOCATION CANADA | 2015 C21

CANADA can connect or disconnect from the grid, enabling them to operate in both grid-connected or island mode. This greatly improves the flexibility, resiliency, and efficiency of electrical supply, and changes the way building operators think about and interact with the electrical system, for example, by generating their own electricity and even sending electricity back into the grid.

More good news for Canadian manufacturers: Canada is a leader in the development of smart grid technology. According to a 2014 report from the Global Smart Grid Federation,1 “With 49 percent smart meter penetration, almost 5GW in distributed generation, over 4000 electric vehicles, and almost 1,100 charging stations, Canada has rallied behind the smart grid since 2007, becoming one of the earliest adopters of smart grid technology.” The report also cites Ontario, Quebec, Alberta, and British Columbia as provinces that are leading the charge to offer smart grid infrastructure.

SOLVING THE ENERGY STORAGE CHALLENGE Providing electricity in a reliable manner means that the energy can travel from where it is stored to where it is needed, when it is needed. This sounds simple, but since electricity cannot be stored at grid scale in a cost-effective way, utilities have had to find ways to “shave” demand at peak times.

In the past, this was done primarily through demand response programs, where energy users agreed to adapt their usage to off-peak night hours in exchange for lower rates for energy. New technologies now enable utilities to offer automated demand-response programs — for example, automatically shutting off energy to a hot water heater for just a few minutes — a minor change that a customer would not notice. However, if we multiply those small savings by hundreds or thousands of households, or many dozens of large commercial buildings, these “mini-shavings” add up to noticeable reductions at peak times. This profound change is partly due to advances in control

C22 LOCATION CANADA

systems, data sensors, and machine-to-machine communications.

SMART GRID, SMART MANUFACTURING FACILITIES There are many parallels between a smart grid and a smart building. The same sensors and wireless technologies that are the basis of grid upgrades are used in buildings in similar ways and go far beyond current machine-to-machine applications, remote monitoring, control of building HVAC and lighting.

The conversation is also about how the smart grid will shape the connected building. Remote operation, big data, deep analytics and fault detection, renewable energy, automatic demand response, and time-of-day billing are all exciting aspects at the building level that will be driven by the maturity of smart grid.

When buildings become part of the energy community, it will bring about two-way energy transactions, market positions, and position trading for distributed energy. This new two-way interconnectivity between smart buildings and smart grids — whereby buildings are not only buyers, but also sellers of energy — will, in turn, shape behaviors.

For example, by providing an added catalyst for accurate data, this will likely bring about radical change to the whole issue of benchmarking building net energy.

Many manufacturing facilities are uniquely suited to produce energy and contribute to the grid, with the land and the zoning to install many types of renewable energy power generation such as solar panel “farms” or wind turbines. Offering those onsite also increases reliability; when the grid goes down, onsite power can be generated at the source.

We have the technology today to transform the energy relationship between buildings and the grid as well as make buildings more energy-efficient and resilient. Yet, businesses and utilities have been slow to keep pace with technological advances. Although a small but increasing number of buildings are now “smart,” and many municipalities have invested in

CANADA LEADING THE SMART GRID CHARGE

some form of smart grid technology, the reality is that the real estate industry has been lagging, and few municipal grids have the capability for two-way interaction with smart buildings.

A NEW ERA IN POWER GENERATION Despite current challenges, smart grid infrastructure throughout Canada is coming — and the government is taking steps to make sure that this new era in power generation comes online smoothly and as rapidly as possible. In 2012, the Standards Council of Canada published “The Canadian Smart Grid Standards Roadmap: a strategic planning document” designed to enable manufacturers, municipalities, and other organizations to operate under a shared set of technical standards. Developed by a committee of more than 20 public and private sector experts, the Council noted the nature of this emerging technology — and the necessity of it for economic development and support for Canadian businesses. The foreword to the report notes, “Smart grid technologies will enhance the reliability, resiliency, and efficiency of the electric network, as well as improve environmental performance by enabling consumers to play a more active role in their energy use decisions and helping to integrate renewable resources such as wind…

As these technologies mature and are brought into the marketplace, standardization will become increasingly necessary to ensure the development of an efficient and effective smart grid.”

As onsite power generation becomes more affordable, and improved battery storage technology makes it possible to store energy until it is needed, some buildings already are becoming self-powered at least part of the time. Such buildings tend to rely on renewable energy such as solar, wind, and geothermal energy in combination with highefficiency refrigerators, LED lights, and green building materials, while accessing municipal power when needed.

By creating microgrids and providing energy

from renewable sources such as wind or solar, smart buildings can help reduce greenhouse gas emissions, while also providing a safeguard against grid disruptions caused by natural or manmade disasters.

Although North America in general, and Canada in particular, has typically lagged behind when it comes to integrating technology into our energy systems, early adopters like Ontario, Quebec, Alberta, and British Columbia have been paving the way for future progress.

THE ECONOMIC IMPACT The economic impact of upgrading the old grid to a smart grid is indisputable. According to the Conference Board of Canada,2 for every $100 million invested in power system assets, real GDP will be boosted by $85.6 million and roughly 1,200 personyears of employment will be created. In other words, for each $100 million invested, 1,200 jobs will be created for one year. And much of that growth will come from the manufacturing sector.

Manufacturers in Canada can seek to better understand the smart grid infrastructure available to them in their locations by requesting up-todate information from their local utility. To better understand smart grid infrastructure across the nation, resources are available from the Standards Council of Canada3; the Canadian Electricity Association; and local, provincial, and federal government websites and industry groups.

As the technology continues to advance and more manufacturing companies opt-in to make their businesses increasingly environmentally friendly, we expect that the application of smart energy will continue to gain momentum, with Canadian manufacturers leading the way for the rest of the world. •• Notes: 1 http://www.globalsmartgridfederation.org/2014/02/27/1170/ 2 http://www.electricity.ca/media/news/CEAFactSheet2015.pdf 3 https://www.scc.ca/en/about-scc/publications/roadmaps/canadian-smart-grid-standards-roadmap

As managing director of Energy and Sustainability with ECD JLL, Jiri Skopek provides advice to owners and managers of large portfolios on sustainable development in the fields of design, asset and facility management, emergency preparedness, business continuity, and building intelligence.

LOCATION CANADA | 2015 C23

needs of the occupants, and often require expensive upgrades and redesigns to accommodate end-user requirements. Many new buildings still do not install energy management systems that can integrate with smart grid functionality, even for jurisdictions that offer it.

So how can we provide more electricity to meet rising demand, increase reliability and quality of power supplies, increase energy efficiency, and integrate low-carbon energy sources into power networks? And on the other side of the coin, how can we make our buildings more efficient and more responsive to the needs of occupants? The answer is

“smart grids” and “smart buildings.”

SMART GRIDS FOR SMART CANADIAN MANUFACTURERS Smart grids consist of interconnected loads and distributed energy resources — including renewable energy — that act as a single controllable entity with respect to the grid. Within a smart grid system, advanced communications and controls integrate the different energy sources, energy loads, and energy storage and make “smart” decisions in collecting the energy and move it around in any direction — when and as needed. Within a smart grid, discrete elements

LOCATION CANADA | 2015 C21

CANADA can connect or disconnect from the grid, enabling them to operate in both grid-connected or island mode. This greatly improves the flexibility, resiliency, and efficiency of electrical supply, and changes the way building operators think about and interact with the electrical system, for example, by generating their own electricity and even sending electricity back into the grid.

More good news for Canadian manufacturers: Canada is a leader in the development of smart grid technology. According to a 2014 report from the Global Smart Grid Federation,1 “With 49 percent smart meter penetration, almost 5GW in distributed generation, over 4000 electric vehicles, and almost 1,100 charging stations, Canada has rallied behind the smart grid since 2007, becoming one of the earliest adopters of smart grid technology.” The report also cites Ontario, Quebec, Alberta, and British Columbia as provinces that are leading the charge to offer smart grid infrastructure.

SOLVING THE ENERGY STORAGE CHALLENGE Providing electricity in a reliable manner means that the energy can travel from where it is stored to where it is needed, when it is needed. This sounds simple, but since electricity cannot be stored at grid scale in a cost-effective way, utilities have had to find ways to “shave” demand at peak times.

In the past, this was done primarily through demand response programs, where energy users agreed to adapt their usage to off-peak night hours in exchange for lower rates for energy. New technologies now enable utilities to offer automated demand-response programs — for example, automatically shutting off energy to a hot water heater for just a few minutes — a minor change that a customer would not notice. However, if we multiply those small savings by hundreds or thousands of households, or many dozens of large commercial buildings, these “mini-shavings” add up to noticeable reductions at peak times. This profound change is partly due to advances in control

C22 LOCATION CANADA

systems, data sensors, and machine-to-machine communications.

SMART GRID, SMART MANUFACTURING FACILITIES There are many parallels between a smart grid and a smart building. The same sensors and wireless technologies that are the basis of grid upgrades are used in buildings in similar ways and go far beyond current machine-to-machine applications, remote monitoring, control of building HVAC and lighting.

The conversation is also about how the smart grid will shape the connected building. Remote operation, big data, deep analytics and fault detection, renewable energy, automatic demand response, and time-of-day billing are all exciting aspects at the building level that will be driven by the maturity of smart grid.

When buildings become part of the energy community, it will bring about two-way energy transactions, market positions, and position trading for distributed energy. This new two-way interconnectivity between smart buildings and smart grids — whereby buildings are not only buyers, but also sellers of energy — will, in turn, shape behaviors.

For example, by providing an added catalyst for accurate data, this will likely bring about radical change to the whole issue of benchmarking building net energy.

Many manufacturing facilities are uniquely suited to produce energy and contribute to the grid, with the land and the zoning to install many types of renewable energy power generation such as solar panel “farms” or wind turbines. Offering those onsite also increases reliability; when the grid goes down, onsite power can be generated at the source.

We have the technology today to transform the energy relationship between buildings and the grid as well as make buildings more energy-efficient and resilient. Yet, businesses and utilities have been slow to keep pace with technological advances. Although a small but increasing number of buildings are now “smart,” and many municipalities have invested in

CANADA LEADING THE SMART GRID CHARGE

some form of smart grid technology, the reality is that the real estate industry has been lagging, and few municipal grids have the capability for two-way interaction with smart buildings.

A NEW ERA IN POWER GENERATION Despite current challenges, smart grid infrastructure throughout Canada is coming — and the government is taking steps to make sure that this new era in power generation comes online smoothly and as rapidly as possible. In 2012, the Standards Council of Canada published “The Canadian Smart Grid Standards Roadmap: a strategic planning document” designed to enable manufacturers, municipalities, and other organizations to operate under a shared set of technical standards. Developed by a committee of more than 20 public and private sector experts, the Council noted the nature of this emerging technology — and the necessity of it for economic development and support for Canadian businesses. The foreword to the report notes, “Smart grid technologies will enhance the reliability, resiliency, and efficiency of the electric network, as well as improve environmental performance by enabling consumers to play a more active role in their energy use decisions and helping to integrate renewable resources such as wind…

As these technologies mature and are brought into the marketplace, standardization will become increasingly necessary to ensure the development of an efficient and effective smart grid.”

