Area Development Q4 Issue 2018 by Area Development

E-COMMERCE’S EFFECT ON REAL ESTATE MARKETS

20 Select Sites 19 Directory

WHAT’S YOUR U.S. MANUFACTURING TARIFF STRATEGY?

AREADEVELOPMENT SITE

AND

FACILITY

PLANNING

THE IMPACT

OF TARIFFS ON SUPPLY CHAIN COSTS

Q4/2018

THE SEARCH CAPITALIZING

IS ON, BUT SHOULD WE TELL?

INCENTIVES AWARDED REMAIN UNUSED?

ON OPPORTUNITY ZONES

ONE YEAR LATER:

THE VALUE AGILE

REAL ESTATE’S IMPACT ON INCENTIVES

OF A CHOOSEYOUR-OWNADVENTURE WORKPLACE

WHY DO

INCENTIVE

CONSIDERATIONS IN M&A TRANSACTIONS

THE TAX CUTS AND JOBS ACT

EVALUATING

THE WORKFORCE

12 INSIGHTS CONSULTANTS’

MILLENNIALS SPARK SEISMIC SHIFT IN SITE SELECTION

DUE DILIGENCE IN TODAY’S SITE SELECTION WORLD

INFRASTRUCTURE

INVESTMENT: SHIFTING THE FOCUS

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

AS A TOP 5 STATE FOR MANUFACTURING ESTABLISHMENTS, FLORIDA IS BUILT FOR YOUR BUSINESS. Why do more than 20,000 manufacturing companies call Florida home? Because not only do we have the space to accommodate them, we also have the custom-trained workforce, infrastructure and trade expertise to ensure success. Add to that a pro-business and costcompetitive environment, and it’s easy to see why Florida ranks among the nation’s top five states for manufacturing. And we have no doubt that your company can make something big of that. Discover what a future in Florida means for your business at floridathefutureishere.com/possibilities, or call 877-YES-FLORIDA.

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CONTENTS

COVER STORY

FEATURES 12 The Calculus of Master Planning an Industrial Site Project

Effective master planning results in seamless construction projects and builds the momentum for lean, concise operations and continued success.

20 The Ins and Outs

of Working With an Architectural/ Engineering Firm

It’s important that clients new to working with an A/E firm understand their standard business processes in order to achieve a successful capital project.

23 What’s Your U.S.

Manufacturing and Tariff Strategy

With the uncertain future of new tariffs and penalties, is it time to consider building a manufacturing site in the United States?

25 CONSULTANTS’ INSIGHTS Leading consultants to industry provide insights on the location decision process.

14 The Surprising Impact

of E-Commerce on Urban Real Estate Markets

Distribution is moving closer to end customers, and that means more distribution centers in urban environments.

16 How Location Strategy

Can Fuel Drug Discovery

Life sciences companies are seeking locations where they can attract top talent and identify flexible facilities, which is directly affecting their real estate decisions.

NOW ONLINE...

Exclusive Online Content • OPERATION RESCUE: Navigating Project Pitfalls from Start to Finish

• THE KEY TO INDUSTRIAL SITE SELECTION? Consumers and Labor

• THE BIG FIVE: Key Tax Credits and Public Incentives

• F IVE TIPS for Successful Economic Development Collaboration

• I S YOUR NEW ECONOMY WORKFORCE Hiding Where You Least Expect It?

• NEGOTIATING INCENTIVES? Avoid These Common Pitfalls

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

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

Volume 53 | Number 4 Q4/2018

Quote:

Work/life benefits allow companies meaningful ways for responding to their employees’ needs; they can be a powerful tool for transforming a workforce and driving a business’ success. Anne M. Mulcahy (1952 –

2019

), former Chairperson and CEO of Xerox Corporation

ANNUAL DIRECTORY

• The Unemployment Picture: Low Jobless Rates Create Growing Labor Shortage

4 Editor’s note

What’s Ahead? Meeting Labor Force and Other Challenges

• The Jobs Picture: Manufacturing and Other Sectors • Educational Attainment: Matching the Workforce with the Opportunities • 2019 Select Sites Directory Within the articles in this section, you will find statistical information on each state’s population and unemployment as well as educational attainment levels. States with the most manufacturing jobs are shown, as well as location of primary industry clusters — manufacturing and nonmanufacturing. Contact information for economic development organizations that

DEPARTMENTS

6 9

can help in your next location search is pages 70–71. Also visit FacilityLocations.com, our interactive directory offering Web and e-mail links to economic development organizations, GIS mapping and radius demographic reports, available buildings and sites listings, social media contact information, streaming videos, and more.

In Focus

Technology and the Evolution of the Real Estate Industry Capitalizing on the Speed of 3D Printing

8 Front Line

UAVs Provide Construction Industry With Clearer Sight Line

10 First Person

Oliver Dehning, CEO, Hornetsecurity

72 Ad Index/

Web Directory

Visit for SELECT SITES profiles and links. www.areadevelopment.com Join Our Newsletter areadevelopment.com/newsletter

Online Database Resources www.facilitylocations.com

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 2018 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 | Q4/2018

EDITOR’SNOTE

Q4/2018

What’s Ahead? Meeting Labor Force and Other Challenges

www.areadevelopment.com

Over the last 12 years, Area Development has produced more than 60 Consultants Forum events across North America focused on the best practices for economic development. Now, for the second year in a row, leading consultants to industry provide advice about site selection and facility planning to our corporate executive readers. In our special Consultants’ Insights report, consultants from 12 highly regarded firms share their views on due diligence in the location decision process, maintaining confidentiality, approaches to workforce development, the impact of tax reform, the role of incentives, advantages provided by the newly created Opportunity Zones, and more. According to Greg Burkart at Duff & Phelps, there has been a “seismic shift” in site selection. Instead of just identifying the right buildings, organizations are looking for the right people — particularly, educated young millennials who seek a work-life balance. In order to find these educated workers, a company can look at a state’s educational attainment levels — but sometimes those statistics don’t present the whole picture. Net migration data helps to complete the workforce picture in a particular market, according to Ann Peterson at Cushman & Wakefield. Low or negative net migration numbers may indicate a trend leading to more workers exiting a particular state versus remaining. As a guideline, each state’s educational attainment levels are provided in the Directory section of this issue. It should be noted, however, that every state is trying to ramp up the educational attainment levels of its citizens because, according to a recent study from Georgetown University,1 there will be 55 million job openings through 2020. Thirty-five percent of these will require at least a bachelor’s degree and another 30 percent some college or an associate’s degree. The Directory section of this issue also contains each state’s population, labor force, manufacturing, and unemployment numbers as well as trends and employment numbers within leading industry sectors. Finally, the Select Sites Directory — as well as FacilityLocations.com — provides contact information for economic development agencies that can help with your next location or expansion decision.

EDITORIAL E-mail: editor@areadevelopment.com Editor Geraldine Gambale Staff and Contributing Editors Dave Claborn Tom Gresham Mark Crawford Mark Schantz Dan Emerson Steve Kaelble Tom Ewing Karen Thuermer Clare L. Goldsberry

DESIGN/PRODUCTION Art & Design Patricia Zedalis

Production Manager Jessica Whitebook

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

Editor 1

Circulation circ@areadevelopment.com

https://cew.georgetown.edu/cew-reports/recovery-job-growth-and-education-requirements-through-2020/

EXECUTIVE OFFICES Halcyon Business Publications, Inc.

2018 Editorial Advisory Board Aaron Ahlburn, Managing Director and Senior Director, Research, JLL Josh Bays, Principal, Site Selection Group, LLC Marc Beauchamp, President and CEO, The CAI Global Group Gregory Burkart, Managing Director and Leader, Site Selection & Incentives Advisory, Duff & Phelps, LLC

Dennis Cuneo, Partner, Fisher & Phillips LLP

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

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

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

Stephen Gray, CEO, Gray Construction

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

Minah C. Hall, Managing Director, True Partners Consulting LLC Trula Hensler, Senior Marketing Manager, Baker Tilly Virchow Krause, LLP

Christine Bustamante, National Co-Leader, Global Location and Expansion Services, KPMG

Scott Kupperman, Founder, Kupperman Location Solutions, LLC

Brian Corde, Managing Partner, Atlas Insight, LLC

Dan Levine, Practice Leader, Location Strategies and Economic Development, Oxford Economics, Inc.

Les Cranmer, Senior Managing Director, Savills Studley

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Bill Luttrell, Senior Locations Strategist, Werner Global Logistics, Werner Enterprises, Inc.

Margy Sweeney, Founder & CEO, Akrete, Inc. Dean J. Uminski, Partner, Site Selection Consulting, Crowe Horwath LLP Dan White, Senior Economist, Moody’s Analytics Joshua Wright, Vice President, Economic & Workforce Development, Emsi

President Dennis J. Shea Finance Mary Paulsen finance@areadevelopment.com Business/Finance Assistant Barbara Olsen (ext. 225) olsen@areadevelopment.com All correspondence to: Area Development Magazine 400 Post Avenue, Westbury, NY 11590 Phone: 516.338.0900 Toll Free: 800.735.2732 Fax: 516.338.0100

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

PURE TALENT

From engineers to construction workers, one state has a talent pool deep enough to meet the needs of any business. Michigan. Our state ranks first in the U.S. in concentration of industrial designers and engineers and eighth in the skilled trade workforce. Plus, Michigan offers a pipeline of high tech talent that flows from 33 public and private universities. Whether businesses require STEAM or skilled trades, Michigan has the talent they need to succeed.

michiganbusiness.org

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INFOCUS Technology and the Evolution of the Real Estate Industry By Robert G. Thornburgh, President, SIOR Global; and Executive Vice President & Partner, Kidder Mathews

The marriage of physical and digital technologies is having a transformative effect on real estate markets — from industrial and distribution to office. ROBERT G. THORNBURGH is the president of SIOR Global (2018–2019) and an executive vice president and partner with Kidder Mathews. Before joining Kidder Mathews, Thornburgh was the president and CEO of Heger Industrial (now Kidder Mathews). His highly successful and respected career stems from over 20 years of service to his clients, industry, and community, particularly his concentrated focus on assisting property owners with the leasing, sale, and acquisition of industrial real estate throughout southern California.

Technology continues to be a catalyst for change in all areas of business and industry, and the real estate market is no exception. Unlike anything previously experienced, we are on the cusp of the Fourth Industrial Revolution, and it is blurring the lines between the physical and digital spheres. The rapid advances in technology are shifting the way we communicate and work together. As more and more smart technologies enter our factories and workplaces, connected machines will interact on a heightened level, envision the production chain, and make decisions autonomously. So what

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decisions will be left for real estate professionals to make? Given the complexity of the industry, most of us are participating in the revolution without realizing it. Understanding what this so-called reinvention is and how it is changing the market is crucial. The Fourth Industrial Revolution can be defined as the marriage of physical and digital technologies, such as analytics, artificial intelligence (AI), cognitive computing, and the Internet of things (IoT). Given the influence of technology on real estate, we must position ourselves to adapt and flourish in this new and everchanging landscape.

A Permanent Turn for the Industry Being able to decipher courses of change and integrating the lessons into our day-to-day business is a necessary first step. We must accept that this is not a trend, but a permanent turn for the industry. This October, the World Economic Forum issued a report1 that estimates half of all jobs we know today will be eliminated by technology by 2025. Machines and automation will take over nearly 52 percent of the division of labor, compared to the 29 percent that is currently in place. Changing consumer and lifestyle trends — how we work, shop, and live — have all been the primary driver for this newest reinvention. There is not a single real estate market or sector that isn’t experiencing this firsthand. While each region has its own story, they all end in a transformative environment that is repositioning antiquated real estate, pushing building design, expenses, pricing, and real estate professionals in ways that we have not seen before. Real estate experts must consider these new influences in order to make sound future planning decisions. Technology is accelerating everything, and the challenge for traditional industrial environments is finding ways to keep pace with cabling, power, and other infrastructure requirements. Good air quality will be required for optimal operat-

ing temperatures of AI robotics. Smart floors, hypervelocity loading docks, autonomous freight carriers, and modularity are now becoming the vocabulary of a forward-looking distribution industry. In office design, a repurposing of space and shift in focus on how to minimize the floor area used by employees is already well under way. Space-sharing will increase for smaller companies, and shared services across companies will become the norm. Take for example flexible office space like WeWork, which optimizes scaled-down floor areas that still allow members to work harmoniously. This is especially true in large cities, where both demand for office space and priceper-square-foot rents are growing exponentially. Commercial real estate has always been a business that heavily depends on interpersonal relationships. However, we must observe the landscape — things are chang-

Changing consumer and lifestyle trends — how we work, shop, and live — have been the primary driver for this newest reinvention of the real estate industry. ing at an accelerated pace. It’s impossible to ignore the influences of technology and the corresponding rapid rate of change. Further, we are only just getting started in terms of its overall impact on our lives both personally and profes-

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

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

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sionally. The best way to maintain relevance in the backdrop of this transformation is to keep pace with today’s technology and the emerging trends that surround it. While there may be no way to “future-proof” current distribution facilities or office space, professional associations like the Society of Industrial and Office Realtors (SIOR) continue to provide an environment where commercial real estate education and networking are focused on these discussions. Professional development through high-level organizations provides innovative solutions to tomorrow’s challenges. 1

https://www.cbc.ca/news/business/jobs-of-future-technologydavos-1.4826623

FRONTLINE

UAVs Provide Construction Industry With Clearer Sight Line By Dan Emerson

As companies increasingly use drones to monitor progress on construction projects, the FAA is easing restrictions that are currently limiting their use. Unmanned aerial vehicles (UAVs), better known as drones, are increasingly being used by a number of industries, with the construction industry leading the way. A report by Goldman Sachs1 estimates that total global spending on drones in the commercial market will reach $100 billion over the next two years. Of that, approximately $11.2 billion will be generated by

AREA DEVELOPMENT

the construction industry. In 2016, the Federal Aviation Administration allowed commercial drone use for a broad range of businesses, but with restrictions: pilots must be at least 16 years old and pass a written test. Equipped with still and/or video cameras and remote-sensing technology, drones are making it easier and cheaper to make aerial site surveys and collect other data. They can quickly provide digital images, maps, and other files that can be shared electronically.

Advantages & Challenges Minneapolis-based Kraus-Anderson (KA), one of the largest construction firms in the Midwest, uses a DJI Phantom 4 drone for surveying sites, doing quality inspections, documenting project progress, and marketing purposes. “Drones give us access to a lot of information we’re not able to get standing on the ground,” says Andrea Blair, a BIM (building information modeling) specialist at KA. “We’ve been able to fly up and down an 18-story building to inspect building wraps, check caulking, and make sure all of the windows are air- and water-tight” using thermal cameras that can detect temperature changes. The major challenges that can limit drone use are adverse weather conditions and, in the case of projects that are located near airports, “no-fly” zones. An unmanned aircraft system (UAS) can be flown in Class G (uncontrolled) airspace without an authorization from the FAA (Federal Aviation Administration). To fly in all other airspace classes, FAA and ATC (Air Traffic Control) authorization are required. The FAA is working to make the approval process quicker by rolling out a program which offers near realtime approval/authorization, Blair says. Drones can be programmed to provide automated notification to ATC, which makes it easier to use them near airports, notes Blair. Sierra Pacific West, a San Diegobased engineering contracting

firm specializing in heavy highway, roadway, public school, memorial, community parks, and agencyrelated work projects, has been using drones since 2014, according to company President Tom Brown. “Our original purpose was to fly over sites we couldn’t see, for our estimating department,” Brown says. Today, the firm uses drones to survey terrain where it is doing large roadway and other infrastructure projects in sites that are difficult to access. About 80 percent of its drone flights are handled in-house, headed by a company vice president who has become “pretty well oriented to it,” Brown says. The company uses drones equipped with GPS modeling systems to find out things like how much dirt has been moved on a given day. “We do GPS modeling on a lot of projects where we have individuals on the ground,” Brown explains. The drone mapping is surprisingly accurate, within 1 percent

Total global spending on drones in the commercial market is estimated to reach $100 billion over the next two years.

of the calculations made by onthe-ground personnel, he says. The company has two drones it uses to make daily flights over large projects to monitor progress. “We have the ability to see almost instantly what we are doing,” Brown says.

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The biggest challenge for his company has been “trying to understand how to incorporate [drones] into our daily business. We had a conflict within the company because some people wanted to use them for estimating, then business development started to want to use them for marketing,” Brown says. “At the end of the day, they’ve been extremely useful for record-keeping, photography, and looking at progress.” According to Goldman Sachs, the next generation of drone technology “will widen the gap between manned and unmanned flight even further, adding even greater stealth, sensory, payload, range, autonomous, and communications capabilities.” The biggest limitation on the use of commercial drones seems to be regulation. Under FAA regulations, drones cannot fly higher than 400 feet, or 400 feet over a building. The FAA has rules against operating drones over people and limiting use to a pilot’s line of sight. But commercial users can obtain waivers to gain exemption from those rules. They must be flown by someone with a remote pilot certification. But, according to Goldman, the FAA is expected to further ease restrictions that are keeping commercial drones from reaching their full potential, which represents an addressable market of $11.164 billion in the construction industry. 1

https://www.goldmansachs.com/insights/technology-drivinginnovation/drones/

INFOCUS Capitalizing on the Speed of 3D Printing By Matt Exline, Engineering Manager, Romeo RIM Inc.

3D printing, rapid prototyping isn’t just for product development.

MATT EXLINE has a degree in Aviation Technologies from Southern Illinois University and has been awarded one U.S. patent. He has been with Romeo RIM for more than 20 years. The company, which provides custom reaction injection molding and composite solutions, serves markets including transportation, heavy truck, agriculture and construction, spa, and railcar with complex engineering applications.

With time-to-market being an increasingly important factor for a successful product launch, 3D printing has fast become an integral part of the product development process. The speed in which products can be reiterated to perfect the design and functionality is, of course, highly valuable. But 3D printing isn’t limited to just product. Some manufacturers have found creative uses to capitalize on the speed of 3D printing. Romeo RIM, for instance, is a composite manufacturer that has adopted lean principles to create a culture where waste reduction is a priority. This waste can include materials, movement on the job, and…time. One way to save time in composite manufacturing is to utilize 3D printing to create prototype molds. This helps to reduce mold construction time which, in turn, reduces time-to-market while improving quality and cost. As an example, some of Romeo Rim’s unique, proprietary products require a series of relatively thin, deep draw rib features over 120mm in depth and 60mm apart. Traditionally, for prototype epoxy mold construction, this required the time-consuming process of CNC-cutting master sections of the close proximity ribs or hand-cutting the patterns prior to application of the epoxy mold substrate. With the introduction of 3D printed capabilities, these sections are now printed, sectioned together, and the epoxy mold matrix applied directly over them. This has reduced mold construction time from 8–10 weeks to six weeks and sometimes less. The ex-

tra cost of the 3D printed sections is offset by the significant reduction in mold construction labor, allowing for a more accurate prototype mold at the same cost but at a significantly reduced lead time. The same 3D printed process is also used in fixture development and validation. Historically, a secondary drill or assembly fixture would be designed and built with production intent using CNC-cut aluminum, nylon, or other durable material. The procurement of materials and time and labor to machine and assemble would take several

One way to save time in composite manufacturing is to utilize 3D printing to create prototype molds; this also improves quality and cost. weeks to complete. The wide range of available 3D printed materials now allows us to generate a fully functional fixture in hours or days instead of weeks. Functionality, alignment, and repeatability can be evaluated and altered quickly and at lower cost. Once the final configuration is validated, a more durable fixture is then produced saving the cost and time often required in the “tuning” of a fixture. Utilizing 3D printing for prototype molds and fixtures has had a significant impact on our bottom line as well as our customers. It has helped to improve accuracy of each prototype iteration, which results in fewer iterations and, thus, faster time-to-market. AREA DEVELOPMENT | Q4/2018

FIRSTPERSON OLIVER DEHNING | CEO | HORNETSECURITY

Why do manufacturers need to be concerned with Internet security? Dehning: More and more, manufacturing systems are connected to companies’ internal network and, through that, to the Internet. Many of these systems are not new and were never designed with them being connected to the Internet in mind. Therefore, many of them lack even a very basic level of IT security. Unlike most office systems, manufacturing systems can actually do physical harm. Therefore, a lack of IT security with these systems can potentially lead to injuries and even deaths. That’s on top of the risk of disrupted production processes, which can cause high financial losses. How does the IIoT (industrial Internet of Things) make their manufacturing systems vulnerable? Dehning: Connecting systems to the Internet that were never meant to be connected makes them vulnerable. Even if an IIoT device itself has a good level of security, it might affect the underlying manufacturing system in a way that it stops working properly. If, for example, a sensor that is supposed to provide information essential for internal functions of a manufacturing system is being asked for information by the IIoT device too often, the sensor might no longer be able to provide its actual function. How does a manufacturing company’s supply chain figure into security concerns? Dehning: Many manufacturing companies these days are closely connected to their partners in the supply chain — downstream and upstream. A lot of sensitive data is exchanged between different members of a supply chain. Sensitive data might include actual production figures, financial information, and detailed product data, such as CAD files. Security is always only as good as the weakest link, so companies should be concerned about the level of IT security of their supply chain partners.

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Can intellectual property/trade secrets be compromised? Dehning: Absolutely. There is a long list of instances involving hackers stealing secrets at the behest of foreign governments.1 Many other data breaches within companies occur simply by negligence, ignorance or a combination of both, and bad actors are talented at finding exploits. Some companies become so large that a tiny flaw in their security can go unnoticed, even with an experienced IT department. What about internal and external communications? Why is it important to secure these as well? Dehning: With external communication, it’s obvious — forms of malware, ransomware, and phishing scams are sophisticated enough to look authentic, and employees may not be aware of what they’re clicking in their e-mails. With internal communication, there are two aspects: First, employees and others who can rightfully access internal data can cause damage intentionally or unintentionally. Therefore, access to data should be restricted to those who need the access for their work. This is not an easy decision, as it is often unclear who actually needs what data. Therefore, read access may be quite open, but write access should be restricted or, at least, there should be good backup procedures in place. Second, insecure internal systems and networks leave the door wide open for any attackers who, more often than not, have malicious intents. Are there any examples you could cite of those who have suffered losses because of security breaches? Dehning: The most prominent example is Stuxnet,2 a computer worm, that is believed to have been used to attack the Iranian nuclear program. Stuxnet was delivered by USB memory sticks and found its way through printer drivers and internal computer systems to the centrifuges used to enrich uranium. It is reported that the attack led to damaged centrifuges and insufficiently enriched uranium. While many will see this attack as a positive event, it is an example of a

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successful attack to well protected industrial systems using less protected office systems as a way of entry. Are the threats mostly coming from overseas or are they domestic as well? Dehning: Hackers live all around the world. State-sponsored threats are mostly coming from countries such as Russia, China, and North Korea. Criminal hacking activities often seem to be originating in Russia. What steps should companies be taking to protect their operations? Dehning: Be aware that the risk of being attacked is real. All companies are under attack, only some don’t realize it. Identify your most valuable data and systems. Identify potential attack vectors. Assess the risk levels and potential costs of security incidents. Protect your data and systems according to the outcome of this analysis, using technical and organizational protection measures.

PUTTING IT TOGETHER

Can this be handled internally, or should manufacturers seek outside help? Dehning: All companies will use some kind of IT security products. Whether they need additional outside consulting from cybersecurity specialists depends on the size of the company and the available internal IT security expertise. Most companies will need outside expertise, because their internal level of knowledge around IT security is insufficient. That is especially true for small and medium-size businesses. What’s ahead as far as new threats and new responses? Dehning: Ransomware attacks — big during the last two years — seem to be happening less, but they’re still around. Cryptominers that illegally use attacked IT hardware to, for example, generate Bitcoins are more prominent right now. CEO fraud seems to be on the rise, and phishing attacks are happening all the time. A new trend is the use of AI techniques by attackers to get around protective systems. 1

https://www.washingtonpost.com/world/national-security/chinese-theft-continues-in-cyberspace-as-new-threats-emergeus-intelligence-officials-warn/2018/07/26/7af698ae-90cc-11e8-9b0d-749fb254bc3d_story.html?noredirect=on&utm_term=. eeb84aafc804 2 https://www.wired.com/2014/11/countdown-to-zero-day-stuxnet/

THE ASSIGNMENT Cybersecurity has become an increasingly important concern for businesses of all types and sizes. To find out more about the cyber threats these companies are facing, Area Development recently interviewed Oliver Dehning, CEO for U.S. operations at Hornetsecurity, a cybersecurity firm focused on cloud-based solutions. For 20 years, Dehning has worked in various management positions at IT companies and in the field of optical technologies. He is also head of the Security Competence Group at eco - Association of the German Internet Industry.

