Area Development Q4 2016 by Area Development

CREATIVITY AT THE LAST MILE

Advanced Technologies

ENTERPRISE ZONE OPPORTUNITIES

the Robotics Renaissance

AREADEVELOPMENT S I T E

A N D

F A C I L I T Y

P L A N N I N G

www.areadevelopment.com

www.facilitylocations.com

Q4/2016

THE TOP FACTORS TO NAVIGATE THE LOCATION MAZE

AVAILABILITY OF SKILLED LABOR HIGHWAY ACCESSIBILITY QUALITY OF LIFE OCCUPANCY OR CONSTRUCTION COSTS AVAILABLE BUILDINGS LABOR COSTS CORPORATE TAX RATE PROXIMITY TO MAJOR MARKETS STATE AND LOCAL INCENTIVES ENERGY AVAILABILITY AND COSTS

Feel free to judge us by the companies we keep. Join industry-leading businesses like Medtronic Canada, CocaCola, Canon Canada, Rogers Communications, Air Canada and Loblaw who call Brampton home. A young, educated, highly skilled and multicultural workforce. A strong economy. World-class transportation corridors to major markets. Room to grow. Need we say more? Discover why weâ&#x20AC;&#x2122;re the best business decision youâ&#x20AC;&#x2122;ll ever make. peoplepoweredeconomy.ca

Brampton, Ontario, Canada

AREA0628.indd 1

04/10/16 4:12 PM

Welcome to Ohio. Itâ&#x20AC;&#x2122;s on.

AREA0642.indd 1

19/10/16 8:53 PM

CONTENTS 23

FEATURES

COVER STORY

14 Advanced Technologies/

Robotics Shaping the Future of Manufacturing

Today’s manufacturers are staying ahead of the innovation curve by making their facilities even smarter than their products.

16 Creativity Is Critical at the Last Mile

The era of consumer instant gratification is inspiring an era of great change in the distribution landscape.

18 Choosing an Existing Structure

2016

or Greenfield Construction

TOP FACTORS TO NAVIGATE THE LOCATION MAZE

Companies considering existing facilities must undertake an extensive due diligence process and weigh the costs compared to new greenfield construction.

This special report examines in detail the top-10 location factors from our Q1/2016 Corporate Survey that determine where companies will locate and/or expand their facilities. It’s not surprising that availability of skilled labor is their number-one concern.

37 Enterprise Zones: Opportunity Requiring Due Diligence

The benefits of investing in an enterprise zone may be substantial, but zone rules, commitments, and potential economic challenges must be clearly understood.

Exclusive Online Content

www.areadevelopment.com

NOW ONLINE... • A Transformative Project of Scale in California • A “Clean” Phase I Environmental Assessment of Industrial Sites Is Just the Start • Environmental Considerations for Planning A New Operation • First Person: John Hornick, Partner, Finnegan — 3D Printing’s Disruptive Effect • EMSI: Where Automation in Warehousing Could Be Most Felt • Location Notebook: Advanced Manufacturing Key to Mississippi’s Economy • Location Notebook: Tennessee — A Growing Hub for Logistics 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.

AREADEVELOPMENT

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

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

Volume 51 | Number 4 Q4/2016

Quote:

In every age of the world, there has been a leading nation, one of a more generous sentiment, whose eminent citizens were willing to stand for the interests of general justice and humanity…Which should be that nation but these States? Ralph Waldo Emerson, (1803–1882) — American essayist, lecturer, and poet

40 North America’s

46 For Optimized Building

Robotics Renaissance

Design, Consider the Key Priorities

As collaborative robotics continue to increase the safety, efficiency, and productivity of businesses in North America, it’s clear that this technological advancement is a key to business growth.

When evaluating efficiency, it’s important to look beyond a single piece of equipment, as the whole is greater than the sum of its parts1

42 A Business-Driven Approach to Utility Infrastructure Whether a utility project is driven by production capacity, energy efficiency, regulatory requirements, or environmental sustainability, its ultimate objective is to add value to the business.

DEPARTMENTS 4 Editor’s note Cobots Driving Innovation and Growth

6 In Focus Disaster Planning for a Smooth Recovery

8 In The Know • U.S. Employers’ Response to Talent Shortage

• Port Initiative to Foster U.S. Supply Chain Competitiveness • New Top Distribution Markets: Front Nine and Back Nine • Business Location Tracker

10 First Person John Murphy, Senior Vice President for International Policy, U.S. Chamber of Commerce

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

12 Front Line Women Will Help Fill the Manufacturing Skills Gap

Trucking Regulations Impact Costs, Productivity

48 Ad Index/

Web Directory

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

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

AREA DEVELOPMENT | Q4/2016

EDITOR’SNOTE

Q4/2016

Cobots Driving Innovation and Growth According to the Brookings Institution’s annual report — America’s Advanced Industries: New Trends — digitization is pervading all fields of industry. Robotics, artificial intelligence (AI), advanced materials, and other technologies are helping “the advanced industries sector…at once develop and utilize the nation’s transformative technologies,” says Mark Muro, senior fellow and director of policy for the Metropolitan Policy Program at Brookings. PwC’s Industry 4.0 survey of 2,000 participants from nine major industrial sectors and 26 countries also takes a look at digitization of industrial manufacturing. Among its findings, robotics, cobotics, 3D printing, and nanotechnology have direct relevance for many industrial manufacturing applications. The implications of these findings are explored in this issue of Area Development magazine. Stephen Gray, president and CEO of Gray Construction, explains how advanced technologies and robotics are shaping the future of manufacturing, making factories more efficient and productive than ever. However, because of the complexity of many of today’s processes, human workers are complemented — not replaced — by their robotic counterparts, says Gray. Stephen Thompson, senior economic officer at Ontario’s Ministry of International Trade concurs. Advancements in the robotics industry are reshaping the way humans and machines interact. These “cobots” augment the complex and intelligent work done solely by humans, Thompson notes. A human-machine study conducted by MIT researchers at a BMW factory has shown that teams made of humans and robots collaborating efficiently can be more productive than teams made of either humans or robots alone. Consequently, the ability to source skilled labor is still a primary concern for growing companies. In fact, availability of skilled labor was the number-one site factor considered by those responding to Area Development’s annual Corporate Survey. This factor, along with all the top-10 location factors, is explored in a special report in this issue. We will delve more into the concerns of workforce availability and skills when we produce our Workforce supplement at year’s end. Ultimately, it’s the skilled workers who will allow manufacturers to continue to innovate and grow their businesses.

www.areadevelopment.com EDITORIAL E-mail: editor@areadevelopment.com Editor Geraldine Gambale Staff and Contributing Editors Dale D. Buss Craig Guillot Dave Claborn Cynthia Kincaid Mark Crawford Phillip Perry Dan Emerson Mark Schantz Tom Ewing Steve Kaelble 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 Circulation circ@areadevelopment.com EXECUTIVE OFFICES

Editor

Halcyon Business Publications, Inc. President Dennis J. Shea Finance Mary Paulsen finance@areadevelopment.com

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

Scott Kupperman Founder, Kupperman Location Solutions, LLC

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

Dan Levine Practice Leader, Kathy Mussio Managing Partner, Location Strategies and Economic Development Atlas Insight 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, Inc. Dean J. Uminski Executive, Bradley Migdal Senior Managing Director, Site Selection Consulting, Crowe Horwath LLP Business Incentives Practice, Dan White Senior Economist, Cushman & Wakefield, Inc. Moody’s Analytics

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

AREA DEVELOPMENT

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

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

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

AREA0640.indd 1

15/10/16 4:10 AM

INFOCUS

Disaster Planning for a Smooth Recovery By Jay Shelton, Senior Vice President of Risk Management, Assurance

Jay Shelton has hands-on experience in performing a full range of risk and insurance management functions, including policy selection and negotiation, broker and TPA management, claim management, risk identification, forecasting model development, trend analysis, OSHA and EPA compliance, and the development of performance benchmarking. He is a member of the American Society of Safety Engineers.

Forty percent of companies that experience a disaster never re-open according to the Federal Emergency Management Agency (FEMA). Avoid being a statistic, or help other organizations you manage, by ensuring a disaster plan is in place. The primary goal in disaster recovery is to limit business disruption and restore critical services as soon after a disaster as possible. There is no one-size-fits-all plan for disaster recovery, but there are some best practices that can guide you in your planning. When faced with a disaster, things get hectic and emotions take over. Without proper planning, the loss can be devastating. To start, assess current business plans. Do they include disaster preparation and a recovery strategy? It is estimated that only 25 percent of small businesses have a disaster recovery plan, according to the U.S. Small Business Administration. Considering the above statistic, this puts most small businesses at risk. For large organizations, there might be some type of plan in place, but is it formalized and tested, and will it be effective when a disaster strikes?

When creating or reviewing your recovery plan, consider the following: • Have a written document that includes step-by-step instructions, emergency phone numbers, and back-up protocols. • Include communication procedures so employees, vendors, clients, and renters know how and when to reach management. Consider establishing an alternative method for phone service, such as forwarding incoming calls to a cell phone or remote number/call center. • Seek out reputable disaster recovery companies, and set-up prearranged agreements that outline the priority of service and assessment of emergency equipment needed. • Develop a realistic budget for disaster recovery planning and training. This should be viewed as an investment in your business.

Second, identify areas of risk and the potential consequences. Review your vulnerable areas, document all office processes, and develop a contingency plan for each. Some things to consider: • Plan to communicate with employees, customers, and vendors — who, what, when, and how. • Develop the appropriate protocols to ensure your data is safe and can be accessed. • Keep copies of insurance policies and other critical documents in a safe and accessible location (e.g., fireproof safe or backed-up computer system). • Develop a training program for your staff on what needs to happen before, during, and after a disaster. • Address protocols for different types of disasters and prioritize based on the likelihood of these events.

Third, understand and address the three elements of disaster recovery planning: prevention, detection, and correction. Prevention puts measures in place to mitigate risk; this includes data protection, inspections, and equipment acquisition. Detection provides measures for early detection of a potential disaster. Correction uses measures to implement recovery operations after the disaster.

Finally, test your disaster recovery plan. Testing your plan during a disaster is the wrong time to discover issues. You need to test at least annually to ensure the disaster plan as written still reflects your current operations; correcting issues found during testing will save you headaches in the long run. Whether you manage or own one building or 500, a proactive disaster restoration and business continuity plan can significantly reduce the effects of a loss.

AREA DEVELOPMENT

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

Opelika, Alabama

Who Would Who Would Have Thought... Opelika, Alabama

Have Thought...

• 100% Fiber Optic Network Helps • Opelika’s 100% Fiber Optic Network Business Work Faster Helps Business Work Faster • $995.9 million in Capital Investment since 2005 • •GIG Symmetric Internet 2,471 Jobs Created sinceSpeeds 2005 Powered By Opelika Power Services • 2200-acre Northeast Opelika Industrial Park • Over $1 Billion In Capital Investment Since 2005 more:Since 2005 • 3,095Find Jobsout Created Lori Huguley, CEcD, Director • 2200-Acre Northeast Opelika Industrial Park Opelika Economic Development lhuguley@opelika-al.gov Find out more: 204 Seventh Street • Opelika, 36801 LoriSouth Huguley, CEcD,Alabama Director opelikaeconomicdevelopment.org Opelika Economic Development (334) 705-5115 lhuguley@opelika-al.gov

204 Seventh Street South • Opelika, Alabama 36801 opelikaeconomicdevelopment.org • (334) 705-5115

INtheKNOW

New Top Distribution Markets: Front Nine and Back Nine As transportation costs continue to escalate and sustainability becomes more important to companies and consumers alike, along with consumers’ desire for instant gratification, retailers, e-tailers, and their distribution partners are seeking facilities closer to their customers. They’re rethinking the distribution network. And while the “front nine” distribution hubs such as Chicago, Los Angeles, and New Jersey/New York continue to thrive, “back nine” secondary markets are beginning to attract the attention of supply chain executives. The JLL Industrial Real Estate team, working with various JLL specialty groups along with JLL industrial real estate professionals nationwide, identified and applied 32 specific metrics to weight and rank industrial warehouse and distribution market performance from a supply chain and logistics perspective. Among these metrics were population demograph-

ics, labor availability and costs, energy costs, transportation/multimodal infrastructure, industrial real estate leasing and investment variables, and local taxes and economic incentives. According to JLL’s Leaderboard: The Top 18 U.S. Distribution Markets report, areas such as the Carolinas, Florida, and the “Honky Tonk Triangle” of Louisville, Memphis, and Nashville offer the transportation options, affordable real estate, and access to markets that competitive retailers are seeking. Real estate professionals need to better understand end-to-end supply chain fundamentals, and supply chain practitioners need to understand and integrate real estate as part of their strategic development plans, concludes the JLL report. Only then can companies ultimately make the right location decisions for their distribution facilities.

Port Initiative to Foster U.S. Supply Chain Competitiveness The U.S. Department of Commerce is partnering with the University of Southern California (USC) Marshall Center for Global Supply Chain Management (CGSCM) in order to improve the competitiveness of the nation’s supply chains. The first event — Port Community Information Technology Systems Exhibition and Technology Challenge, which was slated to take place in Los Angeles in mid-November — brings together supply chain stakeholders, members of port communities, system providers, and leading researchers in this field, as well as talented teams of technology innovators competing for a $15,000 prize for the most cost-effective, userfriendly new port supply chain information-sharing technologies (IT). As mega vessels arrive in the U.S., the nation’s ports will need to be able to implement port community IT systems that permit real-time sharing of 8

AREA DEVELOPMENT

critical cargo information among all participants in the supply chain in order to stay efficient and avoid port and cargo disruptions. “The alliance between the Department of Commerce, USC Marshall, and the CGSCM will facilitate the crucial first step of dissecting this problem so we can move forward with modernizing the global supply chain using digital technology,” said Nick Vyas, executive director of USC Marshall’s CGSCM. These IT platforms have been deployed successfully at some non-U.S. ports, providing them with a competitive advantage by reducing cargoprocessing times. Helping interested U.S. ports and stakeholders to develop such systems for use in U.S. ports will improve port operating efficiency, enable faster U.S. cargo flow, reduce port and supply chain congestion, and improve the competitiveness of America’s supply chains.

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

Silicon Valley’s FICO Opens Operations Hub In Bozeman, Montana FICO, a pioneer in the use of predictive analytics and data science to improve operational decisions, has established an operations center in Bozeman, Montana, and plans further growth for the region.

Chinese Glassmaker Invests $450 million in Ohio Fuyao Glass America has opened its newest U.S. facility in Moraine, Ohio, where it will employ up to 2,500 in the production of automotive glass.

Steel Fabricators Opens Maryland Manufacturing Center Crystal Steel Fabricators, a structural steel fabricator headquartered in Delaware, is opening a new manufacturing facility in Caroline County, Maryland, which will create 126 new jobs over the next two years.

Automotive Supplier Plans Illinois Manufacturing Plant China-based Yanfeng Automotive Interiors is building a new $28 million manufacturing facility to support FCA US LLC in Belvidere, Illinois, which will lead to the creation of 400 jobs.

Italian Firm Plans South Carolina Manufacturing Plant An Italy-based manufacturer of pressure sensitive adhesive materials, Ritrama, will open an $85 million facility in Moore, Spartanburg County, South Carolina, creating 150 new jobs.

Toyota Unveils New North American Headquarters in Texas Toyota Motor North America recently unveiled its new North American headquarters and operations center in Plano, Texas, which will employ more than 1,000 team members.