As onsite power generation becomes more affordable, and improved battery storage technology makes it possible to store energy until it is needed, some buildings already are becoming self-powered at least part of the time. Such buildings tend to rely on renewable energy such as solar, wind, and geothermal energy in combination with highefficiency refrigerators, LED lights, and green building materials, while accessing municipal power when needed.

By creating microgrids and providing energy

from renewable sources such as wind or solar, smart buildings can help reduce greenhouse gas emissions, while also providing a safeguard against grid disruptions caused by natural or manmade disasters.

Although North America in general, and Canada in particular, has typically lagged behind when it comes to integrating technology into our energy systems, early adopters like Ontario, Quebec, Alberta, and British Columbia have been paving the way for future progress.

THE ECONOMIC IMPACT The economic impact of upgrading the old grid to a smart grid is indisputable. According to the Conference Board of Canada,2 for every $100 million invested in power system assets, real GDP will be boosted by $85.6 million and roughly 1,200 personyears of employment will be created. In other words, for each $100 million invested, 1,200 jobs will be created for one year. And much of that growth will come from the manufacturing sector.

Manufacturers in Canada can seek to better understand the smart grid infrastructure available to them in their locations by requesting up-todate information from their local utility. To better understand smart grid infrastructure across the nation, resources are available from the Standards Council of Canada3; the Canadian Electricity Association; and local, provincial, and federal government websites and industry groups.

As the technology continues to advance and more manufacturing companies opt-in to make their businesses increasingly environmentally friendly, we expect that the application of smart energy will continue to gain momentum, with Canadian manufacturers leading the way for the rest of the world. •• Notes: 1 http://www.globalsmartgridfederation.org/2014/02/27/1170/ 2 http://www.electricity.ca/media/news/CEAFactSheet2015.pdf 3 https://www.scc.ca/en/about-scc/publications/roadmaps/canadian-smart-grid-standards-roadmap

As managing director of Energy and Sustainability with ECD JLL, Jiri Skopek provides advice to owners and managers of large portfolios on sustainable development in the fields of design, asset and facility management, emergency preparedness, business continuity, and building intelligence.

LOCATION CANADA | 2015 C23

WINNIPEG

O

ALIVE WITH OPPORTUNITY OF ALL URBAN MUNICIPALITIES

analyzed in KPMG’s Competitive Alternatives (2014) report, Winnipeg, Manitoba, Canada, boasts the lowest business costs of any city in Western Canada — and it’s also lower than every U.S. city examined. One of Canada’s most diversified and stable economies, Winnipeg’s central North American location offers significant business advantages and investment opportunities.

One hour from the U.S. border, Winnipeg is situated at the hub of four key trade gateways reaching across Canada, into the U.S. and Mexico, and to Europe and Asia.

Within a 24-hour drive, Winnipeg-based businesses can access a population exceeding 100 million.

Some of Canada’s largest transport companies are headquartered here, collectively providing over 1,000 local for-hire rigs. Winnipeg is also one of only two Canadian cities served by three Class 1 rail carriers and boasts an award-winning and world-class airport, which processes among the highest percentage of dedicated air cargo flights of any Canadian airport.

The Intelligent Community Forum named Winnipeg

among the world’s “Top7 Intelligent Communities” in 2014, MoneySense magazine considers Winnipeg the second-best place to live among Western Canada’s large cities, and KPMG reports that Winnipeg is the No. 1 most cost-effective locale for aerospace manufacturing in western U.S. and Canadian cities. And in its biennial “American Cities of the Future” 2015/16 rankings, fDi Magazine ranks Winnipeg the leader in business friendliness among midsized cities in the North American Midwest.

Greg Dandewich,

Senior Vice President Economic Development Winnipeg Inc. Suite 300-259 Portage Avenue Winnipeg, Manitoba, Canada R3B 2A9 204-954-1997 • Fax: 204-942-4043 greg@economicdevelopmentwinnipeg.com www.economicdevelopmentwinnipeg.com

CENTREPORT CANADA

C

N O RT H A M E R I C A’ S L A R G E S T T R I - M O D A L I N L A N D P O RT CENTREPORT CANADA is a tri-modal inland port and foreign-trade zone located in the heart of the continent in Winnipeg, and at the hub of international trade gateways moving in all geographical directions. Many highprofile companies call CentrePort home: Boeing Canada, Magellan, MacDon, GE Aviation, Paterson Global Foods, Bison Transport, and North West Company.

As Canada’s only tri-modal inland port and FTZ, significant investments are underway including the new CentrePort Rail Park, which will provide prime co-location opportunities for rail-intensive businesses.

In addition to providing access to Winnipeg’s three Class 1 railways (CN, CP, and BNSF), CentrePort is a major international trucking hub and features a 24/7 worldwide cargo airport.

CentrePort also offers big-city advantages such as abundant, skilled labor; industry-focused training

C24 LOCATION CANADA

programs and incentives; and competitive wages (15–25 percent lower than Ontario and Western Canada).

Also, combined corporate taxes are 33 percent lower in Canada than in the U.S..

These advantages have helped attract nearly 40 new companies to CentrePort’s 20,000-acre footprint — industrial land that is ideal for any size of development.

Diane Gray,

President and CEO CentrePort Canada Inc. Suite 100-259 Portage Avenue Winnipeg, MB, Canada R3B 2A9 204-784-1300 • Fax: 204-784-1308 DGray@CentrePort.ca www.CentrePortCanada.ca

BRAMPTON

A PEOPLE-POWERED ECONOMY

W

WITH A POPULATION APPROACHING

600,000, Brampton is the ninth-largest city in Canada and the third-largest in the Greater Toronto Area (GTA). Brampton is the second-fastest-growing city in Canada, averaging growth of 4.2 percent per year (or 18,000 new residents per year). With a median age of 34.7, this young, educated, and multicultural workforce of 171,000 strong continues to grow with residents representing more than 209 different cultures and speaking more than 89 languages.

Adjacent to Canada’s largest airport, Toronto Pearson International, Brampton is home to the largest intermodal railway terminal in Canada and has immediate access to an extensive network of transcontinental highways. At the center of Canada’s major transportation corridors and located near the U.S. border, Brampton is within a day’s drive of 158 million consumers.

Brampton has a successful, diversified economy and is home to more than 8,600 businesses.

Seventy-two percent of Brampton’s economic base is comprised of service-producing companies and 28 percent is comprised of goods-producing companies.

With all that Brampton has to offer, it’s no wonder companies like Medtronic, Coca-Cola Bottling Company, and Loblaw are headquartered here.

Awards/Designations • Brampton has been included in the Top 10 MidSized American Cities of the Future 2015/2016 — Overall winner for FDI strategy — and included in the Top 10 in Mid-Sized American Cities for Connectivity and Business Friendliness • AAA credit rating designated by Standard & Poor’s, nine consecutive years • Designated by the World Health Organization as an International Safe City

EXPERIENCE WHAT A PEOPLE-POWERED ECONOMY CAN DO FOR YOU. IT ALL BEGINS AT BRAMPTON.CA/B-MORE.

Sohail Saeed,

Director, Economic Development & Tourism City of Brampton Economic Development Office 2 Wellington Street West Brampton, ON, Canada L6Y 4R2 905-874-2650 • 888-381-BRAM edo@brampton.ca www.Brampton.ca/b-more LOCATION CANADA | 2015 C25

MISSISSAUGA:

T

BUSINESS IS A HUMAN RACE People Make the Place

THE KNOWLEDGE ECONOMY is a human race — the competition between the best companies in the world for the brightest minds in business, science, technology, and all manner of industry.

Mississauga is where leading companies win that competition. Skilled, well-educated, inquisitive people in the hundreds of thousands comprise this city’s greatest advantage. So much so, that when landing at Pearson International Airport in Mississauga, Ontario, Canada, the port of entry sign might easily read “Welcome to Our Talent Pool.”

Over 62,000 companies call Mississauga home.

Over 1,400 multinationals turn on the lights here every morning. As do 380 life sciences companies, 4,200 technology companies, and a growing network of entrepreneurial go-getters that stretches from one of the world’s great fresh water lakes on Mississauga’s southernmost border to the farmlands just north and to the west.

What makes each of these organizations special and successful is the talent that works there.

Mississauga is truly a community of great people from all over the world. And they’re all very busy creating a wonderful future here, not only for

themselves, but also for their families and the next generation of the new economy.

So for business leaders who see people and access to markets as critical to what happens next, Mississauga becomes a natural choice.

A Place Made for People When you put this much talent in one place, economic stability and opportunity also lead to other welcome benefits.

Options in unique cultural experiences from around the world are growing. Transit is expanding. Our city plan prioritizes green space, green living, and safe neighborhoods for children. Mississauga is the 760,000 people who make it better every day. Lifestyle, economy, smart local government with a plan — it all adds up to a distinct advantage in the human race.

Mississauga is a premium location for any organization that depends on amazing people or barrier-free access to one of the world’s greatest markets. Connect with our network of Economic Development Office specialists and peers in any business category for a more detailed perspective at winthehumanrace.ca.

Susan Amring,

Director, Economic Development City of Mississauga 300 City Centre Drive, Mississauga, ON, Canada L5B 3C1 1-800-456-2181 • Fax: 905-896-5931 economic.development@mississauga.ca www.winthehumanrace.ca

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ONTARIO CANADA

O

ONTARIO GENERATES 37 percent of Canada’s GDP and is the eighth-largest economy in North America. Ontario has been the North American leader in attracting greenfield capital investment for two consecutive years according to fDi Intelligence — with US$7.1 billion being received in 2014. Savvy business leaders across many industries are attracted to the province for a number of reasons:

Competitive Business Costs Ontario offers the lowest overall business costs when compared to all G7 countries. In addition, the province has an R&D cost advantage of 18.8 percent relative to the U.S.

Access to the $19 Trillion NAFTA Market and Global Markets Ontario has a modern, efficient and widely networked transportation system delivering access to the U.S. and locations abroad. This sophisticated infrastructure facilitates C$844 million in daily twoway goods trade between the U.S. and Ontario.

Highly Talented Workforce Ontario’s 44 colleges and universities consistently produce more graduates in science, technology, engineering, and math (STEM) than any other region in the G7. Additionally, 65 percent of Ontarians have postsecondary education.

Innovation Lives in Ontario Ontario has a unique innovation ecosystem that is conducive to building partnerships that drive business success and profitability. The level of collaboration between government, educational institutions, research facilities, and businesses is rarely replicated elsewhere.

A Quality Lifestyle Everyone desires a safe and welcoming place to

live and work. Ontario offers key benefits such as universal healthcare and a world-class educational infrastructure, and our cities consistently rank in the top tier of various safety and desirability indexes.

Investment Made Easy Ontario understands the tremendous amount of work that goes into site selection and the importance of having a trusted partner in the process. We offer a one-window approach, bringing together a coordinated team of municipal, provincial, federal, and industry representatives with the contacts, expertise, and information required to make an investor’s life a little easier.