Mississippi’s 15 community and junior colleges provide employers tailor-made training programs. The right workforce makes a world of difference. Find out how Mississippi can make a difference for your company.

mississisppi.org/workforce AREA DEVELOPMENT | Q4/2018

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FACILITY PLANNING

The Calculus of Master Planning an Industrial Site Project Effective master planning results in seamless construction projects and builds the momentum for lean, concise operations and continued success. By Alan Cobb, FAIA, LEED AP®, President & CEO, Albert Kahn Associates, Inc.

hile planning major manufacturing projects includes a calculus-level formula of variables — speed to market, multiple communities competing for the project, and final site selection, as well as brand image and analysis through project decisions — it is important to have a clear, comprehensive plan that gives direction to a project from conceptual stages to the moment the first product comes off the line.

Master-Planning Strategies

Master planning is both an art and a science, especially in manufacturing, where speed to market is critical; no product can be built and sold until there is a plant. Project team master planners have a unique ability to deliver design in an integrated way, assimilating design activities to speed up

Companies are sensitive to the way the public perceives them. The design of a building, such as this Mercedes-Benz facility in Tuscaloosa, Alabama, can enhance the desired perception of the company, its products, and facilities as part of a contiguous brand message.

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construction in the field very early in the project. Today, one example of this strategy is unfolding in South Carolina at Volvo Cars’ first U.S. manufacturing plant. The initial planning efforts focused on the construction of the 1,600-acre, multi-building industrial site, which includes body and paint shops, as well as final assembly. The plan is already evolving as the plant — originally slated to manufacture just one vehicle — has doubled in size to accommodate two to three more models. With this change, additional buildings were planned for the site, including a headquarters office building and welcome center with a Volvo museum. These will join body, paint, and assembly shops, a vehicle processing center, administration building, and maintenance support facilities. A detailed master plan was a critical first step in this large-scale undertaking, and proven planning strategies were agile as the project parameters quickly changed. Another groundbreaking automotive facility in Vietnam is posing challenges on multiple fronts. An Asian automotive startup company is constructing a new plant to build cars and scooters. The 10-million-square-foot project has unique goals and construction methods. The site, located in the bustling port city of Hai Phong — marketed to developers as an industrial, tax-free zone — is at least partially under water. Construction crews are driving drill-cast piers 150 feet down to bedrock to reinforce the building pad. Massive amounts of fill have enabled them to move the sea wall out four miles from its original location. In addition to the unorthodox construction, the project also has an extremely aggressive schedule, making a savvy, detailed master plan vital to success. At both of these sites, developers are changing the face of the region. Large manufacturing plants and the suppliers who build near them provide a multitude of jobs, drawing population, which in turn creates a residential construction boom, increasing retail and municipal traffic. Often, multiple communities compete for such an opportunity, and they are willing to provide very attractive incentives to the manufacturer. In the case of the Volvo site, the state of South Carolina provided the land at no cost. for free site information, visit us online at www.areadevelopment.com

Brand Image + Analysis

With such significant investment, site selection becomes a critical part of the early planning equation. And, while key decisions begin as companies are trying to decide between multiple potential sites, branding activities are one of the very earliest components of a truly cohesive master plan to materialize. Brand identity sets the stage for the site selection process with criteria that reinforces the brand informing decision-making. For example, a company that is seeking visibility may choose a site on a major freeway, whereas a facility with many proprietary processes may be more ideally located in a remote or rural setting. Especially when entering a new country or region for the first time, physical expression of the building is extremely important, as well as the campus environment. These considerations are all part of a much larger, macro-analytical evaluation — a process called “image analysis” that is central to a successful masterplanning process. Image analysis is multifactorial, including public sensitivity to the physical design, as companies are sensitive to how people perceive them. The design of the building can enhance the desired perception of the company, its products, and facilities as part of a single, central, contiguous brand message. In the Volvo example, the design team expressed the brand in the building through clean, modern Scandinavian design, using materials like steel, glass, and wood, which are found in the interior of a Volvo. To develop a unified brand message, the planning team engages key stakeholders in an interactive session. Building relationships with leading decisionmakers is critical to gaining clear, precise insight. Developing consensus in decision- making and showing respect across company culture by including representatives from many areas of the company within the design process will allow communication to develop organically throughout the project. As the planning team is immersed in the company culture, decision-making is further streamlined as the planning becomes more refined. Good relationships and good communication together enable a master-planning process to respond to the latest input. Company culture comes out in the discussions that ensue and team-building is an important part of a collaborative design process.

PARTNERSHIP IN SUCCESS

Decisive Advanced Project Planning

One of the early keys is understanding the stakeholders’ goals and where they are headed, which comes back to communication. Going beyond communication with leadership, successful negotiation with regional and civic decision-makers is important in projects of this scale. With a large facility like Volvo, the entire region is affected through population growth, traffic patterns, and logistics. In the case of incorporating rail for shipping/receiving, project leaders need to carefully navigate the significant local impact. Traffic will surge at peak commute times, and minimizing those disruptions fosters a positive ongoing relationship within the community. To prioritize key decisions at each stage of such a large and complex project, savvy master-planning teams use a tool called Advanced Project Planning (APP): a tool that orients the plan from the initial conceptual stages literally through to the moment the first product comes off the line. Using this sophisticated tool, project teams can not only uncover key issues but also minimize rework, ultimately rendering a leaner yet more comprehensive, proactive planning process. Just-in-time decision-making allows the proper amount of research and background before decisions are made, avoiding the waste and undesirable consequences that result from late decisions. Consider a case scenario. At one site, while truck docks had been planned in a location that was immediately convenient, their location precluded future expansion. The planning team proposed another location that could accommodate expansion, rather than going to the trouble and expense of moving them later.

When a home-grown business expands, it speaks volumes about a state’s business climate and workforce. Saf-T-Cart’s more than three decades of growth and success says a lot about opportunities here. Start your success story in Mississippi.

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Continued on page 19 AREA DEVELOPMENT | Q4/2018

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LOGISTICS/DISTRIBUTION

The Surprising Impact of E-Commerce on Urban Real Estate Markets Distribution is moving closer to end customers, and that means more distribution centers in urban environments. By Joe Mikes, Head of Real Estate Solutions, Americas, DHL Supply Chain

As consumer expectations continue to evolve, e-commerce players seek logistics partners like DHL Supply Chain to develop warehouse strategies that bring products closer to their final destinations.

here has been plenty written about the impact of e-commerce on retail infrastructure. Store closings and malls struggling to redefine their purpose have been the subject of major stories in a variety of mainstream media outlets. Reading those stories, it’s easy to get the impression that e-commerce is cratering real estate markets and creating ghost towns. That’s hardly the case, at least not in many major cities where e-commerce has actually had the opposite effect by increasing the demand for real estate. That may seem counterintuitive until you explore the dynamics of the e-commerce market. First is the consistent, strong growth that shows no sign of peaking. According to Statista, U.S. retail e-commerce sales grew from $298 billion in 2014 to $452 billion in 2017,1 an average of better than 13 percent growth per year. But, if accommodating growth was the only issue, retailers would simply expand existing regional distribution centers in areas where land is relatively inexpensive and readily available. That’s not a viable strategy because the e-commerce market is dominated by a major player with the market power to reset consumer expectations for e-commerce delivery. First, it was two-day delivery, then next-day delivery, and now same-day delivery. Everyone in the market must adapt to these changing expectations or risk losing market share. It simply isn’t possible to consistently provide next-day or

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same-day delivery from regional warehouses. The only way to meet these expectations is to move products closer to large groups of consumers. In addition, there is the challenge of reverse logistics. Return rates for in-store purchases average less than 10 percent, while e-commerce return rates can be 30 percent or higher. The challenge is not only how to get returned goods back from the consumer but how to do so without destroying all of their economic value. One solution is the development of small, dedicated sites where consumers can return goods more efficiently. Those factors are driving e-commerce companies and their 3PL partners to increasingly supplement their network of regional distribution centers with smaller, satellite facilities capable of reducing lead times and providing greater flexibility and service consistency. According to a March 2018 report initiated by the Industrial Asset Management Council (IAMC) and the Society of Industrial and Office Realtors (SIOR), “The rise of e-commerce is a primary reason for the growing demand for new warehouse space, strategically located within closer proximity to consumers.”2 Not only is a new type of urban warehouse emerging, the impact of this trend is rippling well beyond the ecommerce and supply chain industries.

The New Urban Warehouse It would be nice if we could simply shrink down the design of large

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regional warehouses to fit in the smaller footprints available in urban areas, but that isn’t necessarily practical or what’s needed. These new facilities are much more about product movement than product storage and so have different requirements than traditional warehouses. In some areas, such as the U.K. and Far East, where population density is high, they have already emerged. According to my colleague Nigel Godfrey, head of Real Estate Solutions for DHL Supply Chain in the United Kingdom and Ireland, “We are seeing a number of specialized cross-dock facilities being developed. These are basically very fastmoving shipment facilities. They don’t have significant amounts of storage space, but they have as many doors as possible. They are relatively small buildings on a low-density site with a lot of parking for vehicles, and a lot of docks for the trucks that come in and the delivery vans that go out.” Another trend that is emerging internationally, particularly in gateway cities like Hong Kong and Singapore, is the development of the multi-story warehouse. This trend has now expanded from the Far East to the U.K. “At a point it becomes economical to look at developing on a multi-level basis so that you can actually justify the high land values that are being demanded,” Godfrey says. “We reached that tipping point in the first half of 2018 where we’ve seen developers taking the first steps in planning multi-level development in the areas where there are highest land values, such as west London.” Spencer Levy, Americas head of Research and senior economic advisor for CBRE, isn’t sure that tipping point will be reached in the U.S. “The multi-story industrial real estate phenomenon is still in its infancy in the U.S compared to some of the higher-density urban locations in the Far East,” he notes. “There are a few such developments happening, but it’s still not really cost-effective here, if you have the land available.” Levy points out that the economics don’t favor multi-story development because of the increased dependence on automation. “Racking systems are able to pick and clear assets from the higher areas of a facility more efficiently and cheaply, so the average roof height of a DC has gone up significantly,” making multi-story development less of a necessity. The IAMC report referenced earlier suggests that more innovation is on the way: “Efficiency along the last mile — from outside the city into the city center and from within the urban core to direct end-user delivery — will become harder to achieve using traditional freight transportation modes and approaches. It translates to a need for transformation, including inner-city warehousing capabilities and a new design approach.” The future, as always, isn’t entirely clear, but one thing is certain: distribution is moving closer to end customers, and that means more distribution centers in urban environments.

The Impact on Real Estate

While there are some differences in the design of urban distribution centers in different parts of the world, there is consensus on their impact. “Land values have increased sharply,” says Godfrey in regard to the U.K. market. “There’s been a marked increase in land values to satisfy the burgeoning demand for space associated with the increased demand for e-commerce requirements.” Levy notes that it isn’t only land prices that will be affected. “There are many knock-on effects that we are seeing as a result of this, but one that’s not so wellknown is that the average length of lease of an industrial building is now longer. For example, in New Jersey, during the last five years the average lease went from about five years to around eight years. The relevance of that is profound. Not only are you seeing increases in rent, and not only are you seeing increases in demand, you’re actually seeing an increase in the value of the asset itself, because the stability of its income base has improved.”

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Continued on page 19 AREA DEVELOPMENT | Q4/2018

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INDUSTRY REPORT

How Location Strategy Can Fuel Drug Discovery Life sciences companies are seeking locations where they can attract top talent and identify flexible facilities, which is directly affecting their real estate decisions. By Roger Humphrey, Executive Managing Director and Life Sciences Group Leader, JLL

he pharmaceuticals industry is at a crossroads. It’s becoming harder and more expensive to find blockbuster drugs, while the labor market remains tight and real estate costs high. While simply increasing the cost of drugs is one way to offset more time- and cost-intensive research and development (R&D), it is not sustainable for patients or the industry. This means life sciences companies need to get creative when evaluating how to improve and optimize R&D and shorten the product life cycle — and one often overlooked area is real estate. In the race for breakthrough — yet efficient — innovations, companies are seeking locations where they can both attract top talent and identify more flexible facilities where R&D real estate is multiuse. In this innovate-or-die environment, access to scientific talent is everything. By recruiting and retaining dedicated and brilliant chemists, biologists, and data scientists, life sciences leaders can sustain momentum in the never-ending race to bring life-saving remedies to pharmacy shelves. Increasingly, this need for a flour-

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ishing talent pool is directly affecting real estate decisions, inspiring industry leaders to invest in higher-cost cities; to design cutting-edge, next-generation lab facilities; and to find more creative ways to keep locations profitable. The need for strategic change is indeed pressing, considering seismic change in the industry at large.

Industry Snapshot: Breathtaking Possibility and Equal Parts Pressure To understand the new focus on real estate strategy, it’s useful to look at the larger industry picture. Globally, the prescription drug market is growing a robust 6.5 percent annually, according to JLL’s Life Sciences Outlook report,1 and by 2022, is expected to reach $1.06 trillion. But getting a drug to market is an astoundingly costly feat, with some estimates putting the average cost to develop and win FDA approval for a new prescription drug upwards of two and a half billion dollars.2 Plus, the average return on R&D investments among large firms has fallen dramatically from 10.1 percent in 2010 to just 3.2 percent in 2017.3 Compounded by the fact that most drug launches achieve only modest sales in the first five years, it’s no wonder R&D teams are under immense pressure to churn out new discoveries faster. At the same time, they’re also

under pressure to successfully adopt fast-evolving technology, from the Internet of Things in medical device manufacturing,4 to advanced analytics in the drug lab. Faster, more sophisticated, techfueled R&D requires that the right mix of people show up to work each day, now and into the future. That can often mean setting up shop in often pricey locations where coveted talent pools will flow naturally, and capturing interest with modern, satisfying facilities and amenities. And yet, cost constraints remain omnipresent, so companies must invest in innovation — while simultaneously finding cost efficiencies where possible. Following are four key ways industry leaders are approaching this balancing act:

Trend #1: Companies following the talent to innovation-rich cities. Top scientific talent can be difficult to come by. According to PwC’s Health Research Institute (HRI),5 51 percent of biopharma leaders — the highest of any industry — say that hiring has become more difficult lately, and only 28 percent report confidence that they have access to top talent. How can they improve access? Set up shop in the cities where access to bright, new recruits is built in. The mass migration to U.S. cities is led by millennials, who are itching

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why are so many companies locating in

greater

for the rich live-work-play environments of an urban setting. And visionary scientists and tech pros can be even choosier. They’re seeking cities that aren’t just popular, but that also ooze with connected innovation, such that the people they rub shoulders with on the street or in line at a trendy food truck are also innovators. An atmosphere of innovation can inspire the kinds of conversations that help generate new ideas, and perhaps even prompt that next big medical breakthrough. To tap into these vibrant ecosystems, companies are forking over the highest rents in sought-after locales like Boston, San Francisco, and San Diego, where private enterprise commingles with leading academic research centers. In addition to simply being where the current workforce wants to be, these locations also contribute to a steady pipeline of future talent.

Trend #3:

In addition to

helping facilitate

Flexible design supports both agility and cost savings.

With the death of the blockbuster drug comes the death of the one-sizefits-all laboratory. Today, flexible, adaptive space is key to supporting continual innovation. After all, different medical breakthroughs require different materials, different environmental controls, and different layouts to test out and produce. According to Journey to the next gen lab,6 many life sciences companies are now purposefully designing lab space that can be changed on a dime, so it’s simple to switch gears for the next big discovery. Consider mobile benches that make it easy to accommodate changing personnel needs; infrastructure, like retractable electrical cords and thick floor slabs, that make it easy to reconfigure entire labs; and more collaborative “flex” space outside the lab area, where conversation can help fuel productivity. We’re also seeing a greater mix of both lab and computational space than we’ve seen in years past, as pharmaceutical science becomes increasingly integrated with data and analytics. In addition to helping facilitate new discovery, flexible lab space can also support fiscal concerns by enabling organizations to do more with less space. And when a flexible, modern space also features the latest equipment and technologies, it can help support recruitment and retention goals, too.

new discovery,

flexible lab space

can also support fiscal concerns by enabling organizations to do

more with less space.

Trend #2: “Edge” locations are gaining momentum. In the race to the drugstore shelf, profitability often also requires frugality. Few companies can afford to pinch pennies at the risk of innovation, but some are finding a “best of both worlds” approach lies in locating just outside the priciest neighborhoods. While close-in sectors continue to experience sky-high demand, a number of firms are now finding value along the edges of the most expensive neighborhoods, where they can enjoy the buzz of surrounding innovation, at slightly more manageable costs. In south Boston, for example, the new Innovation Square development sits just outside the med-tech epicenter in central Boston and Cambridge, and has already commanded serious industry interest, thanks in part to its proximity to some of the nation’s most sought-after graduates. North Carolina’s Raleigh-Durham-Chapel Hill “Research Triangle” area also offers steady access to top-tier talent, considering it is anchored by three Tier 1 universities — Duke, UNC-Chapel Hill, and North Carolina State — and is surrounded by several other four-year institutions, too. Here, more than 5,000 STEM graduates matriculate each year, adding to industry appeal, while also providing value via significantly lower rents than the top-three life sciences clusters.

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Trend #4: Big and small firms can play well together. It can be challenging for a large organization to be as nimble as a small one, while small firms can find it harder to secure funding and attract the same level of star talent as their bigger peers. Together, however, both can potentially benefit in a synergistic relationship. Right now, we’re seeing that early-stage ventures are often the ones driving innovation. According to JLL research, in 2017, midsize and smaller biopharma companies won a record-breaking 23 new drug approvals. Some of the big players are taking note — and action, by setting up venture capital funds and partnering with startups to advance their own development pipelines. This allows the big company to leverage outside scientific talent and access new innovafor free site information, visit us online at www.areadevelopment.com

tion that aligns with its goals and gives the small one access to greater funding and important alliances outside its own organization. These changes are having profound implications on real estate decisions, by making incubators a newly critical part of the innovation ecosystem. For startups looking to grow in the leading life sciences cities, incubators offer a meaningful, affordable opportunity to be in the right place at the right time. Massachusetts, for its part, is home to more than two dozen incubators. Other examples include New York’s Alexandria LaunchLabs in Manhattan’s East Side Medical Corridor, which was the first biotech incubator to launch in New York City. Opened just last year, its 15,000 square feet of lab and office space now house approximately 20 startup companies. Johnson & Johnson’s JLABS incubator concept is another prominent example, with incubators currently in 11 locales around the world, featuring everything from a modest fivefoot bench to a 5,000-square-foot wet research lab complete with the latest equipment.

Zooming In on the Next-Gen Lab of the Future These and other trends are reshaping the map of where, why, and how life sciences organizations work. No simple algorithm exists now to determine the right place to house

a facility, given the many complexities of this fast-evolving industry. Fortunately, just as with the breathtaking pace of discovery now under way, there are also breathtaking new advances in real estate data and insights. With sophisticated location analysis technology and dynamic screening tools, life sciences leaders are increasingly able to probe deeper into the details, from crunching numbers on current labor pools and competition, to comparing long-term demographic change across metro areas. Understanding both short- and long-term potential for growth in any given location can help companies make more informed decisions about the cities where they operate and the kinds of facilities to invest in. It’s a different kind of science than chemistry or biologics requires. But at the end of the day, real estate and lab personnel in the life sciences world are all dedicated to the same cause: helping humans live longer, better lives — wherever discovery may take us. n 1

https://www.us.jll.com/en/trends-and-insights/research/life-sciences-industry-trends https://www.forbes.com/sites/matthewherper/2017/10/16/the-cost-of-developing-drugs-is-insanea-paper-that-argued-otherwise-was-insanely-bad/#6730fc572d45 3 https://www2.deloitte.com/uk/en/pages/life-sciences-and-healthcare/articles/measuring-returnfrom-pharmaceutical-innovation.html 4 https://www.mpo-mag.com/contents/view_online-exclusives/2018-04-12/finding-talent-in-healthcare-iot 5 https://www.pwc.com/us/en/industries/health-industries/health-research-institute.html 6 https://www.us.jll.com/en/trends-and-insights/research/lab-of-the-future-life-sciences-2017 2

The Calculus of Master Planning Continued from page 13 Examining questions like this enables the team to take a broader view of the project in the context of the project’s overall goals to avoid making decisions that can be limiting in the future. The APP process is a vehicle that prompts these types of conversations, bringing relevant stakeholders to the decision-making table — a critical feature of an effective masterplanning process. Collective, collaborative decision-making ensures that all facets are represented, and key project needs are considered. The planning team and its agenda becomes a unifying force that synthesizes these naturally competing interests.

Using APP, the timeline clearly defines the schedule, and the master plan is broken into smaller, more manageable components. As the project goals and program are incorporated into the schedule, milestones are created for decision deadlines, and a decision tree helps manage interdependencies ahead of milestone deadlines to meet the target end date. Comprehensive project planning, the APP process, and execution strategies such as these guide project teams to completion through effective teamwork and communication. This collaborative effort results in campuses that strengthen a company’s brand and image, while bringing jobs to the communities in which they reside. n

The Surprising Impact Continued from page 15 Levy continues: “From a capital markets perspective, industrial real estate has been performing so well for so long in terms of the ‘big box’ space that we are now encouraging new players in the space to look harder at the smaller, lastmile product, which is only now starting to get an institutional audience.” The bottom line for real estate professionals: There is a

shift under way in the definition of what constitutes institutional-grade industrial real estate, which previously was confined to properties like large warehouses and distribution centers. In urban centers, that is driving up demand, prices, and the length of leases. n 1

https://www.statista.com/statistics/183750/us-retail-e-commerce-sales-figures/ http://www.supplychain247.com/paper/roadmap_for_change_the_flexible_industrial_ distribution_facilities_network

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DESIGN/CONSTRUCTION

The Ins and Outs of Working With an Architectural/Engineering Firm It’s important that clients new to working with an A/E firm understand their standard business processes in order to achieve a successful capital project. By John Wharton, Director of Quality, Gresham Smith

here are two kinds of surprises in life: Good surprises and life’s unwanted surprises. And when it comes to doing business, nobody wants to experience the latter. Architectural/engineering (A/E) firms provide professional services that define the client’s project for the contractor. However, clients who have never worked with this type of firm are often unfamiliar with the standard business processes that optimize their ability to produce quality construction documents on time and on budget. In an effort to circumvent unwanted surprises, here are some things a client can expect when working with an A/E firm.

Not an Exact Science Thirty-five years in the industry has taught me the importance of a client knowing what to expect when embarking on a project with an A/E firm. Being knowledgeable of an A/E firm’s business process involves the client having a clear understanding of what we do and what we don’t do. This is especially imperative when it comes to documentation. Similarly, the A/E strives to understand the client’s business and processes. A new client is often unaware that when an A/E firm produces construction documents, those documents serve only one purpose — and that is to facilitate construction, whether it’s the construction of infrastructure, facilities, or processes. Construction documents are not meant to serve as maintenance documents or design standards, and they are specific to one location for one express purpose. When it comes to setting expectations, I believe it’s important that clients are aware that delivering a project is not an exact science. Throughout the life cycle of

a project, there are a myriad of judgement calls and decisions to be made by many people. And there is almost always more than one way to accomplish something. If that approach happens to be different from someone else’s methodology, it doesn’t mean that they’re wrong or we’re wrong — it simply means it is a different approach.

The Importance of Planning Of course, there are no guarantees on any project, but well-planned projects are always more successful than unplanned projects. Therefore, investment in a detailed project plan at the beginning of a project will pay dividends throughout its life cycle. The Project Management Institute suggests that projects are 2.5 times more successful when using proven project management practices. However, even a well-planned project can fail

Projects that have intermediate Stage Gate reviews provide breakpoints to confirm they are on track with the previously defined scope.

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Detailed Design

Bid & Award

Construction

Occupancy

Cost of the Change

Schematic Design

Time Making value engineering changes late in the design process will result in the A/E requiring additional design funds for the purpose of saving substantial construction funds.

if the project plan is not fully implemented and maintained throughout the project. Therefore, it is necessary to insert project team review periods along the way to make sure there is full alignment between the A/E and the client for the defined project scope. Frequent reviews provide the ability to confirm projects are on track as the project progresses. And we rely on our clients to thoroughly review, question, and confirm that we are on track with the previously defined scope. Failure to conduct thorough reviews can result in extra work to correct something that could have been addressed earlier in the process. Projects that have intermediate Stage Gate Reviews provide those breakpoints to check alignment. These Stage Gates are often referred to as conceptual, schematic, design development, construction documents, and construction, which serve as go/no-go decision points. Other times, per-

centages of design completion are assigned for these Stage Gates at 15-, 30-, 60-, and 100-percent design.