New Sawmill for Demopolis, Alabama Two Rivers Lumber Co. will invest $65 million to build a state-of-the-art sawmill in Demopolis, Alabama, eventually employing 95 associates at the facility.

Wayfair Locates New Distribution Center in Georgia One of the world’s largest e-commerce destinations for home furnishings and décor, Wayfair, will locate its newest distribution center in Henry County, Georgia, generating more than 150 new jobs.

U.S. Employers’ Response to Talent Shortage The latest U.S. Talent Shortage Survey from ManpowerGroup reveals that nearly half (46 percent) of U.S. employers are having difficulty filling jobs due to a lack of available talent. This is up from 32 percent making that claim in 2015. As the skills shortage escalates and the demand for talent intensifies, employers are increasingly choosing to upskill their current workforces. Whereas only 12 percent made this claim in 2015, now 48 percent of those surveyed by Manpower are using training and development to satisfy their workforce needs. “Low unemployment paired with shorter skills cycles due to the speed of technological change means employers across the United States are

struggling to fill positions. We see this particularly in industries like manufacturing, construction, transportation, and education,” said Kip Wright, senior vice president of Manpower North America. “When the talent isn’t available, organizations need to turn to training and developing their own people — and in many cases this means first identifying the skills that will be required in increasingly digital industries, like manufacturing.” Employers say they cannot fill certain jobs because of a lack of applicants (23 percent), lack of experience (18 percent), and lack of hard skills or technical competencies (16 percent), as well as the fact that candidates are looking for more pay than is offered (16 percent). AREA DEVELOPMENT | Q4/2016

FIRSTPERSON JOHN MURPHY SENIOR VICE PRESIDENT FOR INTERNATIONAL POLICY U.S. CHAMBER OF COMMERCE

There has been a lot of rhetoric against TPP and even against some long-established trade agreements like NAFTA. Why are trade agreements important for U.S. economic growth? Murphy: U.S. trade agreements have brought tremendous benefits for American workers, farmers, and companies because they provide a level playing field for trade. The U.S. market is largely open to imports from around the world, but many other countries continue to raise steep tariffs and other barriers against U.S. exports. Trade agreements fix this imbalance. While America’s 20 trade agreement partners represent just 6 percent of the world’s population outside the United States, they buy nearly half of all U.S. exports. In fact, the citizens of these 20 countries buy 13 times as many made-in-the-USA goods and services as other countries on a per capita basis. A Chamber study found the increased trade brought about by these trade agreements supports more than five million American jobs. The U.S. even has a trade surplus with its trade agreement partner countries when it comes to manufactured goods — on top of our global trade surpluses in services and agricultural products. It should come as no surprise that eliminating tariffs and other trade barriers enables trade to expand — often turning small economies into major export markets. Do trade agreements ultimately result in the loss of U.S. jobs, as their opponents say, or job creation and wage growth? Murphy: Most economists believe the main effect of trade on jobs — particularly in a period like today, when the economy is said to be near “full employment” — is to alter gradually the mix of jobs available by creating more high-skill, high-wage jobs and fewer low-skill, low-wage jobs. There’s plenty of evidence that jobs tied to trade tend to pay better than those that are not. According to Commerce Department research, jobs tied to exports pay wages that average 18 percent higher than those that are not. It’s a fact that trade sometimes brings disruption to businesses and the workforce, but it’s a relatively minor factor in job loss. One recent study found that 85 percent of all job losses in manufacturing in the past two decades were due to technological progress, not trade. And studies show the benefits of trade outweigh the costs by as much as 100 to 1. But that doesn’t mean some Americans haven’t been left behind. Some workers are displaced by trade, and they should be

AREA DEVELOPMENT

helped. Our country needs to do a much better job with worker training and transition assistance, regardless of the causes of job loss. There are more than 40 federal programs in this area, but the Government Accountability Office says most of them don’t work. Business needs to have a big role to play in securing progress in this area, and companies are already making a major contribution by investing in training and development across the U.S. workforce. The Association for Talent Development estimates that U.S. businesses spent $164 billion on employee learning and development in 2012, or about $1,200 per worker. The Chamber is launching an initiative to make recommendations to improve federal programs in these areas. How do trade agreements affect national security? Murphy: America’s Greatest Generation worked hard to tear down trade barriers because they knew the costs of protectionism. The disastrous Smoot-Hawley Tariff Act of 1930 triggered a 66 percent decline in world trade. This contributed powerfully to the Great Depression, which set the stage for war. They vowed not to let history repeat itself. And for 70 years, trade agreements have fostered economic growth and good jobs, but they have also strengthened ties of peace, cooperation, and friendship between nations. The 40-fold increase in world trade over the past seven decades helped make America the most prosperous country ever, and it has also driven the dramatic decline in absolute poverty in developing countries, which last year fell below 10 percent for the first time. Trade policy is strategically important because no country can afford a strong military without a strong economy. Indeed, America’s military leaders are quick to point out their preference for the “soft power” of trade and diplomacy over the “hard power” of military force: The former is a bargain compared to the latter — both in terms of treasure and of blood. This is why Defense Secretary Ash Carter has said that passing the TPP is as important to him as getting a new aircraft carrier. Are there legitimate problems with TPP and other trade agreements that need to be fixed? Murphy: After the agreement was concluded a year ago, some

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

in the business community and Congress expressed concerns about some shortcomings in the agreement. For instance, the TPP’s important rules on digital commerce were written in a way that didn’t cover financial services. The administration has worked hard to correct this, with good results. Work is still ongoing to ensure the TPP protects the intellectual property that supports biologics, a novel class of life-saving medicines. We’re optimistic this can be accomplished. What are the long-term implications of retreating from the global economy? Murphy: On trade, when you stand still, you fall behind. Most of our trade pacts were negotiated long before the rise of the Internet and e-commerce, before the U.S. economy became so dependent on intellectual property, and before state-owned enterprises became major players in the global economy. And so the TPP will update the rulebook for trade. It offers landmark provisions that will protect our creative, innovative, and research-based industries as well as our smaller firms that rely on new technologies and services to reach the 95 percent

of the world’s consumers living outside the U.S. But the world no longer waits on America. Today, China and other Asian economies are pressing ahead with a mega-agreement known as the Regional Comprehensive Economic Partnership (RCEP), encompassing all of Asia but shutting out the U.S. RCEP may lack the TPP’s innovative protections for a free and open Internet, intellectual property, and fair competition with state enterprises, but it would guarantee preferential treatment to workers and companies on the inside — and leave Americans on the outside, looking in. If it moves forward and the TPP doesn’t, U.S. workers, farmers, and companies will be left behind. We can’t let that happen.

THE ASSIGNMENT John Murphy, Sr. VP for International Policy at the U.S. Chamber of Commerce, recently explained to Area Development’s editor why trade agreements are important for the U.S. economy and discussed the negative consequences of a retreat on trade.

When it comes to expanding or relocating your data center,

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

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

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

AREA0535.indd 1

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

01/02/16 8:05 PM

AREA DEVELOPMENT | Q4/2016

Women Will Help Fill the Manufacturing Skills Gap

courtesy of Caterpillar

FRONTLINE

By Karen E. Thuermer

ccording to a Deloitte analysis of U.S. Bureau of Labor Statistics and Gallup Survey data, over the next decade, nearly 3.5 million manufacturing jobs will likely need to be filled and that the skills gap is expected to result in two million of those jobs going unfilled.1 The Manufacturing Institute attributes two major contributing factors to this: baby-boomer retirements and economic expansion. “In addition, the younger generations have little awareness of the career opportunities available in modern manufacturing and often their parents, if they have any perception, have one that is very outdated,” comments Jennifer McNelly, Manufacturing Institute executive director. Women can fill this gap. According to McNelly, women represent nearly 47 percent of the total labor force, but only make up 27 percent of the manufacturing workforce. McNelly stresses that not only do women bring a diversity of thought to the workforce, they also offer a unique perspective as consumers. “They are an untapped talent pool,” she says. McNelly attributes the lack of women entering the manufacturing workforce to the limited awareness of the diversity of career opportunities in modern manufacturing today. “People don’t realize that modern manufacturing provides challenging, fulfilling, and well-paying careers with opportunity for advancement,” she notes. “In this industry, you aren’t stuck in one position. You are open to endless opportunities, whether you’re interested in design, engineering, or even marketing and business.” Today’s modern manufacturing includes application of technology, robotics, and new innovation. Three-fourths of the Institute’s respondents in its Women in Manufacturing Study2 indicate that they believe that women are underrepresented within their organization’s leadership team. It also found that the proportion of women

AREA DEVELOPMENT

in leadership roles in manufacturing lags behind other U.S. industries. “However, there are more than enough qualified women out there,” McNelly says. “Manufacturers are now making it a priority to recruit and develop women.”

Some Initiatives Eaton Corp. has introduced three specific initiatives to attract women to manufacturing: its mentoring program, flexible work, and its Eaton Resources Groups (ERGs). “One of several ERGs that Eaton has formed is called WAVE — Women Adding Value at Eaton — which has a strategic focus on the attraction, advancement, and retention of women,” according to Cathy Medeiros, vice president of Global Inclusion & Diversity at Eaton Corp. “WAVE also is focused on providing opportunities for women at Eaton to connect and collaborate and have a support system,” she explains. Caterpillar Corp. has a global initiative called Women in Leadership, which focuses on changing the representation of women at Caterpillar and in its industry. “To disrupt a traditional mindset of men only in the heavy equipment and power generation businesses, our programs focus on three pillars: sponsorship from the top, pipeline building in the middle, and cultural change from the ground up,” says Kelly Wojda, Caterpillar Diversity & Talent director. Caterpillar has a significant focus on recruiting and developing the best female talent, using relationships with partners like the Society of Women Engineers, as well as new avenues for reaching female talent directly via social media. “We are also encouraging more explicit role modeling from our female leaders who hold a variety of top STEM-related jobs at Caterpillar,” Wojda says. 1 2

http://www.themanufacturinginstitute.org/~/media/827DBC76533942679A15EF7067A704CD.ashx https://www2.deloitte.com/content/dam/Deloitte/us/Documents/manufacturing/us-mfg-women-inmanufacturing-2015-study.pdf

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

FRONTLINE

Trucking Regulations Impact Costs, Productivity

ver-the-road trucking companies face numerous regulations that raise operational and administrative costs, and reduce productivity. Trucking profits are also very economy-dependent — according to freight transportation forecasting firm FTR, economic indicators are “soft” for the trucking sector this year and reflect tightening conditions for hauling capacity that will likely carry into 2017.1 Some industry experts are further concerned that regulations such as Compliance, Safety, and Accountability (CSA), Electronic Logging Device (ELD), and Hours of Service (HOS) “have the potential to worsen the capacity crisis, increase transportation rates, and harm carrier productivity at a time when carriers expect financial difficulty,” reports PLS Logistics. These rules could bring an additional negative impact to profitability in the 10 to 18 percent range.2 “With new e-log regulations and other laws impacting the trucking industry coming into effect in 2017, we expect these regulations will have a significant impact on corporate supply chains,” says Richard H. Thompson, international director for Supply Chain & Logistics Solutions at JLL. “They will eventually drive up trucking costs, which means higher transportation costs for corporate shippers.” One of the most controversial regulations is HOS, which limits the average workweek to 70 hours, driving time to 11 hours, and on-duty hours to 14 — which impacts how operators move their trailers. “The clock now begins running at the beginning of the day, and does not pause,” says Christopher Steele, COO and North America president for Investment Consulting Associates. “It used to be that when a driver approached the facility, he or she could stop the clock while the trailer was being unloaded. Now, the clock does not stop. As a result, facility operators now need to increase parking/storage for trailers so that a driver can drop a trailer off, hook onto

By Mark Crawford

a new trailer, and go without losing much precious time.”

Drivers Needed Another major challenge for the trucking industry is a retiring workforce. With fewer truckers entering the profession, and the average age of a trucker being the mid-50s, these new regulations may exacerbate the lack of drivers. “With the serious driver shortage we are currently facing, and the capacity crunch, it’s extremely important to keep drivers moving so they make money and get home as often as possible,” states PLS Logistics. “HOS rules could…not only increase operating costs for carriers, it could raise shipping prices for shippers and keep new drivers from entering the industry.” “These regulations will make it even more difficult to find, recruit, and retain drivers,” agrees Thompson. “And, if the economy starts to turn up more rapidly, it creates serious issues for trucking capacity and drivers.”

Intermodal Intervenes A practical alternative to these operational challenges for truckers is expanded intermodal. Intermodal freight options will likely be used more as trucking becomes more costly. “Intermodal operations will continue to grow,” says Grant M. Miller, vice president in the Charlotte office for Colliers International. “Just this year CSX announced a new intermodal facility in Rocky Mount, N.C., and the South Carolina Ports Authority announced a new inland port in Dillon. I think we will continue to see more of these type of operations to help alleviate the dependence on trucking.” 1 http://www.logisticsmgmt.com/article/declining_economic_conditions_have_a_negative_impact_on_ftrs_trucking_condi 2 http://info.plslogistics.com/blog/market-update-2016-2017-trucking-regulations-may-aggravateeconomic-trends

AREA DEVELOPMENT | Q4/2016

ADVANCED TECHNOLOGY

Advanced Technologies/ Robotics Shaping the Future of Manufacturing Today’s manufacturers are staying ahead of the innovation curve by making their facilities even smarter than their products. By Stephen Gray, President & CEO, Gray Construction

across the entire production chain — by making their facilities even smarter than their products.

assembly line, humans are actually far better equipped.

