Area Development Q4 Issue 2023

WORKING TOWARD ZEROEMISSIONS BUILDINGS P8

LOGISTICS ANALYSIS DRIVES SITE SELECTION P 18

FUTURE-PROOFING FOOD AND BEVERAGE P 41 P 57

AREADEVELOPMENT SITE

AND

FACILITY

Q4 2023

PLANNING

2023 Leading Metro Locations: Growing to Meet Demands of Today's and Tomorrow's Economy

WORKFORCE Look Beyond 2023 for Success 45 w w w. a re a d e v e l o p m e n t . c o m

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Plenty Unlimited Inc. selected Virginia to build the world’s largest campus for advanced indoor farming, using the advanced technology and patent assets shown here in their California facility.

A top-ranked state for business is now the leading location for the future of farming.

Virginia is home to the world’s largest Controlled Environment Agriculture (CEA) facility, with plans to add another that’s even bigger. Looking for a culture of innovation? Find your advantage at VEDP.org.

Elite Workforce, Strategic Investments Help Virginia Score Major Wins

T

he last year saw Virginia land the largest capital investment project in the Commonwealth’s history, with project wins continuing from there.

Virginia’s success in 2023 is a direct testament to the quality and continued development of one of the top workforces in the United States.

The historic project announcement kicked off January, when Amazon Web Perrone Robotics, Albemarle County Services (AWS) announced plans to invest $35 billion by 2040 to establish multiple data centers across Virginia has some Virginia. AWS’s investment strengthens an already strong sector in Virginia excellent infrastructure — the Commonwealth is home to an and a very businessestimated 35% of all known hyperscale data centers worldwide, with a parfriendly government. ticularly dense cluster in “Data Center Capital goes where it’s Alley” in Loudoun County outside Washington, D.C. With the third-largest tech needed, but it stays industry workforce in the U.S., Virginia’s and grows where it’s $2 billion Tech Talent Investment Program, aimed at doubling the number appreciated. We’ve of graduates each year in computer seen a high degree of science and closely related fields, will ensure the sector remains robust and appreciation for what provide a pipeline for the future. we’re trying to do, AWS is just one example of companies finding a top-notch workforce not just commercially, in Virginia’s diverse regions across but as an innovation multiple industries. The agriculture sector has seen extensive innovation in sector. The support recent years owing to the development infrastructure is of controlled environment agriculture (CEA) techniques, with smaller physithere, the educational cal footprints allowing for facilities in or institutions are there, near major cities and foodways.

The most recent CEA win came when the policy environment vertical farming giant Plenty Unlimis there. ited Inc. announced plans to build the world’s largest indoor farming campus — Arama Kukutai, CEO, (currently under construction) in ChesPlenty Unlimited Inc. terfield County, just outside Richmond, representing a $300 million investment and 300 new jobs. al tech companies continue to find sucWhile CEA is a tech-intensive induscess in Virginia, with particular pockets of innovation springing up around the try in its own right, other more tradition-

Commonwealth’s universities.

Self-driving vehicle innovator Torc Robotics cited the region’s talented workforce as a decision factor in its 2020 expansion in Blacksburg, near Virginia Tech, while industry competitor Perrone Robotics continues to expand its location in Albemarle County, near the University of Virginia.

Those companies also capitalized on two of Virginia’s popular workforce programs, choosing between the Virginia Jobs Investment Program — which provides funding and consultative services for recruitment and training activities — or the top-ranked Virginia Talent Accelerator Program, which provides fully customized recruitment and training services at no cost.

Outside the traditional tech realm, banking giant Wells Fargo announced an expansion of its Roanoke County customer support center in September, investing $87 million and creating more than 1,100 new corporate services jobs.

The Virginia workforce, bolstered by innovative, forward-thinking programs and investments, continues to attract major companies to do business and expand in the Commonwealth. As AWS Director of Economic Development Roger Wehner said, “Virginia is a world leader in innovation and cloud computing, thanks to its investment in a robust, highly skilled workforce and emphasis on long-term public and private partnerships.” As AWS continues to roll out its data center investments across Virginia, the company — and other corporate partners across a broad cross-section of industries — can rest assured that the Commonwealth will consistently deliver a top-notch workforce.

This article was paid for and written by the Virginia Economic Development Partnership and approved by Area Development.

AREA DEVELOPMENT | Q4 2023

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CONTENTS

22

Leading Metro Locations

The leading metro areas are those poised for long-term growth and are often hubs of high-tech industry, where workers may benefit from an affordable cost of living.

Features

16 AI 101 for Site Selection

75 Clustering Distribution Near Manufacturing Operations: An Old Idea Gaining New Traction

A data-driven approach, enabled by AI and other technology, is enabling those charged with site selection to make better informed decisions that will allow their companies to thrive.

Real estate, labor, and transportation needs must be considered by companies considering a clustering strategy if they are to reap its full benefits.

77 A Message to CREs: What’s Old Is New Againn

38 Three Key Location Factors for F&B Industrial Users to Consider

It seems that face-to-face meetings with community leaders and anecdotal research about a prospective location are back in style again as companies make location decisions.

Workforce skills and availability, the need for speed to market, and the condition of existing infrastructure are all key factors in food and beverage companies’ location decisions.

18 The Logistics Analysis That Drives Industrial Site Selection Finding the optimal site for a logistics facility often involves trade-offs between transportation, labor, and real estate costs, which may be lowered by incentives offered, as well as the need for speed to market.

41 Future-Proofing Food & Beverage Facilities: Why Site Selection Matters Access, utilities, workforce, regulatory issues and future-proofing are all key considerations for choosing the right location for a long-term investment.

Area Development® Site & Facility Planning (USPS 345-510) is published four times per year (Q1, Q2, Q3, and Q4) at Lancaster, PA, by Halcyon Business Publications, Inc., 30 Jericho Executive Plaza­– Ste 400W Jericho, NY 11753. Periodicals postage paid at Jericho, NY, and additional offices. Single copies, $20. Yearly subscription U.S. & Canada, $75; foreign, $95.

2 AREA DEVELOPMENT

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12/6/23 10:48 AM

Volume 58 | Number 4 Q4/2023

Every American who ever lived, with the exception of one group, was either an immigrant himself or a descendant of immigrants.

John F. Kennedy (1917–1963), 35th President of the United States

Departments

4 Editor’s Note

The Worker Shortage: A New Reality

6 In Focus

AI’s Influence on Data Center Growth

8 In Focus

Setting the Standard: Working Toward Zero-Emission Buildings Ahead of Regulatory Mandates

45 SPECIAL SUPPLEMENT

10 Frontline

Brownfields Offer Redevelopment Opportunities

12 Frontline

WORKFORCE W

Electrification of Industrial Processes

2023

64 Look Beyond the Now When Considering Workforce Priorities

14

First Person

80

Last Word

79

Ad Index

48 How to Factor in Labor Needs While Selecting a Site for Expansion

52 Forewarned Is Forearmed: The Importance of Understanding Labor Issues in Making the Location Decision

56 Technology’s influence on Workforce Development 60 After the Ribbon Is Cut: Shifting the Talent Strategy to Retention & Upskilling

68 Insights on Staffing and the Location Decision 72 Immigration: A Potential Fix for Labor Shortages?

• How to Factor in

Labor Needs While Selecting a Site for Expansion

• Forewarned Is

Forearmed: The Importance of Understanding Labor Issues in Making the Location Decision

• Technology’s influence on Workforce Development • After the Ribbon Is Cut: Shifting the Talent Strategy to Retention & Upskilling

• Look Beyond the Now When Considering Workforce Priorities

• Insights on Staffing and the Location Decision • Immigration: A Potential Fix for Labor Shortages?

Mike Flynn, Senior Director, Economic Development, Destination Medical Center (DMC)

Made in the USA: Shoring Up Options for U.S. Manufacturing’s Resurgence

Exclusive Online Content • The Data Center Odyssey in Mexico • First Person: Aligning Energy Needs With Sustainability Goals • Navigating the FDI Process • Home Sweet Home: Mississippi’s Business Climate Makes It Hard to Leave

POSTMASTER: Send address changes to Area Development, Circulation Department, 30 Jericho Executive Plaza­– Ste 400W Jericho, NY 11753. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2023 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 2023

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Q4/2023

EDITORS NOTE The Worker Shortage: A New Reality

www.areadevelopment.com

T

2023 Editorial Advisory Board

he Congressional Budget Office projects that the U.S. labor force will grow by a mere 0.2 percent from 2024 to 2031. The baby-boomers are retiring, millennials are approaching middle age, and a comparatively small Gen Z follows. According to Bruce Evans with Emsi Burning Glass, a firm that analyzes job listings, “We’re trying to warn employers that this is not just a passing fad but a new reality.”1 In this issue’s Workforce supplement, beginning on page 45, we explore some of the challenges that businesses are facing in fulfilling their workforce needs.

If companies are to grow and succeed, they must factor their labor needs into the location and expansion decision early on in the process. With fewer workers available, businesses are increasingly employing AI and automation to increase productivity and lower costs, so acquiring the right talent for this technology becomes even more crucial. Productivity can also be improved by upskilling the workforce, which leads to greater employee satisfaction and retention. It’s not just today’s labor force needs that must be satisfied but also those of tomorrow, i.e., organizations must look beyond the now.

It seems that low unemployment numbers have also tipped the balance of power in the employer-employee relationship to the workers. In fact, according to the latest Gallup poll, 43 percent of U.S. adults want unions to have more power, and 34 percent believe unions will become stronger.2 Since union-organizing efforts vary by location, companies must also assess this factor when making a location decision as well as identify problem areas that might make them vulnerable to union organizing once operations are under way.

Jobs “data also underscores why we also need comprehensive immigration reform to ensure that we are bringing the best and brightest to the U.S. to help strengthen manufacturing in America,” says Carolyn Lee, president of the Manufacturing Institute.3 For example, the H-1B visa process, which has allowed U.S. companies to bring in foreign workers in specialty areas, is time-consuming and difficult to navigate. Reforming this policy and raising its 85,000 annual cap would help certain companies satisfy their workforce needs.

Look to the Workforce articles in this issue to help your company navigate the ongoing labor shortage. The demographics highlight the fact that it’s here with us to stay.

Josh Bays Senior Partner site selection group

Marc Beauchamp Managing Director hickey canada

Brian Corde Managing Partner atlas insight

Kate Crowley Principal baker tilly capital

Dennis Cuneo Director Site Selection Services walbridge

Courtney Dunbar Site Selection & Economic Development Leader burns & mcdonnell Brian Gallagher Vice President Corporate Development graycor

Amy Gerber Executive Managing Director Business Incentives Practice cushman & wakefield Stephen Gray President & CEO gray

David Hickey Managing Director hickey & associates

Scott Kupperman Founder kupperman location solutions

Bradley Migdal

Executive Managing Director Business Incentives Practice cushman & wakefield

Matthew R. Powers

Managing Director Brokerage jll

Alan Reeves Senior Managing Director Global Strategy Consulting

newmark

Chris Schwinden Senior Vice President site selection group

Editor

Alexandra Segers General Manager tochi advisors llc

1 https://www.axios.com/2022/01/22/labor-shortage-work-jobs-data?utm_source=sfmc&utm_medium=email&utm_ campaign=208621 2 https://news.gallup.com/poll/510281/unions-strengthening.aspx 3 https://nam.org/labor-shortage-will-continue-but-manufacturing-is-a-bright-spot-16138/

Eric Stavriotis Vice Chairman cbre

Steven Tozier US-East Region Credit & Incentives Leader ey

AREA DEVELOPMENT

Chris Volney Senior Director Americas Consulting/Labor Analytics

Publisher Dennis J. Shea dshea@areadevelopment.com

Editor Geraldine Gambale editor@areadevelopment.com

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Staff and Contributing Editors Lisa Bastian Steve Kaelble Mark Crawford Mark Schantz Dan Emerson Karen Thuermer

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Consulting & Fiscal Policy Research

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12/5/23 9:18 AM

All business. No red tape.

GET MIGHTY.

#5 Business Incentives Program in U.S. #7 Overall Cost of Doing Business #4 Speed of Permitting mississippi.org

IN FOCUS AI’s Influence on Data Center Growth

look,2 the global colocation data center market is forecast to grow at 11.3 percent per annum (CAGR) from 2021 to 2026. We expect the hyperscale data center market to grow even faster at an approximately 20 percent CAGR. The rise of AI will both bolster the already high demand — with increased data usage — and improve computing efficiency.

and innovative solutions can be uncovered in nontraditional settings. For new centers in these emerging markets, data The use of AI is driving a surge in demand for computing center operators need to power and the development of more data centers, install infrastructure to accomwhich, in turn, have an increasing need for reliable power and water. modate high power density server clusters to accommodate AI requirements. Keep in mind that AI needs as much as five times the fiber, so this may lead to an infrastructure boom to AI sites.

AI also needs more power and ability to keep the servLocation Factors

BY ANDY CVENGROS,

BY MATT LANDEK, ers cool. Unfortunately, AI’s From power to air coolManaging Director, Data Centers & Telecom, hunger for power and water ing requirements, legacy U.S. Data Centers Work Dynamics; JLL data centers are generally are at odds with current ESG Markets Co-Lead ; JLL goals and decarbonization unequipped for AI. Faced efforts. Innovation is crucial with either upgrading existArtificial intelligence (AI) is demand requires the develto improve cooling and one of the most talked about opment of more — and bet- ing facilities or developing energy efficiency for AI uses ter — data centers that can new centers, operators and subjects of the year, angiven sustainability goals of support the unprecedented occupiers must make hard ticipated to touch almost all hyperscalers and colocation choices. In preparation for computing power required facets of modern life. Hotly providers. an AI-driven future, it is cruto operate AI. debated from dinner tables With the continuous to Hollywood to the halls of reduction in transistor sizes Congress, synthetic data The AI boom is coming at a time to nanometer scale and bewill completely overtake when the data center market is real data in AI models by yond, the adoption of liquid 2030, according to market cooling solutions emerges already experiencing research firm Gartner.1 as a popular solution, as it allows data centers to meet The increasing adoption increased demand. sustainability goals and reand emphasis on AI as a The AI boom is coming at a core component of corpoduce carbon footprints. Othcial to approach site selectime when the data center tion with a fresh perspective. er options include using solar rate objectives is driving a market is already experipanels and other renewable Exploring new submarkets substantial surge in demand for computing power and may reveal the ideal solution, energy sources. While certain encing increased demand. resources required to implewhile considering proximity questions remain unanAccording to the 2023 JLL needs becomes a significant swered, we cannot overstate Global Data Center Outment AI models. This new decision-making factor. the importance of addressWhen it comes to univering both power demands and thermal requirements sally applicable AI tools like ChatGPT, the location of a for chips when it comes to the design of future data data center can be more centers. adaptable; however, for financial services firms, retailers, and other organizations using proprietary, industryspecific AI models, being 1 https://www.gartner.com/en/ near existing energy grids, newsroom/press-releases/2022-06connectivity infrastructure, 22-is-synthetic-data-the-future-of-ai and network hubs is essential.