The Cost of Change One of the most important things we try to impart to our clients is that change should be expected. In fact, it is a normal part of a project, and you canâ&#x20AC;&#x2122;t manage change unless you plan for it. At our project kick-off meetings, we discuss how to handle potential change with our clients â&#x20AC;&#x201D; whether it be big or small. We also outline the types of changes that can arise. This includes changes in scope/client requirements, product selection and availability, schedule, deliverables, field conditions, staffing, fees, codes, standards and regulations, value engineering, design innovation, and more. To plan for change, clients should budget contingencies for both

AREA DEVELOPMENT | Q4/2018

design and construction and also build time into the project schedule. When we recognize change, we talk about it with our clients and develop a response to that change. Sometimes that change is within our control and the ball is in our court in terms of expending extra money or time. Other times it is out of our hands, and that is when we discuss with our client how we are going to manage that change, with the goal of staying within the parameters of the budgeted funds and time. In cases where time and money must be increased, the client’s contingency is already in place to address the change.

Most of the risk factors are and many are partially or completely out of the control of the client.

Correct information from our clients is critical. For example, if a client provides us with drawings for an existing building or infrastructure item, we rely on that information as being accurate. If the information turns out to be incorrect, our design will be impacted. When the client is not confident in the accuracy of existing documentation, an alternative approach is to have the A/E build in time and fee into their budget to verify the existing information. Another example of reliance is on design decisions. Designs are developed in a sequential manner. Once a decision is made, that decision is documented and the design proceeds on that basis. If that decision is subsequently changed, the impact could be significant depending on how much design work has progressed since the original decision was made. Decisions made early in the project can have a major influence on successful outcomes with lesser cost and schedule impact, while decisions made out of sequence or changed later in the project have a major cost and schedule impact.

Risk Management Is a Team Event In most cases, the client will ask the A/E to help them identify and manage project risk. Risks can come from many sources, including site conditions, building conditions, operational continuity, equipment supply, market forces, material supply, and labor availability, just to name a few. Most of the risk factors are out of the control of the A/E, and many are partially or completely out of the control of the client. Therefore, it is important for the entire project team to have a proactive approach to identifying risks and planning how to minimize the likelihood or impact of the risk. This proactive approach generally involves the creation and maintenance of a risk register at the beginning of the project that identifies the potential risks and their potential impact, along with a plan for what to do if that risk is realized. This early, overt attention to risk management reduces the incidence of changes later on in the project, saving both time and money, and helping to preserve the team relationships.

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At various points in the life cycle of a project, there will be a “value engineering” discussion that explores ideas to improve the project’s overall value. These ideas may involve cost saving, schedule improvement, improved performance, or enhanced aesthetics. Ideally, value engineering discussions happen at each early Stage Gate. When value engineering is performed throughout the project, the impact to the A/E’s project execution can be minimized, and the value to the client is maximized. Unfortunately, there are many examples where early Stage Gates do not include a thorough assessment of the project cost and schedule, which may result in an unexpected variance between the client’s expectations of cost and schedule and the construction bids. To avoid this situation, the client should agree to let the A/E prepare an opinion of probable cost and schedule at each stage. Significant variances can be addressed by the client and A/E with scope adjustments and value engineering changes before the design has been advanced too far. The client should also engage a construction contractor or construction manager early in the project to obtain an additional opinion on cost, schedule, and sequencing, as well as their ideas for value engineering improvements. It is important for clients to know that value engineering ideas occurring late in the design — and sometimes after design is complete — typically result in the A/E spending considerable time evaluating the ideas and making changes to the project design across all architecture and engineering disciplines to make sure the project is technically correct, well-coordinated, and still meets the original project criteria. Due to the significance and complications of making such changes late in the process, the A/E will typically require additional design funds for the purpose of saving substantial construction funds for the client. Likewise, the construction contractor may make a request to substitute materials or equipment after the construction contract has been awarded. These substitution requests may have a similar impact as late-project value engineering ideas. The A/E may need to devote substantial time evaluating and modifying the design, and then reissuing construction documents that maintain the design intent. For this reason, clients should only entertain substitutions that result in substantial benefits to them — net of the extra effort by the A/E. Ultimately, a client’s understanding of an A/E firm’s business process will allow a project to run smoother, be more efficient, foster better communication, and perhaps most importantly, avoid unwanted surprises! n

out of the control of the A/E,

Getting the Correct Information

Value Engineering and Substitutions – Tread Carefully

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GOVERNMENT POLICY/ BUSINESS CLIMATE

What’s Your U.S. Manufacturing and Tariff Strategy? With the uncertain future of new tariffs and penalties, is it time to consider building a manufacturing site in the United States? By Rosemary Coates, Executive Director, Reshoring Institute, and President, Blue Silk Consulting

U.S.

tax reform legislation of 2017 allowed companies to repatriate overseas cash at a one-time 15.5 percent tax rate, down from the 35 percent paid in the past. But what will companies do with all that cash now that it’s back home? Some are buying back stock, but others are investing in U.S. manufacturing sites. And now, with nearly 6,000 Harmonized Tariff Schedule (HTS) item classifications identified for the imposition of a 10 percent to 25 percent penalty tariff on imports from China, it is time to consider all options. Even though some products, parts, and raw materials have escaped the penalties so far, the future of new tariffs and penalties is uncertain. Will your products be next? What is your U.S. manufacturing and tariff strategy? Should you be considering reshoring? Sourcing from other countries? Building inventories? Use of a foreign-trade zone? Increasing prices to your customers? And what about exports? Every time we impose a penalty tariff, foreign countries respond with an import tariff of their own. Have you considered how these foreign tariffs will affect your export sales?

The goal of the Trump administration is to tax upward of $200 billion worth of goods coming to the U.S. from China, and there is no way to determine which categories, products, or countries might be targeted next. The processes the U.S. Trade Representative is using for selecting items is unclear, which makes many importers rightfully nervous. Import tariffs are adding cost, but no value to global supply chains. In the end, it’s consumers who will have to pay increased prices as the cost is passed along the supply chain and more protectionist measures are implemented by the Trump administration. It appears that the trade wars aren’t going to end anytime soon, either. In fact, there is some discussion about targeting additional countries and additional classification categories. Section 232 tariffs apply to aluminum and steel as of June 1, 2018. Section 301 penalty tariffs on Chinese imports are in three tranches: Section 301 penalty tariffs on Chinese imports (List 1) July 6, 2018 – 25 percent; Section 301 penalty tariffs on Chinese imports (List 2) Aug. 23, 2018 – 25 percent; and Section 301 penalty tariffs on Chinese imports (List 3) Sept. 24, 2018 – 10 percent to 25 percent. Escalating trade tensions between the world’s two largest economies are creating havoc in global supply chains. Which countries or which items might be next is uncertain. Whether or not these tariffs will be effective in addressing the long-term policies of foreign governments is anybody’s guess. In the meantime, they are likely to affect your current operations. Now is the time to consider how to respond.

Return Manufacturing to the U.S.?

Returning, establishing, or expanding manufacturing in the U.S. is our favorite strategy at the Reshoring Institute. Over the long term, this is a solid strategy, especially when your customers are in the U.S. But it takes time to re-establish domestic manufacturing. A new factory location must be secured, new workers hired, and new distribution channels must be secured. Setting up operations in the U.S. could take as long as 12–18 months. In the meantime, if you need to source products, parts, and raw materials from China to supAREA DEVELOPMENT | Q4/2018

m o s t c o m pa n i e s s i m p ly c a n n ot o r w i l l n ot a b s o r b the additional cost of goods s o l d t h at a r e burdened with

percent

ta r i f f s . i n s t e a d ,

port U.S. production, you will still be stuck paying the penalty tariffs. Use of American contract manufacturers is also a possibility, but keep in mind that if parts and products come from China, the 301 tariffs still apply to these imports. If the contract manufacturer is buying parts on your behalf, they will surely pass the increase in cost due to penalty tariffs on to your company.

Source Parts and Raw Materials in the U.S.?

Sourcing parts in America is another good on the increased strategy if you intend to manufacture here. But c o s t s to t h e even with the 25 percent penalty tariffs on Chinese selling price of parts, American-made parts are often still not finished goods. cost-competitive. In addition, some U.S. suppliers are completely overwhelmed with current requests for quotes, are operating at capacity, and not accepting any new orders. Rebuilding your supply chain with U.S. suppliers could take years. This is a genuine opportunity to work with your design and engineering staff to consider different approaches to building your product and extracting costs. For example, you might consider plastic housing instead of aluminum, or unpainted internal parts, to reduce costs. Working cross-functionally within your organization (design-engineering-procurement) is likely to yield new, innovative ideas for production.

t h e y w i l l ta c k

Establish or Use an Existing Foreign-Trade Zone?

Perhaps you are considering the use of a foreign-trade zone to substantially transform component parts into a finished product and a new HTS number, or to avoid paying duty until you are ready to import. Unfortunately, certain provisions in Section 301 require payment on the value of the Chinese components regardless if you are now importing transformed finished goods from the FTZ. Even if you ship

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products from the zone directly to Mexico or Canada, the China penalty tariffs still apply.

Should You Buy More Inventory?

Some companies have been stockpiling inventory in advance of the tariffs going into effect. The result has been worldwide shortages of parts and overstock of finished goods for wholesalers and retailers. In addition, some companies are now paying for additional warehousing space to store production parts. This bullwhip effect adds unsustainable costs in global supply chains. Hoarding inventory also ties up working capital and may put a stranglehold on your companyâ&#x20AC;&#x2122;s ability to operate. In industries with rapid product development, seasonality, and trends such as fashion or electronics, inventory quickly becomes obsolete, so buying too far in advance is a losing proposition resulting in markdowns and sell-offs.

Pass Increased Costs to Your Customers?

In the end, consumers always pay the price for increasing tariffs as these costs are passed through by importers. Economists tell us that sooner or later, consumers will balk at increased prices and stop buying or limit buying of expensive goods. We know that a large portion of the consuming population is price-sensitive. We also know that most companies simply cannot or will not absorb the additional cost of goods sold that are burdened with 25 percent tariffs; instead, they will tack on the increased costs to the selling price of finished goods. As long as all of your competitors are doing the same, this is no problem. But if some competitors can sell for less, you may see an unfortunate drop in demand for your products due to noncompetitive pricing. If increasing your product sales price is your only option, you should brace for decreasing demand.

Effect on Exports

Exports to other countries are also affected. Trade wars mean that countries will retaliate with their own import tariffs on American goods. China announced tariffs on American goods immediately after each of the Trump administrationâ&#x20AC;&#x2122;s 301 list announcements. Unfortunately, retaliatory tariffs are often meant to hurt economic sectors unrelated to U.S. tariff categories. For example, U.S. 301 tariffs may apply to electronic goods imported from China, but Chinese retaliatory import tariffs apply to soybeans or almonds. Again, which items and industries may be next? Keep an eye on what is happening in export markets. It is difficult to predict how other countries will react to U.S. protectionist policies.

Develop Your Strategy

No matter what your opinion about trade wars, itâ&#x20AC;&#x2122;s in your best interest to develop a strategy that will work for your company as U.S. trade policy changes and different imports are targeted. Examine all of your options and be ready to make changes if necessary. n for free site information, visit us online at www.areadevelopment.com

CONSULTANTSâ&#x20AC;&#x2122; INSIGHTS

LEADING CONSULTANTS TO INDUSTRY PROVIDE INSIGHTS ON THE LOCATION DECISION PROCESS

Greg Burkart I DUFF & PHELPS Les J. Cranmer I Art M. Wegfahrt I SAVILLS STUDLEY, INC. Mike Fitzpatrick I BAKER TILLY CAPITAL, LLC Stephen Gray I GRAY CONSTRUCTION Aaron Hirschl I Alex Frei I CBRE Dan Levine I OXFORD ECONOMICS Ann Petersen I CUSHMAN & WAKEFIELD Chad J. Sweeney I GINOVUS Kyle Syers I BIGGINS LACY SHAPIRO & COMPANY LLC Monty Turner I GLOBAL LOCATION STRATEGIES Sarah White I QUEST SITE SOLUTIONS John Wooster I JLL CONSULTING AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS GREG BURKART I Managing Director and Leader, Site Selection and Incentives Advisory Practice, and City Leader, Detroit Office, Duff & Phelps

Millennials Spark Seismic Shift in Site Selection Those looking for a location for a new facility are focusing on communities that differentiate themselves through their quality of life, labor force, and cultural fit. With the C-suite increasingly focused on creating and sustaining a strong corporate culture, site selection is undergoing a seismic shift. Instead of just identifying the right buildings, organizations are looking for the right people — particularly, young millennials, hoping to integrate their joie de vivre into their firms. CEOs recognize that their employees build a strong corporate culture. When executives find the right pocket of labor, companies construct buildings around them. Communities and their amenities are a bigger piece of the site selection equation today, as many millennials value work-life balance. They are driven to communities that have great assets, and ultimately communities where they can enjoy living outside of work.

water-related developments, which are all attractive to millennials. The study also found that low housing costs in metro areas were associated with job and population growth as millennials struggle pay off student loans. Also noteworthy is that colleges and universities are associated with population and job growth in metro areas as the transition from school to work is easier on millennials. While these indicators relate to metro areas, there is hope for rural areas to attract millennials. In a recent article, “Rich millennials are ditching the golf communities of their parents for a new kind of neighborhood,” Tanza Loudenback identified a new housing trend — agricultural neighborhoods or “agrihoods,” where millennials can raise their own food near their homes.3 These are master-planned communities with working farms at their core. Moreover, the homes in these communities are built to high environmental standards with renewable energy and smart technologies. As of 2017, there were 150 “agrihoods” in the U.S., some located near metro areas while others are further out, connected to urban cores by mass transit. A classic example is a new urbanism community Serenbe, 20 minutes from Atlanta’s Hartsfield-Jackson International airport.4

CONNECTING WITH THE COMMUNITY

Amazon’s HQ2 Request for Proposal was an example of this profound shift in site selection. While the company METROS OR SUBURBS? recited traditional site location factors, the winning comAs site selectors, our job is to understand these new munity would differentiate itself through quality of life, laindicators and then identify places bor force, and cultural fit. The chowhere we think millennials will sen city would have demonstrated migrate, today and in the future. a connectivity between buildings, According to Dr. Richard Florida, facilities, and community. It would millennials are the happiest in be a place where Amazon could urban areas. Citing a recent study, cultivate and incorporate the local Dr. Florida notes that millennials culture and creativity into its opCommunities and are particularly the happiest in erations. A place where proximity those cities with more than 250,000 fosters a sense of place. their amenities are residents.1 If you looked at a selection of In a 2009 study by Michigan cities on Amazon’s short list,5 you a bigger piece of State University, “Investing in your would have found the hottest Future or Chasing your Past,” the markets in the country. The comthe site selection Land Policy Institute identified pubmon denominator was that these lic amenities in metropolitan areas communities have an abundance equation today, that are strongly correlated with of amenities that attract young, growth in population, jobs, and per educated millennials, e.g., creative capita income.2 For example, the music and arts scenes, dynamic as many millennials researchers found that investments restaurants, and lush parks and in green amenities in metropolitan open spaces. Austin, Nashville, and value work-life areas increased population, jobs, Raleigh have an average age that and per capita income. “Green is less than the national average of balance. amenities” are investments in 37 years, the growth of the millenassets such as parks, trails, and nial cohort exceeds the national

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average of 7.5 percent, and the education attainment exceeds the national average of 30 percent for bachelor and post-graduate degrees.6 Looking ahead, we know that more than one in three American labor force participants (35 percent) are millennials, which — according to a Pew Research Center analysis7 — makes them the largest generation in the U.S. labor force. Enterprises of all sizes must orient their focus — including site selection — to ensure they appeal to this growing and influential segment of existing (and potential) employees. Doing so successfully won’t be a happy accident. Rather, it will be the result of a detailed and rigorous analysis of what millennials desire in their workplace, the overall work environment, and amenities offered by the locale itself: plenty of creative outlets, attractive green/ water amenities, vibrant food scenes, and music venues, to name a few. Getting this analysis “right” will lead to a happier, more productive millennial workforce and, in turn, enduring business success. >•< 1 2 3

https://www.citylab.com/life/2018/06/millennials-are-happiest-in-cities/563999/ https://www.canr.msu.edu/resources/chasing_the_past_or_investing_in_our_future_full_report https://www.businessinsider.com/agrihoods-golf-communities-millennial-homebuyers-2017-10

http://serenbe.com/ https://www.amazon.com/gp/browse.html/?node=17044620011 http://www.chmuraecon.com/jobseq/ 7 http://www.pewresearch.org/fact-tank/2018/04/11/millennials-largest-generation-us-labor-force/ 5 6

GREG BURKART is a managing director and city leader in the Detroit office of Duff & Phelps and is the leader of the Site Selection and Incentives Advisory practice. Burkart specializes in identifying and securing sites that meet the current and futures needs of clients, and structuring and negotiating government-sponsored economic development incentives packages. Over the past few years, he has managed projects with capital investment exceeding $10.1 billion for which he has obtained $3.2 billion of incentives for his clients. ALSO FROM DUFF & PHELPS: Duff & Phelps recently published a three-part series that examines how to find and leverage local labor data during the site selection process to help generate solutions during a labor shortage. To access the full articles, go to: • https://www.duffandphelps.com/insights/publications/ state-and-local-tax/solving-the-site-selection-labor-crisispart-1 • https://www.duffandphelps.com/insights/publications/ state-and-local-tax/solving-the-site-selection-labor-crisispart-2 • https://www.duffandphelps.com/insights/publications/ state-and-local-tax/solving-the-site-selection-labor-crisispart-3

AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS LES J. CRANMER I Senior Managing Director, and ART M. WEGFAHRT I Corporate Managing Director, Savills Studley, Inc.

Why Do Many Incentives Awarded Remain Unused? There’s often a mismatch between incentives provided and those an organization — which also needs to be aware of any “strings attached” — can actually use. According to a Brookings Institute report (March 2018),1 between $45 billion and $90 billion of various federal, state, and local incentives are offered each year for the purpose of creating jobs and enticing capital investment related to economic development. At the same time, industry experts would say only half are used by the recipients — mostly corporations. So, one might ask, “Why wouldn’t the organizations originally seeking these incentives actually use them?” After serving as “matchmaker” between organizations and communities for over 40 years, we asked ourselves the same question and took a hard look in the rearview mirror to see what answers we could find. What we uncovered were multifaceted answers whereby the economic development agencies (public-sector grantors) and the recipients (private-sector grantees) are both the cause.

PRIVATE-SECTOR GRANTEES An organization is awarded incentives for expanding or locating its business but doesn’t really understand the overall process or all the contingencies attached to the incentives. The “strings” that are attached may have the organization ultimately reject the incentive once the terms are understood. Often, the organization does not assign a single point person to marshal the incentives to the end, as some may be tax-related while others are human-resource–related — therefore ending up in different departments. This leads to misinterpretation and confusion. Once the incentives are taken through the application process and finally get to the administration process,

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the amount of paperwork and back and forth may be deemed onerous and not worth the value received. Also, because many of the incentives are spread over multiple years, out living the initial project, they get “lost” within the organization. Lastly, there can be future changes in the business causing the organization to not meet its initial commitments. While there may be clawbacks in the case of grants, tax credits may never be captured.

PUBLIC-SECTOR GRANTORS Economic development organizations are marketing and sales groups whose functions are bringing in investment and employment, at which most are very good. Unfortunately, they tend not to be operational implementers. Once the organizations receive the commitment of the incentives for their commitment of jobs and capital, they begin interacting with the various revenue and other governmental departments whose job it is to dot the “i”s and cross the “t”s. They also — with the help of attorneys — make sure the implementation is in compliance with all the relevant statues. At times, this causes misunderstandings of what the organization thought was being promised and that which can be implemented. During the process of attracting the investment, the economic developer may not truly understand the organization’s issues or needs. This can cause them to incorrectly target incentives and award incentives that are useless to the organization. This occurs many times with recruiting and training programs. Finally, governmental processes can become frustrating to organizations — especially small, growing entities that are focused on their business and not filings. What they believed initially was something that could be a help to them becomes more of a burden.

A SUCCESSFUL PARTNERSHIP

More often than not, incentives end up being taxoriented, helping to lower ongoing annual costs.

It should be asked, “Why are the incentives granted in the first place?” Most experienced professionals in the location consulting field would tell you that the incentives are necessary to fix deficiencies in a location to make it more attractive to an organization. This may be training to fix a “skills gap.” It can be roadwork to accommodate traffic or utility extensions to make a site functional for the organization’s use. More often than not, incentives end up being tax-oriented — which benefits the recipient by helping lower the ongoing annual costs. It is important that all incentives are

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clarified from the beginning and the organization has a thorough understanding of all the “bells and whistles” as well as “strings” attached. Often, while trying to encourage business to commit and grow at their location, public-sector employees lose the notion of courteous “selling” and instead become the “incentive police,” which can create an adversarial relationship. Public- and private-sector groups need to work as partners and not adversaries.

OBSERVATIONS After reviewing the outcomes of location engagements over a lengthy period of time, as a general rule, we have found that the incentives accepted and actually used the most are those associated with property tax. Included are PILOT programs, abatements, and tax incremental financing programs. Most of these programs are very direct, in terms of rules, less cumbersome to understand, and are usually administered at the local government level, which tends to be free of thicker regulatory bureaucracy. >•< 1

https://www.brookings.edu/research/examining-the-local-value-of-economic-developmentincentives/

LES J. CRANMER has advised over 300 clients representing 80 million square feet — including over 50 organizations with distant relocation efforts. Formerly an architectural firm partner, a partner of Fantus Consulting, and national director of Deloitte & Touche LLP, Cranmer is recognized nationally for his experience and expertise relating to corporate relocation, financial incentives, and real estate. His professional expertise covers virtually all corporate facility types including headquarters, back office operations, customer services, shared services support, R&D, data centers, manufacturing, distribution, and other special-purpose real estate holdings.

ART M. WEGFAHRT brings to Savills Studley more than 40 years of experience in consulting services associated with corporate real estate and facilities. His professional expertise covers virtually all facility types including headquarters, back office, customer service, R&D, data centers, manufacturing, distribution, and other special-purpose real estate holdings. His career highlights have included consulting at Interspace Inc. (an architectural and facility consulting firm), and senior management with PHH Fantus Consulting and its successor, Deloitte & Touche/Fantus Consulting. Wegfahrt has been responsible for advising more than 300 organizations on issues related to facilities configuration and location, representing over 50 million square feet with a real estate asset value of $10 billion.

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AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS MIKE FITZPATRICK I E xecutive Vice President & Principal, Baker Tilly Capital, LLC Capitalizing on Opportunity Zones The U.S. Treasury recently released regulations that will guide governance and implementation of Opportunity Zones, which have the potential to attract more than $50 billion of capital to low-income communities. Opportunity Zones (OZs), a product of the Tax Cuts and Jobs Act of 2017, are designed to stimulate new investment in low-income communities nationwide. The program enables investors to harvest capital gains and defer payment of federal gains tax by investing those gains as equity into a “new activity” within an OZ within 180 days. A new activity will generally take the form of a real estate development, but it could include an operating company as long as the funds can be traced to funding the new activity. Under the new tax law, each state selected 25 percent of its low-income census tracts, as defined under the New Markets Tax Credit program, to be OZs. States were also able to designate up to 5 percent of tracts contiguous to low-income tracts as qualifying areas. The OZs will remain fixed from the date of designation through the close of the tenth calendar year and can be quickly identified on mapping websites.

Investor Incentive Holding Period of OZ Investment

Gains Tax on Original Investment*

Though the tax benefit accrues to the investor, developers planning projects within OZs can share in the benefit through careful attention to the investment structure. Developers seeking OZ capital can target cash returns and tax attributes (e.g., depreciation losses) between classes of investors that consist of OZ investors, non-OZ investors, those that can (or cannot) use passive losses, and the general partner (developer) through special allocations in the operating agreement. A carefully structured operating agreement will “expand the pie” by allowing the developer to retain a greater share of cash and/or tax losses, while OZ investors experience greater after-tax returns — the classic win-win.