Some Examples Robotics on the Rise

Weber Metals’ 60,000-ton forging press will allow the company to produce some of the world’s largest monolithic forging components.

s manufacturers race to meet consumer demands for faster supply chains, more customized products, and competitive pricing, the industry landscape is quickly evolving. In fact, today’s factory appears more like a state-of-the-art tech lab than a traditional assembly line — a place where operational technology, information technology, and advanced robotics converge to make production lines more efficient than ever. A place where downtime, waste, and product defects are minimal, and highly skilled workers and complex machinery integrate seamlessly. Laced with intricate control systems, massive data centers, robots working alongside humans, and hightech rapid material-handling systems, a glimpse into today’s factory is a reminder of the brilliance behind these buildings. Let’s examine how today’s manufacturers are staying ahead of the innovation curve — and adding value

AREA DEVELOPMENT

The global influx of robots in manufacturing is not surprising. With the industry predicted to hit $135 billion by 2019,1 it’s clear that the robotics boom shows no signs of waning. After all, as Dr. Jing Bing Zhang, research director for IDC, recently told Forbes, robotics is “among the core technologies that is enabling significant change in manufacturing.” So, what does this change mean for manufacturers? It’s simple. Factories are now more efficient and productive than ever. In fact, a recent New York Times article2 found that U.S. manufacturers are now producing 47 percent more than they did only 20 years ago. This growth can largely be attributed to an increasing level of automation that is being designed into manufacturing facilities today. While the benefits of automation and robotics are clear, competitive manufacturers know that innovation, flexibility, and adaptability cannot be fostered by machines alone. Only people can develop and improve manufacturing processes to better align with rapidly changing consumer demands. And, with robots requiring significant programming efforts, their capabilities are far more rigid than their human counterparts. So, when dealing with extremely complex operations on the

This is particularly true in the automotive manufacturing space. For example, Mercedes-Benz knows that consumers’ increased need for customized products calls for a new breed of production — one where human workers are merely complemented (not replaced) by their robotic counterparts. As the company continues to offer a broader range of models with customized features, it’s become clear that the variety is too great for machines to take on alone. So instead, Mercedes is leaning on skilled people to carry them through an age focused on individualization. Robots will still play a role in the process, but they will be smaller, more flexible, and be able to function more collaboratively with humans — hence the term “cobots.” “We’re moving away from trying to maximize automation, with people taking a bigger part in industrial processes again,” said Markus Schaefer, Mercedes’ head of production, in a recent Bloomberg article.3 “We need to be flexible.” Just as automotive manufacturers are forging new ground in production, food processors are navigating the waters of manufacturing innovation as well. To stay ahead of factors such as commodity prices, increasing food safety concerns, constant changes in

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

In addition to consumer demands, allowing Weber to and intense price manufacture more competition, food advanced, lighter maprocessors must leterials, the press will verage the latest techfeature green technolnologies to establish ogy to decrease waste differentiation. and energy consumpFor example, Cletion, and increase mens Food Group’s efficiency. Likewise, new fresh pork prooperators will be cessing facility in able to forge parts in Coldwater, Mich., will very tight tolerances feature a patented thanks to an integratequilibration cooler ed load-balancing feasystem that will give ture. The magnitude them better control of this piece of equipof carcass shrinkage. Clemens Food Group’s new facility in Coldwater, Mich., will feature a patented ment alone will pave Once operational, the equilibration cooler system as well as a combination of vision and robotic systems the way for a new set facility will be one throughout the production process. of industry standards of the only hog proand supply-chain cessing plants in the capabilities as Weber expands its capacity and capabilities United States to feature this particular system. Additionally, beyond its competitors. Variable Retention Technology (VRT) is being incorporated “This large-scale investment underpins our strategic into the freezing process to increase efficiency and producalignment in the global aerospace market,” said Dr. Klaus tion. While a typical meat-freezing process can result in a Welschof, aerospace industry sales manager for OTTO three-day waiting period before the product is sent to packFUCHS, in a recent interview with Forging magazine.7 aging, VRT Clemens will optimize the process according to specific product and case sizes, and will decrease freeze time from three days to less than 24 hours. Manufacturing for the Future Clemens is also strategically deploying a combination of As manufacturers across all industries continue to evolve vision and robotic systems throughout the production prowith changing consumer needs and fluctuating market decess to reduce cross contamination, increase food safety, promands, investments in advanced equipment, robotics, and vide a safer work environment, ensure product consistency, technology will continue to surge. The fast-evolving global and increase yields. marketplace calls for a new breed of production — and The aerospace industry is also looking to capitalize on savvy manufacturers are answering by constantly adapting emerging technologies and equipment that will propel the their processes, equipment, and skilled workforces to stay industry to new heights. In fact, according to Deloitte,4 the ahead of rising competition. And, at the forefront of these inherent changes will undoubtedly be the engineers, architects, global aerospace and defense industry is expected to return and builders creating the brilliant factories that will define to growth in 2016, with total sector revenues estimated to the future of manufacturing. ■ increase by 3 percent. In tandem with this growth, aerospace companies such as Boeing are now using 3D printing5 to enNote: To read more about the Gray Construction projects hance production of low-volume, lightweight parts. Boeing mentioned in this article, go to https://www.gray.com. is utilizing Stratasys’ Infinite-Build 3D Demonstrator, which turns the traditional 3D printer concept on its side to print 1 http://www.forbes.com/sites/janetwburns/2016/02/29/ready-for-the-robotic-age-industry-predictedto-hit-135-billion-by-2019/#5cf18e8e45be on a vertical plane, allowing for nearly unlimited part size in 2 http://www.nytimes.com/2016/05/08/upshot/the-economy-is-rigged-and-other-presidentialcampaign-myths.html the build direction. This is ideal for production of large-scale 3 http://www.bloomberg.com/news/articles/2016-02-25/why-mercedes-is-halting-robots-reign-onparts, such as those used in the aerospace industry. the-production-line 4 http://www2.deloitte.com/global/en/pages/manufacturing/articles/global-a-and-d-outlook.html And, as demand for large-scale aerospace parts grows, 5 http://www.aerospacemanufacturinganddesign.com/article/stratasys-reveals-3d-printing-largerparts-faster-082416/ manufacturers in the aerospace market are also investing 6 http://www.webermetals.com/60000-ton-press heavily in state-of-the-art equipment to stay ahead of the 7 http://forgingmagazine.com/forming/sms-build-60000-ton-press-weber-metals competition. For instance, Weber Metals, Inc.’s new titanium and aluminum component manufacturing facility in Paramount, Calif., will feature a massive 60,000-ton forging press,6 which is the largest privately funded forging press investment in the world. This state-of-the art press will alwww.areadevelopment.com low Weber, a wholly-owned subsidiary of OTTO FUCHS, to produce some of the world’s largest monolithic forging components.

Visit us online:

AREA DEVELOPMENT | Q4/2016

DISTRIBUTION/LOGISTICS

Creativity Is Critical at the Last Mile The era of consumer instant gratification is inspiring an era of great change in the distribution landscape. By Rich Thompson, International Director and Leader of Global Supply Chain & Logistics Solutions, JLL

reativity and global mobilization are two essential ingredients as retailers rise to the supply chain challenge of this decade: consumer demand for instant gratification. In this era of ever-speedier product delivery, consumers want their goods “now.” As the emergence of e-commerce and direct-to-consumer shipping fundamentally changes the logistics landscape, traditional brickand-mortar retailers and pure-play e-tailers alike are experimenting with new solutions and new ideas — making this one of the most creative periods in supply chain history.1

The Challenge Gone are the days when a threeto-five-day shipping standard was acceptable. As retailers look to compete not just on price point, but also on delivery time, in an increasingly competitive marketplace, they must face the last-mile, same-day delivery challenge head on. Consumers have come to expect ease, speed, reduced or free shipping costs for many of their online purchases. But they are still willing to accept some limits on the type of product purchased and the location of the buyer, as well as the time and cost incurred to fulfill an order.

The Innovations The prevalence of free shipping and ship-from-store options has inspired creative approaches from global retailers to ensure on-time delivery. In fact, the ability to deliver on time — par-

AREA DEVELOPMENT

ticularly for milestone, gift-oriented holidays such as Christmas and Chanukah — may depend on supply chain and related real estate decisions made much earlier in the year. Online retailers — such as Amazon, Net-a-Porter, and Etsy, among others — have been or are beginning to offer same-day delivery. Meanwhile, traditional retailers are searching for innovative ways to compete with this delivery model. In the race to keep up with e-commerce players, retail giants Macy’s and Bloomingdale’s both launched same-day delivery services in 50 of their stores — across eight of Macy’s markets and four of Blooming-

dale’s. And Macy’s recently decided to close some stores to focus more intensely on e-commerce.

Last-Mile Warriors With their enormous infrastructure advantage, traditional delivery providers like FedEx, United Parcel Service (UPS), and the U.S. Postal Service (USPS) are the largest providers of last-mile (home) delivery. For years, the United States’ $700 billion freight transportation market has been dominated by these shipping giants. Both FedEx and UPS have been expanding their network capabilities to provide two-day, next-day, and same-day ship-

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

ping for retailers and e-tailers under pressure to deliver quickly. However, delivery strategies are becoming increasingly more creative in response to more demanding customer expectations. Some new delivery service players are shifting away from the traditional delivery models. UberRUSH, for instance, is providing major retailers such as Nordstrom, Rent the Runway, and Cole Haan with a very large, nimble, on-demand urban delivery fleet in selected cities that would be very costly to build from scratch — yet Uber does not own any cars. Google now offers Google Express, a consumer membership-based local delivery service. Meanwhile, Starship Technologies’ co-founders have developed an even more creative solution, hoping to automate the last-mile delivery process with robots designed to navigate the streets at up to four miles per hour to their destinations, ideally helping to ease delivery congestion and costs. Retail behemoth Walmart is actively seeking regulatory approval to test drone deliveries, and a newly enacted FAA rule will likely make this option a reality. Amazon recently launched its ENTIRELY own on-demand services,2 named Amazon Flex, which mimics Uber’s model of independent NEW TYPES contractors and a mobile app for service, and allows Amazon to deliver goods within an elusive OF FACILITIES one-hour window. Similarly, newcomer Instacart deploys a fleet of personal grocery shopHAVE EMERGED pers using their own cars and smartphones. For these new players and delivery service disrupTO TRANSFORM tors, expedited “final mile” delivery is at the core of the value proposition. THE GLOBAL Some retailers are creating partnerships with innovative startups to get the goods to their SUPPLY CHAIN, customers. Walgreens, for example, is working with on-demand startup Postmates to make ALL AIMED TO popular items available for fast delivery. ShopRunner provides two-day shipping for its online SATISFY retail brand partners. Then there is Deliv, which partners with shopping malls and on-demand CONSUMER drivers to provide same-day delivery for retailers that lack their own logistics infrastructure. DEMAND. It is clear that we have not seen the end of new and highly innovative last-mile distribution strategies.

Creativity Comes to the Distribution Landscape What success really boils down to is good old-fashioned logistics. Chinese e-commerce giant Alibaba saw sales hit a new record of $14.3 billion on Singles’ Day in 2015, while handling a record-breaking 80,000 orders per second at its peak. Creativity alone didn’t get those orders delivered in a timely manner — a robust supply chain network did. It took capital, the infrastructure of vehicle fleets, and the real estate required for rapid deliveries. The company estimated that 1.7 million delivery people, 400,000 vehicles, and 200 airplanes would be needed to handle packages holding everything from iPhones to underwear. In the big cities, access can be a challenge. In major markets with heavy sales volumes for many retailers, last-mile delivery often involves navigating trucks and delivery vehicles in dense urban areas where land is costly and opportunities for large-block development are often scarce. Amazon, for instance, is opening six major distribution centers in a ring around Chicago,

NEW GLOBAL HEAVYWEIGHT Mississippi’s Port of Gulfport now competes in the heavyweight division with the addition of three new “post-Panamax” gantry cranes capable of handling the workload of even the largest vessels able to use the Panama Canal. The port also owns two mobile harbor cranes, each with a 100-ton capacity. Mississippi boasts a total of 15 ports, including two deepwater ports located on the Gulf of Mexico. The state’s affordable shipping costs, combined with convenient access to rail and truck terminals, give your business a competitive advantage. Make Mississippi your home port.

MISSISSIPPI

SHIPPING mississippi.org

Continued on page 20 AREA DEVELOPMENT | Q4/2016 AREA0630.indd 1

04/10/16 4:18 PM

FACILITY PLANNING

Choosing an Existing Structure or Greenfield Construction Companies considering existing facilities must undertake an extensive due diligence process and weigh the costs compared to new greenfield construction. By Brian Gallagher, Director of Marketing, O’Neal, Inc.

bandoned structures and brownfield sites proliferate in cities across the nation. Sometimes these abandoned mills, factories, and speculative (spec) buildings have become such a burden to counties and economic development organizations that they are being given away for free — or at very low cost — to attract companies and jobs. Acquiring an existing building shell to house manufacturing operations can seem like a real time- and money-saver to companies. But is it really? Existing buildings can provide companies with suitable solutions for their manufacturing operations. This approach can be faster and less expensive than building a new facility in many scenarios. However, many times, the cost of adapting existing features far outweighs the cost of investing in new construction on a greenfield site. Before committing to the purchase of an existing structure, owners should seek an independent consultant, in the form of an engineering/procurement/construction contractor (EPC) or architect, during the site assessment to conduct a thorough due diligence process and code analysis, as well as to address several aspects of the facility.

Assess the Building Structure First, owners and their representatives should conduct a complete review of the physical structure, examining its configuration, capacities, structural integrity, utility systems, code compliance, environmental and site issues, etc. The goal is to thoroughly assess how the facility and property meet the company’s current and future process-specific operational requirements. For example, will manufactur-

AREA DEVELOPMENT

ing equipment fit inside the existing building envelope and around existing structural components? Often, an existing facility is only a fit if the original use or production capabilities of the building were similar to what is intended for them now. Many older structures are “lightweight” from a structural standpoint and have low floor and roof loads and ceiling heights that do not meet the requirements for today’s manufacturers. Existing structures will require compromises and, too often, these constraints may significantly outweigh the initial investment in a greenfield facility. Some existing features, such as column size and location, will be obvious with a visual inspection. But equally important are physical components that are not as easily seen. A useful tool for documenting existing conditions is 3-D laser scanning. Field

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

measurements performed with laser scanners capture very detailed geometric information in the form of “point cloud” data — that is, a large set of points on a coordinate system. That data can be quickly and accurately fed into a digital building information model (BIM) or other CAD platform. Once this point cloud depiction of as-built conditions is incorporated into the BIM model, it can be used to identify potential clashes with newly designed elements — or identify if the site is unviable from a cost or time point of view.

Make a Detailed Analysis As-built drawings and sketches can’t capture the impact new manufacturing equipment will have on a facility. If detailed analyses aren’t performed early in the site assessment and feasibility study, clashes and conflicts are almost certain to appear later in the construction process, hampering progress and potentially causing great expense and delays in production. Raw data should be used to develop specific operational, process, and facility requirements. The key to performing this level of detailed analysis is involving all of the stakeholders early on. For example: • Involve the team that will eventually own, run, and maintain the system in the planning, design, and implementation processes. • Develop an initial plant layout and general arrangement of equipment. • Address facility items, such as utility, electrical, sprinkler, and mechanical systems; floor and roof loads; ceiling heights; column spacing; inbound and outbound loading docks; storage and warehousing needs; and office needs. • Engage equipment providers or systems integrators early to consider how to position or arrange the equipment in the building. The equipment provider should work with owners and the EPC firm early in the planning process. • Address and coordinate the interfaces between the production equipment, material handling, utility systems, and the facility up front. • Consider production and traffic-flow congestion; it can limit the throughput of production equipment. Address access to the facility for workers, suppliers, and distributors. • Assess site and environmental conditions. • Review for compliance with applicable code and regulations (building codes, fire codes, zoning, etc.). Just as collection of as-built data with a 3-D scanner provides critical information about existing conditions, a computer simulation of automated systems can provide proof-of-concept and design validation.

Develop a Realistic Timeline Production goals drive every manufacturing project. Determining how fast the facility can be put into production determines its overall success and, ultimately, the feasibility of the site selection process. Therefore, an early — and accurate — determination of project scope, cost, and schedule is critical. Robust preconstruction planning is just as critical for the delivery of a brownfield project as it is for a greenfield project. The early phase of a project provides owners with a formal approach for developing and executing capital projects. Additionally, an early definition of the scope, schedule, and cost enables the most efficient use of resources and money while reducing risks. Every project should also have an alignment document that encompasses the scope and organization of the project-by-project kickoff. Third-party firms that offer expertise in the project-planning phase can provide site and project assessment that draws upon databases of historical project information. These repositories of information can be used to create detailed 3-D site models, providing instant feedback regarding location, cost, layout/retrofit, energy, lifecycle, site work, and scheduling. When the owner and project team have the ability to visualize and analyze the project, they are better able to make informed decisions.

MISSISSIPPI DELIVERS Mississippi’s multi-modal connectivity and well-integrated infrastructure provide unparalleled distribution and delivery for manufacturers. With six interstates, 14 federal highways, 15 ports, seven commercial airports, ﬁve Class 1 railroads and 2,500 miles of track, Mississippi is the epicenter of one of the fastest-growing regions in the nation and is within a day’s drive to more than 100 million people. By air, by sea, by rail or by road, getting your goods to market is easy in Mississippi. Delivering business advantages is just one of our strengths.

MISSISSIPPI

DISTRIBUTION mississippi.org/distribution

AREA DEVELOPMENT | Q4/2016 AREA0631.indd 1

04/10/16 4:20 PM

Future-Proof the Project

concrete building was not insulated.