In addition, Ontario’s Investment Ready: Certified Site Program provides easy access to key information about properties, including locations and ownership, transportation access, and utilities servicing, thus doing much of the upfront due diligence for you.

Why Ontario?

Ontario’s competitive business costs, prime access to market, skilled workforce, innovation ecosystem, and high quality of life make it one of the world’s most sought after regions for business investment.

Ontario Investment and Trade Centre

35th Floor, Eaton Centre P.O. Box 1, 250 Yonge Street Toronto, Ontario M5B 2L7 Canada 1-416-313-3469 (International) Toll-free: 1-800-819-8701 (North America) Fax: 1-416-325-6375 info@investinontario.com InvestInOntario.com LOCATION CANADA | 2015 C27

CITY OF WOODSTOCK, ONTARIO

T

THE CROSSROADS OF BUSINESS

THE CITY OF WOODSTOCK is a dynamic and growing community of 40,000 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 longterm commitment to managed growth.

Woodstock has roots in both agriculture and manufacturing, as the recognized dairy capital of Canada and as home to Toyota’s second Canadian manufacturing facility. 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 businesses.

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

The City of Woodstock 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. The fourth and newest, North East Business Park, is located less than one mile from the Toyota Motor Manufacturing plant.

Industrial land prices range from $65,000 to $100,000 per acre, depending upon proximity to the Highway 401/403 corridor. All of our business parks are fully serviced.

Woodstock also maintains a business-friendly 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.

Len Magyar,

Development Commissioner City of Woodstock 500 Dundas Street, P.O. Box 1539 Woodstock, ON N4S 0A7 519-539-2382, ext. 2112 lmagyar@cityofwoodstock.ca www.cometothecrossroads.com

C28 LOCATION CANADA

CITY OF ORILLIA

O

S AY G O O D B Y E T O B U S I N E S S A S U S U A L !

Come to Orillia, where your business and your way of life will thrive.

ORILLIA HAS BEEN RANKED one of the top six Canadian cities to invest in, and among the top 60 Canadian cities to live in.

between Lakes Simcoe and Couchiching, Orillia also offers a waterfront playground for your staff when it’s time to unwind or do business with nature as a creative backdrop.

Located about an hour north of Toronto, the City of Orillia sits at the crossroads of two of Ontario’s major roadways, putting your business at the center of the action. Lake Simcoe Regional Airport, with passenger, freight, and full Canada Customs service, is just 10 minutes away.

Orillia also offers superb healthcare at Soldiers’ Memorial Hospital, a state-of-the-art 230-bed regional hospital that recently underwent an $83 million redevelopment and expansion project.

We offer 150 fully serviced acres awaiting your business vision, and Lakehead University’s construction of a $45 million regional campus brings youthful vibrancy to the city plus a steady stream of employment candidates. A streamlined development approval process and zero industrial development charges will help you get right down to business!

Orillia is blessed with abundant and accessible natural beauty and the place to take full advantage of fourseason recreational opportunities all close at hand. Nestled

Dan Landry,

Manager of Economic Development City of Orillia 50 Andrew Street South Orillia, ONT L3V 7T5, Canada 705-325-4900 Dlandry@Orillia.ca www.orillia.ca BusinessinOrillia.ca

Site and Facility Planning E-mail Newsletter This Week

Area Development editors aggregate the most industry-relevant site and facility planning features and commentary from the best sources around the web. Also included is a roundup of the most important news items from the Area Development Online News Desk.

The Insider

Exclusive online content including the latest industry-wide studies and research as well as features from Area Development magazine focusing on all aspects of site and facility planning.

Delivering What the Others Don’t For more information or to sign up, go to

www.areadevelopment.com/newsletter

LOCATION CANADA | 2015 C29

W T

NOVA SCOTIA BUSINESS INC. WHETHER YOU’RE LOOKING to invest, relocate or expand in Canada, take a look at Nova Scotia first. If you are not yet familiar with our province, allow Nova Scotia Business Inc. to show you why our talent, geographic location, reputation, and research and development capabilities are attracting world-leading companies to establish operations here. Our team of investment attraction executives will open doors for you in Nova Scotia. You’ll be amazed at the unparalleled support you’ll receive as you consider Nova Scotia as your next growth location.

Nova Scotia Business Inc. 1800 Argyle St #701 Halifax, NS B3J 3N8 Canada 902-424-6650 Toll-free: 800-260-6682 info@nsbi.ca www.nsbi.ca

QUINTE

ECONOMIC DEVELOPMENT COMMISSION

THE BAY OF QUINTE REGION, a Canadian logistics and manufacturing hub, is home to multinational companies and innovative SMEs. Located between Toronto and Montreal and along highway 401, the Bay of Quinte’s access to major Canadian and U.S. markets lowers your ongoing operational costs and makes it easy to run worldwide logistics.

Our low-cost investment-ready land and available buildings, zero development charges, and a fast tracked development process lower your startup costs. Procter & Gamble, Nestle, McKesson, and Kellogg have achieved success in the Bay of Quinte region.

Let Quinte Economic Development Commission’s experienced team provide confidential project support and assist you in meeting your start-up goals. The Quinte Economic Development Commission represents the Bay of Quinte Region

in Ontario, Canada, consisting of the City of Belleville, the City of Quinte West, and the Municipality of Brighton.

Chris King, CEO

Quinte Economic Development Commission P.O. Box 610 284B Wallbridge Loyalist Rd. Belleville, Ontario, Canada K8N 5B3 613-961-7990 • Toll Free: 1-866-961-7990 Fax: 613-961-7998 chris@quintedevelopment.com www.quintedevelopment.com

Find the Right Location for Your Next Project.

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

FacilityLocations.com C30 LOCATION CANADA

I am Brampton’s power snack.

NAFTA Foods and Packaging, making Brampton the gingerbread capital of North America.

Brampton is about you, about what you can be, about what we can be together.

A fusion of imagination, potential and entrepreneurship. Together, we will cook up new possibilities. Like the ones NAFTA Foods and Packaging uses at their state-of-the-art headquarters in Brampton, the gingerbread capital of North America. Discover what our fast-growing, people-powered Canadian city economy can do for you. Scan the QR code or visit peoplepoweredeconomy.ca

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Industry is at a Crossroads.

It’s called Woodstock, Ontario, Canada.

On highways 401 and 403, at the junction NE "@M@CH@M /@BHƥB @MC "@M@CH@M -@SHNM@K Q@HK RDQUHBD Ŕ @S SGD KNFHRSHB@K BQNRRQN@CR NE -NQSG America – Woodstock sees enough business to know how much – and how rapidly – our world is changing. At the intersections of industry and agriculture, productivity and sustainability, and the last economy and the next one, here’s a place that doesn’t just support how business is done today – here’s a place that also supports how business will be done tomorrow.

519-539-2382 x2115 information@cityofwoodstock.ca cometothecrossroads.com

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TOP STATES FOR DOING BUSINESS 18 14

25T

12

21 9

6

16

10 17

20

22

24 15

13 19

7

4 23 11

3 5

1

8

5T

2

1 2 3 4 5 5T

TOP STATES georgia indiana 6 texas 7 north carolina south carolina 8 louisiana ohio tennessee 9 alabama 10 kentucky florida

25

best overall BUSINESS ENVIRONMENT

texas • south carolina • georgia louisiana • tennessee LABOR CLIMATE

georgia • south carolina • texas north carolina • alabama INFRASTRUCTURE/GLOBAL ACCESS

tennessee • georgia • texas indiana • illinois

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TOP STATES FOR DOING BUSINESS

S

tates that consistently rank at the top for business performance know what it takes to be successful — an attractive business environment (taxes, incentives, permitting), labor pool (cost, availability, education, skill level, training), and infrastructure/ global access (transportation infrastructure, energy costs, intermodal capabilities, certified sites). When combined with a creative and proactive state economic development team, these

BUSINESS ENVIRONMENT LABOR CLIMATE INFRASTRUCTURE/GLOBAL ACCESS

advantages can seem irresistible to companies that are looking to locate or expand their operations. Companies want a quick, seamless startup. With an everwidening global market, they need a well-integrated, modern transportation infrastructure to be competitive in these markets.

Also, top-performing states know how to deal with tough times — something many CEOs still have in the back of their minds.

Site consultants often have

Overall Business Environment 1. Texas 2. South Carolina

64

3. Georgia 4. Louisiana

5. Tennessee

Factor

Top State(s)

Overall Cost of Doing Business Incentives Programs Corporate Tax Environment Cooperative State Government Access to Capital & Project Funding Speed of Permitting Most Favorable Regulatory Environment

1. SC 2. TX 3. GA

AREADEVELOPMENT

1. GA & SC 2. LA 3.TX 1. TX 2. FL 3. NV 1. GA & SC 2. AL 3. LA & TN 1. TX 2. CA, FL, & NY 3. GA 1. SC 2. GA 3. AL, LA, & TX 1. AZ, GA, & TX 2. AL & SC 3. TN

FOR FREE SITE INFORMATION, CALL

the best view of a state’s performance — especially when compared to other states. They work on a variety of projects in multiple industries, interact with economic development offices, and conduct their own research. They get the hardto-find details that are needed to select the best site for their client’s requirements. Our 2015 Top States for Doing Business rankings reflect the results of our recent survey asking the consultants to give us their top picks for 21 factors comprising three overall categories — business environment, labor climate, and infrastructure/global access.

Business Environment Sub-factors for the business environment ranking consist of overall cost of doing business, incentive programs, corporate tax environment, cooperative state government, access to funding, speed of permitting, and most favorable regulatory climate. All these factors work together to create a businessfriendly environment that helps companies succeed.

With that in mind, several states have recently overhauled their corporate tax structures.

For example, Michigan replaced its Michigan Business Tax with a flat 6 percent rate on corpora-

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

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Overall Labor Climate 1. Georgia 2. South Carolina

3. Texas 4. North Carolina

5. Alabama

Factor

Top State(s)

Availability of Skilled Labor Competitive Labor Costs Labor Climate: Right-To-Work States

1. TX 2. GA & IN 3. CA, FL, MI, & NC 1. AL 2. GA 3. MS & SC

Labor Climate: Non-Right-ToWork States

1. KY 2. OH 3. CO & MO

Leading Workforce Development Programs

1. GA 2. LA 3. SC 4. AL

Educational Resources

1. CA 2. NC 3. NY

Quality of Life

1. CO 2. FL 3. NC

1. GA 2. SC 3. TX

Overall Infrastructure/Global Access 1. Tennessee 2. Georgia

66

3. Texas 4. Indiana

5. Illinois

Factor

Top State(s)

Distribution/ Supply Chain Hubs

1. GA 2. IL 3. CA

Highway Accessibility

1. IN 2. OH 3.TN

Rail Accessibility

1. IL 2. TX 3. GA

Certified Sites/ ShovelReady Programs

1. TN 2. SC 3. GA

Competitive Utility Rates

1. TN 2. GA 3. WA

Energy Reliability/ Smart Grid Deployment

1. TX 2. NC & TN 3. GA

Water Outlook (Availability & Cost)

1. MI 2. OH 3. WI

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

tions that exempts most small businesses. Indiana placed its corporate income tax on a dramatic reduction schedule in 2014, ultimately lowering it to 4.9 percent. In FY 2013, North Carolina had the thirdlowest state and local business tax burden in the U.S., according to the Council on State Taxation and EY. As a result of further state tax reforms, the corporate income tax rate fell to 5 percent in 2015 and is expected to drop to 4 percent in 2016. And Texas continues to deliver one the lowest tax burdens in the country according to the Tax Foundation’s 2015 State Business Tax Index.