Expanding the Pie Conventional Return on Investment

Return on Investment Within an Opportunity Zone

After Tax Return

Capital Gains Tax on OZ Investment

100%

no discount

5–6 years

90%

no discount

7–9 years

85%

no discount

10+ years

85%

none

*Paid at the earlier of the disposition of the OZ investment or Dec. 31, 2026

INVESTOR INCENTIVE Investors initially benefit from deferral of capital gains tax, which effectively becomes an interest-free loan from the federal government to fund approximately 20 percent of the OZ investment. The capital gains tax on the original investment is due at the earlier of the disposition of the OZ investment or with the federal tax return cover-

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EXPANDING THE PIE

After Tax Return

< 5 years

ing Dec. 31, 2026. The capital gains tax on the original investment is reduced 10 percent if the OZ investment is held for five years and another 5 percent (15 percent in total) if held seven years or longer. The greatest incentive though is to hold the OZ investment for 10 years, which results in no capital gains tax on the new OZ investment, including the potential for no recapture of depreciation taken during the 10-year holding period.

The OZ tax benefit accommodates a shift of cash returns and tax losses toward the developer, while still enhancing the yield for OZ investors. Savvy developers will need to offer a reasonable combination of cash returns and appreciation to attract OZ investors. Given the current capital gains tax rate, investors will not take excessive risk or substantially inferior cash returns and participation in appreciation to simply capture the deferral and reduction benefit on the original gain. They will need to see potential to take depreciation (to the extent allowed) and participate in the appreciation of the investment to benefit from the elimination of gains on the new OZ investment. In the following example, investors eligible for OZ treatment achieve an internal rate of return (IRR) 45 percent

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(800) 626-2930 • ThinkKentucky.com

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CONSULTANTS’ INSIGHTS higher than investors not qualifying for OZ benefits, and this is before value-engineering the structure to specially allocate depreciation.

Assumptions • Projects are economically identical (i.e., same cash and tax shelter attributes), but one is within an OZ and one is not; • OZ investors defer 23.8 percent in capital gains tax, while non-OZ investors pay 23.8 percent capital gains tax (all investors are assumed to liquidate an investment with a gain to make this investment); • NOI growth of 2 percent per year, 3 percent management fee, triple net tenants, 5 percent assumed vacancy, accelerated depreciation • Investment sold at 6 percent cap rate, net of 5 percent transaction expenses • Annual passive income taxed at 29.6 percent After-Tax OZ Non-OZ OZ IRR Improvement

5 years

7.8%

5.9%

32%

7 years

8.9%

6.9%

29%

10 years

10.9%

7.5%

45%

On October 19, 2018, the U.S. Treasury released regulations that will guide governance and implementation of OZs. The regulations answered many questions but left several important open questions.

IMPORTANT TAKEAWAYS • The regulations broadly define “gain” to allow shortand long-term capital gains. Gains from real estate, securities, the sale of a business, among others are eligible. In contrast to a section 1031 exchange, where all of the proceeds from the sale of real estate must be reinvested into real estate to achieve a deferral, only the gain portion needs to be reinvested within a Qualified Opportunity Zone (QOZ). Additionally, there is no “like kind” requirement, so an investor harvesting gains from the stock market could receive OZ benefits by investing gains into real estate in a QOZ. • Deferred gains retain their original nature, which means that gains invested in an OZ will retain their original tax attributes. For example, a short-term capital gain will retain its character when reported on a future tax return when the original deferred gain is due (the earlier of Dec. 31, 2026 or upon disposition of the new OZ investment). • Qualified Opportunity Funds (QOFs) can be invested as common or preferred equity in a partnership or corpo-

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ration or can be invested directly in QOZ business assets. Since 90 percent of a QOF’s assets must be invested in QOZ property (defined as tangible property), deploying more than 10 percent of the QOF’s capital as a loan to a QOZ business is prohibited. • Generally, a QOF must invest funds into QOZ property within six months. However, when investing in a QOZ business, financial property held for construction or rehabilitation may be held for a period of up to 31 months, if there is a written plan that identifies the financial property as property held for the acquisition, construction or substantial improvement of tangible property in the Opportunity Zone. Note that there is no guidance on how specific the “plan” must be to satisfy this requirement. • While 90 percent of a QOF’s assets must be invested in QOZ property or business within six months from the date received, the QOZ business only needs to hold 70 percent of its owned and leased tangible property within an OZ, which allows some flexibility for the business to have more than one location and/or maintain a portion of its assets outside of the OZ. • Further, 50 percent of the gross income of a QOZ business must be derived from the active conduct of a trade or business in the QOZ. These requirements may be problematic for businesses where their assets and/ or personnel conduct business outside of the OZ (e.g., a landscaping company or other contracting businesses that generate revenue offsite). • To satisfy the “substantial improvement” requirement of acquired property, the basis attributable to land on which an acquired building sits is not taken into account in determining whether the building has been substantially improved. For example, a QOF acquires land and building for $10 million, where $3 million is allocated to land. Another $7 million must be invested to satisfy the substantial improvement requirement. • An investor may liquidate its entire interest in a QOF before Dec. 31, 2028 (expiration date of QOZ census tracts) and reinvest into another QOZ project within 180 days (subject to substantial improvement and all other requirements) to maintain all original deferral benefits. What is not clear is if the underlying QOZ business can be sold with the proceeds reinvested by the QOF into another QOZ business. • The following trades or businesses cannot qualify as a QOZ business: (i) any private or commercial golf course, (ii) country club, (iii) massage parlor, (iv) hot tub facility, (v) suntan facility, (vi) racetrack or other facility used for gambling, or (vii) any store the principal business of which is the sale of alcoholic beverages for consumption offpremises. Continued on page 37

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16.5 in. .25 GUTTER 16.25 in. 15.75 in.

NEW YORK STATE IS FUELING GROWTH AND INVESTING IN THE FUTURE

NEW YORK STATE IS BUILDING THE IDEAL BUSINESS ENVIRONMENT

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10.875 in.

11.125 in.

With a world-class talent pool, infrastructure upgrades across the state, and businessfriendly programs and incentives, New York is committed to helping businesses succeed today and tomorrow.

STATEWIDE INVESTMENTS ■

HERE’S WHY BUSINESS IS THRIVING IN NEW YORK STATE

$150 billion infrastructure investment across the state, building on the existing $100 billion infrastructure program

A highly educated talent pool ■

$5 billion Clean Energy Fund

World-class infrastructure ■

Solar in New York State has increased more than 1,000% and leveraged $2.8 billion in private investment

■

$1.5 billion Upstate Revitalization Initiative

■

$755+ million in economic and community development funding in 2017

Business-friendly programs and incentives Largest public university system in the U.S. Rich diversity Unparalleled quality of life

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INSIDE LIVE

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More than QUALITY OF LIFE

$5.4 billion to job creation and community development projects.

10.5 in.

10.875 in.

11.125 in.

Businesses and people love New York State. With a low cost of living in most areas, revitalized city centers, 180 state parks — including the world-famous Adirondack Park — and a wealth of arts and culture, it’s unmatched as a place to work, live, and play.

STRATEGIC INVESTMENTS New York State is investing heavily in industries that benefit future generations. This includes a $620 million initiative to fuel growth in the life science cluster and $27.5 million for workforce development and training in the state’s clean energy sector.

INFRASTRUCTURE UPGRADES

HIGHLY EDUCATED WORKFORCE New York State is home to the nation’s largest public university system offering free tuition for eligible students, and it is the only state with two Ivy League schools. It’s #2 in the U.S. for math and physical science degrees, #2 for the number of resident scientists and engineers, and #3 in high-tech employment.

New York State has committed $150 billion to mass transit, affordable housing, schools, parks, and sustainable energy. Another $100 billion has already been put to work rebuilding roads, bridges, tunnels, and airports, including a plan to transform JFK International Airport into a 21stcentury hub and a redesign of LaGuardia Airport. In addition, the Build Now-NY program offers Shovel Ready Certification for high-tech manufacturing, warehouse distribution, logistics, and multi-tenant business and technology parks.

New York is #1 in the Northeast in total number of STEM graduates.

ACADEMIC PARTNERSHIPS New York State Centers of Excellence and Advanced Technology help academic and business sectors partner to develop new technologies, and they give qualified businesses direct access to advanced research labs and experts in key industries. They also provide qualified businesses the opportunity to operate tax-free for 10 years on or near eligible university campuses. Additionally, the NYSTAR Division of Science, Technology and Innovation has designated 10 Innovation Hot Spots across the state and also funds 20 Certified Business Incubators to reach even more early-stage companies.

Lowest corporate tax rate

since 1968, and property taxes capped at 2%.

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New York State is the place to do business. That’s why more Fortune 500 companies have their headquarters here than anywhere else. Corporate taxes are at their lowest level in decades, private sector jobs are up, unemployment is down under 5%, and wages and incomes have risen.

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More than QUALITY OF LIFE

$5.4 billion to job creation and community development projects.

10.5 in.

10.875 in.

11.125 in.

INFRASTRUCTURE UPGRADES

New York is #1 in the Northeast in total number of STEM graduates.

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NEW YORK STATE IS FUELING GROWTH AND INVESTING IN THE FUTURE

NEW YORK STATE IS BUILDING THE IDEAL BUSINESS ENVIRONMENT

10.5 in.

10.875 in.

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With a world-class talent pool, infrastructure upgrades across the state, and businessfriendly programs and incentives, New York is committed to helping businesses succeed today and tomorrow.

STATEWIDE INVESTMENTS ■

HERE’S WHY BUSINESS IS THRIVING IN NEW YORK STATE

$150 billion infrastructure investment across the state, building on the existing $100 billion infrastructure program

A highly educated talent pool ■

$5 billion Clean Energy Fund

World-class infrastructure ■

Solar in New York State has increased more than 1,000% and leveraged $2.8 billion in private investment

■

$1.5 billion Upstate Revitalization Initiative

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$755+ million in economic and community development funding in 2017

Business-friendly programs and incentives Largest public university system in the U.S. Rich diversity Unparalleled quality of life

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Consultants’ Insights Continued from page 32

• The step-up in basis after 10 years appears to be inclusive of accelerated depreciation. For example, a property acquired for $10 million that appreciates at 4 percent per year is sold for $14.8 million after 10 years, and has a tax basis of $6 million after taking $4 million of accelerated depreciation (assuming cash distributions equal taxable income for simplicity). The step-up election to $14.8 million would eliminate the gain of $8.8 million. • The proposed regulations permit taxpayers to make the basis step-up election after a QOZ designation expires. The ability to make this election is preserved under these proposed regulations until Dec. 31, 2047, but as currently drafted requires an actual disposition to a third party to receive the step-up in basis. The IRS recognizes this may create an unintended consequence to incentivize sub-optimal dispositions of QOZ investments and is seeking other options to address this issue.

OPEN ISSUES • Can an Opportunity Fund have debt-financed distributions? Or does that constitute an exchange that ends the investment’s tax benefits? • What actions of a QOF lead to decertification? The guidance indicates the Treasury and the IRS intend to publish additional proposed regulations to address conduct that leads to decertification of a QOF.

• While the “substantially all” test for QOZ business property held by an OZ business was set at 70 percent, the definition of substantially all for other rules was left undefined. • What does “additions to basis with respect to such property” mean? Can a second building or improvement qualify? • Can an Opportunity Fund lend capital? Or is lending limited since the Opportunity Fund must have 90 percent of its assets invested in qualified OZ property, which is defined as tangible property? Opportunity Zones have the potential to attract more than $50 billion of capital to low-income communities to stimulate job creation and revitalization. Like all other forms of tax-driven incentives, the devil will be in the details, which will influence the actual efficacy of the program’s intent. >•< MICHAEL FITZPATRICK is a partner with Baker Tilly and executive vice president and principal of Baker Tilly Capital, LLC, the wholly-owned FINRA broker-dealer subsidiary of Baker Tilly. He specializes in working with programs like Opportunity Zones, New Markets Tax Credits, EB-5 and more to provide flexible and affordable capital to qualifying projects and business. ALSO FROM BAKER TILLY: • F oxconn: Breaking Down a $3 Billion Incentives Package (Q3 2017) • P roposed U.S. Policy and Tax Changes: What the Foreign Manufacturer Needs to Know (Location USA 2017) • U sing Incentives to Tip the Corporate Capital Approval Scales (Q4 2017)

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.

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CONSULTANTS’ INSIGHTS STEPHEN GRAY I President & CEO

ADVANCES ON THE LEGISLATIVE FRONT

Gray Construction

Though a popular talking point, the infrastructure problem persists at a federal, state, and local level. Esri, a geographic information system software company, reports that federal infrastructure spending has dropped by 50 percent in the past 30 years — from 1 percent to 0.5 percent of GDP.3 State and local investments are also at a 30-year low. As a percentage of GDP, the U.S. is investing significantly less in its infrastructure when compared to other nations. The current U.S. rate is 2.4 percent, while China’s rate, for example, is 8.6 percent. The White House previously touted a $1.5 trillion plan to repair and upgrade America’s infrastructure, leveraging state and local tax dollars plus private investment. After much opposition from Congress, largely due to responsibility given to states and cities for infrastructure improvements, the plan is, by all reports, dead. Still, the administration appears confident to pass a bipartisan plan for publicly funded projects. In July, House Transportation and Infrastructure Committee Chairman Bill Shuster introduced a draft plan4 that addressed possible funding sources for a number of potential projects that levies taxes on multiple fuel sources. While the bill did not receive action, it has kept momentum for infrastructure alive and laid a solid groundwork for what needs to happen. While a large plan seems on hold, some positive action has taken place more recently. In October, Congress passed the Federal Aviation Administration (FAA) Reauthorization Act of 2018.5 The bill provides for long-term funding for the FAA and touches upon numerous issues of importance to the industry, from certification and regulation to the enabling of the future of supersonic travel and the facilitating of a range of new electrical and autonomous systems. It ascertains infrastructure investment to modernize the aviation sector. Manufacturers welcomed the action both for strengthening the nation’s air transportation as well as increasing U.S. manufacturing competitiveness, efficiency, and growth. Also, more recently, the president signed America’s Water Infrastructure Act of 2018 (AWIA)6 into law. The act will authorize federal funding for water infrastructure projects; expand the country’s water storage capabilities; upgrade wastewater, drinking, and irrigation systems; in addition to permitting or reauthorizing water infrastructure projects and programs. NAM points out that “upgrading and modernizing harbors and ports as well as aging inland waterway lock systems” is critical7 for moving U.S. manufacturing forward. It’s worth noting that the Fixing America’s Surface Transportation Act (FAST Act),8 also known as the high-

Infrastructure Investment: Shifting the Focus from Cost to Opportunity The cost of upgrading and maintaining U.S. infrastructure is an investment that will pay off for industry and the nation as a whole, resulting in job creation and increased GDP. Through tax and regulatory reform, U.S. manufacturing has had a strong year. According to the National Association of Manufacturers (NAM), the industry’s optimism registered at 93.9 percent,1 which is the highest year average in history. Despite strong developments, work is still needed, particularly in infrastructure. Although touted aggressively in 2018, a large infrastructure investment has yet to be announced and is not expected to happen this year. The reasons are ultimately political, but it’s important to recognize the role infrastructure plays in a successful manufacturing landscape.

MODERN MANUFACTURING’S INFRASTRUCTURE NEEDS The fact is U.S. infrastructure is decaying. From roads and bridges to airspace, water, energy, and even cybersecurity — these systems are crumbling, and the band-aid fixes are no longer sustainable. The American Society of Civil Engineers (ASCE) graded America’s infrastructure a D+ in its 2017 evaluation.2 This is actually the same score the U.S. received in 2013, meaning little improvement has been made. For the manufacturing industry, infrastructure is necessary to efficiently acquire materials and reliably transport finished products. Without strong infrastructure systems, the supply chain is broken, slowed or cumbersome, at best. Apart from the obvious decline, modern manufacturing involves sophisticated logistics with inter-modality coupled with containerization and instantaneous communication. It is critical to not only identify changes to the industry but to anticipate further evolutions to plan and invest for the future. For example, what was required for the steam engine centuries ago is irrelevant in the modern era. Currently, advanced communications facilitate the disintegration of the manufacturing process, allowing design, finance, administration, component manufacturing, and assembly to be in different locations, yet still function cohesively. Ultimately, manufacturing and infrastructure need each other. When both are strong, they are an unstoppable force.

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way bill, will expire in 2020. With this deadline looming, Congress is being urged now to build a plan to ensure more funding for transportation improvements.

OUTSIDE INVESTMENT While recent positive moves have occurred, big initiatives have fallen short. As such, private equity firms are taking matters into their own hands and are poised to raise a substantial amount of funding for infrastructure investments. Collectively, firms have raised some $68.2 billion in the first three quarters of the year, which is up 18 percent from last year.9 Still, to truly solve the problem and shore up the infrastructure landscape to ensure a strong U.S. manufacturing economy, federal infrastructure intervention is necessary. The need is clear — our infrastructure needs updating. Without action, America’s economy could be detrimentally impacted, especially the manufacturing sector. The ASCE report cites the following consequences if infrastructure investment is neglected: • $3.9 trillion in losses to the U.S. GDP by 2025 • $7 trillion in lost business sales by 2025 • 2.5 million lost American jobs in 2025

As with any big investment, cost is always an issue, especially considering the capital investment as well as ongoing maintenance. However, if the focus shifts from the cost to the opportunity presented, the return on investment is more prominent. Infrastructure is truly an economic investment that impacts multiple industries translating into new jobs and increased GDP. >•< 1

http://www.nam.org/outlook/ https://www.infrastructurereportcard.org https://iconsofinfrastructure.com/us-is-falling-behind-ininfrastructure-technology/ 4 https://transportation.house.gov/news/documentsingle. aspx?DocumentID=402675 5 https://www.congress.gov/bill/115th-congress/house-bill/4/ text 6 https://www.congress.gov/bill/115th-congress/senatebill/2800 7 http://www.shopfloor.org/2018/10/congress-sends-presidenttrump-another-pro-manufacturing-infrastructure-bill/ 8 https://www.fhwa.dot.gov/fastact/summary.cfm 9 https://www.wsj.com/articles/investment-in-infrastructure-isbooming-despite-lack-of-progresson-trumps-pledges-1538920801?ns=prod/accounts-wsj 2 3

STEPHEN GRAY was appointed CEO of Gray Construction in 2010 with primary responsibility for all execution and operations related to issues of the company.

AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS AARON HIRSCHL I Senior Financial Analyst; and ALEX FREI I Senior Vice President; CBRE Agile Real Estate’s Impact on Incentives Agile real estate solutions that reduce your firm’s level of investment and/or headcount may have an effect on incentives provided by state and local entities. In today’s dynamic and often uncertain business environment, organizations of all types and sizes are searching for opportunities to optimize performance and maximize competitiveness while remaining sensitive to overall costs. Work’s accelerating pace of change — fueled largely by technological, regulatory, economic, and cultural trends — requires companies to adopt agile operational strategies in order to quickly reconfigure structure, processes, people, and technology. Americas-based real estate executives responding to CBRE’s 2018 Americas Occupier Survey1 revealed that although real estate decisions were once focused on building cost, location, and amenities, the framework for making real estate commitments now includes flexibility as an equally important component. While corporate real estate has long been viewed as necessary overhead, today’s executives recognize the need for flexibility and are employing agile workplace strategies that meet the demands of the organization today and in the future.

INCENTIVE ELIGIBILITY REQUIREMENTS Companies are seeking alternative real estate solutions — grounded in the concept of agility — to deliver highly effective and efficient workplaces, differentiated assets, and optimized real estate portfolios that create and protect value for owners, occupiers, and service providers alike. An agile and amorphic approach provides occupiers with alternate real estate solutions; however, these approaches may not align with companies seeking economic incentives from state and local entities that have narrow eligibility requirements, specifically as they relate to minimum levels of investment and job creation. While economic incentive consideration may be site specific, incentives are mainly driven by the level of capital investment, headcount, and payroll associated with a project. Capital investment and job creation are measured to estimate the potential indirect and direct taxable revenue a project may generate. As a growing number of companies seek to employ

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agile real estate strategies, the typical capital investment and headcount levels for a given deal have changed. Agile strategies tend to reduce the capital required for a project by leveraging the growth of co-working networks and flexible on-demand space. Additionally, these strategies can reduce the overall lifecycle facility costs and the time and effort necessary to procure a real estate solution. Finally, agile real estate solutions allow companies to utilize on-demand hiring and employ freelance or contract employees, avoiding costly overhead generally needed to operate a self-sustaining business. As a result, incentive policies with more flexible eligibility requirements will most effectively attract companies utilizing agile workplace strategies.

AGILE REAL ESTATE: WHAT, HOW, AND WHY What is agile real estate? Workplace environments and space agreement structures that are dynamic and nimble in supporting organizational objectives and employee needs — today and tomorrow. How do you achieve agility? Create a unique and implementable strategy that increases productivity, drives efficiency, creates appropriate flexibility, and delivers rich experiences to employees and tenants.

ORGANIZATIONAL AGILITY

69%

Leverage third-party partners

DIGITAL & TECHNOLOGY AGILITY

83% 83% Monitor emerging technology trends

Use sophisticated business analytics

50% Maintain CRE D&T roadmap

PORTFOLIO AGILITY

100% 70% Negotiate flexible space options in lease

Seek shorter and/or more flexible lease terms

70%

Support an enterprisewide flex-work program

60% 50% Use flexible service providers, coworking operators and/or third-party short-term marketplaces

Deliver free address environments

Source: CBRE/CoreNet Global survey, “Stress Testing Your CRE Agility,” February 2018 The chart reveals best practices in which a majority of highly agile respondents engage.

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In February 2018, CBRE published a survey in partnership with CoreNet Global titled “Stress Testing Your CRE Agility.”2 With more than 85 responses, the survey revealed the best practices employed by corporate real estate departments that described themselves as “agile.” (Note that respondents were primarily in the finance, technology, government, manufacturing, and pharmaceutical industries.). Why does agility matter? Agility delivers more effective workplaces and assets and streamlined portfolios that help drive better business performance, helps attract and retain talent and tenants, and increases asset value. Based on responses to CBRE’s 2017 Global Occupier Survey,3 the implementation of an agile, shared workplace strategy is driven by the following internal and external needs: • Reduce costs (45%) • Obtain a short-term space solution (42%) • Increase flexibility in leasing terms (41%) • Acquire satellite/remote office spaces (25%) • Attract and retain talent (21%) • Promote networking or collaboration (15%) • Promote innovation (13%)

Flexible Space Providers vs. Traditional Business Services, Share of Majority Leasing Activity

firms in H1 2018 were flexible space providers, up from less than 7 percent five years earlier. • If a similar rate of growth continues, flexible space providers’ share of major leasing will surpass the legal, government, and insurance sectors by mid-year 2019.

Corporate occupiers have been the major drivers of the expansion of agile space solutions over the last few years: • A Fortune 50 multinational technology company made headlines at the end of 2016 when it announced its decision to give nearly 30 percent of its employees in New York City access to co-working locations. The company cited its desire to tap into the startup culture in a more flexible co-working office arrangement. • A Fortune 500 multinational investment bank and financial services company launched a fintechfocused accelerator space in the Flatiron section of NYC in 2016 to help innovative startups collaborate, experiment, and grow. • A Fortune 50 multinational information technology company partnered with a co-working operator at its recently launched NYC office space in West Soho. • A Fortune 50 multinational engineering and electronics company launched a co-working innovation hub on the top floor of its research campus in April 2017.