Getting an existing facility renovated and in production can seem like the end game. But the key to the project’s longterm success is that it will fulfill its function for many years to come. To do that, it must be scalable for future expansion and growth. Many existing buildings are located near other buildings and adjacent land may not be available. Scalability is yet another item that should be addressed during the pre-purchase planning stage. It’s important to not only assess the building structure for future expansion, but also utilities and infrastructure. The above considerations should be factored in with more obvious costs, such as site remediation, which will typically require another third-party firm to assess and manage.

Real-World Examples The challenges associated with an existing facility can prove calamitous to a project from the very outset. Consider the following stories, which represent actual situations in which companies did not consult an EPC professional or architect before purchasing a property: • One company purchased a building with the intention of putting in a new production line. They installed the unit only to find out that there was not enough overhead clearance for the fire suppression system. The company had to invest additional capital and extend their schedule to retrofit the facility and their utility systems. • A manufacturer acquired a former warehouse building and needed to up fit the building for a manufacturing operation. The existing slab could not handle the new presses, and significant foundation upgrades were required. In addition, the electric power service required significant upgrades. The unforeseen upfit added time and cost to the project. • A European manufacturer purchased an existing speculative building. The manufacturer’s process depended heavily on humidity control; however, the existing precast

Creativity Is Critical Continued from page 17 all in the suburbs where large-scale real estate is cheaper, while providing access to large consumer population centers and their network of smaller, more urban last-mile delivery facilities.

AREA DEVELOPMENT

• Another company purchased an existing building and planned to install an automation system. Unfortunately, the column spacing didn’t allow for the automation to be configured as it needed to be. Significant expense and time delays were incurred while the company reconfigured the system. • A company that desired a brownfield site looked at several different locations. They identified a favorite and made a recommendation to their corporate leadership to purchase the land and building. The corporate processes took too long and a different buyer purchased the property. The original company, now facing tighter timelines, moved on to their second-choice existing facility because they had to meet a production goal. This facility, however, was not as well suited to their process; it was too small and needed several upgrades. Consequently, the original budget of $60 million ballooned to $200+ million. The team did not meet its goals for production and was left with a facility that is less than ideal for their future operations as well as their current ones. For these companies, beginning with a greenfield site would have kept the project on schedule, preserved capital, and resulted in a tailored facility that met their operational requirements. Prior to purchasing the existing facilities, an integrated approach would have revealed the poor fit between existing conditions, utility needs, and production equipment requirements for these companies. Most derelict building shells on the landscape today were built for different industries and production methods than the operations of modern manufacturers. Companies considering existing facilities must undertake an extensive due diligence process and analysis and weigh the costs compared to new greenfield construction. While success stories using existing buildings do exist, the key is to make use of the tools and tests that are available during early planning stages to make informed decisions and the best use of capital. ■

rethinking the distribution network. And while the “front nine” distribution hubs such as Chicago, Los Angeles, and New Jersey/New York continue to thrive, “back nine” secondary markets are beginning to attract the attention of supply chain executives. According to JLL’s Leaderboard: The Top 18 U.S. Distribution Markets report,3 areas such as the Carolinas, Florida, and the “Honky Tonk Triangle” of Louisville, Memphis, and Nashville offer the transportation options, affordable real estate, and access to markets that competitive retailers are seeking. Optimizing the supply chain means creating a delivery network that has the right balance — minimizing operating costs, such as transportation, labor, inventory, and real estate, while being in position to meet customer service expectations. In a world of three- to five-day delivery, fewer distribution centers were required. In a consumer world expecting

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

next-day or even same-day delivery, more facilities will be required closer to the customer. While automation and robotics have added speed and accuracy to central warehouse operations, human capital and ingenuity still count when it comes to last-mile delivery.

Inside the Box Retailers and their distribution partners are testing new approaches to improve their product flow and balance operating costs with service delivery levels. Ultimately, retailers must master the delicate balancing act of last-mile delivery and the investments required to succeed in keeping up with growing consumer demand levels. The need to deliver packages to customers when and where they want them has sparked a renaissance in distribution center development, related technologies, and management. Entirely new types of facilities have emerged to transform the global supply chain, all aimed to satisfy consumer demand — during the holidays and throughout the year. New property types include one-millionplus-square-foot mega e-fulfillment centers, parcel sortation hubs, local parcel delivery centers and urban logistics depots, return processing centers, and food fulfillment centers, as well as new forms of last-mile fulfillment centers. In addition, new distribution models are emerging. Of course, traditional fulfillment and delivery continues, with online retailers tapping traditional parcel carriers for shipping orders from distribution center to parcel hub to the customer, or outsourcing to third-party logistics providers. In secondary markets with lower customer density, large global retailers are making the most of their existing real estate to ship from stores, with the scale, system of stores, and product volume to reach many customers throughout the country. Some are turning excess brick-and-mortar locations into “dark store” fulfillment centers, providing last-mile convenient pick-up locations for consumers rather than lastmile delivery. In dense, urban areas, timely last-mile delivery is essential for staying competitive. Branded delivery services, such as Amazon, Google, and UberFresh, are gaining popularity; and eBay — among others — has launched its own delivery service, eBay Now. Several retailers and online giants are experimenting with locker pick-up systems, although these require heavy infrastructure to fulfill orders quickly from stores or infill fulfillment locations. Increases in freight costs, trucking capacity concerns, labor availability, the impact of e-commerce, more competitive delivery requirements, talent management, global complexities, and risk mitigation — these are only some of the operational concerns keeping supply chain professionals up at night. Retailers and e-tailers alike are discovering that they need both cutting-edge logistics and an efficient warehouse network to compete. Making efficient use of these new types of spaces and optimizing the distribution network will require distributors to rely heavily on Big Data and analytics to help stay ahead of consumer demand. Meanwhile, warehouses and drivers will want to give and receive realtime information about their capacity.

ROCKET SCIENCE Whether it’s as big as a battleship or visible only with a microscope, Mississippi manufactures it. If it’s going into outer space or coming in from overseas, Mississippians make it move. Companies collaborate with our respected community college system for workforce training and utilize the nationally recognized centers of excellence at our universities for R&D. Mississippi is building one success story after another. That’s why companies like Rolls Royce, SpaceX, NASA, Northrop Grumman, Huntington Ingalls, GE Aviation, Airbus Helicopters, Aurora Flight Sciences and Raytheon have operations in Mississippi. Write your success story in Mississippi.

Before the Doorbell Rings When it comes to supply chain optimization and distribution network strategy, companies need to be innovative and nimble. For many companies, there’s a gap between supply chain strategy and real estate execution. Integrating these two important functions is the key to successfully “owning” the last mile. ■

MISSISSIPPI

LEADING mississippi.org

Note: For more on this subject, go to http://www.theinvestor.jll/news/world/03/ watch-changing-global-industrial-logistics-market/

1 http://www.theinvestor.jll/news/world/03/watch-changing-global-industrial-logistics-market/ 2 http://www.wsj.com/articles/amazon-taps-on-demand-workers-for-one-hour-deliveries-1443499263 3 http://www.us.jll.com/united-states/en-us/research/7354/us-the-leaderboard-the-top-18-distribution-markets-in-the-us-jl

AREA DEVELOPMENT | Q4/2016 AREA0632.indd 1

04/10/16 4:21 PM

Providing the Necessary Tools

NV Energyâ&#x20AC;&#x2122;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 stateâ&#x20AC;&#x2122;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

AREA0384.indd 1

13/02/15 11:47 PM

THE TOP FACTORS TO NAVIGATE THE LOCATION MAZE

> AVAILABILITY OF SKILLED LABOR > HIGHWAY ACCESSIBILITY > QUALITY OF LIFE > > OCCUPANCY OR CONSTRUCTION COSTS > AVAILABLE BUILDINGS > LABOR COSTS > > CORPORATE TAX RATE > PROXIMITY TO MAJOR MARKETS > > STATE AND LOCAL INCENTIVES > ENERGY AVAILABILITY AND COSTS >

number

AVA I L A B I L I T Y OF SKILLED LABOR

It pretty much goes without saying that any operation — new or expanding — will need an adequate supply of workers who have whatever skills are required to do the job well.

There is broad agreement that a lot of reasonable amount of time? “No matter the facilities are raising the bar when it comes nature of the project, the ability to train or 1. AVAILABILITY to the skill levels that are essential. The retrain existing labor is the highest priority,” OF SKILLED question is, how does availability of skilled he notes. LABOR labor impact the site search and decisionThompson says the ever-increasing pop2. HIGHWAY making process? ularity of e-commerce is fueling the increasACCESSIBILITY “To me, this [factor] has to be the most ing demand for labor at distribution centers. 3. QUALITY OF LIFE important one, almost with an emphasis on “If you have a traditional retail distribution 4. OCCUPANCY OR CONSTRUCTION it,” says Richard H. Thompson, international center, a big distribution center serving COSTS director for Supply Chain & Logistics Soluretail stores, most of that is on pallets 5. AVAILABLE BUILDINGS tions for JLL. And indeed, respondents to moving in and out by the truckload or less6. LABOR COSTS Area Development’s most recent Corpothan-truckload,” he says. An e-commerce 7. CORPORATE rate Survey agree — “availability of skilled distribution hub, on the other hand, can TAX RATE labor” heads the list of the top factors. require as many as 10 times the workers. 8. PROXIMITY TO So, how challenging is it to find the nec“Because it’s very individual, pick-and-pack, MAJOR MARKETS 9. STATE AND LOCAL essary labor? It depends on the particular even with automation you still require a ton INCENTIVES location, of course, and what kind of labor of people. That really creates a huge weight 10. ENERGY is required, but generally speaking, “it’s on labor when it comes to selecting a site,” AVAILABILITY AND COSTS becoming harder to find exactly the labor Thompson explains. you want when you come into an area,” according to Christopher D. Lloyd, senior vice president, Infrastructure and Economic Development, at McGuireWoods Consulting, LLC. “You’re starting to “The most important thing I’ve been hearing is talsee areas of the country where there is a lack of skilled ent, access to high-level, highly skilled workers, particulabor.” larly in terms of intellectual capital,” says Gene DePrez, There are plenty of factors behind this trend, inmanaging partner, Global Innovation Partners Ltd. “It’s cluding the advancing retirement of the baby-boom not just skilled labor. America’s ability to compete is at generation, employers’ increasing education and skills that high end. North America is going to compete on inrequirements, and the simple fact that with the economy tellectual capital — the ability to innovate, the ability to in better shape than it was several years ago, “a lot of convert ideas into applications that are marketable.” people with the right skills are already employed,” Lloyd Companies seeking that type of workforce, he says, says. If there aren’t enough potential workers with the are more likely to pick sites in urban areas. “Young skills today, how many can be prepared for the work in a people want to flock to urban areas; they want to be in

Access to Talent

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

AREA0627.indd 1

04/10/16 4:09 PM

cool communities,” DePrez says. Meanwhile, manufacturing facilities may have greater flexibility in terms of the type of community, but they’re increasingly particular when it comes to skills. Conventional wisdom is that they’ve been hit increasingly hard by labor challenges, though not everyone is buying that mindset. One recent study,1 “Skill Demands and Mismatch in U.S. Manufacturing,” suggests “three-quarters of manufacturing establishments do not show signs of hiring difficulties.” What’s more, report study authors Andrew

Weaver and Paul Osterman say, “High-tech plants do not experience greater levels of hiring challenges.” On the other hand, according to the study, locating within an industry cluster doesn’t necessarily make it easier to fill vacancies. A vital ingredient is the ability to connect potential hires with the right training, potentially through community colleges or trade associations. As Lloyd observes, the secret isn’t just a matter of finding available skilled labor — in many cases the answer is creating it. * 1

http://ilr.sagepub.com/content/early/2016/07/19/0019793916660067.abstract

number

H I G H W AY ACCESSIBILITY

It is, of course, no coincidence that nearly all of the nation’s biggest manufacturing facilities and distribution centers can be found alongside major highways. Thompson doesn’t think so. “I would see As a location factor, highway accesthis becoming more important as the sibly “can be critically important. Highway 1. AVAILABILITY OF economy grows and capacity gets tighter, accessibility is kind of a must-have,” says SKILLED LABOR Richard H. Thompson, international director, which is expected toward the end of 2. HIGHWAY Supply Chain & Logistics Solutions for JLL. 2017,” he says. Indeed, many forecasts ACCESSIBILITY “It has always been important not to have predict an upward trend in prices as 2017 3. QUALITY OF LIFE to deadhead it too many miles off a major moves ahead. Just as concerning, Thomp4. OCCUPANCY OR CONSTRUCTION expressway.” son says, is that tighter capacity will allow COSTS It’s certainly not hard to understand why. trucking companies to get a bit choosier 5. AVAILABLE BUILDINGS Every extra mile off the highway that a truck about which jobs they take, and that puts 6. LABOR COSTS must travel adds to the freight cost and the importance of highway accessibil7. CORPORATE ity into a somewhat different spotlight. the shipping time, and when you multiply TAX RATE “Trucking companies may start to focus that extra cost by the many trucks that may 8. PROXIMITY TO on companies that are easier to serve, so come and go from a facility every day, the MAJOR MARKETS 9. STATE AND LOCAL being easily accessible is going to be more added costs grow considerably. That said, INCENTIVES important.” the impact on the overall cost of a product 10. ENERGY depends on the relative level of freight costs, AVAILABILITY AND COSTS and those costs have been on a downward trend, or at least running fairly flat. “Freight costs have been pretty stable When evaluating highway access, and trucking capacity has been available over the last 24 people tend to think of interstate highways as the gold months,” says Thompson — and that suggests that site standard, which is a reasonable perspective. After all, planners and operators aren’t losing as much sleep over they allow transportation at the most fuel-efficient highway accessibility right now as they sometimes do. speeds, with the fewest slowdowns and interruptions. The question is, will the current situation hold? Nevertheless, “we’re getting a lot of road construction

Road Construction

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

where non-interstate highways are being built to interstate standards,” observes Christopher D. Lloyd, senior vice president, Infrastructure and Economic Development, at McGuireWoods Consulting LLC. Rather than thinking just in terms of distance to interstate, he says, it’s worth considering distance to parkways as a reasonable measure. Of course, the importance of highway accessibility varies considerably by project. It’s particularly vital for distribution centers and manufacturing facilities. As Lloyd notes, “Highway access is very important to projects that require an input and have some sort of output.” Tech-oriented operations may be less concerned about highway access, says Gene DePrez, managing partner, Global Innovation Partners Ltd. DePrez does a

fair amount of work in sectors other than manufacturing and distribution. For tech companies operating in a global environment, he says, “It’s moving people, not just things.” In that case, highway accessibility as a critical factor may give way to accessibility to air travel and passenger rail. On the other hand, says Lloyd, “Even if you’re a technology company, where is the fiber usually buried? In the highway right-of-way or rail right-of-way. If you’re really removed from a highway or railroad, you’re probably not covered,” he points out. It’s an entirely different reason to locate near a highway — to plug into the fiber that’s buried along the asphalt. “They’re not as disassociated from each other as you might think. You can think, ‘Oh, I can operate anywhere.’ No, you can’t.” *

number

QUALITY OF LIFE

What constitutes quality of life depends largely on the eye of the beholder, and that eye may gaze through different lenses at different times. The question is, what exactly does “quality of life” mean, and to whom is it particularly important? As it happens, back in the day, those involved in economic development often viewed quality of life in terms of golf courses designed by Pete Dye or Jack Nicklaus; temperate climate (to allow more golfing); high-end housing (preferably in golf-course communities); great beaches, if possible, or at least sailing options; decent parks; very good schools. These days, though, the definition is a lot more broad and situational, according to Gene DePrez, managing partner, Global Innovation Partners Ltd. “It’s not just ‘traditional’ quality of life — golf courses and sailing. It’s the quality of life that is attractive to the kinds of talent that you’re looking for, or that is already there.” With that in mind, quality of life for a technology company is more likely to cater

1. AVAILABILITY OF SKILLED LABOR 2. HIGHWAY ACCESSIBILITY

3. QUALITY OF LIFE 4. OCCUPANCY OR CONSTRUCTION COSTS 5. AVAILABLE BUILDINGS 6. LABOR COSTS 7. CORPORATE TAX RATE 8. PROXIMITY TO MAJOR MARKETS 9. STATE AND LOCAL INCENTIVES 10. ENERGY AVAILABILITY AND COSTS

to the lifestyle of the younger demographic that will likely be on the payroll. These are workers who tend to appreciate urban living, esoteric shops, coffeehouses, and outdoor recreation with a bit more edge. Need millennials on your payroll? Don’t neglect the amenities this generation perceives as important.