Regardless of the chosen 2 https://www.us.jll.com/en/trendslocation, ensuring a reliable and-insights/research/data-centeroutlook power supply is paramount,

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IN FOCUS Setting the Standard: Working Toward Zero-Emission Buildings Ahead of Regulatory Mandates All stakeholders working in unison will benefit the environment while also resulting in positive business outcomes.

BY BRITT WILLOWS, Portfolio Leader, HVAC Mechanical Solutions, Johnson Controls

When it comes to driving climate change, the federal government has doubled down on efforts to get owners and operators of commercial buildings rowing in the same direction. The Biden Administration recently announced1 that it will update the definition of a “zeroemissions” building, which will be published in early 2024 by the Department of Energy, to help establish a new national standard and address one of the largest contributors to greenhouse gas emissions — buildings.

Buildings contribute nearly 40 percent of all greenhouse gas emissions globally,2 so providing concrete guidelines for sustainable buildings at the federal level will enable building stakeholders to rally together toward a common goal. The new definitional framework aims to accelerate state and local government regulations through changes to various Building Performance Standards that will require net-zero emissions over the coming years.

How to Prepare Facing these transformative mandates might seem daunting for facility leaders, who must juggle multiple competing priorities. Luckily, there are a variety of

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steps owners can take to prepare for these impending changes: • Identify Key Performance Indicators (KPIs): Determine specific metrics that you will use to measure the performance of your building. If you already have KPIs, consider reevaluating them to reflect today’s environment. To align with the new definition of “zeroemission” buildings, metrics around energy usage

complish these targets by implementing the right solution sets, install and service key equipment, and transfer some of the financial and performance risk of sustainability projects to your partner. Ultimately, collaboration helps ensure all goals are achieved • Educate your occupants: Provide information and resources to your building occupants on how they can help contribute to the building’s performance, such as relying on building automation systems (BAS)

Federal guidelines for sustainable buildings will enable all stakeholders to work toward a common goal. to automatically reguand carbon outputs are a great place to start. late indoor temperatures • Benchmark: Compare based on weather and your building’s perforenvironment, versus occumance against similar pants manually adjusting properties or industry the controls themselves. standards. This may help • Implement connected identify areas for improvesolutions: Connected solutions apply analytics ment and set realistic KPIs. and artificial intelligence Benchmarking allows you to building data to help to track progress over time, improve your building’s both internally and comperformance. pared to peers. Energystar. gov is a great place to get • Incorporate energy effistarted. ciency: It’s easier now than • Collaborate with profesever before to improve your energy consumption. sionals: Working with an Energy-efficient measures integrated energy services such as insulation, HVAC company can help you optimization, smart sensors, identify smart objectives, and updated lighting can build a roadmap to ac-

significantly lower a building’s costs.

• Investigate innovative financing: Through innovative funding methods, like performance contracts or public-private partnerships, facility leaders can retain valuable capital that can be redirected elsewhere.

A Win-Win Despite the challenges presented by ever-changing definitions and mandates, investing in retrofitting buildings for increased sustainability not only benefits the environment, but also yields positive business outcomes. Upgraded buildings enhance cost efficiency, improve public relations, streamline facility operations, bolster local economies, and create safer and healthier environments for occupants.

The time has come for all stakeholders to unite in this critical effort to develop netzero emissions in buildings.

Just as synchronized rowing propels a boat forward, our collective actions can drive us toward a sustainable, climate-resilient future.

1 https://www.whitehouse.gov/ briefing-room/statementsreleases/2023/09/28/ fact-sheet-biden-harrisadministration-hosts-first-ever-whitehouse-climate-resilience-summitand-releases-national-climateresilience-framework/ 2 https://architecture2030. org/why-the-builtenvironment/#:~:text=The%20 built%20environment%20is%20 responsible,of%20annual%20 global%20CO2%20emissions.

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FRONT LINE Brownfields Offer Redevelopment Opportunities Found in both urban and rural areas and often with infrastructure in place, brownfield sites can be revitalized and reused with the proper remediation plan in place.

BY KAREN E. THUERMER

Brownfield sites are often associated with contamination and environmental hazards. Whether real or perceived, contamination may require costly cleanup efforts to make them viable for redevelopment.

The level of contamination may vary depending on its previous use. “Old housing development, a commercial dry cleaner, railroad lines, kerosene soaked pilons on docks/piers, industrial manufacturing, etc., and more specifically, the level and presence of hazardous substances, solid or liquid wastes need to be remediated,” says Michaela Martin, a director at Site Selection Group.

Despite contamination issues, brownfield sites present opportunities for revitalizing blighted properties and promoting sustainable development, particularly in urban areas, as opposed to developing green spaces.

John Tregidgo, LSRP,

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senior project manager, and Doug Neumann, director of Environmental Sciences, at Dresdner Robin, a land-use consultancy firm, point to projects in which their consultancy has been involved.

One is Berry Lane Park in

Bellwether District, a 1,300acre site on the edge of downtown Philadelphia. The $4 billion project under development by Hilco Redevelopment Partners (HRP), was once the site of the nation’s biggest and most productive oil refineries. Now The District will house commercial, e-commerce, life sciences, and logistics activities. HRP says it will be a model of sustainable development and design and employ upwards of 19,000 workers.

Time and cost are the big challenges to developing brownfield sites; The District is expected to take 10 to 15 years to fully build out.

A Remediation Plan Is Needed For brownfield redevelopment to be successful, both public and private entities must be committed to the project. Early collaboration

“Brownfields redevelopment can be a real asset as they are... often close to population centers, meaning access to workforce.” — Michaela Martin, Site Selection Group.

Jersey City, NJ. Comprised of former rail and industrial operations, the site was redeveloped into a vibrant 17-acre park.

“Brownfields redevelopment can be a real asset as they are located in both urban and rural areas, typically found with existing infrastructure in place from roads and railways to utilities, sometimes found with significant utility capacity levels, and often close to population centers, meaning access to workforce,” Martin says.

Another example is the

between the state, municipality, community, and developer are needed to develop a strategic plan that integrates each party’s interests, explain Tregidgo and Neumann.

Before a site can change hands legally, a remediation plan for the site must be made along with ongoing monitoring of the contaminated area(s) that the owner must usually continue to handle unless a new buyer agrees to take the task on as part of the deal, explains Michelle Comerford, a project

director and leader of the Supply Chain Practice at Biggins Lacy Shapiro & Co. “Some brownfields may require years of clean up, while others may not require lengthy environmental cleanup at all, but both scenarios require sign off from local/state authorities before any redevelopment may occur,” Martin says. “Many states have established Brownfield Redevelopment funds that typically require a public entity to apply for brownfield grants that can help offset costs,” she notes.

Additionally, many locations offer a strong and growing set of tools that can support the repositioning of these sites, allowing developers and end-users to mitigate costs, reduce development timelines, and capitalize on the legacy strengths of these locations, emphasizes Shannon R. Selby, vice president of Real Estate at the Detroit Regional Partnership.

Flint, Michigan’s 350-acre massive General Motors’ Buick City is a prime example. “Its fall from a bustling manufacturing hub and civic pride to a run-down brownfield has been well chronicled, but it’s on an upward trajectory with public- and private-sector investment that’s positioning it for an exciting new chapter after its recent groundbreaking,” says Selby.

The $300 million project called Flint Commerce Center is expected to provide up to 10 buildings, 3.5 million square feet of Class A industrial space, and 3,000 new jobs.

“There aren’t many available industrial properties of this magnitude,” Selby adds.

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11/28/23 3:05 PM

Cut through the noise.

Labor market insights to lead the way.

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Cut through the noise with powerful analytics that neatly display information on demographics, industries, occupations, wages, and more. Discover how you can move your community or organization ahead with accurate and timely labor market data from Chmura. Schedule your free demo at www.chmura.com/demo.

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FRONT LINE Electrification of Industrial Processes Reducing the use of fossil fuels in industrial processes will help cut costs while reducing GHG emissions.

BY DAN EMERSON

As the need to reduce the use of fossil fuels to lessen climate-warming carbon emissions grows in urgency, electric vehicles have gotten most of the media and public attention. But there is also largely untapped potential to reduce fossil fuel use in the sector that consumes more energy than any other: industrial processes.

Globally, industry (all of the companies involved in manufacturing and the production of physical goods) consumes more energy than any other sector: 149 million terajoules in 2017, according to a recent report from McKinsey.1 Relatively little of that energy consisted of electricity: about 20 percent. Most of the electricity consumed by industry is used to power equipment such as pumps, robotic arms, and conveyor belts, the report says. As the prices of renewable electricity and electric equipment continue to drop, industrial companies can capture cost-saving and GHG-emission-reduction opportunities by planning the electrification of their operations.

McKinsey projects that renewables could produce more than half of the world’s electricity by 2035, at lower prices than fossil-fuel generation. The resulting lowering of electricity prices — along with the falling cost of electric equipment and more stringent greenhouse-gas (GHG) emission regula-

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Infinitum Aircore EC motor

tion — is expected to boost consumption of electricity in sectors, such as passenger vehicles and space heating, where fossil fuels have long been the standard energy source.

The financial and environmental benefits for industrial companies of using electricity instead of fossil fuels in their processes are increasing.

Generally, electrically driven equipment is only slightly more energy-efficient than the conventional option, but it has lower maintenance costs, and, in the case of the industrial boiler, the investment cost of the electrical equipment is lower, according to McKinsey. Also, using

a furnace or boiler — with a piece of electric equipment.

Makers of electric motors have been making significant advancements in energy efficiency. For example, Infinitum Electric, a startup based in Round Rock, Texas, makes electric motors that are half the size and weight of standard motors. Infinitum investors include Caterpillar and Rockwell Automation. Infinitum founder and chief executive Ben Schuler says one of the keys is using variable frequency drives, “which permit the motor to adjust speed to meet the actual power demand of an application and save energy.”

Schuler cited data from

The financial and environmental benefits for industrial companies of using electricity instead of fossil fuels in their processes are increasing. zero-carbon electricity, can significantly lower an industrial company’s greenhouse gas emissions.

Of all the fuel that industrial companies use for energy, McKinsey estimates that almost 50 percent could be replaced with electricity, using current technologies. This includes all energy required to generate heat for industrial processes up to approximately 1,000 degrees Celsius.

That could be accomplished by replacing a piece of equipment powered by conventional fuel — such as

the U.S. Department of Energy, projecting that implementing advanced motor technology in the U.S. industrial and commercial sectors can save 127 terawatt-hours per year (TWh/yr.), resulting in cost savings of $14.7 billion and reductions of 90.2 MMT of CO2. “That’s equivalent to the annual electricity use of all households in California and North Carolina combined,” Schuler says.

To help industry adapt to electrification, Minneapolisbased manufacturer Thermo King has partnered with the

University of Minnesota’s Technological Leadership Institute (TLI) to develop a program to “train engineering and adjacent employees on electrical engineering basics at a detailed design level” says Grant Ovsak, leader of Thermo King Americas’ Electrification Center of Excellence. The program’s ultimate goal is to enable development in converting fossil-fuel power-based systems to electrified powerbased systems. “This is an important step in helping move the nation, and the world, to green power sources like hybrid or all-electric through education,” Ovsak says.

“The refrigerated transportation industry is going through the same transition as the automotive industry as we work to move toward more sustainable power sources,” Ovsak explains.

He predicts that, as the Infrastructure Investment and Jobs Act and other transportation funding grows in impact, that will increase demand for transitioning away from fossil-fuel systems to hybrid and fully electric designs. TLI and Thermo King hope other industrial companies will benefit from training programs similar to theirs in order to accelerate the move away from fossil fuels.

1 https://www.mckinsey.com/ industries/electric-power-andnatural-gas/our-insights/pluggingin-what-electrification-can-do-forindustry

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11/28/23 3:06 PM

K E N T U C K Y LOCATE BUILD

DELIVER LOCATE LOCATE BUILD

BUILD DELIVER

DELIVER

Did You Know?

Kentucky has approximately distribution and logistics facilities, employing nearly

600

people..

90,0000 people

@cedkygov

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FIRST PERSON Flynn: I’m not sure what company or industry isn’t using much technology today, at least as it relates to corporate recruitment and investment attraction.

Most everyone I’ve dealt with in my career fits the profile of “a technology company that also does XYZ,” where “XYZ” might relate to manufacturing, distribution, or operations.

Since every business is a tech business to some degree, it’s important for community economic developers to be able to answer a variety of innovation questions, including: Who are the drivers of innovation in your community? In what areas is innovation focused? How has innovation successfully connected to industry in the past? It’s vital that community economic developers understand where (and with whom) innovations are being made in their markets.

Is the optimal ecosystem for companies focused on science and medical much different for companies not operating in those fields? In what ways?

MIKE FLYNN, SENIOR DIRECTOR, ECONOMIC DEVELOPMENT, DESTINATION MEDICAL CENTER (DMC) When expanding or relocating companies research communities, what are the foundational business resources (the optimal “ecosystem”) they should seek to ensure operational success?

Flynn: Throughout my career, almost universally, talent has been the number-one driver of decisions, so I would say any resources a community can bring to bear that support an employer’s ability to identify, recruit, train, and retain talent are foundational. After that, a thriving supply chain and service provider network in your target industry or industries are critical.

For example, in Rochester, MN, where life science and biotech are our primary focus, we also spend a lot of time with our innovation partners at the Mayo Clinic doing what we can to ensure their technologies and opportunities for collaboration are effectively connected to industry.