Major Office Leasing Activity by Industry High-Tech

14%

Financial Services

12%

Healthcare/Life Sciences

10%

Business Services (traditional) Creative Industries

8% 6%

9.6%

9.3%

9.4%

10.3%

10.0%

8.9%

Government

4% 2% 0%

Insurance

0.7%

1.0%

2.0%

1.5%

2.6%

4.4%

2013 2014 2015 2016 2017 H1 2018 Business Services

Flexible Space Providers

Legal Business Services (Flexible Space Providers)

0% 5% 10% 15% 20% H1 2018

2017

Source: CBRE Research, Q2 2018 Note: Includes the 25 largest transactions by sq. ft. each quarter for each of the 54 markets tracked by CBRE Research

Source: CBRE Research, Q2 2018 Note: I ncludes the 25 largest transactions by sq. ft. each quarter for each of the 54 markets tracked by CBRE Research

FLEXING THEIR MUSCLES

INCENTIVES: FLEXIBILITY WILL FLOURISH

A recent U.S. MarketFlash by CBRE, “Flexing Their Muscles: Flexible Space Provider Leasing Surging,”4 shows the elevated demand for flexible terms:

Even as companies increasingly employ agile real estate strategies, incentives will continue to be top of mind for corporate real estate decision-makers; incentives play an important role in the site selection process. Traditionally, state and local entities offering economic incentives have based incentive policy on overall economic and fiscal impact and also require minimum levels of investment and job creation. An agile real estate strategy could reduce the level of investment and/or headcount;

• Flexible space providers accounted for 4.4 percent of square footage leased in major deals during the first half of 2018, nearly double their share in H1 2017 and up from less than 1 percent in 2013. • Flexible space providers have been the primary growth driver within the business services sector. One third of major leases signed by business services

AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS thus, state and local entities should proactively revise policies to reflect the reality of companies incorporating flexible workplaces into their real estate strategy. >•< 1

https://www.cbre.us/research-and-reports/Americas-Occupier-Survey-2018 http://www.corenetglobal.org/KCO/content.aspx?ItemNumber=36666 https://www.cbre.us/research-and-reports/Global-Occupier-Survey-2017 4 https://www.cbre.com/research-and-reports/US-MarketFlash-FlexingTheir-Muscles-Flexible-Space-Provider-Leasing-Surging 2 3

AARON HIRSCHL joined CBRE in 2018 as part of the Transaction and Advisory Services team. This advisory group assists clients globally with site selection and economic incentive negotiations, in conjunction with the overall strategy and execution of corporate real estate initiatives. Hirschl has negotiated multimillion-dollar state and local economic development incentives packages for a variety of small and large real estate transactions and has managed location strategies for corporate clients in a range of industries. Prior to joining CBRE, Hirschl was as a senior consultant in the Business Incentives Practice at Cushman and Wakefield.

ALEX FREI joined CBRE in 2018 as a senior vice president with the Transaction and Advisory Services team. He focuses on all aspects of site selection with an emphasis on the identification, negotiation, documentation, and administration of state and local government incentives. He has negotiated over $1 billion in state and local incentives packages for his clients. Prior to CBRE, Alex was a senior managing director of the Business Incentives Practice at Cushman & Wakefield and a trusted advisor in the areas of tax credits and incentives, site selection, and economic development. ALSO FROM CBRE: • W hich Locations Are Drawing FinTech Companies? (Q3 2018) • F ollowing the Millennial Workforce Back to the Burbs (Workforce Q4 2017) • American Manufacturing: Back in the Game? (Q4 2017) • Data Center Outsourcing Trending Up (Data Centers 2017)

DAN LEVINE I Practice Leader, Location Strategies,

And it is not just U.S.-China trade that is the worry. There remain U.S. tariffs on steel and aluminum products coming from Canada and Mexico, and this issue The Impact of Tariffs on Supply Chain Costs remains open under the United States-Mexico-Canada The worsening tariff situation will affect prices Agreement (USMCA) that is intended to replace NAFTA. throughout the international supply chain that supports In response, each of our neighbors has imposed a host companies’ operations both in the U.S. and abroad — of retaliatory tariffs on U.S. goods, especially targeting and ultimately affect their bottom line. agriculture. If this is going to be our new normal, how will business respond? President Trump and Senator Bernie Oxford Economics has had an opportunity to work Sanders agree on almost nothing — with companies considering how the worsening tariff except that they both like tariffs designed environment will impact their bottom line and, in this to “protect” American workers and article, we share a few of the insights that we have especially those imposed on China. learned. For overall context, recall that if “successGiven that rare bipartisan agreement, ful,” tariffs will increase prices of all affected products many businesses are reluctantly reaching in the United States. Theoretically, this will encourthe conclusion that age more domestic producers to protectionist tariffs are becoming the expand output. However, at the new normal and are now beginning to same time, prices remain lower evplan accordingly. erywhere else as foreign producers The stakes are high. Oxford Ecoincrease supply in foreign markets. Many businesses are nomics estimates that a full trade The key question that we are asked war with China, where essentially all is, when all the dust settles, how will reluctantly reaching trade between the two countries is tariffs affect supply chain costs? Busithe conclusion that subject to tariffs, would shave nearly nesses can generally calculate the 0.6 percent off U.S. GDP growth by cost of tariffs on products that they protectionist tariffs are 2020, potentially costing hundreds directly import. What is more difficult to of thousands of jobs unless there are estimate is how tariffs will affect prices becoming the new corresponding offsets to other U.S. throughout the international supply policies, for example, less restrictive chain that supports their operations normal and are now fed policies. The accompanying chart both in the United States and abroad. highlights the five states that Oxford beginning to plan Economics forecasts will lose the most EMPLOYING A CGE MODEL accordingly. under a full trade war scenario without To help us predict how relative price policy offsets. levels will stabilize for key industrial Oxford Economics

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and agricultural sectors once the shock of new tariffs Companies are currently wrestling with how to incorhas worked its way throughout the global economy, we porate these insights regarding rising costs into their future rely on a computable general equilibrium (CGE) model. planning. Some have begun to explicitly balance political The use of a CGE model is standard in the economics and economic risk. In one project, it was clear that the profession whenever the goal is to gain insight into how smart economic decision was to shift steel purchases from a variables such as price and output will likely change in U.S. to foreign supplier. However, high visibility moves to shift response to a change in trade policy. The CGE model production offshore or source away from current U.S. supthat we use calculates expected price and trade volume pliers because of U.S. trade policy carry significant political changes for key industrial sectors in multiple regions and risks. A prominent company with a great degree of political countries globally. The model anticipates substitution efvisibility needs to think carefully about how such a move will fects over time. play out in WashIn other words, ington. To date, it considers how it appears that State Cut to Base GDP Largest Exports production will concerns such as (4th Qtr. 2019) to China move from highthese, coupled cost to low-cost with uncertainty South Carolina 1.2% Motor Vehicles locations (given regarding the Indiana 1.1% Chemicals current trading duration of tariffs, patterns). have essentially Michigan 1.1% Motor Vehicle Parts In a typical frozen business deOregon 1.1% Semiconductors/ engagement, cision-making surOther Electronics a company rounding this issue. provides us with But that situation Louisiana 1.1% Oilseeds and Grains a description of might be starting Source: Oxford Economics its current supto change. These five states will lose the most if all trade between the U.S. and China is subject to tariffs. ply chain. For While it reexample, how mains entirely much steel does possible that it import from Mexico? What volume of motor vehicle USMCA will be modified to address the steel, aluminum, component parts comes from Japan or electronics and retaliatory tariffs currently in place, the fact is, they from China? Once armed with a profile of the compahave already been in place longer than many in the ny’s supply chain, we run a scenario on the CGE model business community expected. Hopefully, China-U.S. that reflects the tariff situation of most concern to that trade tensions will be reduced because of talks reportcompany. Usually, the scenario being considered is edly under way. In the meantime, however, companies the worst-case one currently being discussed in Washremain concerned and now seem to be more seriington. Sadly, the worst-case scenario being discussed ously considering how to operationally respond. State today has too often become the actual policy of governments, too, might want to follow their cue and tomorrow. consider how the changing trade situation will create The model’s results are then applied to the supply some opportunities, but also create many new risks, for chain of that company. For example, the model might their own economies. >•< estimate that the price of motor vehicle components DAN LEVINE is the Location Strategies practice leader at coming from Japan will rise by “x” percent because of Oxford Economics. He previously led the Location and Incenchanging tariffs; or that the price of electronics from Chitives Consulting Practice at ADP, Inc. and also owned and na will increase by “y” percent. The price changes that operated a boutique corporate relocation consulting company, MetroCompare LLC. In these capacities he advised we focus on are those associated with the key compocompanies on where to locate new facilities and negotiated nents of the supply chain of the company that we have incentive packages on behalf of these companies in excess been asked to evaluate. The expected price changes of $100 million. Prior to this, Levine served as Assistant State Treasurer of New Jersey where he led many of that state’s are applied to the current cost structure associated with economic development efforts. Earlier in his career, Levine the current supply chain. The projected increase in costs, was director of Location & Incentive Services at PwC. after the new price structure is considered, allows for a ALSO FROM DAN LEVINE: relatively straightforward analysis of the likely impact on • A Smarter Way to Incentivize (Q3 2018) EBITDA (earnings before interest, taxes, depreciation, and • The Manufacturing Paradox: Output Up, amortization). Employment Down (Q1 2015)

AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS ANN PETERSEN I Managing Director, Business Incentives Practice, Cushman & Wakefield

Evaluating the Workforce Although the education levels of a state’s workforce should be a significant consideration for any project expansion or relocation, that data alone may not be sufficient to tell the whole story of the workforce for a particular market. In July 2018, the unemployment rate was reported at 4.3 percent — at its lowest level since early 2001. Similarly, all typical economic measurements point to a booming economy — employers are adding jobs, output is soaring, and average wages are rising. In these easy economic times, what do corporate executives have to be worried about? Executives are faced with a growing number of considerations when evaluating new opportunities for a location decision or an expansion of an existing operation. With unemployment levels at all-time record lows, any location decision must factor in workforce. An important workforce consideration when evaluating a particular market is the workforce pipeline. Current workforce data becomes outdated almost as soon as the data is pulled, and often does not account for the true supply and demand in the market. For instance, current workforce data will not include recent corporate announcements of company relocations or expansions; it is almost impossible to account for future workforce demand through raw data alone. Accordingly, just because the workforce data looks robust for a certain industry, there may be other factors that could contribute to a shortage in certain skill sets, driving up the market’s average wages and putting pressures on business to attract and retain good talent. One way to evaluate the performance of a market from a skilled workforce perspective is to look at educational attainment levels, or the average education level (e.g., high school diploma, four-year degree, advanced or other master’s level education, etc.) of the market, overall. Minnesota and Massachusetts, two states with historically high educational attainment levels (40 percent of Massachusetts residents and 33 percent of Minnesota residents have a bachelor’s degree or higher1) also spend a relatively high amount, per capita, on K-12 education.2 The correlation makes sense – generally, those states that put a financial focus on K-12 education enjoy increased levels of educational attainment across the state in the workforce population, as compared to the rest of the country. Thus, executives looking for a skilled workforce would be well served by looking to states and markets

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with high educational attainment levels. A market with an already existing highly skilled workforce may seem like a solution to the workforce crisis; however, one metric may be cause for concern. An existing skilled workforce may help to reduce a company’s exposure to risk associated with finding skilled labor, but net migration data helps to complete the workforce picture in a particular market. Although highly skilled states like Minnesota and Massachusetts enjoy high levels of skilled workers, both states’ net migration numbers are extremely low or even negative.3 Net migration data indicates whether or not more workers are moving into a particular market versus moving out, and low or negative net migration numbers may indicate a trend leading to more workers exiting the state versus remaining. Net migration matters, but there may be more to the story than what the data shows. A recent trend in office relocations indicates that while urban areas will always flourish, many skilled workers are preferring to relocate to “mid-tier” cities that offer the same amenities as highly urban areas, but with a lower cost of living. Corporate executives should take this trend into consideration when evaluating a corporate office location decision. While it may make sense to maintain an executive presence in a high-cost, large urban market, many of the middle management and back office operations can be moved to mid-sized, lower cost but still culturally rich in amenities cities like Indianapolis, Columbus, Nashville, or Milwaukee. A company should also look at a state’s available workforce development programs such as Georgia’s QuickStart or Louisiana’s LED FastStart program (two states that offer robust, best-in-class workforce development programs to new and expanding businesses) as part of an overall analysis of a potential market’s workforce, workforce pipeline, and potential retraining opportunities, should a skills gap exist. >•< 1

Percent of population with a bachelor’s degree or higher – ESMI Quarterly Census of Employees and Wage – 2018.3 EMSI Class of Worker $15,593 per student in Massachusetts, $12,382 per student in Minnesota - Fiscal Year 2016 Public Elementary-Secondary School Per Pupil Spending; 2016 Annual Survey of School System Finances, US Census Bureau 3 3.4% net migration for Massachusetts, 1.4% net migration for Minnesota - 2016-2017 Business Insider; data from US Census Bureau 2

ANN PETERSEN is a managing director in the Business Incentives Practice at Cushman & Wakefield. Ann has 15 years of experience negotiating and implementing incentives for her clients, including providing complex financial analysis and utilizing her legal background to provide creative savings solutions through legal analysis, tax legislation, and letter rulings. ALSO FROM CUSHMAN & WAKEFIELD: • Is There A Warehouse in Retail Assets’ Future? (Q4 2017) • Location Strategies in the War for Millennial Talent (Workforce Q4 2016) • Weighing Economic Incentives in the Location Decision (Q1 2016)

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

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Searching for a build-ready site that can help your project hit the ground running? Arkansas’ 78-acre Paragould South Industrial Site is “shovel-ready” and McCallum Sweeney Certified. Better still, Paragould was recently named as a Competitive Community. So it’s not only a great place to live and work, the community is proven to meet infrastructure and workforce criteria. This site is ready for business, and speed-to-market matters. Get there quicker from Arkansas.

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CONSULTANTSâ&#x20AC;&#x2122; INSIGHTS CHAD J. SWEENEY I Senior Principal, Ginovus

Incentive Considerations in M&A Transactions A company that is acquiring or selling a business needs to evaluate the potential advantages and liabilities of incentives already in place, as well as opportunities for future incentives. The use of economic development incentives by state and local governments to attract new investment and employment opportunities has increased significantly over the past 10 to 15 years. During this time, the types of businesses and transactions eligible to receive economic development incentives have been liberally expanded. As a result, the evaluation of the risks and potential benefits from economic development incentives are important items to be considered as part of any due diligence review in the purchase or sale of a business. In general, governmental entities offer economic development incentives that fall within four broad categories: (1) training assistance; (2) tax credits, abatements or exemptions based on employment growth or new capital investment; (3) financial assistance in constructing or improving public infrastructure; and (4) cash grants or loans based on discretionary incentives, tax increment financing or similar programs. Each of these incentives can provide potential advantages and pitfalls when acquiring or selling a business. When evaluating a potential acquisition, the acquirer should gain a full understanding of all prior incentive agreements entered into by the target. If there are none, the acquirer should evaluate the impacts of the acquisition on the combined company and its long-range prospects in order to determine if incentives may be available to support the acquirerâ&#x20AC;&#x2122;s post-acquisition plans and longterm site location decisions for the business.

EXISTING INCENTIVES AS AN ASSET If a company has existing incentive agreements in place from a prior site selection or expansion project, a thorough review of the programs approved and agreements entered into is critical to understanding if there may be an opportunity to continue to claim incentive benefits post-acquisition. Many states and communities are willing to assign and/or restructure incentive agreements in a sale transaction if the outcome of the sale will be positive or neutral as compared to the original project projections. As a result, if the company is currently receiving ben-

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efits under existing incentive arrangements, it is possible for the acquirer to continue to benefit from the incentives post-acquisition, and to even increase the amount being earned if post-acquisition growth or investment is contemplated. However, timing can be a critical component to a successful transition of any incentive benefits. It is important to negotiate any assignment of the incentive benefits prior to closing and to understand how post-acquisition plans may impact (positively or negatively) the underlying incentive value. In the case of an acquisition transaction structured as an asset sale, most governmental entities allow for incentive agreements and their related benefits to be assigned to the acquirer. However, care should be taken to ensure the assignment is done timely and in the appropriate manner, as many incentive agreements have specific notice and approval processes that must be followed. In addition, the assignment may result in an obligation for the acquirer to assume potential repayment obligations resulting from incentives claimed by the target pre-acquisition. These potential liabilities should be weighed against the anticipated future value of the incentives in determining whether an assignment of the incentive agreements should be pursued.

EXISTING INCENTIVES AS A LIABILITY Therefore, in addition to assessing existing incentives for future benefits, incentive agreements should be reviewed for potential future liabilities. Incentive agreements often have relatively long terms. It is not uncommon for the benefits under incentive programs to be claimed over a period of 10 years or more. In addition, many incentive agreements (or the underlying enabling legislation) often have requirements for a company to maintain operations and headcount at a particular location for a period of time extending beyond the period during which incentives can be claimed. These provisions can often be overlooked, since the company may no longer be eligible to claim incentive benefits. Due to the length of the incentive terms and the post-incentive commitments, repayment obligations can often extend for more than 10 years, and in some cases up to 20 years, from the date the incentive was originally awarded. This creates the potential for significant continuing liability associated with a transaction that may have been all but forgotten by the target company. Actions such as relocation of operations, closure of a facility or a significant reduction in headcount could result in a requirement to repay previously earned incentives, including in some cases with the addition of penalties and interest. A full understanding of these potential liabilities is critically important in order to negotiate an appropriate allocation of risk as part of the purchase transaction.

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INCENTIVES AS AN OPPORTUNITY When approaching an acquisition, incentive opportunities should be evaluated even if the target company does not have any existing incentive arrangements. Acquisitions often involve a review of existing operations and a thorough analysis of the most advantageous location for continuing operations, including the combination of company headquarters or support operations and, in some cases, consolidation of operational capacity. As with other site selection decisions, incentive opportunities should be considered as part of this overall analysis. Questions to consider are whether the acquisition will result in new capital investment or employment growth, or the retention of a significant number of employment positions otherwise at risk. If so, there may be opportunities to pursue incentives in advance of closing to offset the initial costs of the acquisition and to reduce ongoing, postacquisition operating costs. Even if capacity consolidation is being considered, such as in the case of a strategic acquisition, there may still be incentive opportunities to consider. While consolidation activities may result in an overall decrease in employment, they often result in an increase at the

KYLE SYERS I Senior Consultant Biggins Lacy Shapiro & Company LLC

One Year Later: The Impact of the Tax Cuts and Jobs Act We are just beginning to see the economic effect of the TCJA, passed in December 2017, but tax cuts are among many factors influencing U.S. investment decisions. The TCJA aimed to help businesses invest tax savings and deferred offshore earnings into expenditure projects and employee wages, fostering economic growth. Is it working? Let’s review the economic impact of the new law on site selection and business investment in the U.S.

CORPORATE INCOME TAX RATE Perhaps the most publicized component of the bill involves the cut of the federal corporate income tax rate to a flat 21 percent. Previously, the U.S. corporate income tax was broken up into four brackets depending on income, with rates of up to 35 percent for large companies. As the Congressional Budget Office reported in 2017,1 this rate was the highest statutory corporate income tax

facility into which the consolidation occurs. In such a case, economic development incentives may be available to support the facility that is the beneficiary of the new capital investment and/or employment positions, helping to offset the costs of consolidation and relocation of assets and employment. An understanding of the benefits and potential liabilities of incentives programs is an important component to understanding the overall risks and opportunities in an acquisition or sale transaction. This understanding and analysis can provide meaningful value to the overall acquisition transaction, while at the same time guarding against any unexpected post-closing surprises. >•< CHAD SWEENEY, senior principal for Ginovus, provides location modeling, site selection, and advice on structuring economic development incentive agreements for clients throughout North America. Sweeney has closed transactions resulting in over $1.1 billion of capital investment and an estimated 7,700 new jobs. Before joining Ginovus, he served on the leadership team of the Indiana Economic Development Corporation. ALSO FROM GINOVUS: • The Collaboration Score: The Missing Link in Site Selection (Q4 2017) • The Importance of FDI to the U.S. Economy (LocationUSA 2017)

rate and the fourth-highest effective tax rate among G20 countries. Of course, lower corporate income tax rates that increase returns on investment make a location more attractive. In fact, the TCJA’s rate aligns the U.S. more closely with neighboring Canada (26.5 percent, Ontario; 26.7 percent, Quebec), which is perhaps the closest comparison. The tax rate reduction increases after-tax earnings on U.S. investments and, as a result, should marginally influence site selection decisions.

TERRITORIAL TAX SYSTEM Another important change with TCJA is the shift to a territorial tax system. This means U.S.-based multinational corporations now pay income taxes only against U.S. earnings — as opposed to a corporate tax on worldwide earnings. Like the corporate tax rate, this alteration makes the country more competitive with other developed nations. Before the TCJA, several U.S.-based multinationals began implementing a tax strategy called a “corporate inversion,” whereby the multinational’s parent company would be domiciled outside of the U.S. to avoid the worldwide tax system. This was temporarily halted by the Obama administration, but similar avoidance strategies continued because of the worldwide system. The territorial switch should minimize the need for some avoidance strategies, resulting in more efficient capital flows back to the U.S.

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CONSULTANTS’ INSIGHTS However, a provision in the TCJA could diminish the competitiveness gains of the switch to a territorial tax system. Called the Base Erosion and Anti-Abuse Tax, “BEAT” is a mechanism whereby U.S. and foreign-resident corporations cannot reduce their U.S. profits (via payments to parties in low-tax countries) without facing a minimum tax of 10 percent (12.5 percent after 2025). The tax affects businesses where U.S. gross receipts are more than $500 million.

FOREIGN EARNINGS Under the TCJA, U.S. multinational corporations that previously deferred foreign earnings will now pay 15.5 percent for cash and cash-equivalent assets and 8 percent for non-cash assets — down from a full 35 percent on the former tax code. The prior system allowed multinationals to stockpile foreign earnings offshore for years and defer paying the full U.S. tax, thus deterring foreign capital flows back to the U.S. Companies were incentivized to only bring back as much income as could be offset by foreign tax credits or as economically necessary. The new tax rate may prompt a return of this foreign earnings cache, thereby encouraging multinationals to invest in the U.S. Among S&P 500 firms, approximately $2.8 trillion in foreign earnings had been deferred, which meant less capital for U.S. parent companies for domestic investments, and less wages paid to U.S. workers. With the offshore earnings expected to be repatriated, an estimated $339 billion in new federal corporate income taxes is expected to be collected over the next decade.

TCJA IN ACTION Approaching one year after its signing, the TCJA has wavered somewhat in its public approval, but it has potentially prompted capital expenditure projects and returned a focus to employee wages and bonuses. From a site selection standpoint, the bill increased U.S. competitiveness. This is apparent in companies (such as AT&T, Home Depot, Apple, JetBlue, and Walmart) announcing new bonuses for employees at an average of $1,000, in addition to salary increases, while citing the TCJA as having an impact. The reform’s effects are also being realized in capital investments. Several companies have announced multi-billion-dollar projects (e.g., Apple, Pfizer, and ExxonMobil). However, the TCJA does not stipulate how increased after-tax earnings must be allocated and, as such, some economists have highlighted the ambiguity — effectively questioning the TCJA’s impact. It is also likely that due to the reform, after-tax earnings may go to company stock buybacks, dividend payouts, and executive bonuses. In fact, Barron’s recently reported2 that companies in the

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S&P 500 spent $646 billion in share buybacks in the 12 months through June 2018.

WHAT WE’VE SEEN Despite these rather sweeping changes with the TCJA, U.S. site selection competitiveness also hinges upon factors related to volatility and even government spending. In September, The Wall Street Journal 3 cited a Goldman Sachs analysis suggesting that buybacks accounted for the largest percentage of cash spending by companies for the first time in 10 years, calling into question the TCJA’s impact on new jobs and investment from the repatriated foreign earnings. This may be a cautionary sign as, historically, companies used the most cash on capital expenditures (factories, equipment, and other goods), the WSJ noted. This could mean the market strength may not be a good litmus test of stability if funds are not flowing through the inner-workings of U.S. companies. Federal spending trends could also catalyze more challenges. As NPR notes,4 the federal deficit skyrocketed to $779 billion in the recent fiscal year. The federal government is expected to borrow more than a trillion dollars in the coming year, in part to make up for lower tax receipts because of the TCJA. The result is more taxpayer dollars spent on debt-financing costs and less on government investments in R&D, education, domestic goods/services, or returning more money to taxpayers. While White House Budget Director Mick Mulvaney said that accelerating economic growth will eventually fill the deficit hole, increased spending and potential friction in the market could raise red flags for foreign direct investment and business expansion. Despite the shifts in the tax code — a step in the right direction — the only proven and economically efficient tax structure for attracting capital and investment from multinational corporations is a low-rate, broad-base system. The TCJA’s impact remains uncertain, as avoidance strategies still, and always will, exist. When it comes to site selection, however, access to stable markets, legal/regulatory issues, skilled labor, and available infrastructure continue to play just as important of a role. The TCJA improves upon U.S. strengths by providing a much needed, albeit flawed, update to the federal tax code. >•< 1

https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52419-internationaltaxratecomp.pdf https://www.barrons.com/articles/646-billion-spent-on-share-buybacks-and-two-more-numbersyou-need-to-know-1538640038 3 https://www.wsj.com/articles/buyback-blackout-to-test-u-s-stock-market-1537272000 4 https://www.npr.org/2018/10/16/657790901/federal-deficit-jumps-17-percent-as-tax-cuts-eat-intogovernment-revenue 2

KYLE SYERS is a senior consultant with Biggins Lacy Shapiro & Co. Since joining the firm’s Site Selection and Incentives practice in 2015, he has worked to optimize value in location decisions for client projects including headquarters, data centers, office, and industrial facilities.