Quality of Life for the Long Term But even that’s not as simple as it might seem, points out Christopher D. Lloyd, senior vice president, Infrastructure and Economic Development, at McGuireWoods Consulting LLC. “It’s not just about having a culture that is sexy for millennials. Eventually they’re going to grab that minivan and have kids in school and move to the suburbs.” AREA DEVELOPMENT | Q4/2016

In other words, quality of life needs to focus not just on attracting a particular demographic — it’s also about retaining people as their lives evolve. “It’s not just about tattoo parlors and indie rock bank venues,” Lloyd says. “It’s about retaining the good people you have.” That, of course, assumes that you’re planning on retaining workers for the long term. That’s not going to be a critical factor for every development. For example, says Richard H. Thompson, international director, Supply Chain and Logistics Solutions for JLL, a manufacturing facility may put a high priority on long-term retention of

qualified workers, and the ability to retain workers is going to hinge to a certain extent on quality-of-life factors. But while no one wants a sky-high turnover rate, those running a distribution center aren’t as likely to expect workers to settle in for a super-long stay. But even if it’s not a deal-breaker for certain types of facilities, quality of life is a factor that can’t be overlooked, says Lloyd. No matter what business you’re in, no matter what type of workforce you’re building, your employees are going to want a life beyond the workplace. “Quality of life matters to every work group and age cohort,” he concludes. *

number

O C C U PA N C Y O R CONSTRUCTION COSTS

It’s easy to see why occupancy or construction costs are a factor that a lot of people are keeping an eye on — these costs are trending upward.

How much does it cost to build or lease tial construction). The Seattle market, on the facility you’re planning? According to the other hand, is pegged at “overheat1. AVAILABILITY OF research from Jones Lang LaSalle,1 construcing,” with annual cost escalation estimates SKILLED LABOR tion costs are rising because of continual at 5 percent and 8 percent. New York City 2. HIGHWAY ACCESSIBILITY upward pressure from building costs, conis “overheating” too, the report says, and 3. QUALITY OF LIFE struction employment, wages, and productivSan Francisco is merely “hot.” 4. OCCUPANCY OR ity. As of earlier this year, the year-over-year CONSTRUCTION costs were up for industrial, office, and retail COSTS construction alike — retail, in fact, was up by 5. AVAILABLE nearly 25 percent. All that said, for the most part the cost BUILDINGS 6. LABOR COSTS Meanwhile, the company reports2 of construction and occupancy is not going 7. CORPORATE warehouse rents are on the rise nationally, to be the biggest factor driving a location TAX RATE thanks to record-low vacancies. Speculative choice, consultants suggest. “It’s impor8. PROXIMITY TO completions are on the rise, but net absorptant, but it doesn’t drive the decision-makMAJOR MARKETS tion is also quite healthy. As a result, rent ing,” says Richard H. Thompson, interna9. STATE AND LOCAL INCENTIVES per square foot this year is up by about $3 tional director, Supply Chain and Logistics 10. ENERGY compared with last year. Solutions for JLL. AVAILABILITY AND COSTS Not surprisingly, there’s noteworthy varia“If you’re leasing a building, the real tion in construction costs from market to estate cost of a distribution center, for market, typically driven by local economic example, is 3 to 5 percent of the total conditions. A global report from Turner & operating cost,” he points out. Meanwhile, Townsend,3 for example, calls the Houston market “lukeone might spend up to half of the budget on freight warm,” with year-over-year construction costs expected and labor. With that in mind, labor rates and proximity to escalate 3 percent this year and 2.5 percent in 2017 factors are usually going to hold quite a bit more sway. (that includes the full range of commercial and residen“You’re going to pay more to be in the right spot. If you

Keeping It in Perspective

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

have two sites that are equally viable, then you start looking at whether one might be cheaper,” Thompson notes. A similar view comes from Christopher D. Lloyd, senior vice president, Infrastructure and Economic Development, at McGuireWoods Consulting LLC. “It’s going to vary greatly depending on the nature of the project, but if you’ve got to be somewhere, you’re going to

pay what the cost is,” he says. “Just because it can be cheaper to build somewhere, it doesn’t mean everyone is going to flock there because of the low construction cost.” * 1 2 3

http://www.us.jll.com/united-states/en-us/research/us-construction-perspective http://www.us.jll.com/united-states/en-us/research/capital-markets/commercial-real-estateinvestment-trends/industrial http://www.turnerandtownsend.com/media/1518/international-construction-marketsurvey-2016.pdf

number

AVA I L A B L E BUILDINGS

People expect near-instant delivery on just about everything these days, and companies seeking new facilities are more likely than ever to want to pick a location and have it up and running as quickly as possible. The need for available buildings fits logiFor example, he says, vacancy rates for cally into the world of just-in-time delivery, distribution center space are averaging 1. AVAILABILITY OF and because companies are operating in under 8 percent on a national basis. That’s SKILLED LABOR an environment of constant change and an already low number, but “in some of 2. HIGHWAY ACCESSIBILITY adjustment, they’re more likely to want a the hotter markets, the vacancy rates are 3. QUALITY OF LIFE compressed project timeframe — not a down to 2 percent, which is very low, like 4. OCCUPANCY OR long, drawn-out process. “It can be a driver, unheard-of low.” He cites eastern PennCONSTRUCTION especially if you’re in a hurry,” says Richard sylvania as an example where it can be COSTS H. Thompson, international director, Supply a challenge to locate available buildings 5. AVAILABLE Chain and Logistics Solutions for JLL. for certain specific uses, along with such BUILDINGS 6. LABOR COSTS Developers are stepping up in their places as Chicago and the Inland Empire 7. CORPORATE creation of speculative space. Research region of California. TAX RATE from Jones Lang LaSalle1 finds a national 8. PROXIMITY TO increase in the completion of speculative MAJOR MARKETS warehouse projects. The problem is that 9. STATE AND LOCAL INCENTIVES As is the case with many location conspace is being absorbed nearly as quickly 10. ENERGY siderations, the importance of this factor as it is being added to the market. Also, AVAILABILITY AND COSTS “is highly dependent on the nature of the the firm reports, “Increased momentum in project,” says Christopher D. Lloyd, senior the preleasing of speculative space prior to vice president, Infrastructure and Economic completion continues to tighten vacancy Development, at McGuireWoods Consultrates.” ing LLC. In quite a few cases, the hunt for just the right Given that, “this is becoming more important as a available building in exactly the right place will ulticriterion,” says Thompson. “I would not have said that mately lead nowhere. According to Lloyd, companies last year, but industrial vacancy rates are at an all-time will often come into the process in a big hurry, and tell low.” At many points in recent years, “you’ve typically him, “We’d like you to find an existing facility, so we can been able to find something that will work for you,” get in and open quickly.” And then, after spelling out Thompson says. These days, though, “availability is at the details of what they’re seeking, they end up building an all-time low.”

Available or New?

AREA DEVELOPMENT | Q4/2016

rather than buying or leasing. That’s not to say the right building is never out there, and for some uses, it’s not as difficult to find. “The availability of buildings can be important for certain office uses and certain distribution uses, certain low-end manufacturing or wet labs,” Lloyd says, and for them, there might be a fit. But in many more cases, the right

building in the right place just isn’t available. “With a lot of manufacturing processes, or maybe the way a data center is set up, it’s so specialized that you need to build the building around it,” he concludes. * 1

http://www.us.jll.com/united-states/en-us/research/capital-markets/commercial-real-estateinvestment-trends/industrial

number

LABOR COSTS

How labor cost impacts total cost depends on the type of project being considered — headquarters, data centers, call centers/back office, retail, warehouse/distribution, manufacturing, etc. For headquarters sites, labor costs are ties — and usually need to be considered a top consideration, depending on total in terms of skill sets, availability, and sus1. AVAILABILITY OF number of employees, how many employees tainability. “Right-to-work” states (most of SKILLED LABOR are planning to move, and the skill levels rethe South) typically have lower wages and 2. HIGHWAY ACCESSIBILITY quired. Labor costs are also highly scrutinized are less unionized, two big draws to manu3. QUALITY OF LIFE for call centers and back-office projects. facturing companies (wages are about 10 4. OCCUPANCY OR “Labor cost is very important to our percent less in right-to-work states). Local CONSTRUCTION clients in these very competitive environand state incentives built around trainCOSTS ments,” says Tim Feemster, site selection ing and workforce development can also 5. AVAILABLE BUILDINGS consultant and managing principal for significantly reduce total labor costs. 6. LABOR COSTS Foremost Quality Logistics in Dallas, Texas. When highly trained, experienced work7. CORPORATE “The cost of labor is high on the list as a ers are required, quality of labor is just as TAX RATE percent of the total cost of the operation, as important as cost of labor. Therefore the 8. PROXIMITY TO MAJOR MARKETS well as the fact of the high capital costs for least-expensive labor location may not 9. STATE AND LOCAL office buildout and technology per person always the best location for an operation. INCENTIVES employed. The higher/more complex skills Availability of skilled workers is critical — 10. ENERGY required also drive the cost per person up. is the region large enough to provide a AVAILABILITY AND COSTS Although these operations can physically be high-quality labor force, even if competilocated almost anywhere, they are generally tors move in? Most companies looking for drawn to locations that provide low labor skilled labor are willing to pay a premium costs in the categories needed, as well as an abundance of up to 20–25 percent in labor costs, if the quality of of headcount to fill the jobs.” the labor meets their needs. Hiring and retaining quality employees translates into less turnover, greater productivity, and more innovation. In addition, highly educated workers are more willing to invest in training, certifications, and credentials on an on-going basis. “The availability of skilled labor is often as important Needless to say, labor costs are also a top factor for as the cost,” says Feemster. “Without an adequate level warehouse/distribution centers and manufacturing facili-

Not Just Cost — Quality Too

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

of sustainable skilled workforce, it is very difficult to keep these types of operations open long-term.”

Working the Numbers Labor costs are, in general, of less concern for data centers and retail. For data centers, this is because so few employees are required per square foot of operation. Even though these workers tend to be highly skilled and, therefore, a higher cost, the cost of power and water for running and cooling the operations, as well as capital costs, are typically far above that of em-

ployee costs. Retail tends to be driven by traffic counts and income demographics. Without these two main factors being identified and above certain levels, companies will not spend the capital to open the operation, regardless of the cost and availability of the labor. “If the company does decide to move forward with additional analysis, these positions tend to be low-wage jobs,” says Feemster. “They are harder to fill due to their higher level of part-time work, fewer benefits, weekend/ evening/night work, and lower wage levels. In this environment, the abundance of an available labor force is a key advantage for any location being considered.” *

number

C O R P O R AT E TA X R AT E

In today’s world, corporate decision-makers want to invest in areas with a “fair” tax structure. tax rates range from 0 to 12 percent, deThis means that companies are comfortpending on the level of net income/profits; able paying a moderate level of taxes, if they 1. AVAILABILITY OF most are in the 4 to 8 percent range.” see a return on the investment in key areas SKILLED LABOR Gigerich indicates that a mid-sized such infrastructure, education, healthcare, and 2. HIGHWAY manufacturing company making an annual public safety that benefits both the business ACCESSIBILITY 3. QUALITY OF LIFE profi t of $2 million would save approxiand the employees. High-tax locations will 4. OCCUPANCY OR mately $150,000 to $175,000 annually by struggle to secure new investment and jobs CONSTRUCTION locating in a lower-tax state, compared to compared to lower-tax regions that return the COSTS a higher-tax state. same ROI, unless companies must locate in 5. AVAILABLE BUILDINGS that high-tax area for other reasons. 6. LABOR COSTS With an increasingly global economy, 7. CORPORATE companies have more options for where they TAX RATE decide to establish operations. In response, According to the Tax Foundation, 44 8. PROXIMITY TO forward-thinking states are trying to improve states levy a corporate income tax. Rates MAJOR MARKETS their business climates and attract investment range from 4 percent in North Carolina 9. STATE AND LOCAL INCENTIVES by reducing the tax burden, including corpoto 12 percent in Iowa. Minnesota, Alaska, 10. ENERGY rate tax rates. Connecticut, New Jersey, and the District AVAILABILITY “Companies are subject to both state and of Columbia have corporate income tax AND COSTS federal corporate income taxes,” says Larry rates of 9 percent or higher. Six states — Gigerich, executive managing director for GiNorth Carolina, North Dakota, Colorado, novus in Indiana. “Federal corporate income Mississippi, South Carolina, and Utah tax rates range from 15 to 39 percent, depending on the — have the lowest rates in the country, at or below 5 business structure (LLC, C corporation, S corporation, percent.1 Further, Nevada, Ohio, Texas, and Washington imetc.) and net income/profit level. State corporate income

A Plethora of Rates

AREA DEVELOPMENT | Q4/2016

pose gross receipts taxes instead of corporate income taxes. “Gross receipts taxes are thought to be more economically harmful than corporate income taxes,” writes the Tax Foundation. “South Dakota and Wyoming are the only states that do not levy a corporate income nor gross receipts tax.” Although they are often regarded as a major tax, corporate income taxes account for just 5.3 percent of state tax collections and 3.9 percent of state general revenue, according to the Tax Foundation. Other state taxes such as property tax, inventory tax, and personal property tax vary greatly from state to state and add significantly to the overall tax load a company faces. “When I look at tax rate, I don’t just focus on the corporate income tax rate,” says Bradley Migdal, senior managing director, Business Incentives Practice, for Cushman and Wakefield in Rosemont, Illinois. “I take into account all tax impacts, including property, sales, excise, and payroll.” This is critical information to know, he adds, because total tax impacts can vary dramatically according to even slight changes in location — for example, what

side of the street a client chooses for its operation.