Texas also recently permanently cut its franchise tax by 25 percent, freeing up more business capital for investment.

Providing flexible financial assistance programs is another way to create a healthy business climate and drive long-term economic growth. In California, the state’s Infrastructure and Economic Development Bank (IBank) and the State Treasurer’s Office deploys the most State Small Business Credit Initiative (SSBCI) funds of any state, according to the U.S. Treasury Department. IBank’s Small Business Loan Guarantee Program (SBLGP) has distributed $58 million to guarantee more than $308 million in loans. The two programs have created or retained nearly 40,000 jobs at small businesses since 2011.

In Kentucky, the Kentucky Small Business Credit Initiative

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

WHAT HAPPENS WHEN

DOWNTOWN meets

download Rocket Fiber to provide ultra-fast internet in downtown Detroit. Rocket Fiber, a game-changing Detroit-based company, has announced they will launch highspeed internet service that’s up to 100 times faster than the current residential average. Construction is already underway on an advanced fiber optic network that will serve residents, local government and businesses in Detroit and the greater surrounding areas. “It’s going to put Detroit among only a handful of cities in the country with this type of Internet,” says company co-founder Marc Hudson. “You’re going to see a lot of tech companies flocking to Detroit.” It’s clear, progress is continuing to move at light-speed in Pure Michigan.

1.888.565.0052 michiganbusiness.org/AD

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TOP STATES OVERALL RANKINGS 1. Georgia 2. Texas 3. South Carolina 4. Tennessee 5. Alabama 5T. Florida 6. Indiana 7. North Carolina 8. Louisiana 9. Ohio 10. Kentucky 11. Mississippi 12. Illinois 13. California 14. Michigan 15. Oklahoma 16. Virginia 17. Utah 18. New York 19. Arizona 20. Colorado 21. Pennsylvania 22. Missouri 23. Arkansas 24. Kansas 25. New Jersey 25T. Washington

NOTE: Other states that rank within top-10 for individual categories

LABOR CLIMATE

BUSINESS ENVIRONMENT Overall Cost of Doing Business

Incentive Programs

Corporate Tax Environment

Cooperative

State

Government

Access to Capital and Project Funding

Speed of Permitting

Most Favorable Regulatory Environment

Availability of Skilled Labor

Competitive Labor Costs

Labor Climate RTW

2 3 1 4 3 6 6 6

1 1 2 3 2 4 5 5

2 1 7 8 – 3 2 3

2 4 3 6 1 8 – 9

1 3 2 4 7 6 8 5

1 3 1 4 5 6 7 10

7 1 6 4 10 2 7 9

1 4 1 3 2 6 7 10

3 1 6 6 9 2 6 8

6

2

3 7 8 5 – – 10 10 6 7 – – – – – 7 7 – –

3

4

–

7

–

9 10 4 – – – 8 10 – 10 10 – – – – 10 5 –

9 9 – 10 – – – 10 10 7 – 10 – – – 10 9 – 10

4

– – 5 – – – 9 10 8 – – – – – – – – –

5 9 10 6 2 8 7 6 9 2 10 8 9 9 10 10 6 10

9 7 5 – – 9 8 9 – – – – – 10 9 9 – –

7 7 5 – – 7 5 6 4 – 1 8 – 7 6 7 – –

4 – – 5 3 3 – 8 6 6 10 8 9 – – – 9 –

– 10 3 – – – 10 – – – – – – – 5 – – –

– – – – – 10 9 – – – – – – – – – – –

3 2 1 5 4 7 – 9

SD – 6

NV – 3 SD – 5 ND – 8 WY – 8 NE – 10

ID – 9 SD – 9

MA – 5 CT – 9 MD – 9 AK – 10 DE – 10 IA – 10 NE – 10 NM –10 RI – 10 SD – 10

IA – 9 ID – 9 NM – 9 NV – 9 DE – 10 NE – 10 ND – 10 SD – 10 WY –10

ND – 6 NV – 6 DE – 7 IA – 7 MT – 7 SD – 7 WY – 7 ID – 8 NE – 8

MA –10

This chart shows the results of our sixth annual Top States for Doing Business survey of site consultants, ranking the states in the top-25 positions overall based on their number of mentions by the consultants in three overall categories and 21 sub-categories. It also indicates the top-10 ranking states within each of the 68

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

LABOR CLIMATE Labor Climate Non-RTW

Leading WorkforceDevelopment Programs

– – – – – – – –

1 7 3 8 4 8 9 5

4 7 8 10 – 8 9 2

5 5 4 8 – 2 – 3

1 5 9 4 – – 4 10

3 2 10 4 8 9 6 10

4 5 10 3 – 10 1 10

3 7 2 1 7 5 4 6

– 2 1 – 8 9 – – – – 7 – 3 5 3 – – 10 7

2 10 10 – – – 6 10 – – – – – – – – – – –

– 5 – – 10 1 6 – 7 9 3 10 7 7 – – 10 9 –

–

– 5 8 – 2 3 – – 8 – – – – 6 10 – – 7 –

8 5 9 10 1 8 – 8 9 10 7 9 10 4 5 – 8 10 10

– 2 7 – 6 10 – 10 8 – – 9 – 9 7 – – 10 –

NM – 4 WV – 6 MD – 8 MN – 9 DE – 10 MA –10 NH – 10 OR – 10

Educational Resources

INFRASTRUCTURE/GLOBAL ACCESS

MA – 4 MD – 8 CT – 9 MN – 9 WI – 9 IA – 10

Quality Of Life

– 10 – – 9 10 – 7 6 – 7 1 – – – – – 10

OR – 9 HI – 10

Distribution And SupplyChain Hubs

NV – 9

Rail Accessibility

NE – 6 NM – 9 CT – 10 DE – 10 MN –10 NV – 10 OR – 10

Highway Accessibility

Certified Sites/ ShovelReady Programs

Competitive Utility Rates

Energy Reliability/ Smart-Grid Deployment

Water Outlook

2 9 4 1 4 9 10 5

3 1 4 2 6 7 7 2

9 7 8 6 – 7 5 7

9 8 7 6 10 – 7 – 10 – 9 10 – 9 – 10 10 – –

7 – 5 9 – – 10 6 – 8 10 – – – – 10 – – 3

– 6 7 8 7 8 7 6 7 7 7 8 6 5 – 7 7 8 6

6 2 6 8 7 – 1 – – 9 6 – 8 8 9 – – – 4

IA – 9 OR – 9 SD – 10

OR – 8 ID – 9 NE – 10 ND – 10 WV –10 WY –10

IA – 6 CT – 7 OR – 7 ID – 8 MD – 8 MN – 8 NM – 8 WV – 8

WI – 3 MN – 6 OR – 7 AK – 8 IA – 8 ID – 8 ME – 8 DE – 9 MT – 9 NM – 9 VT – 9

individual sub-categories. (Many states received an identical number of mentions, accounting for many tie rankings within the sub-categories.)

AREA DEVELOPMENT | Q3/2015

69

PROVIDING FLEXIBLE FINANCIAL ASSISTANCE PROGRAMS IS A WAY TO PROVIDE A HEALTHY BUSINESS CLIMATE AND DRIVE GROWTH.

(KSBCI) encourages banks to provide capital for entrepreneurs or small businesses. More than $2.4 million in loan support was approved through KSBCI last year, resulting in financial institutions providing $12.8 million in small business loans.

Kentucky’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Matching Funds program is recognized as one of the best in the nation — Kentucky

businesses have achieved a 50 percent success rate in receiving federal SBIR-STTR grants, compared to the national average of 37 percent.

To remain sustainable, funding programs must be linked to larger-scale responsible fiscal management. For example, according to the Tax Foundation, Tennessee has the lowest state debt per capita in the country, resulting in an AAA credit rating — in fact, its most recent bond

sale was at the lowest interest rate ever recorded for that state.

Indiana’s balanced budget and fiscal reserves have also rewarded that state with a triple-A bond rating. The state closed FY 2015 with a structural surplus of $210 million. Reserves are the second highest ever in Indiana, at more than $2.14 billion.

A state’s right-to-work (RTW) status is another top consideration for many companies.

According to research by the

2015 TOP STATES Commentary MATCHING CLIENTS’ requirements to the best state is a task that incorporates well over 100 individual dimensions — and it is impossible for any consultant to have “walking around” knowledge on all dimensions for all states. Recognizing that during an average day, most consultants do not have the luxury of time to thoroughly investigate the questions presented in surveys, their answers to the survey’s questions are typically based on past experiences (that may or may not be recent) — and perception.

In some instances, the stated opinions may have more to do with which states were on the top of the consultant’s mind, rather than a truly analyzed selection.

THAT BEING SAID, we were interested in comparing the past four years’ responses in order to gauge consistency in those opinions and perceptions. The results are compelling — not only from a year-to-year standpoint, but also compared to the annual corresponding Gold and Silver Shovel Awards, which identify those states receiving the [largest job-creating and investment projects] in a given year.

NOTABLY, in the past 4 years (2012 – 2015) of survey responses, the top three states named in the overall rankings have been the same (Georgia, South Carolina, and Texas). In fact, seven of the top 10 states named in the overall rankings have also been the same (Alabama, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, and Texas). When comparing these rankings to the Shovel Awards results, the very same states are highlighted again and again, with Texas receiving a Gold Shovel in each of the four years, Georgia and South Carolina in three of the years, and Tennessee two out of the four years. The key conclusion is that the consultants’ opinions, whether based on deep analysis or perception, seem spot-on with where projects are actually being constructed.

By LES J. CRANMER, SENIOR MANAGING DIRECTOR; AND ART M. WEGFAHRT, CORPORATE MANAGING DIRECTOR; SAVILLS-STUDLEY, INC.

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TOP STATES FOR DOING BUSINESS Economic Policy Institute, wages in RTW states are 3.1 percent lower than those in non-RTW states. The AFL-CIO reports an even larger margin: average worker wages in RTW states are 12.2 percent less compared to non-RTW states.

In March 2015, Wisconsin became the 25th right-to-work state in the U.S. The entire southeastern U.S. is right-towork, which is a strong draw for manufacturers. South Carolina’s and North Carolina’s unionization rate for the private sector is 1.9 percent — one of the lowest in the country.

BUSINESS ENVIRONMENT LABOR CLIMATE INFRASTRUCTURE/GLOBAL ACCESS However, RTW vs. non-RTW does not have to be a determining factor in site selection. For example, in Kentucky, a nonRTW state, the union membership rate has never exceeded the national average and, in fact, decreased by 3 percent in 2014. The majority of existing unionized Kentucky facilities are the result of national contracts.