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

Location Economics T H E N E W S C I E N C E F O R A DVA N C E D S I T E S E L E C T I O N

Industry-leading labor data and customized indices to navigate complex real estate decisions

Software â&#x20AC;˘ Interactive apps â&#x20AC;˘ Consulting National to neighborhood analyses

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CONSULTANTS’ INSIGHTS MONTY TURNER I Senior Consultant, Global Location Strategies

The Search Is On, But Should We Tell? When site selecting, there are pros and cons to maintaining confidentiality as well as to making the search public; it all depends upon your company’s current situation. Last year, Amazon single-handedly turned the site selection profession into a household name. As everyone reading this article will recall, in late summer 2017, Seattle-based Amazon publicly announced its plans to establish a second headquarters in North America. News spread far and wide, precipitating a race among local communities to cobble together the most successful bid they could possibly dream up, and dream they did. The creative measures that were undertaken — one Georgia city offered to change its name to Amazon1 if chosen — fueled the media frenzy. For six full months, hardly a day went by without hearing something about Amazon HQ2. Mind you, not all the news was positive. With more than 200 communities2 submitting bids, many critics railed on Amazon for pursuing a public search. The chief complaint was that it caused many unqualified communities to submit proposals, wasting precious local government resources in towns already strapped with underfunded services. In Amazon’s defense, though, its RFP was quite thorough, detailing minimum size requirements for available land, labor, and infrastructure needs. Regardless, the question of whether to conduct a site search publicly or privately remains a matter of debate. There are three types of approaches: Fully confidential. No one — other than a handful of employees, site selection consultants, and the final two to three communities and states under consideration — knows about the project until a formal announcement takes place. The majority of projects follow this approach. Semi-confidential. In this situation, it is common knowledge that the company is looking for a site, but the public does not know precisely where. An example is Apple’s current search for a fourth U.S. campus. Public. This is the Amazon HQ2 approach, where the company announces its plans to find a new location and conducts an open-bidding process to vet qualified communities.

THE ADVANTAGES OF MAINTAINING CONFIDENTIALITY There are many good reasons companies choose to

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keep their search confidential, but these four rise to the top: Human capital. If employees learn their company is considering a move, it can lead to anxiety that their jobs may somehow be affected. News of this magnitude can quickly spin out of control, and executives are eager to avoid distractions that might negatively impact productivity or morale. This complication is exacerbated if the current facility is unionized and possible locations under review are outside of union strongholds. Maintaining a “business as usual” approach, while keeping the site search confidential, is a better guarantee that productivity and profits stay on track. Avoidance of political influence. Companies should select a site because it meets the needs of the project, not for political motives. Politics has a place in site selection, but maintaining confidentiality limits the potential for politics to completely sway a decision. Time management. Anonymity can help avoid a mountain of phone calls, emails, and tweets from potential suitors. It’s an economic developer’s job to recruit companies, but public searches will draw attention from elected officials, well-meaning citizens, and others who will go to great lengths to promote the attributes of their community. While most try not to go overboard, the sheer number of competing communities can quickly overwhelm the inboxes of company executives. Competitive advantage. If competition gets wind of a company’s plans to expand capacity, they may take measures to either derail or to leapfrog those plans and get to market first. If the company is considering a site near one of its competitors, a competitor may go to great lengths to prevent it from happening. Its longevity in a community gives that company certain political clout that could lead to roadblocks. Keeping the search private can thwart aggressive efforts to block corporate strategy and give you a competitive edge as a first-mover in your industry.

THE ADVANTAGES OF A PUBLIC SEARCH There are two sides to every story, and many believe there are as many good reasons for going public with a site search as there are for keeping it under wraps. Here are four counterpoints for an open search: Investor confidence. Many people believe much of the reason Amazon conducted an open site search was to draw attention to the company and its enormous growth potential to secure more investment capital. The sheer novelty of having two corporate headquarters on the same continent — both employing more than 50,000 people — sends a strong signal that company executives have confidence in their long-term growth. Choice sites. It is possible that the more competitive a

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search is, the more likely communities are to offer up their best sites. Companies that don’t have instant name recognition might especially benefit from announcing their search to better ensure the best available offerings. Better incentives. Another widely held view about Amazon’s public bid process is that it opened the door to far better incentives from states and counties. Details provided in the initial RFP shed light on what was most important to Amazon, i.e., talent attraction, public transportation and infrastructure, and land availability. With a clear picture of corporate goals, communities can focus on offering incentive packages with purpose. Comprehensive information. EDOs receive many RFIs every week. They are inclined to invest resources where they know they can be most impactful. Full disclosure of the search company breaks the barrier of secrecy and adds validity to the project, especially if the company is not using a trusted location advisor. Which method is best? The answer depends upon the company’s current situation, its competitive landscape, and the industry in which it operates. In my experience, the benefits of maintaining confidentiality usually outweigh an open bid. Privacy helps eliminate unnecessary

worry among employees and investors. It also keeps your competition in the dark. Once you decide that a new location can be advantageous, you should carefully consider the pros and cons of your approach. Develop a comprehensive checklist (a site selection professional can provide this), making sure to focus on long-term gains. The outcome of your answers should lead you to determine the best approach for your company. >•<

SARAH WHITE I Director,

enough, but ownership hurdles often throw wrenches into the site selection process. Not surprisingly, if a property is not already owned or under option by an economic development organization, county, etc., the asking price tends to increase when a prospect comes to town. If a property is being marketed, hopefully the economic developers and/or brokers have already worked with the landowner to establish a price, but this is not always the case. From my experience, local property owners’ real estate savviness and temperaments vary greatly, so understanding communication protocol and having the right team can make the transaction go more smoothly. Even when a property is available, there is always a risk that there could be an old easement or lien on the property that causes title or development issues. Those properties that have already conducted title searches and/or have title insurance will be less risky compared to those which do not have as much information. Just because there is an “available” sign on a piece of dirt does not mean that the property transaction will be simple so understanding the ownership entity, approval process for a sale or lease, and price, and ensuring clear title are important factors in determining the true availability of a property.

Quest Site Solutions

Due Diligence in Today’s Site Selection World You’ve made your list — now check it twice for ownership issues and site suitability, as well as workforce and financial considerations. Companies are being pressured to make site selection decisions faster and faster in this day and age. Although speed to market is critical, it is important for these companies to carefully conduct their due diligence throughout the site selection process. Taking the time to work through details early in the process can help prevent hardships down the road. The site selection decision can be overwhelming for a company that takes this process on themselves since there is a vast amount of data and information readily available today. If not hiring a consultant to sift through the information, it will be important for the team to focus on key areas during their decision. While this is not an allinclusive list, below are some of the key areas for companies to concentrate on and conduct thorough due diligence when selecting a new location.

OWNERSHIP/PROPERTY CONTROL Ensuring a property is truly available seems easy

MONTY TURNER is a senior consultant at Global Location Strategies, a site selection and incentive negotiations firm specializing in capital-, labor-, and resource-intensive industries. He has managed projects in the Americas, Europe, and Asia with a combined estimated capital investment of over $8.8 billion and new direct employment of over 3,000. He frequently consults with economic development organizations and speaks at conferences across the U.S. about location considerations. ALSO FROM GLOBAL LOCATION STRATEGIES: • What’s Driving Pharmaceutical Firms’ Operations Siting Decisions? (Directory 2017)3 1

https://www.usatoday.com/videos/news/2017/10/04/city-offers-change-its-name-amazonheadquarters-bid/106306106/ http://fortune.com/2017/10/23/amazon-second-headquarters-hq2-cities/ 3 http://www.areadevelopment.com/MedicalPharmaceutical/December-2017/pharmaceuticaloperations-siting-decisions-factors.shtml 2

PROPERTY DEVELOPABILITY/ BUILDING SUITABILITY There is no perfect site or building. Apparently, this statement is news for some companies that are taking

AREA DEVELOPMENT | Q4/2018

CONSULTANTS’ INSIGHTS on a site selection search. Clients can be somewhat surprised at the lack of properties that meet their preferences in terms of location, size, buildable acreage, transportation access, topography, utility infrastructure, startup schedule, etc. Evaluating environmental factors such as floodplain, wetlands, soils, threatened and endangered species, and historical structures is critical in determining a property’s developability. Understanding the developable acreage and any potential environmental hazards allows a company to determine if its layout works on a property or not. While some of the issues that show up in environmental studies, such as the presence of wetlands, can be overcome, the mitigation for these issues is often expensive and time-consuming, which can be detrimental to a company’s budget and startup schedule. Properties that have studies — such as Phase I Environmental Site Assessments and wetlands delineations — already on hand have an advantage compared to other properties that have not been studied and could present unknown issues. In addition to a property’s developability/up-fit potential, utilities should be properly vetted, particularly for complex manufacturing projects. Ideally, the company team consists of members that fully understand the project’s process and corresponding utility needs. Meeting with the utility providers early in the site selection process allows the technical team members to understand if the project’s needs can be met at a particular property or if the property should be eliminated. Those technical team members will also want to explore any permitting needs required for the facility’s process. In some locations, permitting can be an extensive and timely process that could delay a project’s schedule. Oftentimes when people think of due diligence in relation to properties, they only think of the environmental studies. While these studies are crucial steps in the due diligence process, these are only the tip of the iceberg. It’s imperative to evaluate all the technical characteristics of a site or building to make sure it makes sense for the project — both financially and in terms of schedule.

WORKFORCE While a company may have identified a few properties that suit its project, it must also research the workforce thoroughly. This includes not only finding the number of people to fill the positions, but also the right skill sets in order for the operation to be successful. Data sources provide helpful numbers on the availability of workforce, but it is necessary to dig in deeper than just the number of people in an area. For our projects, we conduct confidential interviews with several existing employers in the area and then, in order to respect confidentiality, aggre-

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gate the information to provide feedback to our clients. These employer interviews can be extremely helpful to understanding the qualitative side of workforce. The numbers may tell you one thing, but interviews can clue you in on commuting patterns, turnover, absenteeism, drug/alcohol abuse issues, wages, and much more. With today’s competitive environment, a company must complete its homework to understand who the competitors for labor will be in a location and what wages and benefits will be required to stay competitive, minimize turnover, and operate the facility successfully.

INCENTIVES/COSTS Lastly, the team must conduct financial due diligence by evaluating the true operational costs and value of incentives at each of the finalist locations. States and communities may dangle large incentive numbers at a company, but the company must understand how these incentives work and make sure it can meet the obligations required to capture each of them. Not all incentives offered may be truly realizable for a particular project, so the company must work with its financial team to decipher which incentives actually make sense for it and impact the bottom line.

IN SUM While the four areas above are key aspects of the site selection process, these are not the only items that should be evaluated; a myriad of other factors that need to be thoroughly vetted also come into play. Assembling the correct internal team (engineers, logistics, finance/ tax, human resources, etc.) and external team (legal, consultants, etc.) can help ensure that the company has the right players in the decision-making process. A site selection decision covers all of these areas so having input from these experts during the process can ensure that the proper due diligence is being conducted. Communities and states are largely in sales mode, so it is imperative that companies conduct their own due diligence to examine the various factors in order to make an informed location decision best suited for their projects. Taking the time up front to clarify any potential issues will help the project’s bottom line and startup schedule. >•< SARAH WHITE has more than 10 years’ experience providing site evaluation and labor and incentives analysis on numerous major location projects for manufacturing, distribution, and headquarters operations. Her site selection experience carries across a wide variety of industries including chemicals, food, advanced materials, consumer products, forest products, renewable energy, and more. She also provides economic development consulting and is currently managing the site certification program for the South Carolina Department of Commerce and site-readiness program for Duke Energy in the Carolinas. Previously, Sarah served as a senior consultant at McCallum Sweeney Consulting (MSC).

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

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

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

www.cometothecrossroads.com

CONSULTANTS’ INSIGHTS JOHN WOOSTER I Vice President,

WORKPLACE EXPERIENCE

JLL Consulting

The first step employers can take to get the benefits of a choose-your-own-adventure workplace is to better understand the current workplace experience. Specifically, executives need clear insights about:

The Value of a Choose-Your-Own-Adventure Workplace Smart workplaces are flexible and personalized to attract a high-performing, diverse workforce. Traditionally, a company planning to relocate would focus on how to fit people into a workplace. Today, the principles of flexibility and “chooseyour-own-adventure” are disrupting decision-making both about a company’s portfolio of workplaces and the design of individual workplace locations. In other words, the focus on choice is evidence that the human experience is becoming a driving factor in design and decisions — especially in those industries that are battling for talent. As our researchers discovered in JLL’s Workplace — Powered by Human Experience1 study, happiness is the key ingredient in a unique workplace experience, according to 70 percent of employees globally. Most people are happier and more productive when their office is designed around their needs, rather than around rigid lines of one-size-fits-all “cube farms” or private offices. More than ever, the choose-your-own-adventure workplace can be a critical differentiator that helps attract and retain employees with different needs and preferences — and helps them succeed, too. In parallel, savvy C-suite executives recognize a direct correlation between a productive workplace and healthy balance sheet. Increasingly, they see that a major driver of productivity is a thoughtfully curated choice of workspaces, fixtures, and furnishings — a catalog of sorts. What is right for each company’s catalog is judged by whether the options advance the business strategy and meet employee expectations. But what is right? What is relevant and high-impact? And what process gives decision-makers certainty? The dilemma of deciphering between what is relevant and high-impact versus that which is a fad is all too familiar to executives. HR leaders have seen decades-old approaches to employee engagement surveys produce limited insights. Similarly, marketing executives are evolving longstanding methods to develop more meaningful customer insights and understanding of consumer patterns. In both cases, new data is required, as are new modes of analysis and shorter cycles to take action. Collectively, these changes help leaders get smart about employee expectations and the solutions for meeting them.

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• Who is in the workplace (demographic traits); • How they experience each part of the workplace (degree of satisfaction); and • What differences arise in the experience of employees with different demographic traits (inclusion).

For example, a growing number of employees are likely to have disabilities, impairments, and intermittent or temporary needs. On any given day, you might be surprised at how many of your colleagues have a temporary or permanent physical or mental constraint. Most simply make do as best they can with the workplace they have. You might think that “disability” or “special need” means a person with a wheelchair. The reality is that a need may be less visible and may not be permanent. On any given day, a person might have a short-term condition such as a painful sports injury, stress, or simply a headache. Or, a nursing mother may wish to pump breast milk in a place more appropriate than a crowded storage closet or the restroom. Needs aren’t limited only to older workers or women of child-bearing age. While aging workers may develop long-term mobility, hearing, or vision limitations, the new generations of workers are more likely than older workers to have autism spectrum disorder, attention deficit disorder, and other less-visible cognitive or mental health disorders. In addition, returning veterans in the workplace may have disabilities unique to their service. As you can see, understanding employee needs starts with knowing who is in the workplace beyond government-defined demographic groups and those with various other needs. These traits contribute heavily to how employees experience their companies — workplace included. Therefore, it’s imperative for employers to understand the richness and complexity of their workforce. Only then can companies start to more accurately deliver on workplace experiences that result in satisfied, productive, and included employees.

DESIGNING FOR CHOICE AND INCLUSION The good news is that more companies are going well beyond Americans With Disabilities Act (ADA) requirements to create offices that enable people of all needs and abilities to be as productive as possible. Inclusive design doesn’t mean breaking the bank — it means providing flexible, accessible fixtures and furnishings, and providing workspaces suited for a variety of work styles,

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needs, and preferences. Perhaps most importantly, it entails providing a relevant set of choices and remaining committed to letting employees choose where and how to get work done. You probably experience inclusive design features every day. It’s not unusual for public buildings to have, for instance, door levers instead of knobs that require a firm grip to twist; flat-panel light switches rather than small toggle switches that require dexterity; overhead and task lighting options; wide interior doors and hallways; and alcoves with generous turning space. In a broad sense, everyone in the workplace has a need — it’s just a matter of whether it is known and if it is accommodated. Common workplace features that respond to employee needs include: • Ergonomic features such as sit/stand desks; • Environmental controls for those sensitive to noise, light, heat or cold; • Dedicated pumping rooms for nursing mothers, each with a mini-fridge, a power outlet, and a comfortable chair or two; and • Gender-neutral bathrooms.

A FEW WAYS TO DELIVER FLEXIBILITY AND PERSONALIZATION Designing for inclusion does not necessarily require costly upgrades or radical adjustments in workplace layout. In fact, best practices in modern workplace strategy encompass some naturally inclusive ideas, such as providing different kinds of workspaces for different kinds of work and work styles. A person can simply choose the workspace that is best for them that particular day, rather than a special office set aside for designated people. Also important, it’s possible to find building and interior design products that promote accessibility with style, at reasonable cost. By combining aesthetic appeal, flexibility, and inclusive design, you can create a workplace that provides a rich human experience for all. Following are some suggestions for foundational workplace aspects that meet the needs of a diverse employee population: • Mix up the space offering. Many companies have recognized that people can decide for themselves where they want to work. Forward-looking design is incorporating elements like personal work booths and activity-based work areas, different-sized meeting rooms, informal collaboration zones, and social areas like cafés. A workplace could include huddle rooms, coffee lounges, community patios, and other alternatives to the traditional desk. Strike the balance that best suits your organization’s needs. • Flexible furnishings to advance the work. People come in all sizes and shapes, so why shouldn’t your desks? Opt for desks and chairs with adjustable heights and/ or that can be moved around easily to create more

collaborative space on a whim. Cushioned filing units can double as informal chat chairs. Adjustable monitors and desk height controls create ergonomic comfort for workers of all heights. Sound-absorbing, movable privacy panels can transform an open workspace into a quiet, private spot. • Workplace tech that works for you. Nothing invites flexibility as well as connectivity. Video-conferencing, find-your-colleague tools, smart whiteboards, and easyto-reserve meeting rooms all contribute to a more flexible workspace. And, great workplace technology doesn’t require detailed instructions or a help desk. In JLL’s Workplace — Powered by Human Experience research, 48 percent of employees around the world say their workplace could provide more to help them work effectively. Some companies are recognizing that easy-to-use workplace tools go a long way toward work happiness. • Personalization is possible. You probably have a smartphone or smart home device with a built-in “person” who responds to your commands. Today’s building technologies aren’t quite ready to converse, but intelligent workplace technologies are the next frontier for inclusive design. Even now, computer-controlled building systems used in many facilities can automatically adjust temperature and ventilation according to the number of people using an office or the sunlight heating up a room. Some workplaces now provide mobile apps that employees can use to preset their preferred lighting levels, temperature, and even the window blinds to personalize their workspace.

CONSCIOUSLY MAKE PROGRESS As you get started providing a choose-your-own-adventure workplace, remember to put your employees at the center, understand who is occupying the workplace, and learn about their needs. Once you do that, the series of workplace decisions become easier. When the human experience is first and foremost in your workplace strategy, inclusive design comes naturally — and creates an environment that is just right for everyone. >•< 1

http://humanexperience.jll/global-report/

JOHN WOOSTER is vice president of Consulting at JLL. His experience includes serving as a real estate strategist and change management leader for a multinational healthcare organization and leading organizational development for a highly distributed and mobile workforce. As a workplace strategist at DEGW, Wooster led large-scale workplace projects for the technology, government, and higher education sectors. ALSO FROM JLL: • How Family-Friendly Workplace Policies Can Help Solve America’s Labor Shortage (Q3 2018) • The Secret to Site Selection Success (Location USA 2018) • STEM Grads: At the Core of the Tech Location Decision (Q1 2018)

AREA DEVELOPMENT | Q4/2018

INTERNATIONAL LOCATION REPORT

Tech Innovators Find a Home for Invention and Growth in Canada Something exciting is happening in Canada, and the whole world is playing a part. The country is emerging as the world’s leading technology incubator, sparking important advances from a range of companies and other institutions and attracting new investment from around the world as companies seek to take advantage of a supercharged innovation ecosystem. Canada’s rich climate for research and development in technology stems from a diverse, highly educated workforce, enviable living conditions, and a business-friendly environment that includes a robust infrastructure, low business costs, ready access to international partners, and a commitment to collaboration and innovation. As a result, Canada’s tech sector is thriving and contributed $117 billion to the country’s economic output in 2017.

ANADA’S DEDICATION TO R&D in technology starts with an array of incentives for large-scale industry partnerships. At the head of this effort is Invest in Canada, a federal investment promotion agency that brings together public and private partners to provide service to global investors exploring opportunities in the country. Ian McKay, CEO of Invest in Canada, says the entity acts as a world-class investor concierge service to ensure investors have access to the full spectrum of opportunities that Canada provides. “With diverse and highly skilled talent, access to large and growing markets, an inviting business climate and strong support for in-

Comparing the Marginal Effective Tax Rates on New Investments, Canada and the G7, 2018 Percent 35 30

Impact of Fall Economic Statement measures Impact of U.S. tax reform 29.8

(2017)

25 20

25.1 18.4

17.0

26.6

31.4

27.7

18.7

16.7

15 13.8 10 5 0

Canada

Italy

OECD United Germany United France Japan average States Kingdom

Note: OECD average excludes Canada and Lithuania. Source: Department of Finance Canada The average overall tax rate in Canada on new business investment, as measured by the Marginal Effective Tax Rate (METR), will fall from 17.0 percent to 13.8 percent - the lowest rate in the G7.

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By Thomas Gresham novation, Canada has a value proposition that is as undeniable as it is compelling,” McKay says. Canada’s economic development leaders understand the importance of incentives in helping companies pursue ambitious techbased projects. For that reason, the country’s Scientific Research and Experimental Development provides billions in tax credits and incentives to businesses conducting R&D in Canada. The SR&ED program eases the costs of product testing and software development, reducing some of the largest expenses of project development. The program allows investors to claim expenditures such as wages and salaries, contract expenditures, overhead, and materials. Another integral program for R&D efforts is Canada’s Strategic Innovation Fund, which connects hundreds of projects to other programs and services. The fund focuses on large support requests of more than $10 million. The government’s recent economic update includes a commitment to increase funding for SIF by $800M over five years. In fact, the update includes several new write-offs that mean Canada will enjoy the lowest marginal effective tax rate in the G7, including the U.S.

OME OF THE WORLD’S MOST forward-thinking companies are gravitating toward strategically located superclusters in Canada designed to foster intense business activity and innovation. The superclusters strengthen collaborative ties between private-sector, academic, and public-sector organizations and harness shared competitive advantages to spur the generation of new companies and the commercialization of new products. The strength-in-numbers approach places anchor firms and institutions alongside startups and government partners to create concentrated, vibrant, and prolific business communities. Through strategic investments, Canada is supporting the business-led superclusters with the greatest potential to energize the economy and serve as engines of growth. Companies such as Microsoft, Cisco, General Electric, ABB, IBM, Siemens, Intel, and Thales are among the 450 businesses participating, alongside 60 postsecondary institutions and 180 other participants. Canada especially has emerged as a pioneer in artificial intelligence, among the various technology-based fields. In 2017, Canada became the first country to launch a national artificial intelligence strategy. The five-year, $125 million Pan-Canadian Artificial Intelligence Strategy ensures Canada will be at the forefront of this rapidly evolving field by increasing the number of the country’s AI-focused researchers and graduates, establishing centers of scientific excellence, providing increased support to the AI research community, and developing global thought leadership on the myriad implications of AI. Through these and other programs, Canada’s support for ambition and innovation promises to continue to accelerate the efforts of those individuals and organizations exploring and discovering new frontiers in technology and will inspire new partners from around the world to join them. Copy developed in collaboration with Invest in Canada for free site information, visit us online at www.areadevelopment.com

2019

SELECT SITES DIRECTORY

ANNUAL DIRECTORY 2019

• The Unemployment Picture: Low Jobless Rates Create Growing Labor Shortage • The Jobs Picture: Manufacturing and Other Sectors • Educational Attainment: Matching the Workforce with the Opportunities

Articles by Steve Kaelble

• 2019 Select Sites Directory Within the articles in this section, you will find statistical information on each state’s population and unemployment as well as educational attainment levels. States with the most manufacturing jobs are shown, as well as location of primary industry clusters — manufacturing and nonmanufacturing. Contact information for economic development organizations that can help in your next location search is in the Select Sites Directory beginning on page 70. Also visit FacilityLocations.com, our interactive directory offering Web and e-mail links to economic development organizations, GIS mapping and radius demographic reports, available buildings and sites listings, social media contact information, streaming videos, and more.