Reforming Tax Rates Many states are reforming their tax structures to be more pro-business. According to the American Legislative Exchange Council, in 2015, 10 states cut their personal income tax burdens, eight states reduced corporate income tax or business franchise tax burdens, six states reduced their property tax burdens, four states cut excessively high fees or tolls, three states cut their sales tax burdens, and three states cut discriminatory taxes.2 In 2016, the most notable corporate income tax change was North Carolina cutting its corporate income tax from 5 percent to 4 percent, as a component of its multi-year phase-in of its comprehensive 2013 tax reform package — now making its corporate tax rate the lowest in the nation. * 1 http://taxfoundation.org/article/state-corporate-income-tax-rates-and-brackets-2016 2 https://www.alec.org/app/uploads/2016/03/2016-03-15-State-Tax-Cut-Roundup_FINAL.pdf

number

PROXIMITY TO MAJOR MARKETS

With the ever-growing passion for faster customer delivery, proximity to major markets is becoming an increasingly important site selection factor. It has always made sense logistically — being close to customers reduces shipping costs, transportation distances, traffic delays, and travel times, all of which improve operational efficiency and cost. New trucking regulations that limit how much drivers can drive within a certain time period also raise the value of proximity to markets. Proximity to market is especially important when considering sites for new distribution warehousing and fulfillment center operations. Keep in mind, however, that “proximity” is a relative term. “Twenty years ago, proximity to major markets usually meant a one- or two-day transit from the warehouse or plant to the final customer,” says John Boyd, site consultant and principal with The Boyd Company in Princeton, N.J. “Today, however, due to 32

AREADEVELOPMENT

1. AVAILABILITY OF SKILLED LABOR 2. HIGHWAY ACCESSIBILITY 3. QUALITY OF LIFE 4. OCCUPANCY OR CONSTRUCTION COSTS 5. AVAILABLE BUILDINGS 6. LABOR COSTS 7. CORPORATE TAX RATE

8. PROXIMITY TO MAJOR MARKETS 9. STATE AND LOCAL INCENTIVES 10. ENERGY AVAILABILITY AND COSTS

FOR FREE SITE INFORMATION, CALL

the rise of e-commerce and omni-channel retailing, coupled with Amazon’s quest for same-day delivery, the term ‘proximity to major markets’ takes on a whole new meaning and underscores the importance of speed-to-market in today’s instant-gratification economy.” A proximity-to-market hotspot is eastern Ontario in Canada — located within a few hours of both Toronto and Montreal and within same-day delivery of vast U.S. mega-markets stretching from Boston to Baltimore. “Major market proximity — along with exchange rate advantages favoring Canada — is overcoming previous administrative hurdles at the borders, which have been greatly streamlined in recent years by the Free and Secure Trade (FAST) program,” says Boyd.

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

TOTAL ANNUAL OPERATING COST RANKING

For businesses serving international customers, DISTRIBUTION WAREHOUSE LOCATION proximity to major markets often Meadowlands/Northern NJ Region translates into Cranbury/Central NJ Region proximity to major U.S. deepwater Stoughton/Southeast MA Region ports. The recently Danbury/Southern CT Region expanded Panama Canal is already afNewburgh/Hudson Valley NY Region fecting port-proxiLehigh Valley PA Region mate site selection planning. “ConSchenectady/Upstate NY Region tainer shipments York/Southeast PA Region are projected to increase tremenDover/Central DE Region dously at U.S. East Eastern Ontario Region Coast ports over the next several Source: The Boyd Company years, creating port-proximate inland distribution enclaves in cities situated within a few hour’s truck drayage of deepwater port terminals like Miami, Savannah, Charleston, Norfolk, Baltimore, Newark/Elizabeth, Boston, and eastern Canadian cities served by the St. Lawrence Seaway,” Boyd adds.

Operating Cost Ranking Operating costs can vary drastically among sites that contend for proximity-to-market status. The accompanying chart shows an overall cost ranking of 10 surveyed distribution locations prepared by The Boyd Company — all locations show superior access to major buying power concentrations within the rich Northeast U.S. and Eastern Canadian consumer market. Annual costs are based on a 500,000-squarefoot distribution center employing 250 workers.

TOTAL ANNUAL OPERATING COSTS

Last-Mile Delivery

Probably the most dynamic $20,663,653 link in the supply chain dealing with $20,154,292 market proximity $19,165,711 is “last mile” — that movement of $18,699,489 goods from a dis$18,484,896 tribution center to the final destina$18,400,406 tion in the home. $18,024,334 “Amazon has done much to $16,963,894 challenge and $13,412,191 rewrite the rules of last-mile delivery,” notes Boyd. “Today, proximity to major markets and speed of delivery are trumping many of the more conventional site selection drivers related to taxes, labor, and real estate costs. Witness the surge of new fulfillment centers being constructed by Amazon in market-rich states like California and New Jersey, despite their high costs and challenging business climates.” Last-mile delivery has also produced a new “residence-proximate” warehousing subsector: the locker. Studies show that online shoppers not only want their packages immediately, but they also want them delivered to places other than their homes. “Lockers are already common in densely populated and highly urbanized Europe,” says Boyd. “We anticipate lockers will become a growth sector within the retail site selection field over the next few years. Amazon already has automated lockers in major markets in six states.” * $21,322,480

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 AREA DEVELOPMENT | Q4/2016

number

S TAT E A N D LOCAL INCENTIVES

States are highly competitive with each other for investments and jobs.

States want to make the winning offer Stavriotis, senior vice president in CBRE’s that maximizes project-cost feasibility and Chicago Occupier Practice Group. “With 1. AVAILABILITY OF reduces operating costs through incenthe rise of advanced manufacturing and SKILLED LABOR tive packages customized to the potennew automation techniques, production 2. HIGHWAY ACCESSIBILITY tial client’s needs. This is also becoming jobs are increasingly technical and special3. QUALITY OF LIFE increasingly important for keeping existized. Skills are less transferrable between 4. OCCUPANCY OR ing companies within their borders; these industries and employers. The general CONSTRUCTION COSTS companies increasingly shop themselves labor pool may have a breadth of skills and 5. AVAILABLE around and dangle their job numbers in experience, but too often lacks the exact BUILDINGS front of economic development teams in mix that is required for these specialized 6. LABOR COSTS other states — moving isn’t such a big deal roles.” 7. CORPORATE anymore, especially if they can get a great To combat the skills gap, more compaTAX RATE 8. PROXIMITY TO incentives package. nies are leaning heavily on internal trainMAJOR MARKETS Incentives that states and communities ing curricula and career path programs, 9. STATE AND offer include land acquisition, infrastructure cultivating talent from within. This ensures LOCAL construction or improvement, low-interest that all employees receive the exact training INCENTIVES financing, tax credits, and expedited perthey need, and that employers have direct 10. ENERGY mitting. Sometimes low-cost energy is part control over the way proprietary procedures AVAILABILITY AND COSTS of the deal, including rate discounts, tax and processes are taught. exemptions, and grants for utility infrastrucThis approach has interesting implicature improvements. tions for site selection, notes Stavriotis. Companies are most attracted to cash-equivalent inIn the past, expanding companies would pore over centive programs that help offset operating costs, such sophisticated labor studies, chasing markets that as cash-refundable job-creation tax credits, property seemed to promise the perfect talent mix. Today, many tax abatements or refunds, training grant dollars, and are looking inward, focusing instead on crafting the infrastructure grant dollars. Examples of cash-equivalent internal training curriculum necessary to build a strong incentives that lower project costs include deal-closing talent pipeline, regardless of where they land — and funds to purchase land, tax increment financing (TIF) increasingly are looking to state development agencies funds to offset construction costs, and grant dollars to to assist, screen, and even train their workers, often at purchase equipment. no cost. “As these companies relocate or expand into new markets, local training partnerships are essential,” says Stavriotis. “Often markets that offer the strongest trainAn increasingly popular (and creative) incentive that ing assistance lead the short list — and local educational states are using to attract economic development is institutions and networks can be as important as labor training partnerships to help companies close the skills costs and tax rates.” gap. Specifically, when seeking a good training part“The shortage of qualified applicants to fill open ner, companies look for confidentiality of proprietary positions remains a primary concern with many of curricula, flexibility of curriculum and requirements, our clients, especially in manufacturing,” states Eric simplicity of administrative functions, transparency of

Addressing the Skills Gap

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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

funding dispersal, versatility of industries and occupations, immediacy of funding, and diversity of training resources.

Sealing the Deal Although incentives can add up into an attractive package, they can be a bit distracting from fully evaluat-

ing other key site selection factors. Most site consultants agree that incentives shouldn’t be considered until there is a short list of three to five final potential locations. At this point these locations all look very similar in terms of key factors such as human capital, tax liability, real estate, infrastructure — it is at this juncture that incentives can help offset project and operating costs and make a significant impact in the final decision. *

number

ENERGY AVA I L A B I L I T Y AND COSTS

Energy availability and costs are important for every project, but especially critical for industries that consume large amounts of energy, such as manufacturing, distribution, and data centers.

continue to offer competitive electric and It is beneficial to evaluate the history of natural gas rates; however, a drawback is rate increases, understand how energy is 1. AVAILABILITY OF that a portion of this electricity is genergenerated, research potential impacts of fuSKILLED LABOR ated from coal, which becomes more ture regulatory changes, and investigate grid 2. HIGHWAY ACCESSIBILITY problematic with stricter environmental reliability. Energy costs can vary greatly by lo3. QUALITY OF LIFE regulations. As a result, these states tend cation; some areas are also better positioned 4. OCCUPANCY OR offer the best incentives to lower rates, or than others in terms of future impacts on rates CONSTRUCTION are more willing to enter into long-term by environmental regulations. COSTS 5. AVAILABLE power agreements. Many states and localities work with their BUILDINGS utility providers to offer low-cost energy 6. LABOR COSTS plans that can be customized to meet the 7. CORPORATE operational needs of potential new compaTAX RATE nies. Utility incentive programs include rate Companies are increasingly interested 8. PROXIMITY TO MAJOR MARKETS discounts, tax exemptions, and grants for in drawing at least some of their power 9. STATE AND LOCAL utility infrastructure improvements. from renewable energy sources, primarINCENTIVES Evaluating the energy resources/costs ily wind and solar. This can be for several 10. ENERGY for an area can be a complicated process. reasons. With growing capacity and lower AVAILABILITY “It takes a lot of research and analysis to prices, renewable energy can be considAND COSTS complete the evaluation process,” says Larry ered a hedge against oil and gas prices. Gigerich, executive managing director for It is also viewed as a more stable energy Ginovus in Indiana. “When a client is a large source — for example, production doesn’t energy user, we sometimes bring in an energy consulcome to a grinding halt like it does with a major pipeline tant to help us work through different options.” spill. Areas with large amounts of hydro-generated power “Business leaders recognize that the energy land— for example, Washington, Oregon, Idaho, Utah, scape has changed, and traditional sources to produce Canada, and upstate New York — typically have lower energy are changing due to regulatory reasons,” says blended energy rates. States in the South and Midwest Gigerich. “As a result, site selectors and corporate deci-

Going Green

AREA DEVELOPMENT | Q4/2016

sion-makers are asking more questions about how utilities generate electricity so they can better understand what could happen with future pricing when new environmental standards come into play in 2022 and 2030. For example, areas that are still reliant on high-sulfur coal are at risk of greater prices adjustments in the future due to these standards.” The other major reason for “going green” is that companies want to be good environmental stewards and be seen as caring about the environment, which resonates with consumers, who are more likely to support and purchase products from companies that utilize renewable energy sources. Production of solar and wind energy is on the rise. Areas in western parts of the country generate large amounts of wind power and can offer lower costs. The

U.S. Energy Department predicts that the cost of wind energy will drop dramatically by 2030.1 According to Gigerich, “Areas with significant wind, solar, and hydro-generated power are faring well, both today and also in terms of price predictability for the future.” A corporate champion of wind energy is Amazon, which just agreed to purchase 90 percent of the output from a new 235-megawatt wind farm in Scurry County, Texas.2 Combined, Amazon’s wind projects in multiple states will generate more than 2.5 million megawatt-hours every year, which is intended to offset the increased energy demands on the grid resulting from Amazon’s rapidly expanding operations. *

COMPANIES ARE INCREASINGLY INTERESTED IN DRAWING AT LEAST SOME OF THEIR POWER FROM RENEWABLE ENERGY SOURCES, PRIMARILY WIND AND SOLAR.

1 http://www.governorswindenergycoalition.org/?p=18802 2 http://www.convergedigest.com/2016/09/amazon-plans-253-megawatt-wind-farm-in.html

THIS LAND IS YOUR LAND.

REALLY. With the resources, opportunities and incentives the Tulsa region offers, your business can thrive and immediately land a leadership role in our community. You won’t ﬁnd a more welcoming economic climate. Visit GrowMetroTulsa.com/MoveForward to download our regional business overview.

AREA0641.indd 1

AREADEVELOPMENT

15/10/16 4:11 AM FOR FREE SITE INFORMATION, CALL

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

FINANCE/TAXES

Enterprise Zones: Opportunity Requiring Due Diligence The benefits of investing in an enterprise zone may be substantial, but zone rules, commitments, and potential economic challenges must be clearly understood. By David Hickey, Senior Director, Hickey & Associates

s political leaders and economic developers seek policy instruments to stimulate economic activity in their communities, enterprise zone programs are a tool deployed by many across the United States. At their core, enterprise zones are initiatives established in a predesignated area facing economic disparity with unique public incentives opportunities. In theory, providing public incentives to businesses investing in these zones will provide the necessary support to allow the area to overcome certain economic barriers. However, many economists challenge the true impact of these zones over the long

The initial sites were in Newcastle, Liverpool, Belfast, and east London. Not long after, the ideology behind enterprise zone programs reached the United States. Beginning at the federal level, Representatives Jack Kemp (R-NY) and Robert Garcia (D-NY) introduced legislation to establish enterprise zones throughout the country. The Reagan Administration also supported the concept of zones with tax concessions and relaxed regulations. However, these efforts did not make it outside the capital beltway. Connecticut was the first state to enact an enterprise zone program in 1981; four years later, at least 40 states established legislation enacting the enterprise zone program idea. A decade on, the Clinton Administration worked with Congress to develop a community and empowerment zone program. term. This article is not meant to present the economics of these programs, but instead to review the key factors to evaluate when considering an investment in an enterprise zone.

History of Enterprise Zones Enterprise zones were first developed in Great Britain and implemented by the Conservative Party government of Margaret Thatcher in the early 1980s. The initial concept, credited by many to Peter Hall, an urban planning professor, believed permitting more free enterprise in economically struggling areas through tax benefits and reduced governmental interference would lead to new economic activity.

Alternative Measures Today, enterprise zone programs are still found throughout the United States. However, there are policy leaders identifying alternative measures to improve the programs, as well as replace them altogether. The United Kingdom still utilizes enterprise zones as a key economic development tool, albeit in a different form than introduced in the 1980s, with up to 48 areas to be designated by 2017. Recent examples of state legislatures choosing to go against the enterprise zone model can be found in California and Florida. The California Assembly and Governor Jerry Brown AREA DEVELOPMENT | Q4/2016

ended the state’s Enterprise Zone Program in lieu of a new approach with competitive tax credits and a manufacturing sales and use tax exemption. The three new programs — California Competes, the New Employment Credit, and the Manufacturing Sales and Use Tax Exemption — are statewide, as opposed to the Enterprise Zone Program that focused solely on 42 districts. The Florida legislature simply let their state’s enterprise zone program sunset at the end of 2015. Despite support from business and local organizations, including the Florida League of Cities, the program is no longer available as an economic development tool for communities. As a brief reprieve for investors, legislation passed earlier this year does allow for companies to capture zone benefits if in place ahead of the program’s expiration. While other public incentive programs are facing budgetary challenges, several states are leveraging enterprise zones further for economic development. In Illinois, a state facing significant budget shortfalls directly affecting economic development policy in Springfield, enterprise zones drive significant opportunity for local governments to support investing businesses. In the Land of Lincoln, communities with designated enterprise zones may offer property tax abatements and permit fee waivers, among other support measures.