Labor Climate Labor is a leading cost for any company. Factors beyond wages and benefits that are considered include availability of skilled workers; effective state work-

force development programs that can find and train qualified workers, often at no cost; and postsecondary schools and other educational resources.

A common factor among top-ranked states is a labor force that is supported by a strong network of universities and colleges. For example, Texas’s 146 higher-education institutions awarded more than 271,000 new degrees statewide in 2013-2014, with many of the graduates entering the Texas workforce. With 457,900 new jobs created in Texas in 2014, these newly graduated profes-

2015 TOP STATES Commentary IT IS NOT SURPRISING to see Georgia rank as the Top State for Doing Business. Georgia places strong in overall cost of doing business and has a diverse workforce. Millennials are now driving the workforce equation, and their decision to call Southern States home has had a positive impact on the corporate and tech sector growth throughout the region. The Georgia difference has been that its longstanding corporate citizens have become team players in economic development. Georgia has built a playbook to bring business leaders to the forefront of economic development, and this collaboration of the private and public sectors has wooed companies such as NCR and Newell Rubbermaid.

IN ADDITION to economic development efforts, Georgia offers a highly educated labor market, affordable housing and office space, and access to Hartsfield-Jackson Atlanta International Airport, the world’s busiest airport. The city of Atlanta sits at the intersection of three major interstate highways, with robust railroad access and the fourth-largest shipping container port just a few hours away in Savannah. This mobility makes the state attractive for all asset types.

HOWEVER, Georgia’s competitors are not sitting back and watching Georgia grow without a fight. Georgia’s playbook has been adopted by all of the states ranked in the top 10. Specifically, these states are listening to the marketplace and providing what is most important for business — a cooperative state government and strong workforce development for an evolving workforce. They realize that when companies make location decisions, time is money and the quicker you can get them to the ribbon-cutting, the better, because this translates to profit. This is why the South continues to outpace the rest of the country when it comes to a favorable business environment.

By T. BRADLEY FULKERSON III, CCIM, MANAGING DIRECTOR, TRANSWESTERN

72

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Micro and Nano Fabrication

World’s Thinnest Electronic Generator

Naval Engineering

Electronics and Nanotechnology

Controlling Robotic Swarms

Fluorescence Microscopy

LET’S TALK INNOVATION There is a place where technology breakthroughs are benefiting you every day. A place where solutions to our toughest problems are discovered, from rare and deadly diseases, to the world’s thinnest electronic generator.

A place where global brands like AT&T, The Coca-Cola Company and The Home Depot are opening innovation labs, and leading small businesses are achieving new product commercialization through the #1 industrial and #2 biomedical engineering programs in the nation. That place is Georgia. Start the conversation at Georgia.org.

We SPEAK Business Georgia Department of Economic Development | Georgia.org

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sionals will be in high demand for continued job growth.

North Carolina has one of the fastest-growing populations in the U.S., increasing at twice the national rate over the past decade, which helps fulfill workforce needs. More than 380,000 students are seeking degrees

at 41 colleges and universities, providing a steady stream of skilled workers.

And in Virginia, more than 575,000 students are enrolled in over 100 in-state institutions of higher education, including 23 community colleges with transferrable programs that partner

with companies to offer customized education and training.

Companies now expect to work with state-run workforce development programs that collaborate with universities and colleges to customize workforces for their new or expanded facilities. Two of the most-recognized

2015 TOP STATES Commentary THE SURVEY is generally consistent with my experience as to the states that are attracting large shares of U.S. location investment. Putting some broader geographic context to the list, the process of site selection is not isolated by state political borders and, in fact, broad state business climate is but one of several layers to sort through to find the right locations for specific projects.

THE LAYERS are both broader and narrower. More broadly, regional patterns of industry clustering and supply chains have a tremendous influence on where projects locate, for example the “automobile corridors” from the Midwest/Mid-South into Mexico. More narrowly, localized talent and innovation clusters, for example Boston-Cambridge, are of global significance. The Boston region is booming from a location investment perspective in the biotech, education technology, and other knowledgefocused sectors, yet the state of Massachusetts does not show up on the top 25 list. Local factors, particularly as related to talent, infrastructure, and property availability, will often trump statewide business climate considerations. The following observations, though not intended to be comprehensive, offer additional context to the rankings: SOUTHERN STATES such as Tennessee, Alabama, Kentucky, and Mississippi benefit from being in the center of the automobile and supplier chain and offer relatively low labor costs.

SOUTH-CENTRAL STATES such as Texas, Louisiana, and Oklahoma benefit from the strength of the energy sector. Texas also benefits from its many large and medium-sized metro areas that are attractive for investment from a scale and talent perspective.

SOUTHEASTERN and Mid-Atlantic States such as Georgia, South Carolina, Florida, and North Carolina benefit from varying combinations of moderate to lower costs, proximity to Eastern and Midwest markets, East Coast ports, and established reputations as relocation destinations from the Northeast and Midwest, in particular.

THE RELATIVE strengths of traditional manufacturing belt states such as Indiana, Ohio, Illinois, and Michigan are underpinned by localized skills, proximity to markets, big industry supply chains, and scale/density of labor markets among other factors. Illinois benefits from the relative strength of metro Chicago; Indiana from the attractiveness of the Indianapolis metro and its smaller cities; Ohio, by multiple metro areas that drive much of the investment; and Michigan by a strong skills base, regained strength in the automotive sector, and an improved business climate reputation.

IN THE WEST, California is fueled primarily by the strength of the Bay Area, San Diego, and Los Angeles and the strength of the state’s higher education system. Though ranked a bit lower on the list, Utah, Arizona, and Colorado benefit from in-migration growth, strong technology skills fueled by higher education resources and relocation appeal, and efficient customer servicing to West Coast markets.

IN SUM, while state-level factors are important, site selection decisions are driven more broadly by industry-specific customer and supplier dynamics as well as more narrowly by localized factors pertaining to clustering synergies, talent, labor market supplydemand, sites/buildings, infrastructure, and localized costs. States play an important role relative to incentive, tax and regulatory policy, long-term planning around education and infrastructure, and shaping a business open environment.

By LAWRENCE MORETTI, LFM CORPORATE LOCATION SOLUTIONS

74

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TOP-RANKED STATES HAVE A LABOR FORCE SUPPORTED BY A STRONG NETWORK OF COLLEGES AND UNIVERSITIES.

programs in the country are Georgia Quick Start and readySC, which provide recruiting, screening, and training to fit a company’s needs. Training can be delivered in the classroom, special facilities, or on the plant floor.

For example, employees at Plasma Surgical in Roswell, Ga., make a groundbreaking product used every day in operating rooms. Producing the company’s sophisticated PlasmaJet surgical system requires precision and

a great deal of manual dexterity and eye-hand coordination.

Since the system was developed in Sweden, many of the processes are new to the Fulton County workforce, though biomedical devices in general are

2015 TOP STATES Commentary ASSESSING THE general business climates of the U.S. states for location investment is an inherently complex task. While there are general traits and conditions that most companies and site selectors seek during a location search, economic and business climate factors can have widely varying weight and importance for different industries, functions, companies, and projects.

LOCATION PROJECT decision goals, objectives, specifications, and priorities change, sometimes dramatically, from company to company even within the same corporate function and industry, based on the company’s specific project expectations; their current competitive position; their network of facilities, customers, and suppliers; and even the team’s personal past experience and preferences.

FOR EXAMPLE, while one company may be highly focused on labor-management relations, regulations, low taxes, and incentives, another company in the same industry with similar project specs may have a different customer and supplier set, production technology, tax structure, and union history, and therefore be instead more focused on logistics, skill sets, and infrastructure. Therefore, rating state business climates can often be a function of personal preferences or unique industry and project experiences.

THAT BEING SAID, there are commonalities and general agreement among site selectors and their projects. Nearly all projects, and now more than ever, are keenly interested in the workforce and the ability to obtain and retain critical skills at competitive costs. Companies and their site selectors have long held in high regard states that have a long track record in helping companies recruit and train skilled workers that are productive at competitive wages/salaries, and this year’s top 10 states fit that mold.

LIKEWISE, while any specific cost factor will vary from industry to industry, function to function, and project to project, total variable operating costs are nearly always a critical bottom line location decision factor. This year’s-top rated states have a long history of competitive variable operating costs.

AND FINALLY, a factor set that nearly all projects deem very important is the ability to react to project data and feedback requests rapidly and accurately, and then the ability to help the company implement their project quickly, with as few hurdles as possible once the location decision has been made. Once again, this year’s top-rated states have a tradition of project “after care” and helping companies go from decision to operations with minimal delay.

By PHIL SCHNEIDER, PRESIDENT, SCHNEIDER CONSULTING LLC

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FOR FREE SITE INFORMATION, CALL

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

Providing the Necessary Tools

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

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

www.nevadasitelocator.com

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TOP STATES FOR DOING BUSINESS not. To transfer the company’s advanced technology from Europe to Georgia, and to find the best Georgians and train them to manufacture the complex devices, the company partnered with Quick Start. The program’s success in providing customized training for hundreds of advanced manufacturing companies has put Georgia in the top spot for workforce development programs every year since Area Development began this survey of consultants six years ago.

CareerSource Florida provides programs such as quick response training and incumbent worker training to help existing and new companies recruit, train and maintain cutting-edge skills, and keep pace with new technologies.

Last year in Alabama, AIDT — the state’s long-standing workforce development agency — opened the $7 million Alabama Aviation Center at Mobile Aeroplex to help Airbus assemble the workforce for the aerospace company’s newest aircraft assembly facility. AIDT also recently opened a regional training center in Montgomery focusing on manufacturing and IT jobs.

Mississippi has also been highly effective in providing qualified workers for its rapidly growing aerospace industry.

Mississippians make a variety 78

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BUSINESS ENVIRONMENT LABOR CLIMATE INFRASTRUCTURE/GLOBAL ACCESS of aerospace products, ranging from helicopters and unmanned aerial vehicles to composite jet engine components. Mississippi State University, with its Raspet Flight Research Laboratory and Center for Advanced Vehicular Systems, was recently named an FAA Center of Excellence for unmanned aerial systems. Major aerospace firms operating in Mississippi include Aurora Flight Sciences, Northrop Grumman, and Stark Aerospace. Mississippi is working with its network of 15 community colleges and universities to create customized training programs to meet the needs of its growing aerospace cluster.

Louisiana’s FastStart program was established in 2008 and relies on experienced industry professionals to interface with companies to create highly customized employee recruitment, screening, and training solutions for clients. FastStart constructed a new 65,000-square-foot, advanced training center to support Benteler Steel/Tube’s $975 million manufacturing project in Shreveport. To meet projections of fast job growth in Louisiana over the next five years, FastStart is developing more advanced job-matching and recruitment tools.

Newer workforce development programs include the Kentucky Skills Network, which provided training for 84,000 FOR FREE SITE INFORMATION, CALL

Kentuckians in a variety of industry sectors in 2014, including manufacturing, healthcare, information technology, energy, distribution, and research and development.