Visit for SELECT SITES profiles and links. Every effort has been made to include the most active economic development organizations so that www.FacilityLocations.com will be a useful source of information on all areas of the United States as well as Canada, Mexico, and other nations around the globe. All of these organizations can help with your site selection needs. Listings for location consultants are also provided in our online directory. Note: If you are an economic developer and your organization is not listed on FacilityLocations.com, contact mshea@areadevelopment.com.

The charts on the following pages contain data supplied by Emsi. Emsi is the industry leader in labor market data and expert analysis to professionals in economic development, workforce development, higher education, commercial real estate, and talent acquisition. Learn more at www.economicmodeling.com.

AREA DEVELOPMENT | 2019 Select Sites Directory

2019

SELECT SITES DIRECTORY

The Unemployment Picture: Low Jobless Rates Create Growing Labor Shortages While low unemployment numbers are usually considered a good thing, labor shortages could have an impact on economic growth.

he economic expansion continued unabated throughout 2017, with another two million new jobs1 on the books. The U.S. Bureau of Labor Statistics tagged the jobless rate at 4.1 percent2 as the new year began, and the decline in unemployment has continued in the time since. The January 2018 unemployment rate as determined by the labor market and economic analytics firm Emsi ranged from a tiny 1.2 percent in Hawaii up to 4.9 percent in Alaska. Emsi’s total for all states was a healthy 2.7 percent.

••• Defining “Full Employment” It’s a pretty astonishing picture, all in all. Economists don’t always agree on the exact point at which the country has reached “full employment,”3 a situation in which nearly everyone willing and able to work either has a job or is in the midst of moving from one to another. Full employment is a natural sweet spot in which the jobless rate is as low as it’s likely to get before inflation sets in, and once upon a time that spot was thought to be when the unemployment rate would hit about 5 percent. Once the U.S. passed that desirable mark in the recent economic expansion, economists debated further — is full employment really 4.7 percent? 4.1 percent? Something else? The fact is, as the accompanying chart indicates, other than in Alaska, the Emsi-calculated unemployment rate in January was under 4 percent in every single state. With the ranks of the unemployed dwindling so drastically, two words come to mind: labor shortage. Indeed, by the summer of 2018, ADP and Moody’s Analytics were reporting that there were more open jobs than there were eligible workers to fill those jobs.4 Job openings hit 6.7 million over the summer, a new record, and economists began wondering when wage inflation was going to kick in more noticeably. By autumn, Jim Baird, chief investment officer for Plante Moran Financial Advisors, was quoted expressing surprise that job creation

AREA DEVELOPMENT

hadn’t slowed: “Given the dwindling pool of untapped labor, it’s somewhat surprising to see the pace of job creation still this strong.”5 Services jobs continue to be big gainers, according to a variety of observers. Emsi reports that every state with a big stake in financial services ( except Massachusetts) saw that sector grow. The same goes for every state that is heavily into business services, and every state that’s high on the employment list for education and knowledge creation (except Illinois). That same trend continued on into the warmer months of 2018. A June CNBC analysis6 of government statistics found that education and health services showed the biggest employment gain, followed by professional and business services. Manufacturing was adding jobs at a healthy pace, too, enough to rank third, according to CNBC. The biggest manufacturing job gains were in the motor vehicle sector, continuing a trend. Hawaii, with its ultra-low jobless rate, continues to employ more people in leisure and hospitality than in any other sector, according to the BLS.7 Its unemployment rate has ticked upward slightly as 2018 has progressed, but even as of October there were still more people working in this sector than there were a year earlier. In Nebraska, with a low 2 percent jobless rate according to Emsi data, the employment picture has held steady all year. Its biggest BLS sector is trade, transportation, and utilities, which has been shedding some jobs in 2018. Manufacturing, on the other hand, has been growing at a healthy clip. Emsi charted the same rate of joblessness in New Hampshire and Wisconsin. The rate calculated by BLS has held steady in New Hampshire for most of the year, as both the labor force and the number of people employed have risen significantly. The biggest proportional gains have been in the construction sector. The big picture has been steady in Wisconsin, too, with the most noteworthy gains in construction and manufacturing.

••• A Mixed Blessing Who wouldn’t want a plethora of jobs? It’s every state’s dream, every community’s fondest desire. But as today’s numbers indicate, low unemployment is a mixed blessing. Take Hawaii as an example. The tourism business is setting records in terms of the number of visitors, which is creating the need for increased staffing. But the dominant hospitality sector has, like other sectors, been having a tough time finding enough workers. It certainly doesn’t help matters that the cost of living in Hawaii makes life challenging on a services-sector wage. As cited by the Christian Science Monitor,8 nearly half of the residents of Hawaii spend at least a third of their income on housing, a higher rate than in any other state. Indeed, even as employers fight to find workers, some potential workers are moving to the mainland in search of a better balance between pay and the cost of living.

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Population/Labor Force State Alabama

Population Jan. 2018

Labor Force Jan. 2018

Unemployment Rate Jan. 2018*

3,984,002

2,139,849

2.2%

589,082

357,665

4.9%

Arizona

5,728,143

3,348,672

3.0%

Arkansas

2,421,925

1,326,311

2.4%

California

32,208,649

19,301,527

2.8%

Colorado

4,619,279

3,014,995

2.2%

Connecticut

2,973,578

1,889,311

3.4%

798,014

478,719

2.8%

17,651,466

10,136,427

2.4%

Georgia

8,404,967

5,111,631

2.8%

Hawaii

1,182,487

684,810

1.2%

Idaho

1,350,659

841,219

2.4%

Illinois

10,400,563

6,407,823

3.3%

Indiana

5,372,371

3,268,203

2.2%

Iowa

2,545,435

1,658,641

2.4%

Kansas

2,323,614

1,463,728

2.2%

Kentucky

3,625,172

2,025,735

2.4%

Louisiana

3,789,598

2,111,566

2.5%

Maine

1,125,904

688,549

2.1%

Maryland

4,954,761

3,204,982

3.0%

Massachusetts

5,747,740

3,652,272

2.5%

Michigan

8,153,538

4,833,172

3.1%

Minnesota

4,496,956

3,089,012

2.8%

Mississippi

2,398,329

1,257,863

2.4%

Missouri

4,975,662

2,996,330

2.4%

Alaska

Delaware Florida

Montana

864,059

520,022

3.1%

Nebraska

1,527,155

1,000,215

2.0%

Nevada

2,446,202

1,475,715

3.2%

New Hampshire

1,130,372

743,798

2.0%

New Jersey

7,356,888

4,457,917

2.9%

New Mexico

1,683,772

934,005

3.2%

16,362,212

9,658,369

3.0%

8,410,155

4,935,595

2.7%

New York North Carolina North Dakota

623,568

407,939

2.2%

Ohio

9,491,456

5,667,505

3.0%

Oklahoma

3,158,153

1,830,214

2.5%

Oregon

3,438,029

2,107,517

2.6%

Pennsylvania

10,602,543

6,358,455

3.2%

Rhode Island

887,431

554,069

3.3%

4,139,085

2,309,726

2.8%

695,669

453,342

2.6%

South Carolina South Dakota Tennessee

5,484,180

3,191,508

2.2%

Texas

22,443,698

13,621,776

2.5%

Utah

2,348,264

1,569,390

2.1%

527,878

344,434

2.1%

Virginia

6,961,459

4,279,447

2.3%

Washington

6,058,118

3,736,220

3.4%

West Virginia

1,517,296

776,029

3.0%

Wisconsin

4,743,578

3,125,687

2.0%

Wyoming

473,215

287,251

2.8%

Vermont

There are numerous ways to respond. One is to simply raise pay, as many Hawaii employers have done. And there are new efforts to “grow your own” workers in Hawaii, the Monitor reports. Hawaii Pacific Health, for example, is going into high schools to train medical assistants, so that they’ll be ready for work as soon as they graduate. Nebraska’s surge in jobs has also created labor shortages, in part for reasons similar to Hawaii’s, but with a twist. In Hawaii, many workers find housing hard to afford. In Nebraska, there’s just not enough housing for the workers that employers would like to attract. Zillow Research has found the state’s housing inventory to be tighter than anywhere else in the country, with the exception of California and the District of Columbia.9 Putting up more housing is not as simple as it seems, because the state’s agricultural land is prosperous and, therefore, pricey to convert into crops of subdivisions or apartment complexes. And in Wisconsin, one of the biggest economic development prizes in history has some clouds inside its silver lining. Electronics maker Foxconn has promised that a giant new factory will create as many as 13,000 high-paying jobs, but the labor situation is causing concern about the state’s ability to deliver enough workers to fill those jobs. The company has denied reports that it may need to bring in engineers from China to help fill jobs.10 Whether that happens or not, the labor problem is real, as evidenced by Amerequip Corp. in Kiel, a manufacturer that has turned away potential sales because it can’t find enough labor to meet the demand for making its products.11 Certainly, having a super-low jobless

AREA DEVELOPMENT | 2019 Select Sites Directory

••• Impact on Growth

rate is better than having one that’s super-high, but as Emsi has found, even the high end is not all that high by historical standards. The state that Emsi found had the highest unemployment rate in January was Alaska, which has seen significant job losses in recent years in its oil and gas sector. As 2018 has progressed, the Alaska picture painted by the BLS has shown some improvement in the overall jobless rate, as both the labor force and the number of people without jobs have dropped. The mining and logging sector is always volatile, but construction has seen healthy job gains, as has the professional and business services sector. Indeed, Alaska’s 4.9 percent is far from what most economists would view as catastrophic. The next-highest states on the list, in terms of unemployment, have rates that would be enviable at just about any other time in history. Connecticut and Washington both had rates of 3.4 percent in the Emsi tally. Connecticut has seen its BLS numbers improve as 2018 has passed. It’s a strongly service-oriented economy, and its services sectors have all seen slow but steady job growth. Manufacturing has been a consistently positive performer this year, too. Healthy signs can be found in Washington, too, according to the BLS. The workforce has been expanding, and so have jobs, and the jobless rate has gotten correspondingly smaller. Virtually every sector has been adding jobs in 2018.

What will the future hold? Perhaps more of the same difficulty finding an adequate supply of labor, according to some forecasts. The Conference Board, for example, says the overall global economic outlook is positive, but labor shortages could have an impact on future growth.12 Analysts have for a long time wondered how the aging of the workforce was going to impact economic growth, but the common assumption was that technology gains would boost productivity enough to ease the crunch. Now, it’s not clear that technology is moving quickly enough to keep up with the retirements.

••

https://money.cnn.com/2018/01/05/news/economy/december-2017-jobs-report/index.html https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm https://www.bloomberg.com/quicktake/full-employment 4 https://www.cnbc.com/2018/07/05/the-us-labor-shortage-is-reaching-a-critical-point.html 5 https://www.barrons.com/articles/jobs-report-puts-economy-in-unusual-sweet-spot-but-nothinglasts-forever-1538764767 6 https://www.cnbc.com/2018/07/06/heres-where-the-jobs-are--in-one-chart.html 7 https://www.bls.gov/eag/home.htm 8 https://www.csmonitor.com/Business/2018/0405/Hawaii-s-low-unemployment-presents-uniquechallenges 9 https://www.washingtonpost.com/news/wonk/wp/2018/06/06/we-try-to-solve-the-great-nebraskamobile-home-mystery/?utm_term=.b6faa535410a 10 https://venturebeat.com/2018/11/06/foxconn-may-bring-chinese-engineers-to-wisconsin-factorydue-to-skilled-labor-shortage/ 10 h ttps://www.jsonline.com/story/money/2018/10/17/growing-fast-small-manufacturer-turns-businessaway-because-labor-shortage/1668476002/ 12 https://footwearnews.com/2018/business/news/global-economy-2019-forecast-gdp-growth-laborshortage-1202706385/ 2 3

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Camp Hall Charleston international Airport Port of charleston Atlantic OCEAN

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Learn more about how Camp Hall outshines other industrial work spaces at

www.camphall.com. Home to Volvo’s only U.S. car manufacturing facility.

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2019

SELECT SITES DIRECTORY

The Jobs Picture: Manufacturing and Other Sectors Among the drivers of manufacturing employment growth are the auto, food processing, and bio/ pharma sectors; job gains have also been seen in IT and financial and business services.

anufacturing jobs are coveted by most communities, and the sector as a whole continues to show solid growth across most of the country. To be sure, manufacturing is far from what it was in its heyday several decades ago, in terms of its slice of the economic pie. Nonetheless, the Bureau of Labor Statistics1 says manufacturing earnings continue to climb, and average well above $59,000 annually.

••• Where Are the Manufacturing Jobs? The biggest manufacturing states are, for the most part, still adding manufacturing jobs. California ranks first in manufacturing employment, and it has added 3 percent to its goods-producing job total since 2014. The greater Los Angeles area, in fact, has more people working in manufacturing than anywhere else in the country — about 351,000 as of September 2018. There’s no denying California’s dominance in manufacturing employment, but the state dominates a lot of lists due to its gigantic overall population. When it comes to the proportional role manufacturing plays in a state’s economy, it’s safe to say that the area sometimes referred to as the Rust Belt still relies more heavily on making things than anywhere else — including such states as Indiana, Wisconsin, Michigan, and Ohio. Indeed, about 7 percent of California’s workers are involved in manufacturing, as well as a bit under 7 percent of the workforce in Texas, the No. 2 state in terms of total manufacturing jobs. But the manufacturing share is above 16 percent in Indiana, close to 16 percent in Wisconsin, higher than 13 percent in No. 4 Michigan, and nearly 13 percent in No. 3 Ohio.2 And these states dominated by manufacturing are seeing the sector expand, too. The change from 2014 is 5 percent in Indiana, 2 percent in Wisconsin, 7 percent in Michigan, and 2 percent in Ohio. That said, the biggest gain in manufacturing employment

came in a place where one might not expect it: Nevada, with 20 percent manufacturing job growth since 2014. The sector hasn’t traditionally been a big part of that state’s economy, but it’s now Nevada’s fastest-growing sector.3 State officials, who are pleased to note signs that a tourism-dominated economy is diversifying, report that manufacturing accounted for 3.5 percent of the job picture in 2010, and it’s up to 4 percent now. The second-fastest manufacturing growth came in another unlikely place, Idaho. It’s far down the list in total manufacturing employment, which in fairness has a lot to do with its comparatively smaller population — about 8.5 percent of the Idaho workforce is involved in manufacturing, according to the BLS. But it has seen 12 percent manufacturing job growth since 2014. The state has done well in food-related production, with healthy growth in such companies as McCain Foods and yogurt-maker Chobani. Idaho also celebrated a big win when Indiana-based RV maker Jayco Inc. announced plans to expand its Idaho plant.4

••• S ectors Growing Manufacturing Employment One of the big drivers of the overall growth in manufacturing is the ongoing expansion of the automotive industry. The Bureau of Labor Statistics reports that jobs involved in making motor vehicles and parts have been on a steady upward trend ever since bottoming out in 2009.5 Not surprisingly, a fair amount of that gain can be found in the states where motor vehicles have been made for generations, such as Michigan, with 6 percent automotive job growth since 2014, and Indiana, with 9 percent growth. Missouri has long made cars, too, and it recorded the biggest growth of all, 30 percent. Ohio, though, recorded automotive job growth of just a single percent. California enjoyed an auto manufacturing job gain of 28 percent, but the rest of the big growth was in the industry’s comparatively newer hotbed, the South — job growth was 25 percent in South Carolina, 21 percent in Georgia, 21 percent in Kentucky, and 17 percent in Tennessee. The U.S. population continues to add mouths to feed, so it’s no surprise to see ongoing growth in food processing and manufacturing. All of the major food processing states added jobs between 2014 and 2018, most at double-digit rates. This is a sector that, according to the BLS,6 had only a mild dip during the Great Recession and has taken off in a big way in the years since. The past five years have seen mostly healthy growth in the job picture for those states that are major players in biopharmaceuticals. Florida enjoyed the biggest job growth, at 29 percent — it’s now home to more than 1,100 companies involved in biotech, pharmaceuticals, and medical devices, according to Enterprise Florida.7 Maryland — with an industry rich in research, testing, medical labs, and pharmaceuticals — enjoyed

AREA DEVELOPMENT | 2019 Select Sites Directory

Manufacturing Jobs State California

2018 Jobs

2014 - 2018 % Job Change

1,346,909

Texas

875,255

-3%

Ohio

698,361

Michigan

625,425

Illinois

584,739

Pennsylvania

573,487

Indiana

538,891

North Carolina

476,530

Wisconsin

473,672

New York

455,317

-1%

Georgia

406,157

10%

Florida

372,734

10%

Tennessee

354,739

Minnesota

325,353

Washington

284,995

-2%

Missouri

271,743

Alabama

267,594

Kentucky

253,426

Massachusetts

249,655

-2%

New Jersey

247,784

South Carolina

245,022

Virginia

238,147

Iowa

220,374

Oregon

197,409

Arizona

168,080

Kansas

164,157

Connecticut

162,253

Arkansas

160,382

Colorado

149,739

Mississippi

145,437

Louisiana

137,044

-8%

Oklahoma

132,643

-6%

Utah

132,307

Maryland

109,343

Nebraska

99,561

New Hampshire

70,846

Idaho

70,060

12%

Maine

52,467

Nevada

51,524

West Virginia South Dakota

job growth of 21 percent. Utah added 19 percent and is a growth leader in a wide range of life sciences activities. The manufacturing big picture has not been as hot in the area of aerospace vehicles. California is the biggest player here, and saw a 2 percent job gain since 2014, but major-player Washington State saw a job contraction of 11 percent. So did Missouri and Pennsylvania. The brightest star was the traditional gateway to space, Florida, where job growth in this sector totaled 15 percent. Ohio is a rising star, too, adding to its job total by 11 percent and landing on a PricewaterhouseCoopers report8 as the sixth-most-attractive state for aerospace manufacturing, particularly in the Dayton area.

••• Other Growing Sectors Information technology continues to be a bright spot in job growth. The leader in IT and analytics employment is, by far, California, and it’s also the growth leader, with a 14 percent change since 2014. The Cyberstates 2018 report from industry association CompTIA9 says growth has been strong in such roles as software and web developers, computer system and information security analysts, and network architects, administrators, and support specialists. This sector also saw solid growth in such places as New York, North Carolina, and Ohio. There’s no doubt New York is the center of the universe when it comes to financial services. But that’s not where the hottest job growth can be found. You’ll have to fly to Arizona for that. It’s by far the fastest-growing state in terms of financial services jobs, adding 24 percent since 2014. This past year has seen significant growth at such establishments as Bank of the West in Tempe.10 North Carolina grew

Automotive State Name

2018 Jobs

2014 - 2018 % Job Change

Michigan

194,363

Ohio

113,051

Indiana

94,009

20%

Tennessee

70,484

17%

47,597

-2%

Kentucky

65,152

21%

44,299

Alabama

47,605

Rhode Island

41,254

-1%

Illinois

43,586

Vermont

30,722

-5%

California

40,243

28%

New Mexico

29,829

-3%

Texas

38,887

Delaware

26,521

32,297

25%

North Dakota

25,440

-3%

Montana

21,229

Hawaii

16,172

Alaska Wyoming

14,390 9,844

-4% -4%

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South Carolina

29,939

-2%

28,695

10%

Georgia

28,339

21%

Missouri

27,425

30%

Pennsylvania

26,141

Wisconsin North Carolina

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its financial services sector by 14 percent, and the job tally was up 10 percent in Virginia. Business services continues to grow in a broad way, across all of the states with the biggest employment in this sector. BLS statistics11 indicate that employment in professional and business services has grown remarkably steadily since bottoming out during the Great Recession — the trend line shows virtually no downward movement since then. Florida leads the way, with 19 percent growth in its business services employment since 2014, including at firms involved in legal services, accounting, consulting, architecture, engineering, and research. Other states with doubledigit growth include Texas, New York, Arizona, Colorado, Georgia, Massachusetts, and Virginia. The education sector has been growing slowly but surely in the states with the highest sector employment. Jobs haven’t shrunk in any of the top states, but only Florida broke into double digits, with 10 percent growth in education and knowledge creation. The transportation and logistics sector has registered mostly healthy growth, with just a few exceptions. California, Florida, New York, New Jersey, North Carolina, and Washington have enjoyed doubledigit job gains, while the logistics-heavy state of Indiana registered an 8 percent decline. Tennessee also lost some transportation employment, despite its busy logistics hubs. The darkest mark in the job-growth picture is the same volatile sector that was among the hottest not all that long ago: oil and gas. Every single state that has major employment in this sector lost jobs between 2014 and 2018 — lots and lots of jobs. Indeed, according to the BLS12, 2014 was the industry’s peak in U.S. employment, and it was downhill from there, all the way through 2017.

California

2018 Jobs 173,436

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Food Processing & Mfg. State Name

Class A Oﬃce & Modern Flex/R&D

2014 - 2018 % Job Change 11%

Illinois

64,037

Texas

60,235

16%

Pennsylvania

55,739

Ohio

54,350

11%

Wisconsin

51,989

13%

New York

42,678

12%

Minnesota

37,303

Michigan

33,255

14%

Washington

32,417

17%

Iowa

32,093

Indiana

31,796

Florida

30,749

13%

Georgia

30,280

15%

Oregon

29,832

16%

Stephanie Caronna, 410.369.1235 1,000 sq. ft. to 85,000 sq. ft. Class A Oﬃce 2,000 sq. ft. to 60,000 sq. ft. Flex or R&D 200,000 sq. ft. of R&D space possible, just ask!

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Biopharma State Name

Aerospace Vehicles 2018 Jobs

2014 - 2018 % Job Change

State Name

2018 Jobs

2014 - 2018 % Job Change

California

51,014

New Jersey

22,296

-20%

California

102,440

North Carolina

20,954

-3%

Washington

84,879

-11%

New York

20,748

Texas

49,136

-4%

Illinois

19,996

Arizona

32,204

Florida

31,950

15% -1%

Pennsylvania

18,210

Indiana

17,856

Kansas

30,824

Texas

12,111

12%

Connecticut

30,212

Massachusetts

10,139

Georgia

21,136

-2%

Maryland

8,432

21%

Ohio

20,462

11%

Michigan

8,223

-7%

Missouri

15,902

-11%

Utah

6,816

19%

Massachusetts

14,748

-6%

Florida

6,229

29%

New York

14,563

-5%

Missouri

5,829

10%

Alabama

13,429

Ohio

5,326

Maryland

12,623

Pennsylvania

11,619

-11%

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Financial Services

Info Tech & Analytics State Name California

2018 Jobs 314,212

2014 - 2018 % Job Change

State Name

2018 Jobs

2014 - 2018 % Job Change

14%

New York

267,978

California

234,848

Texas

96,655

-1%

Massachusetts

80,396

Texas

200,179

Washington

78,477

Florida

126,642

New York

57,574

13%

Illinois

100,371

Pennsylvania

74,240

New Jersey

71,212

Massachusetts

70,110

Oregon

50,055

Minnesota

48,251

North Carolina

45,370

12%

Florida

41,944

Arizona

70,070

24%

Pennsylvania

31,980

Ohio

63,553

Colorado

31,419

Virginia

58,761

10%

Illinois

30,833

Georgia

56,406

Wisconsin

30,692

North Carolina

49,493

14%

Arizona

30,031

-3%

Colorado

47,629

Ohio

24,583

11%

Michigan

44,900

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Business Services 2018 Jobs

State Name

Transportation & Logistics 2014 - 2018 % Job Change

California

1,237,553

State Name

242,798

Texas

807,469

13%

California

199,477

14%

Florida

606,299

19%

Florida

129,946

15%

New York

594,709

12%

Illinois

120,773

Virginia

451,111

10%

Georgia

100,942

Illinois

411,657

New York

96,939

10%

Pennsylvania

370,975

Ohio

72,949

Ohio

342,263

Pennsylvania

67,338

Georgia

323,687

11%

Tennessee

59,522

-3%

New Jersey

308,856

New Jersey

58,197

12%

North Carolina

291,478

North Carolina

56,162

10%

Massachusetts

284,127

10%

Michigan

54,149

Michigan

284,010

Indiana

53,594

-8%

Arizona

232,536

11%

Missouri

50,567

Colorado

224,729

11%

Washington

49,888

14%

Oil & Gas

2018 Jobs

State Name

2014 - 2018 % Job Change

2018 Jobs

2014 - 2018 % Job Change

California

834,294

Texas

300,207

-25%

New York

528,933

Oklahoma

61,084

-20%

Texas

467,780

Louisiana

52,927

-30%

Pennsylvania

326,055

California

30,086

-26%

Massachusetts

308,242

Colorado

26,802

-18%

Florida

275,488

10%

Pennsylvania

23,179

-25%

Illinois

274,728

New Mexico

19,828

-18%

18,693

-36% -30%

Ohio

252,442

North Dakota

North Carolina

226,123

Wyoming

13,984

Michigan

212,310

Ohio

11,826

-4%

Virginia

185,822

Alaska

10,917

-33%

New Jersey

174,293

Kansas

8,755

-31%

Maryland

173,833

West Virginia

8,258

-24%

Georgia

165,615

Mississippi

6,629

-26%

Washington

150,776

Illinois

6,357

-13%

But around the beginning of 2018, a sense of optimism started to take hold, and indeed, the job trend has started to head back into positive territory. Many analyses, including one from PricewaterhouseCoopers,13 have speculated that the oil oversupply of the past few years could be heading toward a supply crunch. Oil prices have rebounded significantly since hitting bottom in 2016. Odds are good that when the next annual chart of the employment situation is produced, it’ll look better for oil and gas.