If a company isn’t selling or using much technology, does it matter if the new locale under review has an ecosystem focused on tech or innovation?

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Area Development 2023 Q4.indd 14

Flynn: I think it is different. In my role at Destination Medical Center (DMC), I spend the bulk of my day working with life science companies needing access to very particular types of talent, highly specialized real estate, and access to clinical partners with unique capabilities. Additionally, these companies need access to a set of service providers and supply chain partners who can help them navigate regulatory requirements, reimbursement models, and a long list of other variables I’ve not necessarily seen in other places I’ve worked.

How can an organization determine if a community’s ecosystem is healthy and/ or a great fit? Any cautionary tales on the topic?

Flynn: When assessing an ecosystem, I’d ask two questions: Who else is here, and what are they doing? Gaining an understanding of the types of companies that are thriving (hiring, raising money, advancing products) will help determine if your business is a fit. Conversely, understanding who is not there — and why they don’t have a presence — also can be informative.

Measuring the health of an ecosystem is trickier. But in my experience, when it comes to a healthy and thriving ecosystem environment, you know it when you see it. My advice is to ask if competitors are present. Are there companies at varying stages of growth and development?

Do people work together and know one another?

Are supply chain answers easy? If you can easily

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tease out answers to these questions, you’re probably in a healthy ecosystem.

How can community leaders facilitate — or even accelerate — the building up of a robust ecosystem? What are the best tools for that activity?

class, and on par with competitive markets found on the East and West coasts.

At DMC we’ve spent the last decade building an innovation district called Discovery Square, which is home to various industry and higher-education tenants, and several Mayo Clinic departments.

We’re now in the process of developing a shared lab concept that will provide another piece of Discovery Square infrastructure, and make private investment in Rochester easier, more cost-effective, and faster.

In the future, we will continue to listen to our local ecosystem to determine what the next infrastructure project needs to be so we can continue improving our competitive position.

Flynn: You build an ecosystem by engaging an ecosystem; engagement through communication is a key tool. You’ve got to get people communicating with one another and with community leaders. You need to be able to easily identify challenges and develop solutions to issues rising to the surface. A very smart person once told me, “No ecosystem is perfect, and if you try to convince me yours is, I’ll know you’re lying. Figure Anything else you’d like to share with out what isn’t working and tell me your solutions for our readers? fixing it.”

Flynn: Don’t underestimate the power of data when Community leadership must be okay with both thinking about your ecosystem plans. Start with asking hard questions good market intelligence and getting tough to determine where Since every business is a tech answers if they want to the community has make improvements. strengths. Avoid making business to some degree, Civic pride, or the decisions based on it’s important for community belief that “everything anecdotes or, worse is awesome,” can be a yet, gut feelings. Figure economic developers to be fatal flaw when it comes out whom your key able to answer a variety of to building a robust customers are based on ecosystem. that intelligence and talk innovation questions.

Communication to them early and often. is a two-way street, Figure out what makes so community leaders should commit to routinely those customers tick, learn about how they make hearing from ecosystem members. They can do this decisions, where they source information, where they by taking the lead in hosting conversations where congregate, what they read, etc. In sum, build your information is exchanged, thoughts and ideas are strategy based on good customer feedback, revisit expressed, solutions are advanced, and supportive it often, and be comfortable adjusting as the data relationships are fostered. changes.

What types of infrastructure are needed to build an ecosystem prepared to serve well the present and future needs of a community?

Flynn: What’s needed in building a successful ecosystem depends on the type of industry you’re chasing. For us in Rochester, our value proposition is directly tied to Mayo Clinic, and the life sciences and biotech industries.

The types of projects we can win will be closely tied to our ability to demonstrate an ecosystem with a vast pipeline of talent at both the entry level (technicians) and highly skilled level (MD/PhD).

As such, any investments we make in workforce development will have value. We also need to demonstrate physical infrastructure that is world-

THE ASSIGNMENT Creating an exceptional business environment to attract certain industries can be a daunting task for any community’s leaders. However, it can be done with focused introspection, research, and strong partnerships. Area Development’s staff editor Lisa Bastian asked Michael Flynn, senior director of Economic Development at Destination Medical Center (Rochester, MN), for his ideas on ecosystem formation.

AREA DEVELOPMENT | Q4 2023

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>

SITE SELECTION

AI 101 for Site Selection A data-driven approach, enabled by AI and other technology, is enabling those charged with site selection to make better informed decisions that will allow their companies to thrive.

By Mark Crawford

S

electing the right location is one of the most important decisions a business can make. This process requires the comprehensive analysis of a host of critical factors. An increasingly key factor that site selection professionals must consider is speed — companies prefer the shortest-possible but still thorough site selection process and/or construction schedule, so they can get to market faster. Speeding up the process, however, requires an investment in technology, such as artificial intelligence (AI).

“With the aid of modern technology, site selection has evolved from a subjective and labor-intensive task into a data-driven, analytical process that leverages vast amounts of information and sophisticated tools,” stated Josh Love,1 co-founder and CEO of Zite AI, an AI technology firm that serves a variety of industries.

Of course, currently the most disruptive/ transformative business technology is AI. Probably the biggest advantage AI has is being able to evaluate huge amounts of data, quickly, which results in faster, better-informed decision-making.

“AI manages all types of commercial real estate transactions, from new sites to renewals, relocations, and more, leveraging your entire lease portfolio, detailed site analysis, and predictive analytics to help you make the best real estate decisions for your business,” stated AI firm Tango Analytics,2 which develops site selection software. “Artificial intelligence, machine learning algorithms, and geographic information systems (GIS) together can help organizations build site models, create sales forecasts, and evaluate real estate opportunities.”

AI shortens time to market by having a role in almost every aspect of the site selection process. By completing these tasks with rapid speed and impressive accuracy, AI makes it much easier for a site selection team to meet compressed timelines.

What AI Can Do AI automates the site selection and feasibility analysis process. It provides high-precision digital tools that enable site selection professionals to select the best sites for their clients, in record speed. A big part of AI’s allure is its ability to analyze large volumes of data quickly. It can identify new patterns or trends that are hidden in the data, which can give a firm a competitive edge in identifying new opportunities.

At one time a largely manual process, over the past few years site selection has become increasingly more digital. Most site selectors have not delved into AI at a deep level — below are some key tasks that AI can do with top accuracy and speed, creating an agility that a site selection team has never experienced before.

By combining GIS with AI, site selectors can evaluate a wide range of data, including market trends, consumer behavior patterns, and infrastructure.

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• Mapping and data analytics: By combining GIS with AI, site selectors can evaluate a wide range of data, including market trends, consumer behavior patterns, and infrastructure (on-site, transportation, logistics).

“By leveraging historical data and algorithms, businesses can develop models that forecast viability and profitability of a site based on data for foot traffic, sales projections, market saturation, and other economic indicators,” said Love. “By relying on predictive analytics, companies can minimize risks and enhance their competitive edge. Geospatial technology and mapping tools provide real-time visualization of data layers, including population density, competitor locations, customer proximity, and other relevant variables.”

• Demographics and market analysis: AI allows site selectors to dive quickly into demographics and market data.

It analyzes key factors such as population size, growth trends, income levels, age distribution, and consumer behavior patterns. This information is vital for determin-

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11/28/23 3:08 PM

ing how well the target market aligns with what the customer is seeking. A huge amount of data exists that AI can analyze quickly — for example, the U.S Census and STI PopStats provide critical details regarding the population of an area, such as age, gender, marital status, ethnicity, income, education, employment, and more. Also useful are STI Spending Patterns, which help “companies make informed decisions on everything from site location, to merchandising, to marketing.”3 • Compare similar sites: In many cases, site selection consultants derive a short list of sites from a much longer list of candidate locations. Not only will AI help create those lists, it will also compare multiple sites, using as many criteria as needed to make the final decision. For example, AI helps selection teams take a deeper look at important factors, such as business environment, crime rates, and even climate risk. Foot traffic data can reveal visitation patterns that can greatly enhance or reduce a property’s viability.

“AI can better analyze the demographics, traffic patterns, geographic details, and other characteristics of the surrounding trade area, including when different parts of the trade area see peak demand,” according to Tango. Also, when searching for an AI vendor, be sure it can combine internal corporate or client data with as many of available data sources as possible, to best evaluate target areas.

• Infrastructure specifics: Easy access to interstate highways, airports, rail, and intermodal facilities is vital for many companies. In addition to proximity, site selectors must factor in time and travel costs (and sometimes weather delays) to major cities, distribution centers, and suppliers.

AI is also a very effective tool for drilling deeper into the data, such as the capacity of utility systems to meet the current and future needs of companies looking to locate in the area. AI can be programmed to review and evaluate local zoning regulations, building codes, and permit requirements. Using this information aids in discussions with local authorities regarding the processes necessary for obtaining permits, as well as identifying any potential restrictions or delays.

deals with the possibility of future expansion on the site. “AI will assess the availability of additional space or adjacent land, as well as the potential for business growth in the area,” said Love. “A site that can accommodate a client’s future needs can save you from the hassle of having to relocate in the later stages.”

Other considerations include assessing the availability and quality of the labor force over the long term in the area. AI can also easily analyze the availability and role of local financial institutions in workforce training.

Future Possibilities With AI, scale or geographic reach is no problem — AI can even be used by companies that want to consider as many factors as possible before deciding on the viability of reshoring. They want to secure a domestic location first, with as many business advantages as possible, before they take the leap.

At some scale within a company’s operations, technology (including AI) is becoming a vital tool in site selection today, allowing for actionable insights and deeper thinking.

“The data-driven approach — enabled by technologies like AI, GIS, data analytics, machine learning, and virtual reality — has revolutionized the site selection process, leading to more informed decisions and higher chances of success,” said Love. “As technology continues to advance, it is expected that site selection will become even more precise, efficient, and strategic, enabling businesses to unlock new opportunities and thrive in an increasingly competitive landscape.”

1 https://www.ziteai.com/news/harnessing-technological-advancements-site-

• Future expansion and growth potential: Of course, most companies are very strategic in their short-term and long-term goals, including having a plan in place that

selection-in-the-modern-era 2 https://tangoanalytics.com/blog/site-selection-software/ 3 https://synergos-tech.com/spending-patterns/

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>

DISTRIBUTION/LOGISTICS

The Logistics Analysis That Drives Industrial Site Selection Finding the optimal site for a logistics facility often involves trade-offs between transportation, labor, and real estate costs, which may be lowered by incentives offered, as well as the need for speed to market.

By Joe Dunlap, Managing Director, Supply Chain Advisory, CBRE Consulting

I

ndustrial real estate is key to establishing an efficient supply chain. There are several critical business imperatives such as growth or new market entry, contraction and cost takeout, mergers and acquisitions or spinouts, changes in the customer promise, and risk mitigation efforts that can create opportunities for change within a company’s supply chain.

Whether significant growth occurs in a short period of time or slower over years, companies experiencing growth, even at a small 3–5 percent compound annual growth rate (CAGR), will bump into capacity constraints. The company might be able to drive short-term efficiency of space, but

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at some point, these capacity constraints trigger the need for additional space options, whether that includes expansions, adding off-site storage, or relocation to a larger building.

Conversely, businesses that are experiencing a flattening or decline in their revenues will look for cost-takeout opportunities, closing facilities, or consolidations.

Mergers, acquisitions, and divestitures impact both of the above to the business. Companies making acquisitions of other businesses with operations in the same geographies may find cost-reduction synergies through the consolidation of some of those redundant operations. In

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some situations, consolidation may close multiple existing operations and merge them into a new, larger facility.

Changes in customer promise, particularly those requiring speed, will often require operations to be closer to the customer in order to meet demand. This can provide some cost savings opportunities if there is a shift from a higher-cost transport mode to a lower-cost transport mode.

The phrase “eggs-in-one-basket” or companies operating their entire business or entire product line from one facility find themselves at risk of not being able to recover if something were to go wrong. Events such as a building fire, earthquake, flood, tornado, or other tragic event could impede the company’s ability to generate revenue.

Each of these is an example of how shifts in business strategy (growth, contraction, mergers and acquisitions, changes in customer promise, and risk mitigation) create changes in the company’s supply chain, which will often create changes in a company’s real estate portfolio.

Logistics Cost Components For Industrial clients, there are a number of logistics cost components that influence site selection decisions: how many facilities, the role of each facility, size, and employee count. Most often, these logistics cost components include transportation costs, variable facility expenses (including labor, benefits, and maintenance), inventory carrying costs (capital captured by products sitting in inventory), fixed facility expenses (rent, utilities, insurance, etc.), and “other” related costs, which often include customer service, order management, and reverse logistics.

Typically, an organization’s total logistics spend breaks down to the following, on average: • Transportation costs – 45 percent to 75 percent • Variable facility expenses – 15 percent to 25 percent • Inventory carrying costs – 12 percent to 16 percent • Fixed facility expenses – 3 percent to 10 percent • Other related costs – 7 percent to 10 percent Each one of these expenses varies across industries, with some industries having high transportation costs but low real estate expenses, and others having low transportation costs but high fixed costs given the number of facilities.

Each one of these expenses should be considered a “trade-off” to determine how to minimize total logistics costs. For example, take an e-commerce retail company that has one location in California and generates $1 billion in revenue. The bulk of their logistics expenses are likely in transportation, as they will most often have to ship cross-country and upgrade from ground parcel to air depending on their customer promise.

Alternatively, a similar company located in the middle of the country may have lower variable, fixed, and inventory carry costs since they are located closer to customers.

If this company were to increase the number of facilities and, consequently, their headcount, they may find that

At some point capacity constraints trigger the need for additional space options, whether that includes expansions, adding off-site storage, or relocation to a larger building. their overall logistics expenses may decline. Why, you ask?

Often it takes only a 1 percent change in transportation expenses to yield, on average, and 8 to10 percent change in real estate. While variable and fixed facility costs increase incrementally, total logistics costs decrease.

Organizations also need to consider the ever-evolving question of logistics costs versus service. Businesses should focus on striking the right balance between acceptable logistics costs versus their speed and how each impacts revenue goals, market share, and customer expectations. Focus too much on the lowest logistics costs and your brand becomes unacceptable to the customer due to slow response time. Or, focus too much on highest service levels, and this begins to negatively impact profit margins.