What To Know When Investing? Going forward, enterprise zones can provide vast benefits for businesses through tax concessions and relaxed regulation, along with supplemental support dependent on the location. However, businesses need to conduct a thorough evaluation of these potential benefits when making location decisions to understand all of the dynamics facing the project. The key factors to identify and understand include the specific rules of the zone, the benefits, the commitments, and the potential economic challenges. • Rules of the Road: Through legislation, and subsequent rulemaking processes, state and local governments have developed their enterprise zone programs to best meet the unique elements of their communities. For any business seeking to invest in a zone, the company must understand the specific statutory and regulatory rules in place.

AREA DEVELOPMENT

“

Depending on the site and goals of the community, enterprise zones frequently target specific types of industries for investment, such as manufacturing, distribution, and office facilities.

• The Benefits: When it comes to the benefits provided to investors in these zones, there are major variations across the country. Many of the enterprise zones have a key focus on the delivery of tax benefits to stimulate investment. How the tax relief is applied varies depending on the state. Several states focus on state corporate income tax liability, while others leverage sales and use tax exemptions/refunds, as well as property tax abatements. It is vital to understand how these tax concessions benefit the company being in the particular zone, and if the relief is of true value. In addition to tax relief, state and local governments provide further support for businesses investing in enterprise zones. This supplemental aid may come in a number of different forms, including cash grants, subsidized unemployment insurance, waived permitting fees, training funds, and technical assistance. • The Commitments: Along with the varying levels and forms of support available in enterprise zones, state and local governments also have vastly different project commitments to capture incentives. Investing in an enterprise zone often does not automatically trigger incentive support. Typically, the key eligibility drivers include industry, size of capital investment, job creation, employee wages, and employee residency. Enterprise zone programs frequently target specific types of industries for investment. Dependent on the site and the goals of the community, eligibility may be limited to certain industries, such as manufacturing, warehousing and distribution, and office facilities. Before making an investment in a zone, it is critical to identify the target industries to ensure the project is eligible. Incentives in enterprise zones are also frequently tied to the level of capital investment for a project. For example, to capture the Texas Enterprise Program Sales Tax Refund, the maximum value of the incentive is limited on the capital investment level. With an eligible investment of less than $400,000, a project may receive no more than $25,000 in total refund. Incrementally, the refund level increases as does the level of eligible investment. Ultimately, an investment over $250 million may capture up to $3.75 million in total refund. Many enterprise zone incentives are

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

also directly associated with job creation, along with employee wages. In the Commonwealth of Virginia, the state’s enterprise zone program offers an Enterprise Zone Job Creation Grant. For the creation of new jobs within an enterprise zone, a company may capture a cash grant up to $800 per job per year for five years. Capped at a maximum of 350 jobs, the ultimate value is dependent upon wage levels versus the federal minimum wage rate. Additional requirements may be in place that are critical to identify and understand when evaluating an enterprise zone program, including residency requirements. In driving economic activity to a certain area, state regulations may require a level of employees to be residents of an enterprise zone. In Texas, if a business is located in a zone, at least 25 percent of new employees must meet economically disadvantaged or enterprise zone residency requirements. If not in a zone, the threshold increases to 35 percent. • The Challenges: Enterprise zones are designated for a reason, which is characteristically a heightened level of economic disparity. With that under consideration, these areas are frequently faced with economic barriers, including labor availability, transportation access, social challenges, and environmental issues, among others. Areas designated as enterprise zones can present many opportunities for investing businesses, but the availability of required skills is often a challenge. As is critical in any site

decision, the company must ensure a skilled and affordable workforce exists. With the challenges presented in an enterprise zone, a company needs to undergo the due diligence to make certain the labor force is available. Many communities targeted for these support mechanisms are also often facing difficult social challenges, such as high crime rates. Depending on the project, it is important to understand the local dynamics of an enterprise zone. Additionally, transportation access to move goods and services, as well as for commuting employees, is vital to evaluate ahead of an enterprise zone investment. Finally, many enterprise zones are aimed at vacant industrial properties. Business leaders should fully certify that each site within an enterprise zone does not face environmental challenges ahead of development.

In Sum With several decades in existence, enterprise zone programs have evolved greatly from their inception in the United Kingdom. Today, while not supported by all, enterprise zones are continuing to be utilized as a policy instrument to stimulate economic activity across the United States. Before investing in an enterprise zone, there are a number of key factors to evaluate, including the specific rules of the zone, the benefits, the commitments, and the potential economic challenges. The benefits can be substantial, but the requirements and challenges must be understood. ■

MORE AFFORDABLE ENERGY. MORE WATER TO THRIVE. MORE GROWTH. From some of the lowest electricity and labor costs in the Southwest to a young and qualified workforce, SRP and Greater Phoenix offer you the tools and incentives needed to make your move a success. With low taxes and a reliable water supply, Greater Phoenix is consistently named one of the top 10 places to locate businesses. Coupled with SRP’s awardwinning customer service and broad dark fiber network, you’ll find what you need to build your business here. To learn what we can do for you, visit PowerToGrowPHX.com.

AREA0503.indd 1

5:23 PM AREA DEVELOPMENT26/11/15 | Q4/2016 39

ADVANCED TECHNOLOGY

North America’s Robotics Renaissance As collaborative robotics continue to increase the safety, efficiency, and productivity of businesses in North America, it’s clear that this technological advancement is a key to business growth. By Stephen Thompson, Senior Economic Officer, Ontario’s Ministry of International Trade

The OTTO 1500, a collaborative robot made by OTTO Motors, a division of Clearpath, is designed for material transport.

hile automated assembly-line machines have been enhancing the efficiency and quality of production for decades, advancements in the robotics industry are reshaping the way that humans and machines interact — augmenting the complex and intelligent work done solely by humans. Traditional industrial robots still have a place when things have to be done repeatedly, quickly, and without mistakes, but advanced robotics technology is enabling a new set of robots, called collaborative robots, to assist in areas other than manufacturing. Collaborative robots can handle a multitude of tasks because they can think for themselves. They’re a combination of artificial intelligence, sophisticated vision systems, and mechanical engineering. This means they can teach themselves about their surroundings, work safely alongside humans, and address the challenges of aging workforces and more demand for customization — not to mention escalating labor and production costs. The interest in collaborative robots makes sense in today’s world. Globally, collaborative robots represent one of the fastest-growing categories of the robotics industry, with shipments expected to grow from $100 million to $1 billion by 2025 — a tenfold increase, according to an ABI Research Study.1 This growth matches the global demand for all categories of robotics, which will continue to grow through this decade to a market value projected to reach $41 billion by 2020. According to the International Federation of Robotics (IFR), in 2014, robot sales increased by 29 percent to 229,261 units, by far the highest level ever recorded for one year. In comparison, an average of 171,000 units per year were sold between 2010 and 2014.2 Najah Ayadi, President of Bluewrist Inc., a provider of industrial automation solutions and products based in Richmond Hill, Ontario, Canada, believes new robotic technologies make good business sense. “This new generation of safe robots can deliver a return on investment within one year on average.”

Improving Quality and Safety But it’s not just dollars and cents. Collaborative robots, along with robotics and

AREA DEVELOPMENT

autonomous systems in general, can help manufacturers improve quality, accuracy and, most importantly, worker safety. Robots are working alongside humans using artificial intelligence to evaluate their environments and use rational processes to step in when conditions are unsafe or workers need a helping hand. Collaborative robots are enhancing the way humans live and operate, and there are examples of this robotic renaissance happening in North America. For instance, autonomous vehicles and devices, such as those developed by Clearpath Robotics of Kitchener, Ontario, Canada, can travel on land or under water, proving useful in unsafe conditions such as an oil spill or fast-moving water.3 Researchers at the University of Waterloo in Ontario have even developed facial recognition software that can identify when a driver is experiencing road rage and play soothing music to calm him or her down.4 Other machines can provide a “third arm” to a worker, provide guidance tools for surgeries, or retrieve and install car tires on an assembly line.

Small Businesses/ Big Aspirations U.S. robot installations — the thirdlargest robot market — continued to increase, by 11 percent to the peak of 26,200 units, according to the IFR. Driving this growth are improvements in automated production to maintain domestic manufacturing, the IFR notes, and in some cases, to bring

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

‘000 of units

back manufacturing that had previously been sent Estimated worldwide annual supply of industrial robots overseas. 250 Like other disruptive 229 technologies in the United States and globally, the for200 mative advancements can 178 be seen in startups that op166 erate on small budgets and 159 big aspirations. In the U.S., 150 that includes companies 121 120 such as Dispatch, a Silicon 114 113 112 97 Valley company that is test100 ing an autonomous delivery 81 vehicle — a smart-box on 69 60 wheels — on two American 50 college campuses.5 Marc Benioff, CEO of Salesforce, a titan in Silicon 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Valley for the past two decades, wrote recently that Source: World Robotics 2015 robots, particularly their use of artificial intelligence offered at the Institute for Robotics and Intelligent Machines (AI), will soon become as at Georgia Tech, Carnegie Mellon’s Robotics Institute in ubiquitous and underlying in our lives as electricity: “As in Pennsylvania, The Robotics & Mechanisms Laboratory at past periods of economic transformation, AI will unleash Virginia Tech, and MIT’s Computer Science & Artificial Intelnew levels of productivity, augment our personal and proligence Laboratory, among many other colleges and univerfessional lives, and pose existential questions about the agesities too numerous to list here. old relationship between man and machine.”6 Additionally, community colleges are helping to satisfy the Perhaps one of the main advantages of the use of artificial robotics industry’s need for skilled labor. For example, Applied intelligence in collaborative robots is the ability to quickly Manufacturing Technologies (AMT), a Robotics Industries make smaller businesses more competitive. They are both Association (RIA) Certified Robot Integrator based in Orion, affordable and more user-friendly than they used to be, exMichigan, recruits workers from community colleges as well plains Chris Claringbold, CEO of KUKA Robotics Canada as universities. According to Diane Haig, the company’s Chief Ltd., a robotics systems manufacturer based in Mississauga, Knowledge Officer, “Automation engineers (typically four-year Ontario. “Today’s systems are far more intuitive and easier degrees) have exposure to and an understanding of how the to program, as well as more accessible to business owners. different engineering disciplines go together to make automaToday you don’t need an engineering degree to program a tion a possibility. They’re familiar with the electronics, the robot or system. So anyone can benefit.”7 control system, the robots, the mechanical design, and some of the software tools that are used in automation. Coming from Skilled Labor a community college, they may be well-versed in one of those But what is required to be a leader in industrial automadisciplines,” she says. “We’ve had people start from the twotion and robotics — and critical for success — is skilled labor. year program and develop very quickly and work their way In Ontario, 24 of the province’s colleges offer automation into automation engineer positions.”8 and robotics-related programs, with applications in robotics, automation, controls, electronics, and mechatronics. The RoAs the use of robotics continues to drive business growth botics and Control Group at Ontario’s Western University is in the United States and Canada, particularly in Ontario, satequipped with state-of-the-art tools including virtual reality isfying the industry’s need for skilled workers will continue and haptic devices, along with a wide variety of robots such to be a top priority. ■ as the Magellan Pro Mobile Robot. Additionally, The David Notes R. Cheriton School of Computer Science at the University 1 http://roboticsandautomationnews.com/2015/07/06/collaborative-robotics-market-to-grow-to1-billion-by-2020/253/ of Waterloo conducts top-tier research, specifically in the 2 http://www.ifr.org/industrial-robots/statistics/ 3 http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/its-a-robotsfields of artificial intelligence and human-computer interacworld-canadian-firm-clearpath-looks-to-automated-future/article23178969/ tion. This focus provides the talent required to undertake 4 http://www.foxbusiness.com/markets/2016/07/30/artificial-intelligence-may-soon-drive-your-carand-keep-company-at-same-time.html robotics-related research, such as space robotics, drone tech5 https://www.weforum.org/agenda/2016/05/the-rise-of-the-robots-how-the-market-is-booming 6 https://www.project-syndicate.org/commentary/artificial-intelligence-revolution-by-marc-benologies, autonomous ground vehicles, and underground/ nioff-2016-09 7 http://www.investinontario.com/spotlights/collaborative-robots-manufacturing-environments underwater applications. 8 http://www.robotics.org/content-detail.cfm/Industrial-Robotics-Industry-Insights/Closing-the-SkillsIn the U.S., robotics education and research programs are Gap-in-Automation-A-Call-for-Action/content_id/5362 AREA DEVELOPMENT | Q4/2016

FACILITY PLANNING

A Business-Driven Approach to Utility Infrastructure Whether a utility project is driven by production capacity, energy efficiency, regulatory requirements, or environmental sustainability, its ultimate objective is to add value to the business. By Jim Lewis, Electrical Controls Department Manager and Principal, SSOE Group

aking a business-driven approach in utility infrastructure adds value and minimizes risks in expansion and upgrade projects. Every manufacturer has a unique business driver for a utility infrastructure expansion or upgrade, whether it is production capacity, energy efficiency, regulatory compliance, or environmental sustainability. Yet all seek a comprehensive solution that adds value to their businesses using project execution strategies that minimize the risks — in particular, avoiding disruption of existing operations. Each of the following examples shows how a utility challenge can be turned into a business advantage.

Energy Efficiency/Reduced Costs In many cases, a utility upgrade may be motivated by the twin objectives of improving energy efficiency and reducing operational costs. Before effective decisions can be made, a life-cycle analysis of the business, systems, and equipment is essential. An ROI study may conclude that new technologies, such as heat-recovery systems and economizer cycles, can generate sufficient life-cycle operational savings to make the project viable, cost-effective, and sustainable.

Regulatory compliance is yet another driving force in technology upgrades. An example that applies to hazardous air emissions is MACT — the U.S. Environmental Protection Agency’s Maximum Achievable Control Technology standards. In some cases, the upgrades can be designed to achieve both energy efficiency and compliance goals. One manufacturer replaced its aging oil, gas, and coal-fired boilers with new, natural gas-fired boilers and a condensing economizer to reduce emissions and increase energy efficiency. Although not mandated by regulation, the change from coal to natural gas reduced emissions for the plant and is in alignment with the corporation’s overall sustainability goals. The replacement of this equipment also improved the reliability and robustness of the system such that any one boiler failure would not impact facility production. SSOE provided project management and engineering services to integrate vendor-supplied equipment into an overall solution that met the plant’s capacity needs for its current and projected future loads. Construction was sequenced around scheduled downtime. As designed, the re-installation sequence was anticipated to reduce labor costs by $170,000.

Utility Expansion Planning Replacing aging oil, gas, and coal-fired boilers with new, natural gas-fired boilers and a condensing economizer reduces emissions and increases energy efficiency.

AREA DEVELOPMENT

Utility expansion planning is typically driven by a business need in one or more of the following areas:

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

• Increasing production capacity in a successful product line • Adding a new product • Improving uptime • Cleaning and asset utilization • Increasing energy efficiency and associated operational savings • Replacing obsolete equipment • Improving regulatory compliance • Meeting a corporate environmental sustainability mission Often, a capital project or expansion in support of business goals strains the capacity of the existing utility infrastructure. As the utility infrastructure ages beyond 20 or 25 years, it also becomes increasingly costly to operate, maintain, and repair. It may not satisfy new building codes or changing regulatory requirements. Fortunately, new technology — such as heat recovery, water savings, and HVAC economization systems — offer opportunities to save energy dollars with a good return on investment.