Finally, states also need to look to the future when it comes to STEM (science, technology, engineering, and math) jobs. A widespread problem in manufacturing is not being able to find enough skilled workers to fill openings — especially for STEM-related jobs. Tennessee has become a champion of STEM in K-12 education. In 2013 STEM and STEM-related completions at Tennessee institutions were approximately 28,800, an increase of 31 percent in just five years. Graduates in engineering, engineering technologies, and engineeringrelated fields have grown in Tennessee by 30 percent from 2008 to 2013.

Indiana has increased its commitment to career and technical education with the goal that by 2020 the state will have a fivefold increase in students who graduate high school with an industry-recognized credential.

In another announcement, Michigan plans to spend $50 million for community college skilled trades equipment, especially for in-demand jobs — one of the largest investments of its kind in the country in 2015.

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Infrastructure/ Global Access With increasingly global markets, and just-in-time manufacturing and delivery, there has never been greater demand for a modern, well-maintained transportation infrastructure.

Our top-ranked states all have well connected interstates and highways, rail lines, airports, and port shipping. Other factors include certified sites/shovelready programs, competitive utility rates, energy reliability/ smart grids, and water availability/cost.

When combined, all these factors work together to maximize the speed and efficiency of business. For example, Florida’s

extensive multimodal transportation system that includes international airports, deepwater shipping ports, and extensive highway and rail networks enables robust economic activity. Merchandise trade valued at $153.2 billion flowed through Florida’s airports and seaports in 2014, making the state one of the world’s leaders in international trade. As a result, many distribution/logistics firms operate in Florida to take advantage of the easy access to global markets.

Port access is critical for global shipping. California has nine deepwater ports within its borders. In 2013, over 17 million intermodal shipping containers

moved through California ports.

Los Angeles and Long Beach are the two busiest ports in the U.S., moving a combined 14.5 million containers in 2013. In Georgia, the Port of Savannah is the second-busiest seaport for containerized cargo on the East Coast and the fourth-largest and fastest-growing container port in the country.

States also depend on busy inland ports on the Mississippi and Ohio rivers and the Great Lakes. Michigan has access to several major international shipping ports via the Great Lakes.

Ohio’s well-integrated transportation infrastructure includes major barge ports on Lake Erie and the Ohio River. In fact, Ohio

ARLINGTON, TEXAS Celebrating Six Decades of Automobile Manufacturing

General Motors to invest $1.4 billion in Arlington Assembly Plant Arlington is in the spotlight and is perfectly situated at the epicenter of a thriving North Texas region. Our strong economy, skilled workforce, and globally-recognized industries make Arlington a prime location for investment. Dare to dream? Land here.

ARLINGTON: WHERE DREAMS GET DONE ArlingtonTX.gov/ecodev | ecodev@arlingtontx.gov | 817.459.6155

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INCREASINGLY GLOBAL MARKETS AND JUST-IN-TIME DELIVERY DEMAND A MODERN, WELLMAINTAINED INFRASTRUCTURE.

is eighth in the nation for total water tonnage moved, handling over 103 million tons of cargo valued at $11 billion every year.

Memphis is the second-busiest port on the Mississippi River and the fourth-busiest inland port in the U.S. In addition to two deepwater ports on the Gulf of Mexico, Mississippi enjoys robust shipping along the Mississippi River and the TennesseeTombigbee Waterway.

It’s not just enough to have the infrastructure — companies also want to see states maintain and improve their transportation networks for the future.

At Hartsfield-Jackson Atlanta International Airport — the tenth-largest air cargo hub in North America — plans are under way to add a sixth runway and expand the airport’s air cargo facilities. Charlotte Douglas International Airport in North Carolina will also add a runway and build a new international terminal. The Georgia Ports Authority has committed to $1.4 billion in capital investments for its ports over the next 10 years.

Los Angeles and Long Beach ports combined are spending approximately $5 billion on port infrastructure upgrades from 2012 to 2017. The Port of 80

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Oakland is in the process of a $1.2 billion upgrade, including building a world-class global trade and logistics center and one million square feet of new warehouse space.

What integrates these different modes of transportation and shipping are intermodal facilities. For many companies, easy access to modern intermodal connections is a must. Ohio, for example, has 10 intermodal facilities that connect its roads, rail, ports, and airports. Texas has two world-class global logistics hubs that support NAFTA trade and provide strategic multimodal transportation access, including an industrial airport, interstates, and an abundance of Class 1 rail lines.

According to the Intermodal Association of North America, intermodal transport is the fastest-growing method of transportation in the U.S. It is more fuel-efficient and creates less pollution. The Port of Mobile in Alabama, one of the nation’s busiest ports, is undergoing a major expansion, including the construction of an intermodal rail facility. Georgia has more than 30 intermodal facilities, most of which are located in Atlanta or near the FOR FREE SITE INFORMATION, CALL

Port of Savannah. Norfolk Southern has expanded its two intermodal facilities in Atlanta several times and invested over $2 billion in capital improvements to its overall intermodal network.

Finally, access to water resources is becoming a serious concern for many companies, especially as drought patterns continue to shift and expand across the country. As surface water dwindles, wells are at more risk for running dry and high-discharge wells for industry are more difficult and expensive to permit. For high water users, long-term access to plentiful water sources is a big deal. This becomes a strong advantage for states like Michigan, Ohio, Wisconsin, and Minnesota along the Great Lakes (which are now at or above normal levels). Other leading states are in the Southeast and the Pacific Northwest, where hydroelectric power plants provide reliable, low-cost electricity to industrial users. • •

•

Survey data compiled by Area Development magazine; story written by Mark Crawford, contributing editor

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

SPONSORS

ALABAMA

AIDT AIDT, Alabama’s primary workforce training program, arms the state’s workforce with the specific skills needed for new and expanding industry. Since 1971, the program has played a critical role in preparing Alabama’s workforce and in building industry in the state.

Ed Castile, Director AIDT One Technology Court Montgomery, AL 36116 334-242-4158 • Fax: 334-242-0299 www.aidt.edu info@aidt.edu

FLORIDA

Enterprise Florida From a talented workforce to a strategic geographic location, Florida has the breathing room businesses need to grow. Freedom from high taxes and prohibitive regulations make Florida the #1 tax climate in the Southeast and 2nd best state for business in the U.S. Learn how Florida can help your business thrive.

Crystal Sircy, Senior VP, Business Development Enterprise Florida 800 N. Magnolia Ave., Ste. 1100 Orlando, FL 32803

1-877-YES-Florida • Fax: 407-956-5599 csircy@enterpriseflorida.com www.perfectbusinessclimate.com Greater Fort Lauderdale Alliance Greater Fort Lauderdale offers “Life. Less Taxing.” to more than 150 corporate and international regional headquarters including AutoNation, Citrix, DHL, Emerson, Microsoft, and Nipro Diagnostics through a cost-competitive business climate and no state personal income tax, combined with robust domestic and international air and seaports and exceptional quality of life.

Peggy Doty, Executive Assistant & Project Coordinator Greater Fort Lauderdale Alliance 110 East Broward Blvd., Suite 1990 Fort Lauderdale, FL 33301 954-627-0134 pdoty@gflalliance.org www.lesstaxing.com

GEORGIA

Georgia Department of Economic Development The GDEcD plans, manages, and mobilizes state resources to attract new business investment to Georgia, drive the expansion of existing industry and small business, locate new markets for Georgia products, inspire tourists to visit Georgia, and promote the state as a top destination for arts events and film, music and digital entertainment projects.

Tom Croteau, Deputy Commissioner of Global Commerce Georgia Department of Economic Development 75 Fifth Street, N.W., Ste. 1200 Atlanta, GA 30308 404-962-4000 communications@georgia.org 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 38 weekly container ship calls. Savannah features enough fully entitled land to build 34M square feet of industrial space, while Georgia offers a business-friendly tax structure and targeted workforce training.

Stacy Watson, General Manager, Economic & Industrial Development Georgia Ports Authority P.O. Box 2406 Savannah, GA 31402 912-964-3879 • Fax: 912-964-3869 swatson@gaports.com www.gaports.com

NAMED TOP STATE FOR BUSINESS

BY AREA DEVELOPMENT AND SITE SELECTION TM These latest honors continue to confirm what everyone at Georgia Power already knew: Our state is a great place for business. If you’re considering relocating or expanding here, our Economic Development team will work closely with the Georgia Department of Economic Development to help you with labor analysis, market data, available properties – whatever you need – at no charge. For a closer look at all Georgia has to offer, visit SelectGeorgia.com.

©2015 Georgia Power Company. All rights reserved.

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SPONSORS Georgia Power Georgia Power is the largest subsidiary of Southern Company, one of the nation’s largest generators of electricity. With an international reputation for excellence in economic development, the company has helped bring more than 121,000 jobs and $24 billion in investment to Georgia over the last decade alone.

Jonathan Sangster, General Manager Economic Development Georgia Power 75 Fifth Street NW, Ste. 175 Atlanta, GA 30308 404-506-2216 • Fax: 404-506-1474 econdevga@southernco.com www.SelectGeorgia.com

The Crossroads of Access and Advantage.

INDIANA

Seymour-Jackson County Industrial Development Corp.

For over 30 years, the Jackson County IDC has worked to attract and retain business in Seymour-Jackson County, Indiana. Located along Interstate 65, Seymour-Jackson County is one hour south of Indianapolis and an hour north of Louisville, KY, and is also a member of the South Central Indiana regional economic development group.

Jim Plump, Executive Director, CEcD, FM Jackson County Industrial Development Corporation 301 N. Chestnut St. Seymour, IN 47274 812-522-4951 • Fax: 812-522-1235 jimplump@jcidc.com www.jcidc.com

KENTUCKY

Kentucky Cabinet for Economic Development Kentucky is open for business. Whether your company is looking for an ideal location, competitive utility rates, a highly skilled labor pool, or flexible workforce development programs, Kentucky is the choice for companies to do business. Explore the many advantages of the Commonwealth and you’ll find Kentucky will go the extra mile to exceed your needs.

Mandy Lambert, Commissioner, Business Development Kentucky Cabinet for Economic Development Old Capitol Annex, 300 W. Broadway Frankfort, KY 40601 Mandy.Lambert@ky.gov www.ThinkKentucky.com

MICHIGAN

Michigan Economic Development Corp.

Michigan is undergoing a once-in-ageneration transformation. Bold changes have made Michigan more business-friendly than ever. Business taxes are lower than any time in decades. Combined with our economic developing tools, automotive and manufacturing leadership, world-class talent, and geographic advantage, we are fueling new economic growth and new business opportunities.

We are positioned, prepared, successful.

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

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FOR FREE SITE INFORMATION, CALL

Robert Wilson - Senior Project Manager, Site Consultant Services Michigan Economic Development Corp.

300 N. Washington Square Lansing, Michigan 48913 517-763-4156 • 1-888-565-0052 wilsonr9@michigan.org www.michiganbusiness.org

NEW YORK

Empire State Development START-UP NY helps you start, expand, or relocate your qualified business to a tax-free zone in New York State. You will pay zero taxes for 10 years and have access to college and university resources. An expansive infrastructure will connect your business to the nation and the world. ny.gov/business

800-735-2732, EXT. 225, OR VISIT US ONLINE 12/08/15 7:09 PM AT www.areadevelopment.com

SPONSORS

NORTH CAROLINA Winston-Salem Business Inc. Winston-Salem is the only local agency that conducts external economic development marketing. WSBI promotes Winston-Salem and Forsyth County as an excellent business location and provides unparalleled customer service to clients and consultants interested in our community.