Being able to find the right balance between logistics costs and service is what organizations should focus on when making supply chain network decisions.

Once pins are on the map, so to speak, most supply chain costs are locked in. According to analysis from AMR Research, roughly 80 percent of a supply chain network’s costs are locked in once strategic and tactical network design decisions are made.1 Included in these decisions are an organization’s manufacturing and supplier networks, distribution networks, inventory placement, inventory levels, and top-level service policies. Meanwhile things like advanced planning and scheduling, ERP systems, and execution are operational decisions which make up the remaining 20 percent of the operational costs.

Finding the Optimal Location So how do we get to the optimal locations, the right number of facilities, and acceptable service? The first analysis a firm should perform is a supply chain network design. Supply chain network design defines the supply configuration that provides the best balance of cost minimization, service excellence, risk mitigation, and complexity management based on customer requirements. As an end result of this analysis, organizations should be able to answer how many facilities are needed, where they are loAREA DEVELOPMENT | Q4 2023

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cated, what the needed facility sizes are, how much talent is needed, and what the business case is.

In a perfect world, alignment between the best building, labor cost, and labor availability exists exactly where your organization needs it. Unfortunately, this is not always the case. For example, let’s take the same company described above and assume the results from the supply chain network design indicate Nashville, Tennessee, would be the optimal location for a primary or secondary facility.

After performing a bit of investigating, this company finds that Nashville does not quite fit their labor needs and expands their search further within a specified radius a short distance away. We call this the “transportation zone of indifference,” or where labor and real estate logistics tradeoffs need to be made relative to transportation costs (the largest chunk of spending).

The next analysis that might be performed is a labor analysis, where talent availability and labor costs are balanced. Next, assume the most optimal market that is found that aligns the supply chain network design and labor analysis is in nearby Franklin, Tennessee. Here, there is another opportunity and added layer of complexity: economic incentives.

The number of jobs and investments that this organization is making may qualify for state and local incentives. This company might begin to work with the local economic development agencies to identify acceptable sites that meet their needs and negotiate with the local authorities for incentive packages.

The last component in the cycle is real estate.

Does the existing site work, does the company need to make changes, or even does it need to build entirely from scratch? All are key decisions made at the final phase of the site analysis.

Finally, after assessing all the tradeoffs between transportation, labor, operating environment, incentives, and real estate, the organization decides on a site, ultimately balancing all of the logistics trade-offs.

Overall, the initial phase in the logistics analysis that drives site selection typically involves some form of supply chain network design, with depth trade-off depending on the specific needs. This is often followed by a labor analysis, incentives assessments, site selection, facility redesign and retrofits, or design, build, implementation of a new facility.

1 https://ptgmedia.pearsoncmg.com/images/9780133017373/ samplepages/0133017370.pdf

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2023

Leading Metro Locations

By Steve Kaelble

22 AREA DEVELOPMENT

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www.areadevelopment.com/LeadingLocations2023

12/1/23 11:49 AM

The leading metro areas are those poised for long-term growth and are often hubs of high-tech industry, where workers may benefit from an affordable cost of living.

W

hat’s the best indicator that a city or metropolitan area is healthy from an economic perspective? There are plenty of factors and indicators to examine, but arguably the best general measure of health can be boiled down to one magic word: growth.

Indeed, if you’re not growing, you’re likely falling behind. It’s a safe bet that the metropolitan areas that fare the best on Area Development’s latest listing of Leading Metro Locations are very much on the upswing and are poised to keep moving in a positive direction.

Area Development partnered with Virginia-based Chmura Economics & Analytics in crunching the numbers and compiling the data shared in the accompanying report and charts. As observed by Patrick Clapp, senior economic consultant, it was vital to gather data as fresh as possible, “especially with the importance of the pandemic and how that disrupted literally every indicator.”

At the same time, a long-term perspective is critical for determining if an area is enjoying a sustainable upward trend that’s more than just a blip, says Chris Chmura, Ph.D., the firm’s founder and CEO. “It’s important to see that a region is growing over time,” she notes.

That’s especially the case these days, when the headlines are filled with news of gigantic projects resulting from such initiatives as the CHIPS and Science Act and the Infrastructure Investment and Jobs Act. Granted, those headlines are happy news, but a recent gleeful development does not a trend make.

“We want to see the staying power of a region,” Chmura says, “sort of like the tortoise and the hare. We want to see consistent growth over time. If it’s just last

12 months, you may have a company that’s moved in, an expansion, a one-time effect.”

“Long-term growth is important to highlight,” Clapp concurs, “as opposed to most recent growth.”

That’s why the Leading Metro Locations study measures data over a five-year timeframe. As Chmura observes, five years ago it was well before COVID-19 turned the world upside-down. Three years ago was right in the midst of that upheaval. And current-day metrics have largely moved on from their pandemic interruptions, at least in the healthiest locations. The areas that fared the best in this ranking are generally the ones whose metrics show them in a significantly better place today than they were before the COVID pandemic, even if they took an understandable dip in the middle.

Indicators Used How cities and regions compare with one another depends a lot on the specific indicators tracked and

Leading Metro Locations are very much on the upswing and are poised to keep moving in a positive direction.

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Top 50 Metro Locations Rank

MSA

Region

Size

Total Score

Prime Economic Workforce Strength Category Category

1 2 3 4

Salt Lake City, UT

Mountain

Big

84.25

95.52

88.73

Olympia-Lacey-Tumwater, WA

Pacific

Mid-Sized

83.74

94.31

89.43

Decatur, AL Miami-Fort Lauderdale-Pompano Beach, FL

South Small South Atlantic Giant

80.55 79.47

94.37 90.81

86.18 88.66

5

Austin-Round Rock-Georgetown, TX

Southwest

Big

79.41

97.35

82.06

6

Missoula, MT

Mountain

Small

77.54

94.45

83.09

7 8 9 10 11 12

Palm Bay-Melbourne-Titusville, FL

South Atlantic Big

77.53

95.09

82.45

Tampa-St. Petersburg-Clearwater, FL

South Atlantic Big

76.94

92.83

84.11

Tallahassee, FL

South Atlantic Mid-Sized

76.67

86.22

90.45

Ogden-Clearfield, UT

Mountain

75.81

94.57

81.24

Naples-Marco Island, FL

South Atlantic Mid-Sized

75.41

93.18

82.23

Crestview-Fort Walton Beach-Destin, FL

South Atlantic Mid-Sized

74.94

93.13

81.81

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

The Villages, FL

South Atlantic Small

74.22

94.96

79.26

Jonesboro, AR

South

Small

73.7

87.92

85.77

Denver-Aurora-Lakewood, CO

Mountain

Big

73.5

89.72

83.78

Boulder, CO

Mountain

Mid-Sized

72.76

91.44

81.32

Brownsville-Harlingen, TX

Southwest

Mid-Sized

72.49

93.09

79.4

Chattanooga, TN-GA

South

Mid-Sized

72.23

89.23

83

Gainesville, GA

South Atlantic Mid-Sized

71.4

93.94

77.46

42 43 44 45 46 47 48 49 50

Big

Nashville-Davidson--Murfreesboro--Franklin, TN South

Big

71.32

91.1

80.22

Rapid City, SD

Plains

Small

71.09

94.15

76.94

Grand Island, NE

Plains

Small

70.72

88.1

82.63

Port St. Lucie, FL

South Atlantic Mid-Sized

69.99

91.08

78.91

Colorado Springs, CO

Mountain

Big

69.89

91.3

78.59

Boise City, ID

Mountain

Big

69.65

91.45

78.2

Dallas-Fort Worth-Arlington, TX

Southwest

Giant

68.97

90.03

78.94

Lake Havasu City-Kingman, AZ

Southwest

Mid-Sized

68.83

93.84

74.99

Cape Coral-Fort Myers, FL

South Atlantic Big

68.41

94.86

73.55

Orlando-Kissimmee-Sanford, FL

South Atlantic Big

68.08

90.86

77.22

Knoxville, TN

South

Big

68.07

88.16

79.9

Jacksonville, FL

South Atlantic Big

68.01

92.49

75.52

Longview, WA

Pacific

Small

67.54

90.15

77.39

College Station-Bryan, TX

Southwest

Mid-Sized

66.57

87.38

79.19

Charleston-North Charleston, SC

South Atlantic Big

66.55

91.38

75.17

Madison, WI

Midwest

Big

66.16

88.64

77.53

Deltona-Daytona Beach-Ormond Beach, FL

South Atlantic Big

66.02

94.56

71.47

Bend, OR

Pacific

Mid-Sized

65.77

93.52

72.25

Seattle-Tacoma-Bellevue, WA

Pacific

Big

65.75

89.08

76.67

Phoenix-Mesa-Chandler, AZ

Southwest

Big

64.97

87.45

77.52

Sebastian-Vero Beach, FL

South Atlantic Mid-Sized

64.81

92.81

72

Reno, NV

Mountain

Mid-Sized

64.67

91.73

72.94

Pensacola-Ferry Pass-Brent, FL

South Atlantic Mid-Sized

64.53

89.82

74.72

El Centro, CA

Pacific

Mid-Sized

64.51

88.79

75.73

St. George, UT

Mountain

Mid-Sized

64.5

90.9

73.6

North Port-Sarasota-Bradenton, FL

South Atlantic Big

64.31

94.99

69.33

Salem, OR

Pacific

Mid-Sized

64.1

87.21

76.89

Punta Gorda, FL

South Atlantic Mid-Sized

63.95

94.69

69.25

Florence, SC

South Atlantic Mid-Sized

63.63

86.5

77.13

Blacksburg-Christiansburg, VA

South Atlantic Mid-Sized

63.3

86.93

76.38

Lexington-Fayette, KY

Midwest

63.09

81.58

81.51

Mid-Sized

Indicates top performer in category

24 AREA DEVELOPMENT

Area Development 2023 Q4.indd 24

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12/1/23 11:50 AM

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Big / Giant Metro Locations Top 15

Mid-Sized Metro Locations Top 15

MSA

Total Score

Overall Rank

1

Salt Lake City, UT

84.25

1

1

Olympia-Lacey-Tumwater, WA 83.74

2

2

Miami-Fort LauderdalePompano Beach, FL

79.47

4

2

Tallahassee, FL

76.67

9

3

Austin-Round RockGeorgetown, TX

79.41

5

3

Naples-Marco Island, FL

75.41

11

4

12

77.53

7

Crestview-Fort Walton BeachDestin, FL

74.94

4

Palm Bay-MelbourneTitusville, FL

5

Boulder, CO

72.76

16

5

Tampa-St. PetersburgClearwater, FL

76.94

8

6

Brownsville-Harlingen, TX

72.49

17

6

Ogden-Clearfield, UT

75.81

10

7

Chattanooga, TN-GA

72.23

18

7

Denver-Aurora-Lakewood, CO

73.5

15

8

Gainesville, GA

71.4

19

8

Nashville-Davidson-Murfreesboro--Franklin, TN

71.32

20

9

Port St. Lucie, FL

69.99

23

9

Colorado Springs, CO

69.89

24

10

Lake Havasu City-Kingman, AZ

68.83

27

10

Boise City, ID

69.65

25

Dallas-Fort Worth-Arlington, 68.97 TX

11

College Station-Bryan, TX

66.57

33

11

26

12

Bend, OR

65.77

37

12

Cape Coral-Fort Myers, FL

68.41

28

13

Sebastian-Vero Beach, FL

64.81

40

13

Orlando-KissimmeeSanford, FL

68.08

29

14

Reno, NV

64.67

41

14

Knoxville, TN

68.07

30

15

Jacksonville, FL

68.01

31

15

Pensacola-Ferry Pass-Brent, FL

64.53

42

Rank

how they are weighted. To learn the full details of the methodology of this particular examination, check the accompanying explanatory sidebar.

Generally speaking, though, some of the important factors include the local gross domestic product and how it’s trending, unemployment rates, what kinds of jobs are growing, how well the needs of employers are matching with what the labor market has to offer, and the activity in such hot sectors as high-tech manufacturing and R&D, and other occupations linked to science, technology, engineering, and math (STEM).

There’s good reason to pay close attention to hightech industries when gauging the relative strength of a

26 AREA DEVELOPMENT

Area Development 2023 Q4.indd 26

Rank

MSA

Total Overall Score Rank

metropolitan area — that is where much of the economic activity can be found and where much of the future is headed. The Milken Institute also studies the economic strength and health of cities and metro areas, and in its latest report,1 it notes that “high tech and the digital economy played a key role in the country’s recovery from the pandemic.”

Even in the midst of the pandemic downturn, the high-tech sector grew significantly between 2020 and 2021, far above the national average. Milken notes that such outsized growth continues a trend dating back years before the pandemic.

As Clapp observes, in some indicators, there’s a

www.areadevelopment.com/LeadingLocations2023

12/1/23 11:51 AM

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Commentary The 2023 Top Metros Show a Stark Shift in Regional Preferences

Small Metro Locations Top 15 Rank

MSA

Total Overall Score Rank

1

Decatur, AL

80.55

3

2

Missoula, MT

77.54

6

3

The Villages, FL

74.22

13

4

Jonesboro, AR

73.7

14

5

Rapid City, SD

71.09

21

6

Grand Island, NE

70.72

22

7

Longview, WA

67.54

32

8

Parkersburg-Vienna, WV

62.75

53

9

Brunswick, GA

62.55

55

10

Jefferson City, MO

62.1

59

11

Beckley, WV

61.81

62

12

Fond du Lac, WI

61.63

65

13

San Angelo, TX

60.76

68

14

Walla Walla, WA

60.23

74

15

Manhattan, KS

60.09

75

lot of variation from one region to another. The STEM workforce and advanced manufacturing, for example, might be significantly stronger in some places, while languishing in other metro areas. Other indicators have less variation across the board — unemployment, for example, is pretty low all over the place right now.

Clapp also notes that overall strength is a product of all of the factors combined — rather than totally cleaning up in just one category, it’s preferable to be in a decent place on all of them. “Salt Lake City didn’t actually rank the highest for any specific indicator, but on average had the best ranking,” he notes.

As employees continue to work remotely post-pandemic, small regions with lower living costs moved up in the rankings.