••

2014 - 2018 % Job Change

Texas

Education & Knowledge Creation

2018 Jobs

https://www.bls.gov/iag/tgs/iag06.htm#earnings https://www.bls.gov/eag/home.htm

AREA DEVELOPMENT

https://vegasinc.lasvegassun.com/business/tourism/2018/jul/31/manufacturing-sector-growingas-nevada-diversifies/ https://www.kmvt.com/content/news/Idaho-ranks-2nd-in-nation-for-manufacturing-job-growthrate-471353604.html 5 https://data.bls.gov/timeseries/CES3133600101?amp%253bdata_tool=XGtable&output_ view=data&include_graphs=true 6 https://data.bls.gov/timeseries/CES3231100001?amp%253bdata_tool=XGtable&output_ view=data&include_graphs=true 7 https://www.enterpriseflorida.com/industries/life-sciences/ 8 https://www.bizjournals.com/dayton/news/2017/08/22/as-profits-soar-industrywide-ohio-is-a-topstate.html 9 https://www.comptia.org/about-us/newsroom/press-releases/2018/03/27/california-tech-industryadds-more-than-43-000-jobs-in-2017-contributing-more-than-$385-billion-to-state-s-economy 10 https://phoenixchamber.com/2018/01/26/financial-services-expansions-bring-high-paying-jobsarizona/ 11 https://data.bls.gov/timeseries/CES6000000001?amp%253bdata_tool=XGtable&output_ view=data&include_graphs=true 12 https://data.bls.gov/timeseries/CES6000000001?amp%253bdata_tool=XGtable&output_ view=data&include_graphs=true 13 https://www.strategyand.pwc.com/trend/2018-oil-gas 4

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2019

SELECT SITES DIRECTORY

Educational Attainment: Matching the Workforce with the Opportunities Realizing that the jobs of the future will require higher levels of education, state policymakers are attempting to make sure their workers will be ready to meet that demand.

sk those in charge of recruiting, and you’ll inevitably be told that it’s incredibly challenging these days to find qualified workers. The headlines often warn of labor shortages, and plenty of articles expand upon that to explain how today’s jobs often require workers with higher levels of education. That type of dynamic would seem to favor locations that enjoy higher educational attainment among their workforce participants. Indeed, high educational attainment is one of the big selling points touted by those communities and states that are able to boast about that. And there are certainly plenty of reasons to strive for that location trait.

••• Higher Pay, Lower Unemployment For one thing, with little exception, jobs requiring higher educational attainment return the favor with higher pay. Citing 2017 statistics, the U.S. Bureau of Labor Statistics1 says those workers without a high school diploma earn a median of $520 a week, well below the $907 median earned by all workers combined. Only those with at least a bachelor’s degree surpass the median. A bachelor’s is worth $1,173, while a master’s ups the weekly pay to $1,401, and a professional degree is worth $1,836 (a doctoral degree comes in just a tad lower, at $1,743). Higher educational attainment is also tied to lower unemployment, according to the BLS. The jobless rate among those with the highest education was just 1.5 percent in 2017. The jobless percentages grow as the attainment level drops. Those with some college but no degree registered a 4.0 percent jobless rate. It was 4.6 percent for those with a high school diploma, and 6.5 percent for those without. Other BLS information, cited by the National Science Foundation,2 finds that job growth is particularly strong in the areas of science and engineering.

Those statistics jibe with Pew Research Center3 findings that “employment has been rising faster in occupations requiring more preparation.” Pew counts education, job training, and experience as “preparation,” and says the total number of U.S. jobs requiring average or above-average preparation grew by 68 percent between 1980 and 2015, while jobs needing below-average preparation grew by just 31 percent. Meanwhile, jobs requiring higher levels of analytical skills or social skills are seeing their pay increase at a faster rate, Pew reports. Given that, it’s probably not surprising that the majority of Americans believe they’ll need continuing training to keep up with workplace changes. It’s also true that many civic leaders believe residents of their areas will need additional education and training to keep up with the needs and demands of employers. The issue got a lot of attention during 2017 and 2018 as more than 200 communities competed for one of the biggest single prizes in the history of economic development: Amazon’s “HQ2” second headquarters project. The company promised 50,000 high-paying jobs, and for months analysts wondered aloud how many of the potential sites could really deliver the talent required. In the end, the company split the prize in half, so that neither winner will need to find or attract 50,000 properly educated Amazon employees.

••• Where Are the Most Educated Workers? Where in the U.S. can the highest levels of educational attainment be found? The 2018 data indicate these states have the highest rates of residents with bachelor’s degrees, master’s degrees or higher: Colorado, Connecticut, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Vermont, and Virginia, along with the District of Columbia. In all of these places, at least a third of residents 25 or older have a bachelor’s degree or higher. That’s a good thing, because these also happen to be many of the same states where jobs are most likely to require postsecondary education, as identified a few years ago in Georgetown University’s “Recovery” study4 of job growth and education requirements. By 2020, that study predicted, about two thirds of all American jobs will need some level of postsecondary education — but that need is at or near three quarters in the District of Columbia, Minnesota, Colorado, Massachusetts, and North Dakota. Massachusetts tops the 2018 educational attainment list among the 50 states: 40 percent of its residents 25 or older have achieved a bachelor’s or graduate degree. Narrow the selection to just those presently in the workforce, and the state tops 50 percent with at least a bachelor’s degree, according to the Massachusetts Budget and Policy Center.5 That’s more than double the rate back in 1979, and the trend has paid off for Massachusetts residents. The median hourly wage there is

AREA DEVELOPMENT | 2019 Select Sites Directory

2018 Educational Attainment Less Than 9th Grade

9th Grade to 12th Grade

High School Diploma

Some College

Associateâ&#x20AC;&#x2122;s Degree

Bachelorâ&#x20AC;&#x2122;s Degree

Graduate Degree and Higher

Alabama

5.6%

11.1%

31.2%

21.3%

7.6%

14.7%

8.6%

Alaska

3.4%

5.2%

27.9%

28.1%

8.1%

17.8%

9.6%

Arizona

7.4%

7.5%

24.5%

25.4%

8.3%

17.0%

10.0%

Arkansas

6.5%

9.7%

34.5%

21.9%

6.3%

13.5%

7.4%

California

11.4%

7.8%

21.0%

21.4%

7.6%

19.6%

11.4%

Colorado

4.6%

5.3%

22.2%

21.9%

8.1%

24.1%

13.9%

Connecticut

4.8%

6.4%

27.7%

17.2%

7.3%

20.5%

16.1%

Delaware

4.3%

7.8%

31.1%

19.7%

7.7%

17.4%

11.9%

Florida

6.0%

7.9%

29.4%

20.3%

9.3%

17.2%

10.0%

Georgia

5.9%

9.2%

28.2%

20.4%

7.1%

18.4%

10.8%

Hawaii

4.1%

5.3%

28.6%

21.7%

10.4%

19.9%

10.1%

Idaho

5.3%

5.8%

27.6%

26.6%

9.1%

17.5%

8.2%

Illinois

6.2%

6.7%

26.9%

20.8%

7.6%

19.7%

12.3%

Indiana

4.4%

8.4%

34.5%

20.4%

8.0%

15.5%

8.8%

Iowa

4.0%

5.5%

32.5%

21.2%

10.5%

17.9%

8.5%

Kansas

4.6%

5.9%

27.3%

23.5%

7.8%

19.9%

11.1%

Kentucky

7.1%

9.5%

33.6%

20.2%

7.3%

13.1%

9.2%

Louisiana

6.0%

11.3%

34.0%

20.7%

5.4%

14.7%

7.8%

Maine

3.3%

5.8%

33.2%

19.4%

9.3%

18.8%

10.2%

Maryland

4.6%

6.8%

25.4%

19.3%

6.4%

20.4%

17.1%

Massachusetts

5.1%

6.0%

25.4%

15.9%

7.6%

22.3%

17.7%

Michigan

3.3%

7.4%

30.0%

23.5%

8.7%

16.5%

10.5%

Minnesota

3.6%

4.7%

26.1%

21.7%

10.5%

22.2%

11.2%

Mississippi

6.6%

11.9%

30.3%

22.2%

8.4%

12.9%

7.7%

Missouri

4.1%

8.2%

31.3%

22.2%

7.1%

16.7%

10.3%

Montana

2.5%

5.3%

30.9%

23.4%

8.1%

20.2%

9.6%

Nebraska

5.0%

4.9%

27.6%

23.5%

9.5%

19.7%

9.7%

Nevada

7.7%

8.0%

28.4%

25.4%

7.6%

15.0%

7.8%

New Hampshire New Jersey

2.6%

5.5%

28.7%

19.1%

9.5%

21.6%

13.0%

5.8%

6.4%

28.6%

16.7%

6.2%

22.5%

13.8%

New Mexico

7.8%

9.2%

26.9%

22.9%

7.6%

14.5%

11.1%

New York

7.0%

8.2%

26.9%

16.0%

8.2%

19.1%

14.5%

North Carolina

5.9%

8.9%

26.7%

21.2%

8.9%

18.5%

10.0%

North Dakota

4.4%

4.7%

27.2%

23.2%

12.8%

20.3%

7.4%

Ohio

3.3%

8.1%

34.2%

20.4%

8.0%

16.3%

9.7%

Oklahoma

5.3%

8.7%

31.7%

23.5%

7.1%

15.9%

8.0%

Oregon

5.1%

5.9%

24.3%

25.6%

8.4%

19.3%

11.3%

Pennsylvania

3.9%

7.9%

36.3%

16.0%

7.8%

17.1%

11.0%

Rhode Island

6.5%

8.4%

27.9%

18.1%

8.0%

18.6%

12.6%

South Carolina

5.1%

9.8%

30.0%

20.3%

8.9%

16.6%

9.3%

South Dakota

4.3%

5.6%

31.1%

21.6%

10.3%

19.0%

8.1%

Tennessee

6.1%

9.3%

32.9%

20.6%

6.4%

15.8%

8.9%

Texas

10.5%

8.6%

25.1%

21.8%

6.7%

18.1%

9.3%

Utah

3.7%

5.5%

23.9%

26.7%

9.4%

20.7%

10.2%

Vermont

3.1%

5.7%

30.2%

17.4%

8.2%

21.2%

14.1%

Virginia

5.2%

7.2%

24.8%

19.5%

7.1%

20.8%

15.3%

Washington

4.9%

5.2%

23.4%

24.2%

9.6%

20.9%

11.8%

West Virginia

5.6%

10.3%

40.6%

18.2%

6.4%

11.5%

7.4%

Wisconsin

3.6%

6.1%

32.2%

20.9%

9.7%

18.3%

9.2%

Wyoming

2.8%

5.8%

29.6%

26.2%

10.1%

16.7%

8.8%

State

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second in the nation, just below Alaska, according to government figures. The stats from Massachusetts are topped only by those in the District of Columbia, which as the center of the federal government has a starkly different range of occupations and educational requirements. That Georgetown University report predicted that by 2020, nearly three in 10 D.C. jobs will need a master’s degree or higher, almost triple the national average. No wonder the educational attainment stats from 2018 show 31.6 percent of D.C. residents with some level of a graduate degree. Another 23.3 percent have a bachelor’s degree. Colorado and Maryland come close to the levels of educational attainment demonstrated in Massachusetts — with more than 37 percent of the population above age 25 holding bachelor’s and graduate degrees. That is a great support for many of the industries that are strong in Colorado, from advanced manufacturing and aerospace to biosciences and defense. Thanks in part to its location adjacent to D.C., Maryland’s share of students with graduate-level education is nearly as high as it is in Massachusetts, and that’s great for such industries as advanced manufacturing, cybersecurity, life sciences, and aerospace. Connecticut also has a high share of workers with graduate-level education, which matches up with the industry sectors the state is working to grow, such as advanced manufacturing, biosciences, digital media, green technology, and financial services.

••• State Initiatives to Boost Education Levels Of course, not every job requires a graduate degree, or even a bachelor’s degree. The key is in delivering the workforce that the local job market is demanding. Here are the states in which fewer than one in six of the residents 25 or older has earned a bachelor’s degree: Alabama, Arkansas, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, and West Virginia. A number of these states enjoy unemployment rates among the nation’s lowest, suggesting that they’ve mastered the equation for delivering the workers that employers are requiring. That doesn’t mean leaders in these states are satisfied with the situation as-is, even if their employment numbers are good. Take Tennessee as an example. The jobless rate is low, the economy as a whole is faring well, but the state is working overtime to boost its citizens’ educational attainment. Tennessee’s Drive to 55 initiative recognizes that many residents don’t have a college degree or certificate and aims to get that attainment stat up to 55 percent by 2025. Kentucky has been building up its New Skills for Youth

“

NEARLY every state has an educational attainment level that’s below what the jobs of the future will require, according to Georgetown University’s “Recovery” study.

initiative that strives to create more opportunities for students to gain the right kind of education and training for the jobs that are in demand. Among the possibilities are expanded dual-credit studies, work-based learning experiences, and ways for students to earn industry-recognized credentials. Kentucky has identified five sectors for which it is working to create stronger career pathways for students: advanced manufacturing, business and IT, construction, healthcare, and transportation/logistics. Indiana, meanwhile, has launched an initiative called Skillful Indiana,6 inspired by a model in Colorado and ideas from other states that are part of the Skillful State Network, created earlier in 2018 to accelerate workforce innovation. Indiana’s aim is to prepare to fill as many as a million skilled jobs expected to open up over the next decade. And Alabama — concerned by research suggesting that by 2025 it would need a half million more workers with education beyond high school — launched its Success Plus educational attainment initiative to tackle the challenge. There are efforts across the states that have similar ambitions. As the “Recovery” study from Georgetown pointed out, just about every state has been chasing an attainment gap. Nearly every state, those researchers found, has an educational attainment level that’s below what the jobs of the future will require. It’s no secret that the most prosperous futures await those areas that best solve the educational attainment equation, so policymakers all over are hitting the books.

••

https://www.bls.gov/emp/chart-unemployment-earnings-education.htm https://www.nsf.gov/nsb/sei/edTool/data/workforce-03.html https://www.nsf.gov/nsb/sei/edTool/data/workforce-03.html 4 https://cew.georgetown.edu/cew-reports/recovery-job-growth-and-education-requirementsthrough-2020/ 5 http://massbudget.org/reports/pdf/Education%20and%20State%20Economic%20Strength%20 FINAL.pdf 6 https://www.wthr.com/article/indiana-announces-workforce-initiative-partnership-includes-microsoft 2 3

AREA DEVELOPMENT | 2019 Select Sites Directory

2019

SELECT SITES DIRECTORY

Directory of Select Sites Contacts ALABAMA

Ed Castile, Director AIDT One Technology Court Montgomery, AL 36116 334-280-4400 info@aidt.edu www.aidt.edu

ARKANSAS

Mike Preston Executive Director Arkansas Economic Development Commission 900 West Capitol Avenue, Suite 400 Little Rock, AR 72201 501-682-1121 info@ArkansasEDC.com www.ArkansasEDC.com

CALIFORNIA

Mike Lee Economic Development Director City of Moreno Valley 14177 Frederick St. Moreno Valley, CA 92522-0805 951-413-3460 edteam@morenovalleybusiness.com www.morenovalleybusiness.com

CONNECTICUT

Gerald Sitko Economic Development Coordinator Cheshire Economic Development Corporation 84 South Main St. Cheshire, CT 06410 203-271-6670 Fax: 203-271-6688 jsitko@cheshirect.org www.cheshirect.org

David Coddington Vice President, Business Development Greater Fort Lauderdale Alliance 110 E. Broward Blvd., Ste. 1990 Fort Lauderdale, FL 33301 954-627-0123 dcoddington@gflalliance.org www.gflalliance.org www.lesstaxing.com

GEORGIA

Rodger Brown Executive Director of Marketing Georgia Quick Start 75 Fifth Street, NW, Ste. 400 Atlanta, GA 30308 404-253-2800 Fax: 404-253-2821 RBrown@georgiaquickstart.org www.GeorgiaQuickStart.org

INDIANA

Jason Hester, CEcD President Greater Columbus Indiana Economic Development 440 5th Street Columbus, Indiana 47201 812-378-7300 Fax: 812-372-6756 info@columbusin.org www.columbusIN.org

KENTUCKY

Terry Gill Secretary Kentucky Cabinet for Economic Development 300 West Broadway Frankfort, KY 40601 502-564-7670 1-800-626-2930 Econdev@ky.gov Terry.Gill@ky.gov www.thinkkentucky.com Gina Greathouse Executive Vice President, Economic Development Commerce Lexington 330 East Main St., Suite 205 Lexington, KY 40507 859-225-5005 ggreathouse@commercelexington.com www.LocateInLexington.com

FLORIDA

Tim Vanderhoof Senior Vice President, Business Development Enterprise Florida, Inc. 800 N. Magnolia Ave., Suite 1100 Orlando, FL 32803 407-956-5600 tvanderhoof@EnterpriseFlorida.com www.FloridaTheFutureIsHere.com www.EnterpriseFlorida.com

AREA DEVELOPMENT

LOUISIANA

Louisiana Economic Development 617 North 3rdÂ Street Baton Rouge, LA 70802 225-342-3000 Toll Free: 800-450-8115 OpportunityLouisiana.com

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

MARYLAND

John Henry King Economic Development Director City of Bowie 15901 Excalibur Road Bowie, MD 20716 301-809-3042 Fax: 301-809-2315 jhking@cityofbowie.org www.cityofbowie.org

MICHIGAN

Michigan Economic Development Corporation 300 N. Washington Square Lansing, MI 48913 888-522-0103 www.MichiganBusiness.org

MISSISSIPPI

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

NEVADA

Barbra Coffee Director, Economic Development & Tourism City of Henderson City Hall Annex 280 Water Street P.O. Box 95050 MSC 512 Henderson, NV 89009 702-267-1655 Fax: 702-267-1651 Barbra.Coffee@cityofhenderson.com www.HendersonNow.com

NEW JERSEY

Sandy Forosisky Director, Economic Development Department City of Vineland 640 E. Wood Street P.O. Box 1508 Vineland, NJ 08362-1508 856-794-4100 sforosisky@vinelandcity.org www.vinelandbusiness.com

NEW YORK

Empire State Development 633 Third Avenue – Floor 37 New York, NY 10017 212-803-3100 www.esd.ny.gov

SOUTH CAROLINA Dan Camp Vice President of Real Estate Camp Hall 114 Three Point Drive Ridgeville, SC 29472 843-761-4070 Dan.camp@camphall.com www.CampHall.com

TENNESSEE

Steven Crook Vice President of Economic Development Cookeville Chamber of Commerce 1 West First St. Cookeville, TN 38501 931-526-2211 scrook@highlandsofTN.com www.cookevillechamber.com www.HighlandsOfTN.com

TEXAS

Floyd Batiste, CEO Port Arthur Economic Development Corporation 501 Procter St., Ste. 100 Port Arthur, TX 77640 409-963-0579 Fax: 409-962-4445 fbatiste@paedc.org www.paedc.org Kelly Violette Executive Director Tomball Economic Development Corporation 29201 Quinn Rd., Ste. B Tomball, Texas 77375 281-401-4086 Fax: 281-351-7223 kviolette@tomballtxedc.org www.tomballtxedc.org

WISCONSIN

Tricia Braun, Deputy Secretary & COO Wisconsin Economic Development Corporation 201 W. Washington Avenue Madison, WI 53703 608-210-6807 tricia.braun@wedc.org www.wedc.org

CANADA

Ian Mckay, CEO Invest in Canada info@InvestCanada.ca www.InvestCanada.ca Len Magyar Development Commissioner City of Woodstock 500 Dundas Street, P.O. Box 1539 Woodstock, ON N4S 0A7 519-539-2382 Ext. 2112 Fax: 519-539-3275 lmagyar@cityofwoodstock.ca http://cometothecrossroads.com

AREA DEVELOPMENT | 2019 Select Sites Directory

ADINDEXWEBDIRECTORY

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ARKANSAS

Arkansas Economic Development Commission 45 info@ArkansasEDC.com www.ArkansasEDC.com

CALIFORNIA

City of Moreno Valley Economic Development C3 edteam@morenovalleybusiness.com www.MorenoValleyBusiness.com

CONNECTICUT

Cheshire Economic Development jsitko@cheshirect.org www.CheshireCT.org

FLORIDA

Greater Fort Lauderdale Alliance dcoddington@gflalliance.org www.lesstaxing.com www.GFLAlliance.org

Emsi 49 www.EconomicModeling.com

INDIANA

KENTUCKY

Commerce Lexington 39 ggreathouse@commercelexington.com www.LocateInLexington.com 31

City of Bowie Economic Development 63 jhking@cityofbowie.org www.CityOfBowie.org

MICHIGAN

AREA DEVELOPMENT

11, 13, 15

NEVADA

Henderson Economic Development Barbra.Coffee@cityofhenderson.com www.HendersonNow.com www.CityofHenderson.com Nevada Energy www.NVEnergy.com

33–36

SOUTH CAROLINA

Santee Cooper Economic Development Dan.camp@camphall.com www.CampHall.com

Cookeville Chamber of Commerce SCrook@HighlandsOfTN.com www.cookevillechamber.com www.HighlandsOfTN.com

TEXAS

Port Arthur Economic Development fbatiste@paedc.org www.PAEDC.org Tomball Economic Development Corporation kviolette@tomballtxedc.org www.TomballTXEDC.org

Print Media Area Development Magazine The industry’s most respected magazine since 1965 Online Media Area Development.com & Newsletters The leading website for corporate site and facility planning Face to Face Consultants Forums The industry’s leading best practices conference events for economic developers Online Database Marketing

The world’s most viewed building and site database Custom GIS Applications Affordable cutting-edge GIS technology for your website

WISCONSIN

Wisconsin Economic Development Corporation tricia.braun@wedc.org www.wedc.org

CANADA

MARYLAND

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

TENNESSEE

IDAHO

Michigan Economic Development Corporation www.MichiganBusiness.org

MISSISSIPPI

Empire State Development www.ESD.NY.Gov C2

Greater Columbus Indiana Economic Development Corporation info@columbusin.org www.GreaterColumbusIN.org

Page

NEW YORK

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

Kentucky Cabinet for Economic Development Econdev@ky.gov Terry.Gill@ky.gov www.KYOZ.com www.ThinkKentucky.com

Who we are. What we do.

Invest in Canada www.InvestCanada.ca

City of Woodstock lmagyar@cityofwoodstock.ca www.ComeToTheCrossroads.com www.CityOfWoodstock.ca

Let us work with you. Add to your marketing success. Area Development Magazine 400 Post Ave., Westbury, NY 11590 516-338-0900 Fax: 516-338-0100 www.areadevelopment.com

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

C A L I F O R N I A

212,682 Population 2019

4.99%

2,375,586

31.8

CAN WE

FIND A DEVELOPMENT-FRIENDLY SITE IN A WORKER-FRIENDLY COMMUNITY?

In Wisconsin®, we can. When Canada’s The Little Potato Company was looking to build its first facility in the U.S., DeForest, Wisconsin, was a natural fit. Using WEDC’s Certified Sites Program, we helped them find a development-ready site in a place where they could find employees who shared their company’s values of family and community. Just think what we could make happen for your business. See the whole story at WEDC.org/success-stories-lpc.

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