Robert E. Leak, Jr., President Winston-Salem Business Inc. 1080 W. Fourth Street Winston-Salem, NC 27101 336-723-8955 • Fax: 336-761-1069 rleak@wsbusinessinc.com www.wsbusinessinc.com

Lubbock Economic Development Alliance Lubbock’s highly skilled and educated workforce, proximity and connection to major national and international markets, and affordable utility and living costs make it the ideal place to grow your business.

Known as the “Hub City” of West Texas, our diverse economy is based on manufacturing, agriculture, wholesale and retail trade services, as well as government, education, and healthcare.

Carolyn Rowley, Director of Business Recruitment Lubbock Economic Development Alliance 1500 Broadway Lubbock, TX 79401 800-687-5330 Carolyn.rowley@lubbockeda.org www.lubbockeda.org

OHIO

JobsOhio JobsOhio, a private, non-profit corporation, helps businesses locate, expand and prosper in Ohio. Our managing directors have extensive work experience in various industries so they understand the needs of business and stand ready to assist you.

Contact us to learn why your company should call Ohio home.

JobsOhio 41 S. High Street, Suite 1500 Columbus, Ohio 43215 614-300-1151 contact@jobs-ohio.com jobs-ohio.com

TENNESSEE

Knoxville-Oak Ridge Innovation Valley Innovation Valley is east Tennessee’s regional economic development initiative that is managed by the Knoxville Chamber. The diversity of the region gives companies access to world-class resources and assets that make it a prime business location in the U.S. Doug Lawyer, CEcD, Vice President, Economic Development Knoxville-Oak Ridge Innovation Valley 17 Market St. Knoxville, TN 37902 865-637-4550 dlawyer@knoxvillechamber.com www.knoxvilleoakridge.com

TEXAS

City of Arlington Office of Economic Development Arlington, located at the epicenter of the thriving North Texas region, is quickly becoming a hub for engineering, advanced manufacturing, technology, and medical science industries. Beyond our world-class entertainment is the backbone of our city: economic vitality, a competitive business environment, and a diverse, skilled workforce.

Bruce C. Payne, Economic Development Manager City of Arlington Office of Economic Development 101 W. Abram Street Arlington, TX 76010 817-459-6155 ecodev@arlingtontx.gov www.arlingtontx.gov/ecodev AREA DEVELOPMENT | Q3/2015 AREA0471.indd 1

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real estate

E-Commerce Development, Industrial Land Pricing, and the “Amazon Effect” The emerging information and services market is a game-changer for the industrial land market.

By John Morris, Leader, Industrial Services for the Americas; Ben Conwell, Senior Managing Director, e-Commerce and Electronic Fulfillment Specialty Practice Group; and Bruce Erhardt, Executive Director, Land Brokerage – Americas; Cushman & Wakefield

T

he world of real estate today is consumed by the conversation about ecommerce. And rightly so.

The significant growth in e-commerce and same-day/ next-day delivery services is directly impacting industrial lease rates, land pricing, and development costs in every city, submarket, and MSA in the world.

The growth of online retail sales as a significant

percentage of total retail sales is showing no signs of slowing. The shift in how people are shopping is a leading demand driver that will increasingly influence real estate decision-makers and their markets. Forrester Research estimates that the online share of the retail sector would reach the midteens during the coming decade, up from less than 10 percent today.

In turn, retailers and

third-party logistics organizations are working to secure the best sites close to population centers. This has been a tremendous boon to owners and developers of entitled land adjacent to urban areas and suitable for development.

Although secondary markets have also seen an increase in development, activity in primary markets has been stronger, particularly in core markets like

Forecast: US Online Retail Sales, 2012 to 2017

$231

$262

$291

$319

$345

$370

CAGR from 2012 to 2017: 9%

(US$ billions)

Year-on-year growth Share of total retail sales

2012

2013

2014

2015

2016

14%

13%

11%

10%

8%

7%

8%

8%

9%

10%

10%

10%

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

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FOR FREE SITE INFORMATION, CALL

2017

Figure 1

Atlanta, Chicago, Dallas/ Fort Worth, and the Inland Empire, which each have in excess of nine million square feet in the construction pipeline. The Inland Empire, with 18.8 million square feet of space currently in development, tops the ranking.

With projected occupancy gains of 380 million square feet in warehouse/ distribution space from 2014–2017, activity will remain strong. At the same time, limited land availability and high land prices are making urban facilities in top markets more expensive. This supply and demand imbalance has neighboring submarkets increasingly land-constrained.

Diversification of Uses and Users The market today on land is certainly a hurdle, and the challenges include assemblage and readiness — not just ownership.

Corporate real estate professionals today are particularly interested in shovelready “certified” sites. An increasing number of own-

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

ers are working with landcertification companies that can complete zoning, wetlands studies, and utilities improvements upfront when marketing a parcel for sale or as a build-to-suit opportunity. Just because one parcel may be available and ready to sell does not mean adjacent parcels, which may be needed for an industrial requirement to be developed, can be added to the assembled project.

The market is difficult.

In addition to new development, some markets are beginning to see older stock buildings demolished and rebuilt, or adapted for modern needs. For example, KTR (now Prologis) completed a substantial demolition and rebuild for Amazon in Avenel, N.J.

In California, Prologis is preparing re-development plans that include the demolition of existing obsolete structures in a close-in site just south of Market Street in San Francisco. Many more examples can be found coast to coast. These reuse projects are driven by the lack of functionality with the current building, certainly, but just as much by the dirt underneath and the opportunity it can unlock.

For many retailers, future sales — and profits — will be dependent on how quickly and consistently goods can be delivered to customers in major metro areas. Developing robust, flexible, highly responsive final-mile networks will be critical for both retail-

ers and shippers. Amazon, as a clear and present first mover, is helping accelerate the migration in retail that technology has enabled. Order it online, or mobile, get it today or tomorrow. That is the expectation stretching the retail world.

E-Commerce Networks Buildout Amazon is clearly making the largest e-commerce impact in the U.S. today, occupying more than 60 million square feet of distribution space nationwide.

In a move to compete with Amazon, Wal-Mart is now investing heavily in the buildout of its e-commerce fulfillment network. This includes one million-squarefoot projects under development or already operating

in six major markets. Home Depot, Target, and Kohl’s are also making major investments in e-commerce– related facilities throughout the U.S. The overall acreage required to deliver these projects rises into the multiple thousands.

While requirements for big-box space are common among e-commerce tenants, there is also growing demand for smaller- and midsize buildings. Increasing service expectations, elevated transportation costs, and the need to access labor are leading e-commerce companies to establish smaller infill locations around major population centers. Not only do companies covet the closeness to FedEx/UPS ground shipping centers these locations often bring,

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but also proximity enables them to fill and deliver orders to a large number of customers quickly. Where the land is becomes more important by the day.

Omni-channel commerce is also behind some of the most creative logistics solutions the supply chain field has seen. Some of the world’s largest retailers are turning their existing stores into mini-distribution hubs to help them compete better online against Amazon.

Instead of fulfilling web orders from warehouses hundreds of miles from shoppers’ homes, companies including Wal-Mart, Best Buy, and Gap are routing orders to stores nearby.

This trend, known as “Ship from Store” (SFS), allows retailers to ship online orders from a physical store, which may be closer to the end consumer than the retailer’s e-commerce fulfillment facility.

Wal-Mart, Sam’s Club, and dozens of anchor and grocery chains are investing in creating convenient store pick-up experiences to complement in-store and online sales. Amazon reportedly is preparing to pilot a grocery drive-up offering in Tampa …more land needed.

Looking Ahead in E-commerce The real estate footprints and building strategies that companies will employ continue to unfold, and it is becoming quite clear that “one size fits all” will not be part of the picture.

E-commerce real estate requirements likely will continue to move toward four distinct categories: • Mega big boxes landing well outside major metropolitan areas

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• Mid-sized distribution/ fulfillment centers seeking to locate inside the “ring of faster gratification” • Medium to large sortation centers popping up within major urban centers to accelerate delivery • Small depots emerging seemingly on a corner near you, where the last mile really begins We also know this new world will drive absorption and development in industrial real estate for years to come. Over the next three years alone, an anticipated 290 million square feet will be completed, with much of it over 100,000 square feet per building.

The “Amazon Effect” As the overall economy improves and last-mile delivery strategies begin to gel, expanded close-in development of smaller facilities is guaranteed by two major factors. The first is certainly urbanization and the gradual net movement of population toward the dense core of the city. The second major factor is the rising service level expectations from e-commerce buyers — i.e., the “Amazon effect.”

The more Amazon drives up the expectations around service levels with offerings as short as sameday and even two-hour delivery, the more proximity becomes critical to retailers and other fulfillment organizations trying to keep pace. Competitors in the space are going to need to develop their fulfillment infrastructure closer to cities.

Landowners already have investors and industrial developers in bidding wars for their property.

At the same time, however, these infill parcels are FOR FREE SITE INFORMATION, CALL

“ Omni-

channel

commerce is also

behind

some of

the most creative logistics solutions the supply chain field has seen.

also appealing for office and multifamily development. With all of these new, urbanization-spurred requirements for development in the urban core, land prices in these areas have gone up significantly to the point where development in some markets now has a very challenging payback.

On the other hand, industrial land in the exurban parts of any major city, further out, remains available and generally plentiful de-

pending upon its proximity to other population centers and transportation infrastructure. Except for the nation’s densest industrial markets, industrial land is generally readily available at reasonable prices — for now.

It is important to note that the trend toward urbanization does not mean that suburban growth is over. In fact, suburban and rural consumers will continue to be significant demand drivers. This means that last-mile providers will need to craft solutions for both urban and suburban needs. And while the right answers will vary significantly from market to market, they will have one characteristic in common: they will need to meet consumer expectation for a fast, seamless, and friction-free delivery experience.

Good News?

What does all of this mean? E-commerce retail, and soon wholesale directto-consumer, will continue to grow commensurate with the conversion of our economy to an information and services market. Ultimately, so will competition for the best land sites.

Generally, however, we think this is good news for manufacturing and economic development for the typical projects looking for affordable land in lower cost markets. The competition for those land sites is now focused elsewhere.

Attracting manufacturing jobs and investment is never easy for municipalities looking for that growth, but perhaps, at least, finding land for these projects may not get any harder for the time being. ■

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

Compliance: Where Incentives Are Won or Lost Continued from page 28 companies should consider the authority of each incentives compliance team member to view sensitive PII prior to beginning the compliance report.

All parties involved in compliance reporting should agree to procedures for use of PII in reporting, including whether the retention of the data is planned, and by whom, or if the return or destruction of PII is necessary. These procedures should apply not only to the internal compliance team, but also to the government agency administering the incentives program.