The top 50 Leading Metro Locations in 2023 depict an economy that is still feeling the aftershocks of Covid nearly three years after it hit the U.S. shorelines. Giant metropolitan areas such as New York and Los Angeles did not make it in the top 50 and lost a collective 732,065 people from 2020 through 2023, while seven small regions peppered the top 50 metro locations and gained 68,443 population over the same period as individuals took advantage of the opportunity to work remotely and departed from some high cost-ofliving areas.

Florida held the top spot for the most attractive locations in 2023 with 16 metros in the top 50.

Collectively, the population in those metro areas swelled by 848,527 from the start of the pandemic through 2023.

The top locations in 2023 show a stark shift in preferences compared to the list produced before the pandemic in 2019. The top three locations in 2023 went to Salt Lake City, Utah; Olympia, Washington; and Decatur, Alabama.

A slight change in methodology that brought in more recent data such as job postings created a small shift in regions. However, top ranked Reno, Nevada, in 2019 dropped to a rank of 41 in 2023.

Second ranked San Jose, California, in 2019 underwent a seismic shift, plunging to 207 in 2023.

The only California metro in the leading locations was El Centro with a ranking of 43. Unlike most metro areas in California where the cost of living is on average 41 percent higher than in the United States, El Centro’s cost of living is just slightly above that of the nation. The lower cost of living likely helped support growth in the region that saw an annual average 10.2 percent gain in manufacturing employment over the three years ending with the second quarter of 2023.

The South Atlantic region was by far the most attractive location with 20 metros in the top 50 followed by the Mountain region with nine metros scattered across five states. Only two regions were not represented in the top 50 locations. The MidAtlantic failed to make the list with Trenton-Princeton, New Jersey, ranking the highest at 73, with a score of 60.3. New England was also absent with Portland, Maine, scoring 58.8 and ranking 91.

By Dr. Chris Chmura, Founder, CEO, and Chief Economist, Chmura Economics & Analytics

28 AREA DEVELOPMENT

Area Development 2023 Q4.indd 28

www.areadevelopment.com/LeadingLocations2023

12/1/23 11:52 AM

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Columbia

Home to Port St. Lucie, the #10 fastest-growing large city in the U.S.

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Commentary Top Metros Provide Educated Workforces and High Quality of Place This scorecard clearly shows that the landscape of workforce trends across the United States is intricate, diverse, and highly localized.

While the results of the analysis inform on potential labor force advantages across the various markets, delving deeper into the unique, localized strengths (and weaknesses) of a market is important in determining the viability of the labor force for a company.

At a high level, all locations are dealing with a similar subset of issues that will ultimately influence their ability to attract, retain, and develop the needed talent to support employers. Demographic trends show a significant portion of the workforce “aging out” faster than it is “aging in.” A full 90 percent of baby-boomers are expected to leave the workforce by 2030. Considering the declining birth rate, increasing mortality rate, and a historically declining labor force participation rate, the replacement of the workforce will require significant advances in technology, an altered approach to immigration, and a focus on “family-friendly” policies that unlock workforce participation. These facts underscore the importance of policies that invest in human capital, education, and regional infrastructure to foster the growth and development of labor markets locally and nationally.

If we shift focus to the often-overlooked locations among the rankings — the smaller/medium cities — we see that these markets may bear distinctive strengths and untapped potential that make them promising hubs for a variety of industries. For example, Reno, Nevada (overall rank #41, prime workforce rank #26, medium-sized metro rank #14) is a great case study of a market that has garnered a significant amount of investment from technology, manufacturing, and logistics companies in the past couple years, including Tesla ($3.6B, 3,000 jobs) and Redwood Materials ($3.5B, 700+ jobs).

These smaller and medium-sized markets, while not as prominent as major urban centers, exhibit unique strengths and growth potential, making them attractive destinations for companies looking to harness the power of a skilled workforce and emerging economic opportunities.

Prime Workforce Top 30 Metros Rank

MSA

Score

1

Austin-Round Rock-Georgetown, TX

97.35

2

Myrtle Beach-Conway-North Myrtle Beach, SC-NC

95.86

3

Salt Lake City, UT

95.52

4

Palm Bay-Melbourne-Titusville, FL

95.09

5

North Port-Sarasota-Bradenton, FL

94.99

6

The Villages, FL

94.96

7

Cape Coral-Fort Myers, FL

94.86

8

Twin Falls, ID

94.83

9

Punta Gorda, FL

94.69

10

Ogden-Clearfield, UT

94.57

11

Deltona-Daytona Beach-Ormond Beach, FL

94.56

12

Missoula, MT

94.45

13

Decatur, AL

94.37

14

Olympia-Lacey-Tumwater, WA

94.31

15

Rapid City, SD

94.15

16

Gainesville, GA

93.94

17

Lake Havasu City-Kingman, AZ

93.84

18

Bend, OR

93.52

19

Naples-Marco Island, FL

93.18

20

Crestview-Fort Walton Beach-Destin, FL

93.13

21

Brownsville-Harlingen, TX

93.09

22

Tampa-St. Petersburg-Clearwater, FL

92.83

23

Sebastian-Vero Beach, FL

92.81

24

Jacksonville, FL

92.49

25

Jacksonville, NC

92.29

26

Reno, NV

91.73

27

Boise City, ID

91.45

28

Boulder, CO

91.44

29

Coeur d'Alene, ID

91.44

30

Charleston-North Charleston, SC

91.38

By Matt Niehoff; Senior Consulting Analyst; Location & Labor Analytics; Logistics & Industrial Services, Americas; Cushman & Wakefield

30 AREA DEVELOPMENT

Area Development 2023 Q4.indd 30

www.areadevelopment.com/LeadingLocations2023

12/1/23 11:52 AM

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Commentary Metros With Solid Prime Workforces Garner Significant Investment Small and medium-sized metros with a pipeline of educated workers at a competitive cost are attracting companies looking for long-term growth.

The leading metros ranking aligns closely with many of the U.S. locations that the CBRE location strategy consulting team sees rising to the top of our clients’ shortlists for active site selection requirements. Our clients on the office-side are seeking to identify net new locations for hiring that will position them as an “employer of choice” with the ability to attract and retain a market’s top talent.

The process for evaluating potential new locations typically seeks to optimize between three areas: talent supply and quality, talent cost, and the local competitive environment. Metrics in each of these categories are evaluated to understand not just today’s market conditions but also its historical performance and likely future trajectory to ensure long-term sustainability for our clients.

The U.S. locations that tend to perform best are small to medium metros with robust university talent pipelines and above-average population growth driven by in-migration. Markets with a balanced competitive environment as measured by turnover rates, job posting volume, and wage inflation also perform best in that they pose less talent attraction and retention risk for our clients over the longer term.

Some of the top-ranked metros in Area Development’s report that we also see appearing frequently on the shortlist for office clients include places such as Salt Lake City-Provo, UT; Missoula, MT; Tampa, FL; Jacksonville, FL; Phoenix, AZ; and Charleston, SC (among others).

While these locations have many differences, they’re similar in that they are all growing geographies with an educated workforce that is generally not oversaturated by competition, and they present talent cost savings opportunities, especially versus gateway coastal markets. On top of these factors, these locations also boast high quality of place and unique local character, which is attractive for clients looking to promote the relocation of employees from existing offices to their newly opened locations.

By Chris Volney, Managing Director, CBRE Consulting

32 AREA DEVELOPMENT

Area Development 2023 Q4.indd 32

There’s good reason to pay close attention to high-tech industries when gauging the relative strength of a metropolitan area.

Southwest and Southeast Lead Just behind Salt Lake City on the Leading Metro Locations list is the Olympia area of Washington. Those who follow economic development news won’t be surprised to see a lot of high-level representation from the Southwest to the Southeast, as well as Mountain States. More than a quarter of the top 20 metros are in Florida, in fact, with additional entries in Alabama, Arkansas, Colorado, Georgia, Montana, Tennessee, Texas, and Utah.

What doesn’t show up as much near the top are locations in California, nor those in the Northeast. That doesn’t necessarily surprise the researchers, though, given that workforce migration trends can reflect such factors as housing costs.

Some workers, Chmura suggests, could be picking up roots and moving to more affordable areas that happen to have job growth in hot sectors such as technology.

Indeed, the highest-placing California location, El Centro, happens to be one part of the state where the cost of living is not all that out of line with the rest of America, unlike other large California metros where costs are high. Clapp concurs that with regard to economic development and location decisions, “We’ve definitely been hearing in our conversations that housing is really moving up the list in terms of importance.”

Other National Rankings Similar regional trends seem to hold with other national rankings of metro areas. The Milken Institute’s previously referred to Best-Performing Cities report, for example, puts Provo, Utah, at the top of Tier 1 large cities, followed by the Austin area of Texas, Raleigh in North Carolina, the always harmonious Nashville, and the Boise metro area in Idaho. None of that organization’s highly ranked Tier 1 cities are in California or the Northeast, or even the Midwest. Milken’s 2023 report notes that the attractive high-tech sector continues to be a big force in large cities but adds that “many top-performing small cities experienced accelerated high-tech growth over the last five years.”

Another study of the relative strengths of metro

www.areadevelopment.com/LeadingLocations2023

12/1/23 11:52 AM

Thomas & Hutton helps communities attract industries through site selection, planning, and workforce development.

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Top Regional Metros Plains MSA

Total Score

Overall Rank

1

Rapid City, SD

71.09

21

2

Grand Island, NE

70.72

22

3

Topeka, KS

62.59

54

4

Sioux Falls, SD

62.14

58

5

Manhattan, KS

60.09

75

Rank

Mountain Rank

MSA

Total Score

Overall Rank

1

Salt Lake City, UT

84.25

1

2

Missoula, MT

77.54

6

3

Ogden-Clearfield, UT

75.81

10

4

Denver-AuroraLakewood, CO

73.5

15

5

Boulder, CO

72.76

16

6

Colorado Springs, CO

69.89

24

7

Boise City, ID

69.65

25

8

Reno, NV

64.67

41

9

St. George, UT

64.5

44

10

Provo-Orem, UT

62.82

52

Pacific Rank

MSA

Total Score

Overall Rank

1

Olympia-LaceyTumwater, WA

83.74

2

2

Longview, WA

67.54

32

3

Bend, OR

65.77

37

4

Seattle-TacomaBellevue, WA

65.75

38

5

El Centro, CA

64.51

43

6

Salem, OR

64.1

46

7

Walla Walla, WA

60.23

74

8

San FranciscoOakland-Berkeley, CA

58.27

92

9

San Diego-Chula Vista-Carlsbad, CA

57.26

107

10

Stockton, CA

57.14

111

34 AREA DEVELOPMENT

Area Development 2023 Q4.indd 34

Southwest MSA

Total Score

Overall Rank

1

Austin-Round Rock-Georgetown, TX

79.41

5

2

Brownsville-Harlingen, TX

72.49

17

3

Dallas-Fort Worth-Arlington, TX

68.97

26

4

Lake Havasu City-Kingman, AZ

68.83

27

5

College Station-Bryan, TX

66.57

33

6

Phoenix-Mesa-Chandler, AZ

64.97

39

7

Albuquerque, NM

62

60

8

El Paso, TX

62

61

9

San Angelo, TX

60.76

68

10

Midland, TX

59.2

82

Rank

www.areadevelopment.com/LeadingLocations2023

12/1/23 12:24 PM

New England Rank 1

Portland-South Portland, ME

58.75

91

2

Bangor, ME

57.39

105

3

Boston-Cambridge-Newton, MA-NH

56.82

115

4

Manchester-Nashua, NH

55.35

131

5

Burlington-South Burlington, VT

51.26

168

Midwest Rank

Total Overall Score Rank

MSA

Mid-Atlantic MSA

Total Overall Score Rank

Rank

Total Overall Score Rank

MSA

1

Madison, WI

66.16

35

1

Trenton-Princeton, NJ

60.29

73

2

Lexington-Fayette, KY

63.09

50

2

Dover, DE

59.1

85

3

Jefferson City, MO

62.1

59

3

Salisbury, MD-DE

56.77

116

4

Fond du Lac, WI

61.63

65

4

Lancaster, PA

56.69

117

5

Lafayette-West Lafayette, IN

60.72

69

5

Lebanon, PA

55.85

124

6

Lansing-East Lansing, MI

60.63

70

7

Indianapolis-CarmelAnderson, IN

58.94

87

8

Elkhart-Goshen, IN

58.9

88

9

Jackson, MI

58.09

94

10

Bloomington, IN

58.07

95

South Atlantic Rank

South Rank

MSA

MSA

Total Overall Score Rank

Total Overall Score Rank

1

Miami-Fort Lauderdale-Pompano Beach, FL

79.47

4

2

Palm Bay-MelbourneTitusville, FL

77.53

7

3

Tampa-St. Petersburg76.94 Clearwater, FL

8

4

Tallahassee, FL

76.67

9

5

Naples-Marco Island, FL

75.41

11

6

Crestview-Fort Walton Beach-Destin, FL

74.94

12

7

The Villages, FL

74.22

13

8

Gainesville, GA

71.4

19

9

Port St. Lucie, FL

69.99

23

10

Cape Coral-Fort Myers, FL

68.41

28

1

Decatur, AL

80.55

3

2

Jonesboro, AR

73.7

14

3

Chattanooga, TN-GA

72.23

18

4

Nashville-Davidson-Murfreesboro-Franklin, TN

71.32

20

5

Knoxville, TN

68.07

30

6

Daphne-FairhopeFoley, AL

62.51

56

7

Huntsville, AL

62.45

57

8

Fort Smith, AR-OK

61.73

64

9

Montgomery, AL

60.38

72

10

Auburn-Opelika, AL

59.95

77

AREA DEVELOPMENT | Q4 2023

Area Development 2023 Q4.indd 35

35

12/1/23 12:24 PM

areas is regularly conducted by the Brookings Institution.

Its Metro Monitor2 has a bit different methodology, tracking not just economic growth but also a variety of factors related to prosperity, overall inclusion, racial inclusion, and geographic inclusion.

The Brookings overall growth index shows similarly noteworthy strength in the Southeast, especially Florida, as well as Texas, although it does give high growth marks to a number of California cities, too. When it comes to racial inclusion, Michigan metro areas perform quite well, Texas not bad at all, but Florida and California not as strongly. Salt Lake City and Nashville are among the metro areas with impressive results in all of the Brookings overall measures.