Building the Foundation for an Execution Plan Developing the basis of an execution plan involves taking a system-wide perspective. Since a utility infrastructure expansion is both an engineering project and a business initiative, it must be based on several components: • A clear comprehension of the business objectives; • An evaluation that identifies each plant’s production capacity; • An audit that assesses the capacities and condition of existing utility systems; and • An understanding of the constraints on the proposed expansion. To define these components requires knowledge gained from multiple areas of expertise: business, operations, engineering, and marketing leaders; management and operations at the plant level; and professionals in architectural/engineering, as well as construction and construction management disciplines. Each of these areas should be represented on the planning team. The team’s evaluation of the company’s facilities identifies capabilities that may be tapped to maximize the system’s existing production and utility infrastructure. For example, it may not prove optimal to expand an existing plant because there are opportunities to shift production among other existing plants to support the business for a lower capital expenditure. However, when expansion is determined to be the most feasible alternative, a system-wide perspective enables the team to identify opportunities to offset construction-related downtime, such as building inventory at another plant.

Developing an Effective Execution Strategy Generating an execution strategy involves assessing needs, risks, and constraints at the facility level. Therefore, the team must look at the impact of the project on production at that level. It must work closely with plant managers and key personnel from all disciplines, as well as equipment vendors and utility providers, to identify and mitigate the risks to the following parts of the business plan:

“

The team must fully understand the project’s potential impacts on the business during execution, and develop a customized plan to add value and reduce risks.

• Production capacity, uptime, market share, inventory • Employees’ benefits and status related to furlough time, as well as employee health and safety • Flow of people and materials • Support facilities for shipping, lockers, and offices • Utility service capacities and utility feeds, required modifications, and coordination of work orders A good execution strategy does not revolve around the utility infrastructure project itself. The team must fully understand the business driver and the project’s potential impacts on the business during execution, and develop a customized plan to add value and reduce risks.

Total Project Delivery Total project delivery takes a holistic, value-added approach. The architectural/engineering, construction, and construction management team serves as the expert partner in providing a comprehensive solution. A Total Project Delivery approach integrates design and construction into a cohesive team, and it uses the group’s collective talent and insight to benefit both the project and the business. Total Project Delivery improves efficiency and productivity through all phases of design and construction through improved and earlier coordination and collaboration among designers, construction managers, project managers, project controls staff, and contractors. The benefits of Total Project Delivery include fewer revisions, fewer communication AREA DEVELOPMENT | Q4/2016

glitches, and fewer delays as the project moves forward. This delivery method also results in a compressed project schedule, and it promotes equal commitment by all entities to achieving the project’s goals. Recently, one manufacturer added one new product line with the space and capacity to add a second line at a future date to its facility, which drove a 300,000-square-foot expansion of production, staging, and warehouse space, including a 110,000-square-foot warehouse component. The new lines had to be fitted with new equipment ranging from bulk material receiving through final palletized product. Maintaining existing production was crucial to the business’ market supply, yet the locations of incoming raw materials and shipping areas for final product were located in the required expansion space. The engineering assessment revealed that the expansion would put an additional load on the plant’s medium-voltage electrical system and further strain an already inefficient plant HVAC System. SSOE and a local partner used Total Project Delivery to provide a comprehensive solution. The team planned and executed the project in three phases. First it modified existing incoming and outgoing shipping areas. Then it modified and added to each incoming utility. Finally, while adding the necessary square footage, it changed existing systems and added new mechanical systems to improve operating efficiency. To minimize down times, construction activities were pulled forward to allow for the movement of systems in par-

New England Studios

Quiet Logistics

allel to running systems — a strategy that was only feasible due to the early collaboration of design and construction. The power utility and project team met to determine that a service upgrade from a medium-voltage to high-voltage system promised a good payback. The solution required new substations and switchgear, and these would sub-feed the existing power system for the entire plant. This increased power stability while reducing costs. The existing HVAC system was replaced with efficient gas-fired HVAC units that use return air, saving $35,000 per year in gas usage and $53,000 per year in electricity usage. Construction was completed months before delivery of the production line equipment, which gave the facility the time it needed to be completely prepped. All systems were started up and ready to go. Utility infrastructure expansions and upgrades are never simply engineering projects. Whether a utility project is driven by production capacity, energy efficiency, regulatory requirements, or environmental sustainability, only a business-driven approach will meet the ultimate objective, which is to add value to the business using project execution strategies while also minimizing the risks. ■ JIM LEWIS is the Electrical Controls Department Manager and Principal at SSOE Group (www.ssoe.com), a global project delivery firm. He can be reached in SSOE’s Toledo, Ohio, office at 567-2182217 or jim.lewis@ssoe.com.

Devens. The right environment for business growth. In Devens, you’ll ﬁnd a friendly environment for starting, expanding, and growing your business. We offer advantages such as new business incubation space, equipment leasing, fast-track permitting, and unique real estate opportunities tailored to your needs. And with amenities including two hotels, a conference center, and even an 18-hole golf course, you can attract clients and employees alike. To explore properties for sale, call Mika Brewer at 978.784.2906. To learn about leasing opportunities, call Tom Pope at 978.784.2939. Devens. The place to grow.

DevensBusiness.com Bristol-Myers Squibb

AREA DEVELOPMENT AREA0638.indd 1

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com 13/10/16 4:41 AM

FacilityLocations.com

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

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

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

Connect A directory with 5000+ listings including: • Local and Regional Economic Development Contacts • Port Authority Contacts • Utility Contacts • Foreign Trade Zone Contacts • Foreign Inward Investment Contacts If you are an economic development agency and want to have an enhanced listing with a location profile on FacilityLocations.com, please contact Dennis Shea at 800.735.2732 x 208 or dshea@areadevelopment.com

FACILITY PLANNING

For Optimized Building Design, Consider the Key Priorities When evaluating efficiency, it’s important to look beyond a single piece of equipment, as the whole is greater than the sum of its parts. By Al Fullerton, Intelligent Systems Leader, Trane

A Better Approach

To maximize efficiency of the entire building, it’s important to first consider how to make the entire system more efficient before going granular and looking at individual pieces of equipment.

Rather than asking which individual pieces of equipment are the most efficient, the question becomes how to make the entire system more efficient, while also ensuring it meets the priorities identified for the facility. Resisting the urge to go granular immediately — and instead taking this systems approach up front — helps maximize efficiency and performance of the entire building. It starts with understanding what you want to achieve in your facility, and what building outcomes are being sought. Is the driver reliability and redundancy, efficient performance, a sustainability goal, or other benchmarks or regulations? Next, consider how the building will be run and when it will be occupied. The needs of a manufacturing facility differ greatly from the needs of a hospital. Knowing how the building will be used provides a better understanding of full-load and part-load performance, which helps determine what equipment and systems are best suited for the building. From there, move backward into what building systems best match these goals and needs. In addition, it’s important to look at how the various building systems — from plumbing, lighting, security, and HVAC — interact and best work together to optimize building efficiency. The issue of system redundancy and optimization also plays a key role in this process. Emergency power sizing, peak-demand utility charges, and power blackouts and brownouts are all issues to consider for manufacturing and industrial facilities. Certain systems are better suited to provide redundancy than others. For example, chiller-based thermal storage systems run the chillers at night when energy prices, cooling loads, and outdoor temperatures are lower. By moving some of the system redundancy into thermal storage rather than excess or oversized chillers, systems using air-cooled chillers with ice storage have increased emergency cooling capacity with competitive or lower first

uildings in the industrial and manufacturing sector must be designed with a focus on the priorities specific to those facilities. Critical building and system needs can include reliable performance, redundancy, energy efficiency, and sustainability. While efficiency is often cited as a key factor in selecting individual pieces of heating, ventilation, and air conditioning (HVAC) equipment, this may not be the best way to achieve the most efficient and optimized building performance. This may seem counterintuitive, but there are many variables that contribute to optimized building performance. It depends on how the building is being used and occupied, how the various pieces of equipment in the building interact and work together, and what the goals are for the facility. In many industrial and manufacturing buildings, system redundancy and optimization are key priorities on that list. This makes it important to look beyond the efficiency of a single piece of equipment and instead consider building performance and efficiency — in keeping with

AREA DEVELOPMENT

the priorities for the facility — and seeing the whole as greater than the sum of its parts.

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

cost, and lower maintenance and water costs.

Key Strategies for Building Design Consider these key strategies that can help in successfully implementing a systems-level approach in building design: • Understand the utility cost structure. Don’t choose systems and equipment without a clear understanding of the utility rates and structure for a specific building and location. Understanding the utility rate structure, which often includes consumption charges and demand charges, allows for a more accurate analysis of building performance based on how the building will be occupied and used. In some areas, demand charges can comprise up to 75 percent of the monthly utility bill. Knowing this can help in choosing the most efficient system from a utility bill perspective, such as taking advantage of the load-shifting capabilities of a thermal storage system. It’s often helpful to consult a partner who offers expertise in building systems and equipment, as well as in utility rate structures and billing. • Consider the total budget. Selecting the building systems and equipment that will best provide optimized efficiency and performance for a specific building also hinges on the budget — both up front and long term for staffing and maintenance. Selecting a system that requires less long-term maintenance can help save staffing costs in the long run. • Understand the needs. Asking the right questions about how the building will be used and occupied is a critical consideration in choosing the systems and equipment that will provide the most efficient and optimized performance. • Use a modeling program. Using a modeling or energy simulation program in building design contributes to sound decision-making and can pay off in improved energy efficiency and performance. Modeling allows you to optimize the systems from an energy and utility bill perspective before construction even begins. It’s important to model against the potential optimized performance of the whole building and its systems, rather than modeling against performance of individual components.

be completed before the team assembled for a face-to-face design-day meeting. The design-day meeting was a deep dive into the design and operation of the campus’ central plant. Since the plan was for both a district cooling and heating plant, careful consideration was given to understanding their simultaneous demands so that heat recovery could be maximized. The utility rate structure included a high daytime rate that made a thermal storage system attractive. A ground source solution was also part of the preferred design. The diversity of system demand led to careful consideration for equipment selection criteria for safe and efficient system operation. The design-day meeting ended with a list of follow-up evaluations to be completed on the way to a holistic, integrated design solution. Follow-up items included an evaluation of the turndown capability of the larger chillers at nonstandard operating conditions to help determine if there was a need for a small “swing” chiller, and an assignment to develop a system control mode table to be evaluated by the manufacturer’s system application experts.

Seeing the Sum Instead of the Parts Taking this approach can result in improved energy efficiency and operational cost savings, and play a role in meeting goals you may have for performance, redundancy, sustainability, energy consumption, and efficiency. By determining upfront what you want to achieve in your building and the steps that need to be taken, you will be better prepared to choose the systems that are best suited for the job. It will also help you keep your priorities at the forefront when designing industrial and manufacturing facilities. ■ AL FULLERTON is intelligent systems leader for Trane, a leading global provider of indoor comfort solutions and services and a brand of Ingersoll Rand. In this role, Fullerton leads a team of engineers focused on skillfully applying Trane systems. He has worked in the HVAC industry since graduating from the University of Cincinnati with a bachelor’s degree in Mechanical Engineering in 1981.

Real-World Application Consider this example of a major automotive manufacturer working to develop a new district cooling and heating plant for its campus, which consists of a combination of offices, production, and laboratory test facilities that produce large quantities of heat. A primary performance goal was to create a LEED Gold or better solution. Given the varying demands of the different building types — along with the desire for high energy-efficiency performance — a whole-system approach was followed. The consulting engineer chose to work with a major equipment provider to consider and evaluate all design options. It was a collaborative process from the beginning, involving the consulting engineer, its sales representative, and system application experts from the equipment manufacturer. Project requirements, objectives, and design limitations were discussed; utility rates and building load profiles were shared; and existing design concepts were reviewed. Assignments for further investigation were identified, to

FacilityLocations.com AREA DEVELOPMENT | Q4/2016

ADINDEXWEBDIRECTORY Advertiser

Page

ALABAMA

Advertiser

Page

MASSACHUSETTS

City of Opelika www.OpelikaEconomicDevelopment.com lhuguley@opelika-al.gov

ARIZONA Salt River Project www.PowerToGrowPHX.com

NV Energy www.NVenergy.com/econdev www.NevadaSiteLocator.com

Page 22

OHIO JobsOhio www.jobs-ohio.com/Saama

17, 19, 21

NEVADA Las Vegas Global Economic Alliance www.LVGEA.org info@lvgea.org

OKLAHOMA Tulsa Regional Chamber 36 www.GrowMetroTulsa.com/MoveForward brienthorstenberg@tulsachamber.com

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

LOUISIANA Louisiana Economic Development www.LouisianaWorksWithYou.com

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

KENTUCKY Kentucky Cabinet for Economic Development www.ThinkKentucky.com Econdev@ky.gov

MassDevelopment (Devens Massachusetts) www.DevensBusiness.com mbrewer@massdevelopment.com

Advertiser

CANADA ONTARIO Brampton Economic Development www.PeoplePoweredEconomy.ca edo@brampton.ca

FacilityLocations.com Statement of Ownership Statement of Ownership, Management and Circulation. Publication Title: Area Development. Publication Number: 345-510. Filing Date: 10/1/2016. Issue Frequency: 5x. Number of issues published annually: 5. Annual Subscription Price: $75. Complete mailing address of known office of publication: 400 Post Ave. Westbury, NY 11590-2226. Contact person: Dennis J. Shea. Telephone: (516) 338-0900. Publisher name: Dennis J. Shea. Editor name: Geraldine Gambale. 400 Post Ave. Westbury, NY 11590-2226. Owner: Halcyon Business Publications, Inc. 400 Post Ave. Westbury, NY 11590-2226. Stockholders owning or holding 1% or more of total stock: President Dennis J. Shea and Secretary Randi S. Shea. 400 Post Ave. Westbury, NY 11590-2226. Known bondholders, mortgagees and other security holders owning or holding 1% or more of total amount of bonds, mortgages or other securities: None. Publication title: Area Development. Issue date for circulation data below: Q3 2016. Extent and nature of circulation: corporate real estate executives. Average number of copies of each issue during preceding 12 months: Total number of copies: 38,454. Legitimate paid/requested distribution: Outside country paid/requested mail subscriptions stated on PS 3541: 19,345. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/requested distribution outside USPS: 0. Requested copies distributed by other mail classes through USPS: 0. Total paid/requested circulation: 19,345. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 18,758. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 350. Total non-requested distribution: 19,108. Total distribution: 38,453. Copies not distributed: 182. Total: 38,635. Percent paid/requested circulation: 50%. Number of copies of single issue published nearest to filing date: Total number of copies: 32,583. Legitimate paid/requested distribution: Outside county paid/requested mail subscriptions stated on PS 3541: 16,453. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/requested distribution outside USPS: 0. Requested copies distributed by other mail classes: 0. Total paid/requested circulation: 16,453. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 15,980. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 350. Total non-requested distribution: 16,330. Total distribution: 32,783. Copies not distributed: 600. Total: 33,383. Percent paid/requested circulation: 50%. Publication of Statement of Ownership for a requester publication is required and will be printed in the Q4 2016 issue of this publication. I certify that all information furnished on this form is true and complete: Dennis J. Shea, Publisher.

AREA DEVELOPMENT

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

THE STORY OF

BUSINESS IN

LAS VEGAS IS A STORY

WITHOUT LIMITS

WHAT IS THE LAS VEGAS GLOBAL ECONOMIC ALLIANCE? The Las Vegas Global Economic Alliance grows the economy of Southern Nevada and helps foster a more prosperous, diverse and connected regional economy that thrives in the global marketplace. Weâ&#x20AC;&#x2122;re a dedicated group working to grow and promote the business climate and quality of life in a region that we also call our home. Call or visit our website to learn more.

702-791-0000

www.lvgea.org

AREA0627.indd 1

04/10/16 4:09 PM