Companies must realize that the heavy workload of incentives is often not during the front-end negotiation and application approval process. Likewise, an incentives offer from a state or local government, or even an incentives approval from a government body, does not secure the realization of the full incentives value. Proper incentives compliance reporting is as important, and usually is more important, to securing incentives. Sound planning and process implementation may be the difference between realizing the full value of an incentives program and potentially falling out of compliance and not receiving the benefit. ■ 1 2

http://newsok.com/oklahoma-governor-signs-bills-to-give-tax-incentives-greater-scrutiny/article/5414219 http://oklahomawatch.org/2014/12/30/in-state-jobs-program-promises-fall-far-short-of-results/

Call Centers Increasingly Returning Home Continued from page 30 states in the region either average lower overtime premiums for workers, or their workers are available for more hours during the week at base pay, compared with workers on the coasts, according to ManpowerGroup research.

“They can work seven days a week but don’t have to get double pay for Saturday or Sunday, or they don’t get different pay for a night shift,” Gagnon explains. “In California and the East, it’s very common for night-shift work to come with a wage premium. Not so in the Midwest.”

Ryan Hulland, president of Charlotte-based Netfloor USA, which supplies contact centers with specialized flooring that includes built-in “data” trenches, adds that these regions are leading in landing new operations “because there is a lot of labor out there and costs for real estate are down.

Plus, this isn’t to say that workers don’t need to be specialized, but it’s pretty easy — unless you’re trading stocks – to train someone,” he says.

In that vein, markets that have lost out as call centers return to the United States include Washington, Oregon, California, and New York because they are “very expensive,” Wilson notes. On the Eastern Seaboard, the primary bright spot remains financial call centers, where employers in an indigenous industry can take advantage of the region’s high educational levels. ■ AREA DEVELOPMENT | Q3/2015 AREA0473.indd 1

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Mexico A GLOBAL MANUFACTURING PLAYER CIAL INVESTMENT REPORT SPECIAL INVESTMENT REPORT SPECIAL INVESTMENT REPO

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UST OVER A DECADE AGO, when Quebec-based Bombardier Recreational Products Inc. (BRP) decided to try Mexico as a manufacturing market, the off-road vehicle manufacturer took a measured approach. In 2003, BRP tested the waters by leasing a facility in Ciudad Juarez, Chihuahua, to assemble outboard engines for export. Two years later, the Canadian firm decided to transfer all of its ATV assembly and engine manufacturing operations to Juarez.

Building on its first, successful ventures south of the border, over the last decade BRP has steadily increased its stake in Mexico to more than $190 million worth of manufacturing facilities in the states of Chihuahua and Querétaro, and an extensive distributor network.

Investments Continue to Rise

WHETHER THEY ARE MANUFACTURING VEHICLES, AIRPLANES, ELECTRICAL CABLE, OR SOMETHING ELSE, COMPANIES ARE FINDING THE RESOURCES THEY NEED TO COMPETE IN MEXICO.

Business expansions like BRP’s have become “the story” in Mexico, as the country has developed into one of the world’s manufacturing powers.

“Mexico has really burst on the scene as a legitimate player in the global manufacturing sector,” says Bob Cook, president and CEO of the El Paso, Texas-based Cook Strategies Group, LLC. “Every trend I look at indicates that rise is going to continue.”

Agreeing with that prediction, the Boston Consulting Group estimated in a 2013 report that Mexican manufacturing exports will increase up to $60 billion annually by 2018.

According to Banco de Mexico data, Mexico has received over $135 billion in foreign direct investment (FDI) over the last five years — almost $86 billion of that within the past three years.

The largest share of FDI in Mexico comes from the United States, representing over one third (34 percent) of total FDI over the past three years. Canada has been the source of another 10 percent of FDI in Mexico over the same period.

More than half (58.6 percent) of the FDI coming into Mexico was invested in manufacturing enterprises, with the top five sectors being food and beverages; transportation equipment; chemicals; electronics; and electric equipment. The automotive sector alone added more than 93,000 jobs in 2014, growing nearly 15 percent.

However, the growth trend has also been “pretty diverse,” Cook says. “We’ve seen a lot of growth the across the board,” a trend which bodes well for the country’s economic future. The most pronounced growth has taken place in “high value” categories such as aerospace, automotive, and electronics.

An Automotive Powerhouse This tsunami of foreign investment has transformed Mexico into the world’s seventh-largest automotive producer and the fourth-largest exporter after Germany, Japan, and South Korea.

Mexico has usurped Japan to become the No. 2 supplier of vehicles to the U.S. market, behind Canada. By 2018, industry analysts predict Mexico’s current annual production of 3.2 million cars and light trucks to increase more than 50 percent to five million vehicles. Earlier this year, The Wall Street Journal reported that seven Asian and European automakers have opened new Mexican assembly plants, or announced plans, in just over a year. Other car companies have bankrolled major expansions in Mexico, including Nissan, General Motors, Ford, Volkswagen, and Fiat Chrysler Automobiles NV. In total, automakers and parts suppliers have earmarked more than $20 billion BRP facility in Juarez

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of new investments, Mexican officials say. The automakers’ presence has also spawned major growth of smaller vendors who supply the auto plants, according to Cushman and Wakefield’s Gonzalo Gutierrez, who is the firm’s senior director of Industrial Brokerage Services for the Northeast Region of Mexico, based in Monterrey. These vendors come from all over the world, but most hail from the U.S., Japan, Germany and, more recently, Korea, Gutierrez says.

Meanwhile, recreational vehicle maker BRP has gradually upped the ante on its Mexican investment.

In 2013, BRP opened a $100 million manufacturing facility in Querétaro, which employs 1,100 people. Last year, BRP decided to build a second plant in Juarez, to expand its Can-Am product offering and meet future demand for off-road vehicles.

When completed in late 2017, the $55 million facility is expected to employ BRP facility in Querétaro about 900 workers.

Aerospace, Electronics, and Medical Devices The aerospace sector in Mexico has also been growing rapidly. Last year, Mexico exported an estimated $1.9 billion worth of aerospace products to the U.S., an amount that has quadrupled since 2009, Cook notes. In that sector, “Mexico is rapidly moving up the global rankings.”

Regarding regional distribution of FDI, just over half accrues to Mexico City and the surrounding state, according to Cook.

About a third of the balance goes to the four states of Chihuahua, Jalisco, Puebla, and Nuevo Leon.

In addition to being an automotive center, the border city of Juarez has become a manufacturing center for electronics and medical devices. Its electronics manufacturers include Electrolux, Flextronics, Foxconn, and Lexmark. Its medical device companies include Cardinal Health, GE, and Johnson and Johnson. Other northern states have benefited from the growth of the electronics industry, including Chihuahua, Baja California, and Tamaulipas.

Mexico’s developing manufacturing clusters have also drawn smaller companies. One example is Greatbatch Inc., which plans to move 170 jobs from its Electrochem Solutions Inc. manufacturing facility in Beaverton, Ore., to a new plant in Tijuana (Baja California) by year’s end.

The southern Mexican region has also benefited from lower labor costs, which have helped attract clothing and textile manufacturers to cities including Campeche and Veracruz.

Boosting Mexico’s Natural Advantages There have been a multitude of reasons for Mexico’s manufacturing boom, including both indigenous advantages, and efforts by the government in recent years to make the country a

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more desirable trade partner and place to do business. Over the past decade, Mexico “has been pretty aggressive in liberalizing trade with companies around the world,” and has the most free-trade agreements of any country in the world — 44, Cook points out.

Mexico’s homegrown business advantages include lower transportation and warehousing costs, an improved ability to respond to customer demands, improved control of intellectual property, the availability of proximate time zones between management and production locales, and the cultural similarities between the U.S. and Mexican markets.

Augmenting Mexico’s expansive, free-trade policies, the government has also been proactive in modernizing the country’s business climate to 21st century standards. Investing in education has been a major thrust to ensure a well-prepared, bilingual workforce.

According to the United States Embassy in Mexico, more Mexicans — almost 100,000 more — earn engineering degrees annually than Canadians and Germans. And during the past decade, Mexico has doubled the number of its public two-year colleges and four-year universities. The government financed 140 new colleges and universities, with 120 of those emphasizing science and engineering.

Another priority has been improving Mexico’s roads, bridges, and utility infrastructure to help expedite the flow of materials and manufactured goods. Revisions in the country’s energy policy have encouraged private-sector investment in new natural gas pipelines and power lines. Additionally, earlier this year, AT&T announced plans to invest $3 billion to extend its high-speed mobile Internet service to Mexico and cover 100 million consumers and businesses by year-end 2018.

Mexico also continues to benefit from the near-shoring trend among some American companies — i.e., moving manufacturing operations to Mexico from China and other low-cost countries. Average manufacturing labor costs in Mexico are now almost 20 percent lower than in China — a sea change from 15 years ago, when Mexico’s labor costs were 58 percent more expensive than China’s, according to Forbes.com.

Are there other supply chain issues in Mexico companies need to be aware of? “There are no critical issues related to transportation inside Mexico,” Gutierrez says. “Since the last five years, the 3PL companies, such as the companies with distribution centers in multiple (Mexican) states, have handled their operations with no inconvenient events, while they have significantly increased their operations, every year.”

Some Challenges Ahead Of course, crime and violence, much of it related to the ille-

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C EXICO MEXICO MEXICO SPECIAL INVESTMENT REPORT

gal drug trade, remain a concern. However, media reports may exaggerate the hazards. Gutierrez notes that companies doing business south of the border have developed effective, operational planning strategies to minimize risk and avoid travelrelated hazards in problematical regions.

Yet, with such a rapid economic expansion, some growing pains are to be expected. There are several challenges facing the country, which the current Mexican administration is working to address, according to Cook, in order to help promote continued economic growth To capitalize on Mexico’s abundant energy resources, the country will need new capital investment and technology upgrades in the processing and distribution of energy. “That’s opening up as we speak,” Cook says. This year, Mexico opened its oil industry to foreign investment for the first time since the 1930s, offering for auction exploration rights to 14 shallow-water fields. And this summer, Mexico’s Federal Electricity Commission began taking bids on 24 projects that will enable the generation of an additional 1,442 megawatts of power, along with adding nearly 1,500 miles of natural gas pipeline and almost 2,000 miles of power lines.

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Competition for skilled labor can be expected to heat up, along with the overall economy. “If you need specialized engineers and technology, you will not find them along the border; you need to go closer to Mexico City,” notes Sylvain Blanchette, BRP’s VP of Mexican operations. Generally, the average cost of labor increases moving south from the border to the country’s interior. That may be due to more competition for skilled labor, due to the increased number of auto, aerospace, and other manufacturers, says Blanchette.

To sustain its manufacturing expansion, Mexico is going to need “to have an even greater emphasis on skilled labor,” Cook says. However, in spite of the challenges ahead, Mexico’s ascendance as a global economic power should continue, Cook believes, citing its globally competitive cost structure, young workforce, and friendly trade policies.

Mexico’s richest resource — and the real driving force behind the growth boom — may be its people, says Blanchette, who praises the knowledge, enthusiasm, and initiative of the Mexican workforce. “When we have come to Mexico with projects, the people we work with have been extremely eager to learn and improve what they do,” Blanchette concludes. •

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