Though various studies of metro area strength will always vary from one year to another, and from one ranking to another, it remains true that cities are where it’s at when it comes to growth and prosperity. As Milken notes, “U.S. metropolitan areas are proving their resilience in the face of the economic turmoil created by the pandemic.

Despite changing domestic migration patterns, cities remain the main centers of economic activity.”

1 https://milkeninstitute.org/report/best-performing-cities-2023 2 https://www.brookings.edu/articles/metro-monitor-2023/

2023 Leading Metro Locations Methodology Area Development ranked 384 MSAs across 24 economic and workforce indicators pulled from eight (8) data sets — each set containing a five-year change, a three-year change, and a one-year change indicator — originating from the U.S. Bureau of Labor Statistics, U.S. Census, and JobsEQ® by Chmura Economics & Analytics.

Each MSA earned a ranking within each of the 24 indicators based on its statistical performance within that indicator. The MSA with the best performance in a certain indicator earned a ranking score of “1” and the MSA with the worst performance earned a ranking score of “384.”

To calculate “Overall Ranking,” we created a score of total ranking across all indicators for each MSA. The indicators were weighted with five-year change indicators carrying the most weight and the one-year indicators carrying the least weight.

We also calculated overall ranking across two

36 AREA DEVELOPMENT

Area Development 2023 Q4.indd 36

categories: “Prime Workforce” and “Economic Strength.” Within the “Prime Workforce” category we calculated rankings within two sub-categories: “Workforce Readiness” and “Wage and Salary Growth.” Within the “Economic Strength” category we calculated rankings within two sub-categories: “Core Economic Indicators” and “Job Growth Indicators.” To calculate the overall ranking within these two categories, and four sub-categories, we produced a score and average ranking across only certain indicators.

We have also produced a set of lists, using overall ranking, grouping the MSAs by each of the 9 U.S. regions and by size: “Small” (population < 160,000), “Mid-sized” (population 160,000-600,000), and “Big/Giant” (population > 600,000).

Full results and interactive chart are available at areadevelopment.com/LeadingLocations2023.

www.areadevelopment.com/LeadingLocations2023

12/1/23 11:53 AM

Make it a mid-market location.

There’s large, there’s small, and then there’s the right size for your company.

Greater Richmond, Va., should be on your list because it was at the top of other smart companies, such as the LEGO Group, Meta, the CoStar Group and Walgreens.

They all chose this region for megaproject operations without the megaproject cost of a big-city metro.

For your next site location project, select Greater Richmond, Va., capital of one of CNBC’s top states for business.

AreaDevelopment_Aug23b.indd 1

LocateInRichmond.com

8/29/2023 5:15:46 PM

FOOD PROCESSING

Three Key Location Factors for F&B Industrial Users to Consider Workforce skills and availability, the need for speed to market, and the condition of existing infrastructure are all key factors in food and beverage companies’ location decisions.

By Bob West, Vice President, Food &Beverage – Industrial, Ryan Companies

S

electing the right location for a food and beverage industrial facility is a multifaceted decision that requires an understanding of current market trends and extensive planning.

With the F&B market growing at a rapid pace — now valued at $7.2 billion and projected to exceed $9.2 billion in 2027, according to the 2023 Food and Beverages Global Market Report1 — it is a crucial time to secure a location that supports future business growth and operational efficiencies.

Choosing the right location is paramount because it can make or break the facility’s output. It’s important to determine each potential site’s opportunities and challenges and consider all aspects that enable or hinder a facility’s success. To meet growing consumer demand, it is crucial to place facilities in locations equipped with strong labor market fundamentals, suitable infrastructure, and the ability to meet speed-to-market requirements.

By developing a solid site-selection strategy and collaborating with local economic development arms in the areas you plan to locate, F&B users can come out on top as the race for space tightens in the industrial sector.

Here are three questions F&B operators should ask when deciding where to place their next facility.

1. What Does the Labor Market Look Like?

Current workforce availability, or lack thereof, represents one of the biggest obstacles to F&B manufacturing in the United States. According to FDI Intelligence,2 the food and beverage sector has announced 86 manufacturing and/or distribution projects within the first half of 2023. This represents

38 AREA DEVELOPMENT

Area Development 2023 Q4.indd 38

the creation of more than 6,800 jobs. Analyzing and understanding the labor market in a proposed region or location ensures new facilities can be adequately staffed with a workforce that meets the role requirements.

Having an up-to-the-minute view of the availability of labor provides an understanding of the education level of available talent to fill these positions, current average wages, and the unemployment rate in the proposed region.

Automation has become increasingly prevalent in the F&B industry, leading to a shift in the skills required for the typical F&B warehouse workforce. Facilities must now have a more educated staff with a specialized, tech-oriented skill set. Warehouse work has shifted from manual labor to the operation of complex equipment because of automation.

State and local governments understand the state of their labor markets. Working with regional and local economic development corporations (EDCs) and analyzing labor studies can provide critical knowledge

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

11/28/23 3:09 PM

we

lOve what’s next-ers momentum builders game changers companies with vision world-first innovation industry revolutionizers competitive edge seekers

Wisconsin loves to help all sorts of companies find their version of success. That includes yours.

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when making these decisions. EDCs track a collection of beneficial information such as: • Community college graduation rates and types of degrees awarded • Local wage rates for varying positions • Unemployment rates and availability of the labor market • Traffic patterns in the region that determine the reasonable radius from which to recruit staff Many economic development departments, e.g., in Georgia, Kentucky, and North Carolina, have dedicated departments for the F&B sector, making them an even more valuable resource.

2. What Is the Speed to Market You Are Trying to Hit? For many operators, the quickest way to ramp up operations is to retrofit an existing facility, which can be readily available, depending on the market. However, there can be complications with using that route. For one, the facility will need to be brought up to current USDA standards to ensure food safety policies are being followed. Another challenge is infrastructure requirements. Power and water will likely need to be outsourced to meet operational demands, especially with modern food production facilities.

There are some exceptions when it comes to retrofitting. Ryan Companies recently worked with a large e-commerce company planning to expand its F&B network by retrofitting existing buildings in areas where demand for its products is high. This allows the company to experiment with operational processes before investing in greenfield facilities or new build-tosuit development.

Building greenfield facilities can also lead to high costs such as potential rezoning efforts. However, a greenfield project allows you to build for efficiency rather than modifying previous work. Ultimately, the decision comes down to your optimal speed to market and when you would like it all to come back to you. Users are typically better off building from the ground up because the facility is being built to the exact specifications of your operations and guarantees efficiency.

It’s also important to note that, in some cases, there are economic development entities that specifically hold land for manufacturing facilities instead of logistics facilities, which gives more flexibility to vacate spaces.

Manufacturing facilities are typically extensively built out to remain on a specific site for decades, making it a better deal for the cities that own the land. These municipalities are more receptive to F&B users with complex build-outs and long-term lease requirements for

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their production facilities. They can offer assistance for building a ground-up facility. Go where you’re wanted — especially if the need for speed is essential.

3. What Infrastructure Is in Place at Your Proposed Location?

Water, power, and sanitation are the most significant drivers of infrastructure for any facility. Given the substantial power requirements, this only becomes truer for an F&B facility. According to the United Nations Environment Program (UNEP), the F&B sector consumes 30 percent of the world’s total energy.3 A large source of this power consumption is derived from equipment operations in these facilities. When discussing the F&B industry, 80 percent of the time we are referring to cold storage, which has very important power access requirements.

To entice industrial users to operate in their local jurisdictions, some EDCs will go the extra mile to include infrastructure incentives in their development agreements such as footing the bill for infrastructure improvements or excess usage. When scouting out new locations, it’s crucial to see which municipalities are more liberal with their incentive packages because it can save you money in the long run. EDCs can also provide information on how recently existing infrastructure was updated to determine if it can power the facility’s operational load.

Currently, Ryan Companies has a project underway in Texas where a new power grid and 20 new generators were brought in to support a new campus throughout the Lone Star State’s sweltering summer months. This project exemplifies the importance of scouting location incentive packages. If this project’s power grid were to fail, the city of San Antonio would finance the use of the generators.

Considering the growth that the F&B industry has experienced in recent years and the projected expansion in the decade ahead, it’s imperative to find locations equipped to handle this swell in demand. Some simply play the game better than others. Diligence in site selection and recognizing the impact a smart site selection strategy can have will ensure your facility remains efficient and resilient through the inevitable ebbs and flows of the marketplace.

1 https://www.thebusinessresearchcompany.com/report/food-andbeverages-global-market-report 2 https://info.siteselectiongroup.com/blog/site-selection-andeconomic-trends-impacts-on-food-and-beverage 3 https://energy5.com/green-revolution-how-businesses-in-food-beverage-lead-in-energy-conservation

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

11/28/23 3:10 PM

FOOD PROCESSING

Future-Proofing Food & Beverage Facilities: Why Site Selection Matters Access, utilities, workforce, regulatory issues and future-proofing are all key considerations for choosing the right location for a long-term investment.

By Brian Miller, Executive Vice President – Industrial, Gresham Smith

rail, road, or water can limit production capacity or the ability to find the required workforce. A properly sited facility can operate when a competitor’s facility is offline due to a natural disaster or efficiently expand when the demand for the product increases. In addition, the right site can also minimize risk associated with GMP/cGMP processes, such as rodent control.

This article discusses developing a plan that not only serves the purpose of developing a strategy but also forces consideration of other aspects of the process. Refining the plan and working through the major hurdles of environmental factors, access, utilities and regulatory considerations will provide a more robust strategy anchored in Blue Bell facility in Sylacauga, Alabama, designed by Gresham Smith. a logical process that creates confidence and efficiency among all site selection team members. ite selection is not a process to be taken lightly Below, I’ll explain the factors every organization should nor hurried. It should be approached with the consider when looking to mitigate risk, achieve success, same logic, reasoning, and priority as any other and uncover the best location for the organization’s next major business decision. Selecting the wrong site can facility. lead to costly mistakes for companies that can last for decades to come. Done right, site selection can prove to be as much of an asset as the product itself. Many Priority No.1: Consider the organizations see site selection as a task and don’t truly End at the Beginning consider the benefits that the right location can provide, The first step in achieving success is understanding especially in FDA-regulated markets such as food and what success looks like. The same is true for site selecbeverage. This added layer of regulation requires facilition. The process should begin with the end in mind; ties to meet good manufacturing practice (GMP), and however, defining the end can prove to be difficult. When some organizations take GMP a step further to current looking for the next site, consider starting with a basis good manufacturing practice (cGMP). With cGMP, conof selection (BOS) document that contains input from siderations such as animal control, testing, validation, all internal stakeholders. This will become the guidquality, and cleanliness become requirements and not ing document that can be shared with the rest of the simply business operational goals. internal and external site selection team. This single For example, selecting a site in a flood-prone region document will provide the framework for creating a team can expose the organization to supply disruptions. and help maintain cohesion by providing efficient and Locating the facility in an area with limited access to effective communication.

S

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Begin by conducting a SWOT analysis to examine your company’s strengths, weaknesses, opportunities, and threats that will help determine the business case for the facility. Use those findings to develop key performance indicators (KPIs) and then consider additional topics that are seen as short-term and long-term trends for the specific sub-market within the overall industry.

Lastly, include any ancillary goals or metrics that the project team considers.

Once this list is generated, group similar items and rank these groups by order of importance. Upon completion of this process, review the list again, this time considering current and future trends in technology, i.e. lights out/dark factory requirements such as reliable connectivity, backup power, computing capabilities/power densities. This BOS document will help guide and inform the decisions throughout the entire site selection process.

Priority No. 2: Environmental Factors

Many organizations see site selection as a task and don’t truly consider the benefits that the right location can provide, especially in FDA-regulated markets such as food and beverage.

An early assessment of environmental risks is critical. This may include weather and climate threats such as flooding, droughts, earthquakes, hurricanes, and tornadoes; it can also involve site constraints of existing natural resources like wetlands and streams that require special permitting. Weather can affect how and when you work. Consider the potential impact to the construction project and the long-term resilience of the facility. While mankind has learned to live with the weather, it can still disrupt operations and damage the physical facility.

Other environmental factors are less direct in their impact on the facility location. For example, locating a facility close to a water source is a benefit in terms of utilities but can also be a breeding ground for insects that may be difficult to eliminate and prevent from gaining access to the GMP areas of the facility.

Priority No. 3: Access Access to both the right type of workforce and the right transportation infrastructure is another key consideration.

If the recent past has taught us nothing else, it has

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taught us the value of the workforce. Depending on the site that’s chosen, the correct workforce may or may not already be present. Part of the site selection process should involve asking workforce-related questions. Consider the following: • What is the facility’s radius of influence or the radius from the facility that will be affected by the facility’s operations?

• How far is the anticipated commute for the potential workforce?

• What is the current workforce capacity within the radius of influence?

• What is the current level of training of the potential workforce?

• What other competition for the workforce is in the same area? How does this facility/organization compare in terms of benefits, pay, job satisfaction, opportunity, and training?

• What educational institutions are within the area that can be strategic partners for workforce development?

Next, think in terms of logistics. Similar to workforce, logistics can greatly impact a facility’s operation and chances of success. This involves the understanding of the current product development process and incorporating any known changes that may be coming to the industry, such as alternative protein development, 3D printing, drone delivery, etc.

These all impact the logistics of the facility. For example, switching from a traditional protein-based process to an alternative protein-based process could affect the type of deliveries the facilities is accepting. A few of the questions that should be asked with regards to access include: • What type of raw materials/ingredients are being anticipated, and how do they arrive (i.e., rail, barge, road, combination)?

• What is the finished product, and how it is shipped (i.e., rail, barge, road, combination)?

• Are just-in-time (JIT) deliveries being utilized, or will warehousing be required?

• If trucks are being utilized, how many will be needed, and will the number of inbound and outbound trucks affect the local traffic patterns and cause congestion?

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• How are the trucks queued before entering and leaving the facility?

• What is the security plan for the entire site?

• Is this site a free-trade zone (FTZ), and will it require additional security?

• How does the facility maintain its cGMP standards around the exterior?

Priority No. 4: Utilities Utilities are an essential part of any facility, and in the current environment, they are all becoming scarcer.

The traditional rules of thumb for water, power, and gas consumption rarely apply in today’s modern production facilities. The incorporation of technology — such as electronic controls, robotics, automatic storage and retrieval systems (ASRS), etc.— has not only increased power demand, it also means there has to be an increased emphasis on the quality and reliability of the power.

Water and wastewater is another utility often taken for granted in parts of the country, but even today it must be an identified risk with an associated mitigation strategy.

Gas and potentially hydrogen are other municipal utilities that should be considered.

The reliability of these utilities must be evaluated, and resiliency mitigation measures should be considered and, at the very least, planned for. These strategies can involve dedicated on-site power generation from cogeneration, simple gas cycle generation, or the addition of small modular reactors (SMR) as they become more readily available. Water resiliency may take the form of stormwater collection and treatment for non-potable water use, such as non-contact process water.

Priority No. 5: Regulatory Considerations The product being made, ownership structure of the organization, and its track record of being a good community partner all play a role regarding the type of

reception the facility will receive from the federal, state, and municipal stakeholders. A good relationship can lead to favorable incentive packages.

Each jurisdiction is different and will have its own unique process of project approvals to turn an expansive piece of agricultural land into the site for any type of manufacturing facility. Because this process can have a big impact on the project cost and timeline, create a detailed plan for the required approvals during the site selection process. There may be site-specific permitting requirements, community engagement, negotiations, trade-offs, and multiple levels of government involvement.

With any site, there are a number of regulatory bodies and issues to consider. Depending on the product, there may be incentives available for more sought-after industries, while others are going to be seen as a negative by many in the neighboring community because of the impact to the local environment.

While the Food and Drug Administration is ultimately regulating the processes inside the plant, the major regulatory body you’re most likely to encounter during the site selection process is the Environmental Protection Agency. The EPA will weigh in on issues ranging from emissions to wastewater treatment.

A Vital Part of the Nation’s Infrastructure As one of the base physiological needs represented

by Maslow’s Hierarchy of Needs, the food and beverage industry is a vital part of the nation’s infrastructure and should be treated as critical to national security similar to energy infrastructure, cyber, and defense. This article serves to provide a starting point for a successful site selection process that will benefit any company operating in this sector. To make the right long-term investment, be sure the site selection strategy considers utilities, workforce, access, and regulatory concerns, and always begin with the end in mind. These five steps will save you time, money, and headaches down the road.

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AREA DEVELOPMENT | Q4 2023

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WORK FORCE W 2023

64 Look Beyond the Now When Considering Workforce Priorities

48 How to Factor in Labor Needs While Selecting a Site for Expansion

52 Forewarned Is Forearmed: The Importance of Understanding Labor Issues in Making the Location Decision

56 Technology’s Influence on Workforce Development 60 After the Ribbon Is Cut: Shifting the Talent Strategy to Retention & Upskilling

68 Insights on Staffing and the Location Decision 72 Immigration: A Potential Fix for Labor Shortages?

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12/6/23 11:09 AM

Kentucky’s Logistics Industry Is Creating Current & Future Economic Success

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t is no secret that Kentucky is experiencing record-setting economic momentum, and the continued success of the state’s key industries is a major reason why.

From the rapidly growing automotive and electric-vehicle industry to food and beverage, agritech, and general manufacturing, when the state’s strongest sectors see unprecedented growth, a strong economy that benefits all Kentuckians will follow.

One of Kentucky’s strongest — and most critical — industries is distribution and logistics, which helps the commonwealth remain one of the premier landing sites for companies looking to access their customer base quickly and more efficiently.

The state’s unique resources allow for unparalleled logistics capabilities and lead to businesses’ continued commitment to creating quality opportunities throughout the commonwealth.

Since the start of the Beshear administration, companies within the logistics sector have announced over 8,500 fulltime, Kentucky-resident jobs across nearly 130 facility expansion and new-location projects with more than $2.5 billion in capital investment in the commonwealth.

Kentucky’s logistics prowess centers around companies like UPS, DHL, Amazon, and FedEx, each with significant presence in the state.

UPS houses both the planet’s largest automated package-handling facility, UPS Worldport, as well as its Centennial Ground Hub in Louisville, while FedEx operates several large ground hubs throughout the state.

Meanwhile, DHL continues to grow

its presence at Northern Kentucky’s CVG Airport, and the Amazon Air Hub is delivering more than 1.5 million packages a day.

Distribution- and logistics-related companies benefit from the state’s second-to-none geographic location. Kentucky sits at the center of a 34-state distribution area in the eastern U.S., and its borders lie within a day’s drive of more than two-thirds of the nation’s population, personal income, and manufacturing operations. This ideal geographic location

puts Kentucky at the confluence of the Northeast, Midwest, and South, giving it proximity to key populations and centers of international commerce. This is a fundamental reason the logistics and distribution industry has concentrated in the commonwealth. Both the state’s stable, predictable climate, including mild winters, and the establishment of the Southern Automotive Corridor in the past four decades contribute as well.

Additionally, Kentucky’s three air-cargo hubs — the aforementioned

UPS Worldport, DHL, and Amazon Air — have positioned Kentucky among the national leaders in aircargo shipment volume. This strong presence by the world’s most prestigious logistics companies means products manufactured in Kentucky can virtually get anywhere in the world overnight.

Twenty interstates and controlledaccess parkways, as well as 28 highways and state parkways, provide companies with quick and efficient highway transport. With 2,400 rail miles, Kentucky is a mainline center for CSX, Canadian National, and Norfolk Southern, as well as for regional and local networks of short line railroads and intermodal freight facilities.

Kentucky boasts 80,000 miles of public roads in state, as well as 1,000-plus miles of navigable waterways that provide cost-effective shipping of bulk goods.

Initially spurred by Kentucky’s growing manufacturing base, the logistics sector in the past 20 years has been supercharged by an ever-increasing tide of online ordering, warehouse fulfillment, and rapid shipment to homes. And that momentum has shown no sign of slowing.

The distribution and logistics sector has grown to become a pillar of Kentucky’s economy — and all signs point to the industry playing an even more pivotal role in the commonwealth’s future.

This article was paid for and written by the Kentucky Cabinet for Economic Development and approved by Area Development.

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11/28/23 4:37 PM

‘Tis the Season for Overnight Shipping

CED.KY.GOV

Even Saint Nick knows Kentucky is the best location to ship products anywhere in the world in a single night C E D. KY. G OV

HOW TO FACTOR IN LABOR NEEDS WHILE SELECTING A SITE FOR EXPANSION With today’s low unemployment rates, companies must consider how they will fulfill their workforce needs early on in the site selection process.

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ompanies have a long list of factors to consider before building a new facility or expanding operations. How much available land is there? Are there utilities nearby to power the site? What’s the closest interstate and port to move our goods? But as unemployment rates have steadily dropped in the past decade — except for a two-year period during the COVID-19 pandemic — one factor has been climbing higher on this list: labor.

In today’s tight labor market, where unemployment rates are back to prepandemic lows of just under 4 percent nationally, companies are forced to dig into the data of the communities where they intend to set up operations. On top of questions like land availability, companies — including manufacturers — are forced to consider the labor needs question early on in the site selection process.

While there isn’t necessarily a magic labor number to hit, manufacturers can seek out the reassurances they need for labor, including whether they can get a skilled workforce at a competitive price. With the help of data, companies can begin to paint a picture of the labor market and learn, for instance, how many applicants a community has per job and how many people are considered underemployed.

Here’s an in-depth look at how companies might assess whether the communities have the availability and quality of labor needed for their project during the site selection process.

Use Available Resources Companies looking to locate in the United States should be able to find state and local government-backed workforce development programs that can assist with labor questions. By teaming up with these programs, companies can learn more about the availability and skillsets of the existing labor pool, as well as the cost of labor in a particular region. Companies can also help line up training for a specific skillset they will need. In many cases, that training can be done on the job or prior to employment.

Given the tight market, companies across the country are considering these questions much earlier in the site selection process today compared to 15 or 20 years ago.

Companies are also becoming more creative about attracting and retaining labor. By offering child daycare services, fun events on the weekends for employees and their families, or smaller perks like movie tickets, companies can better recruit and retain employees.

By Sam Moses, Mark Simmons, and Azad Khan; Business Expansion and Location Solutions Team; Parker Poe 48 • WORKFORCE

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A Division of the Missouri Department of Economic Development

Workers want to be paid a competitive wage and have solid benefits. But they’re also looking for a company that offers an attractive culture and one that provides schedule flexibility.

How Automation Factors into Labor Needs While the entire country is dealing with a tight labor market, it’s important for companies to consider the ongoing impact of automation. Manufacturers today might not need as many employees given the advent of automation.

Ten years ago, for example, a large manufacturing project with a capital investment of $100 million would likely have brought 300 to 400 jobs to a community. Today, that same project might only need 50 employees. Automation can help solve the labor question for companies.

The less labor-intensive a project is, the more it could save a company locating to a community that has fewer applicants for the jobs the company needs.

Data Diving Numbers don’t lie. A company looking to open up a new manufacturing site in the U.S. should look at labor and employment data throughout the course of the site selection process. Not every piece of data — especially data based on surveys — can be relied on 100 percent, meaning companies should look at multiple sources. Those sources include the Bureau of Labor Statistics, as well as more localized data that communities can provide upon request.

The better understanding a company can glean of a community’s labor pool from this data, the better informed it can be when it’s time to make a decision between the top finalists being considered by the company.

Here are a few points to consider: • Is there a military installation in the community, meaning can you look for skilled soldiers transitioning from the military to civilian workforce?

• Are there technical colleges nearby?

• What is the age breakdown of the population, and is the community attracting younger people to the labor market?

• What does state employment data say about how many potential job candidates there are in the workforce?

• How many job applicants are there per job opening?

From these sorts of questions, a company can begin to learn more about the demand and undersupply of a particular type of job in a certain area. Companies can use this granular data to draw several insights, including whether the size of the labor market has grown at a pace that’s faster than the national or state average. If a company knows it needs machinists or engineers, for example, it can learn how many people with those skills are applying to those jobs in a given community.

In addition to labor questions, companies should dig into

wage data. Should a company locate in a place that has high or low wages, and what is the supply of jobs relative to that?

It’s important for companies not to look at this data through the lens of city or county borders. Employees usually do not consider a county’s border when applying for jobs; if the pay is right and the commute is bearable, employees will travel between county and state borders. Companies should apply this rule when it comes to data: Instead of looking at data within a particular city or county, consider data within a 30- or 60-minute drive time of the site that’s under consideration.

G o B eyo n d t h e D a t a a n d Ta l k t o Pe o p l e A German manufacturer of computer parts wants to open its first facility in the Southeast. The company has its own culture and, in particular, its own hiring policies. But it doesn’t know much about the labor market in the U.S., let alone how the market is different between states like Georgia, North Carolina, and South Carolina.

In this example, the German company can set up a phone call with the human resources and other leadership departments with existing companies in these states. It can ask the American companies what sorts of workforce challenges exist and where labor can be found.

By interviewing the American companies, the German executives are able to get more information beyond the data points they already reviewed. The Germans can go a step further and interview staffing firms that are putting temporary workers into different manufacturing facilities. They can ask questions such as, “How did you find, attract, and retain the employees you needed, and how has it been going?”

F i n a l Ta ke aw ay Even with automation, companies will always need to consider the availability of skilled workers during the site selection process.

Today, with low unemployment rates, companies don’t have to devote every waking hour to finding the exact number of qualified workers. Instead, companies can use data and conversations with existing companies to learn about the workforce in a particular community. If there aren’t the right number of skilled workers, a company can lean on the fact that governmental-backed workforce programs exist to identify qualified candidates and teach them the skills needed in the new job.

Parker Poe attorney Sam Moses and Parker Poe Consulting’s Mark Simmons and Azad Khan are part of the firm’s Business Expansion and Location Solutions Team. The team provides legal and location solutions for companies expanding their operations across the United States. In this collaborative model, experienced consultants provide data-driven location analysis, working alongside attorneys advising on legal strategy, to create a seamless and proven structure for successful expansion projects with the added benefit of saving companies time and money.

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FOREWARNED IS FOREARMED: THE IMPORTANCE OF UNDERSTANDING LABOR ISSUES IN MAKING THE LOCATION DECISION Site selectors should assess a potential location’s workforce with an eye to identifying areas of concern that might make it open to unionization efforts.

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uilding new and expanding existing facilities are complex undertakings. Companies face myriad decisions in first selecting a site and then in the long-term challenges of managing ongoing operations. A labor market analysis is a critical step in the site selection process, as the company needs to understand the local demographics for current and future workforce availability. Part of that analysis should involve assessing the actual “labor” laboring in the area — Are they unionized, union-free, or unionizing? The answer holds important information about the company’s future workforce because it illuminates both actual payroll costs and the costs organized labor exacts on employers.

U n i o n i z a t i o n To d a y The U.S. Bureau of Labor Statistics reports the union

membership rate in 2022 was 10.1 percent, or 14.3 million workers, which is the lowest on record.1 Yet those numbers only tell part of the story. The latest Gallup poll2 from August 2023 reveals that 43 percent of adults want unions to have more influence in the country, and 34 percent believe that unions will become stronger. Importantly, for workforce considerations, 77 percent say that unions help more than hurt union members; a recordhigh 47 percent say that unions help more than hurt non-union members; and 57 percent say that unions mostly help the companies where employees are unionized.

These opinions are the result of changing demographics, societal issues and, as discussed below, the National Labor Relations Board’s (NLRB) decidedly pro-employee shift to make union organizing easier. More college-educated people view unions favorably and Gen Z is the most pro-union generation of American

Michael J. Ball, Partner, and Michael C. Griffaton, Of Counsel, Vorys 52 • WORKFORCE

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workers. Unions primarily rely on an “us versus them” mindset to garner support, which is currently being fueled by inflation, a tight labor market, high cost of education/education-related debt, existing and broadening wealth and wage gaps, and a post-pandemic rethinking of values and priorities.

That union support is manifesting itself in workplaces across the country as Microsoft, Trader Joe’s, Starbucks, Apple, Home Depot, Chipotle, Amazon, Alphabet, REI, and others encountered historic organizing efforts. Last year, the NLRB saw a 53 percent increase in union representation petitions3 — the highest since 2016. In 2021, unions won about 77 percent of certification elections, 76 percent of such elections in 2022, and 80 percent to date in 2023 –— the highest win rates in five years.4 Increased union activity and awareness also brought a 19 percent increase in unfair labor practice charges.5 And, there is the union’s ultimate economic weapon, the strike. Recent, highprofile strikes by the United Auto Workers (145,000 members), Writers Guild of America (11,000 members), and SAG-AFTRA (160,000 film and TV actors), and threatened strikes at UPS (340,000 members) and Kaiser Permanente (75,000 members) have shown unions exerting a growing influence.

As we look toward 2024, President Biden’s re-election campaign is already supported by the American Federation of State, County & Municipal Employees (AFSCME) and other top organizers. NLRB and union activity amplifies when pro-union administrations take office, and the results of presidential elections typically sway public opinion surrounding unions and union activity.

The NLRB’s Current Effor ts to Aid Organizing The NLRB’s union-friendly stance has wrought multiple substantive changes to its procedures. Almost all of these make unionizing a non-union workplace less onerous, including: • Decreasing the time between filing a petition and actually holding a union election; • Putting the onus on employers to seek an election when presented evidence that a union has majority support within a bargaining unit; • Limiting the unilateral changes an employer can make after expiration of a collective bargaining agreement; and • Expanding the universe of actions that can constitute protected activity under the National Labor Relations Act (NLRA).

With respect to its pro-union election changes, the NRLB said: “The new standard will promote a fair election environment by more effectively disincentivizing employers from committing unfair labor practices.”6 Businesses should expect emboldened unions and increased awareness among employees for some time. Because the NLRB has jurisdiction over both unionized and nonunionized workforces, companies should review their current practices and keep these changes in mind when assessing their current operations and when evaluating potential business sites.

Amount of Union Organizing Activity Varies by Geographic Region However, while the filing of union representation petitions has increased nationwide, the number of petitions filed varies greatly by location. For example, to date in 2023, there have been 33 representation petitions filed in NLRB Region 15 (New Orleans, LA); whereas NLRB Region 19 (Seattle, WA) has seen 215 representation petitions filed. Other regions with the most representation petitions filed in 2023 include Region 5 (Baltimore, MD) with 177, Region 1 (Boston, MA) with 130, and Region 13 (Chicago, IL) with 126. In contrast, regions with the fewest representation petitions filed include Region 6 (Pittsburgh, PA) with 42 and Region 8 (Cleveland, OH) with 45. The prevalence of union-organizing activity, and the filing of representation petitions, within the relevant geographic area should be a key consideration in any site selection decision.

Unionization Is Always a Choice The NLRA gives employees the right to join a union or engage in other concerted protected activity — and the right not to do so. Because this is exclusively the employee’s choice, a business needs to understand how to reduce employees’ interest in unionizing. This starts with understanding why employees typically seek to form or join a union: to protect themselves from unfair treatment, for a sense of belonging, and to protect their dignity.

Taking action in these areas may help a business to remain union-free. The fundamentals of doing so are the same — assess your workforce, communicate with your employees, and document policies, procedures, and decisions.

Supervisors are key to avoiding most workforce issues, as many legal issues relating to employees result from the things supervisors either failed to do or did incorrectly. Employees will file lawsuits, discrimination charges, unfair labor practice charges, or seek union representation when they feel (rightly or wrongly) they are being treated unfairly, arbitrarily, or unjustly.

Front-line supervisors deal most often with employees and are typically the focus of employee complaints. At the same time, supervisors — especially those with positive working relationships with the workforce — can help identify and assess employees’ issues and concerns that make the employer attractive to union organizers.

Supervisors can ascertain shifts in employee behavior or increases in certain types of complaints that could warn of potential union activity. Some early warning signs of union organizing include unusual gatherings of employees; employee disrespect; non-employees or former employees showing up on the premises or at after-work gatherings; an increased volume and/or militant tone in inquiries about policies, pay, benefits, and discipline; employee conversations suddenly stopping when supervisors appear; employees who are no longer friends with co-workers or are suddenly friends with those with whom they previously didn’t associate; employee complaints being raised by one person on behalf of a group; anti-company graffiti and pro-union regalia.

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Like all relationships, frank and open communication is critical to fostering effective (and union-free) employer-employee relations. This means a business cannot wait to start effectively communicating with employees until after problems have been created, especially because an employer’s ability to communicate directly with its employees and address employee concerns is limited once they are represented by a union. Make sure that employees are aware of the open-door policy and the willingness to follow the policy.

Finally, employees must be treated fairly and consistently.

When issues arise, a business should document its interactions, decisions, and rationale for changes in policies, promotions, discipline, etc., and, when possible, share that with its employees. Such transparency, along with fair and prompt treatment, helps cultivate trust. Employees are usually more likely to voice concerns about workplace issues to the employer (as opposed to seeking out union representation) when they believe those concerns are being heard and responded to.

representation is to reduce the incentive for employees to feel that they need a union in their workplace. Employers should take time to assess their current workforce and the potential labor force where they may open new operations, identify potential areas (workplace policies, pay, benefits, employee complaints) that make them vulnerable to organizing efforts, and seek legal counsel for guidance.

~

1 https://www.bls.gov/news.release/union2.nr0.htm 2 https://news.gallup.com/poll/510281/unions-strengthening.aspx 3 https://www.nlrb.gov/news-outreach/news-story/election-petitions-up-53board-continues-to-reduce-case-processing-time-in 4 https://aboutblaw.com/9Wb 5 https://ogletree.com/insights-resources/blog-posts/nlrb-fiscalyear-2023-data-shows-unfair-labor-practice-charges-electionscontinue-to-increase/#:~:text=Unfair%20labor%20practice%20(ULP)%20

In Sum

charges,percent%20increase%20in%20ULPs%20filed.

Some dissatisfaction or conflict in the workforce is unavoidable. The most effective way to deal with the presence of union

6 https://www.nlrb.gov/news-outreach/news-story/board-issues-decisionannouncing-new-framework-for-union-representation

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TECHNOLOGY’S INFLUENCE ON WORKFORCE DEVELOPMENT How can a company develop an analytics-focused talent strategy to meet the needs of AI, specialized skillsets, automation, and beyond?

T

he hype around artificial intelligence (AI) accelerated into high gear this year, catalyzed by the splash made

by ChatGPT when it gained 100 million users within two months of launching. Since then, AI has become the latest focus for industry leaders looking to capitalize on the promise of productivity it will bring and by the cost savings that could materialize over time through these gains. But is AI really the magic bullet everyone seems to think it will be? First, it’s important to discern what exactly AI is, and what industry applications are possible through this evolving technology.

Innovation Drives Productivity AI uses machine learning and deep learning algorithms that learn from experience to understand complex concepts and recognize patterns — which allows for the technology to interpret the nuances of language and independently make decisions. Generative AI, which is a subset of AI, uses

advanced algorithms to create new outputs, and is used to generate new content including synthetic data, images, text, and music. AI has the potential to contribute $15.7 trillion to the global economy in 20301 and will drive productivity across a variety of industries in different ways.

For industry leaders looking to implement an AI strategy in their business, talent will be a critical factor in supporting those goals.

Tech talent continues to be in ever-increasing demand as a host of new AI roles now need to be filled across sectors. AI has already begun to drive growth in new semiconductor development, as the race to meet the demand for AI chips has scaled and has driven insatiable demand for new data centers to meet the needs of increased computing power. Healthcare and life sciences are also going to be hugely impacted by the evolution of AI, with implications for increased speed of drug discovery and increased personalized medicine.

Although AI is perceived publicly to be a threat to job security, the reality is that it’s expected to create more opportunities than it dismantles. As advancements lead to increased productivity and the automation of certain tasks, net demand among some occupations, with a greater emphasis on roles that prioritize interpersonal skills, is expected to grow. Since 2021, AI job postings have increased by 250 percent and are expected to continue to grow.2 With the continued shortage of skilled labor, the Bureau of Labor Statistics (BLS) projects that data science and information jobs will grow 35.2 percent by 2032, more than triple the average profession rate.3

G e o g ra p hy o f Ta l e n t In past years, software and hardware companies were most interested in understanding where to best locate technology talent. Now, firms in all industries are seeking out this information.

By Steve Carlos, Senior Director, Work Dynamics Consulting; and Amber Schiada, Senior Director, Research and Strategy, Head of Americas Work Dynamics and Industries Research; JLL 56 • WORKFORCE

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Top Talent.

Top Companies.

Arizona tops the list.

In Arizona, you’ll find the perfect balance of business opportunity and high-quality lifestyle that makes it a top state to live and work. Businesses benefit from pro-innovation policies and business stability. Residents enjoy a reasonable cost of living compared to other major metros and beautiful scenery, all while taxes remain low for everyone. With a highly skilled talent pool and a commitment to future-forward industries like semiconductors, electric and automated vehicles, and battery manufacturing, we’re maximizing our potential for generations to come.

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8/10/23 2:54 PM

But not all industries are looking for the same type of AI talent.

What is required to develop an AI strategy for a semiconductor fabrication is different than what a pharmaceutical organization would require in scaling up a data science program. Even so, the concentration of companies developing new AI technologies are located in a handful of the most innovative markets across the globe.

AI talent in the U.S. is specifically concentrated in coastal markets, with the Bay Area, Seattle, and New York being the top three, followed by Boston, Los Angeles, and Austin. Proximity to major AI research institutions also plays a major role in the talent landscape, with the Bay Area, Boston, Pittsburgh, and Georgia leading in recent AI talent graduates. Although many urban cores saw sharp population declines during the pandemic, recent Census Bureau data paints an increasingly positive picture for large CBD markets, most of which have seen a slowing or reversal of out-migration.

These gateway markets, like New York and Washington, D.C., have the largest number of AI workers, while Austin and San Francisco have seen the fastest growth.

As firms consider what should drive their real estate location strategy, factors such as government policies, proximity to major research institutions, educational incentives, partnerships, and investment all need to be considered. Federal funding shifts have put higher education institutions at the forefront of AI research, leading to increased innovation and more readily accessible talent. Funded by the National Science Foundation, seven AI institutes have been founded at six universities across the country including University of California, Santa Barbara; University of Minnesota; University at Buffalo; Columbia University; University of Maryland; and two AI institutes at the University of Illinois, Urbana-Champaign.

estate needs, they start to gain clarity on how these factors will translate to their real estate selection priorities. Going through this process helps them understand their current and desired state in objective, quantifiable terms. We also see that while AI and digital talent has invigorated their interest in talent location, walking through a rigorous process helps inspire additional foundational questions about other talent pools, as well as the comprehensive set of factors that should ultimately inform what their future footprint and location strategy should look like.

When companies complete these location studies, the obvious question is, “What’s next?” But there is no one-size-fits-all solution. Some firms are choosing to concentrate investment in a multifunctional HQ in gateway markets, while others are reducing their footprint in these markets and instead targeting a combination of secondary or emerging markets for specific segments of their workforce.

While an increase in remote working is affording companies access to more distributed talent pools, a majority of companies still plan for their teams to be centered around a physical, unifying location.

AI HAS THE POTENTIAL to

contribute $15.7 trillion to

the global economy in 2030 and will drive productivity

across a variety of industries

Data Will Enable Decision-Making

AI has emerged as a powerful force for productivity and cost savings, but it requires the right talent to drive its implementation effectively. By understanding the nuances of AI and its application across industries, leaders can proactively cultivate the necessary skillsets to stay ahead.

As AI continues to reshape industries, developers must have an analytics-focused location strategy that is closely tied to the organization’s talent strategy to stay ahead of the curve. AI has the potential to drive productivity and fuel growth across sectors, but acquiring the right talent is crucial. Developers must identify key locations for AI expertise by leveraging proximity to research institutions, incorporating talent data into real estate decisions, and striking a balance between remote work and physical collaboration. The time to act is now — shape your talent strategy, secure AI talent, and position your organization for success in the age of AI.

in different ways.

Strategic Considerations Increasingly, we are working with clients to proactively incorporate talent data into their location decisions. It’s part of a continuing recognition from leading organizations that better synchronizing workforce and real estate decision-drivers can give them a real competitive advantage in a challenging environment. Some firms feel like AI-oriented talent is a blind spot, while others see it as an opportunity to future-proof their location strategy.

As clients work through the discovery process to clearly align their strategic and operational priorities with their talent and real

~

1 https://www.forbes.com/sites/greatspeculations/2019/02/25/ai-will-add-15trillion-to-the-world-economy-by-2030/?sh=27fb904b1852 2 https://medium.com/@multiplatform.ai/job-postings-related-to-generativeai-have-surged-by-nearly-250-from-july-2021-to-july-2023-27683f331024 3 https://www.bls.gov/emp/tables/fastest-growing-occupations.htm

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“ Why would you go anywhere else? This is the greatest place to be an entrepreneur, or to be an investor, in the world.”

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AFTER THE RIBBON IS CUT: SHIFTING THE TALENT STRATEGY TO RETENTION & UPSKILLING By upskilling its workforce, a company can improve its overall productivity, while positively impacting employee satisfaction and retention.

T

he site selection process often includes 18+ months of a national search with dozens of employer interviews and meetings with economic developers, workforce development groups, and higher education institutions. While sophisticated site selection consultants perform due diligence to ensure their client’s immediate workforce needs are met, the process often emphasizes attracting new talent based on existing workforce availability but can fall short of incorporating the likelihood of retaining and upskilling employees to achieve long-term talent sustainability and operational success.

After a new employer in the community is fully staffed and a ribbon is cut, the employer must shift their talent strategy to place less emphasis on talent acquisition, and pivot toward

employee retention and upskilling. This shift in talent strategy is pivotal to mitigate risk to the business operations and remain competitive with sustained growth. With average annual turnover rates as high as 25–30 percent in some labor markets and technological disruption in worker tasks in today’s evolving talent landscape, a talent strategy focused on employee retention and upskilling can not only improve an organization’s business performance but also lead to long-term success in its community.

The Relationship Between Workforce Retention and Upskilling Workforce retention and upskilling are two interconnected pillars that play a vital role in the longevity of operational suc-

By Vince Giovannini, Human Capital Analytics & Insights, Deloitte Consulting, LLP 60 • WORKFORCE

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Workforce retention and upskilling are two interconnected pillars that play a vital role in the longevity of operational success. cess. Upskilling can be viewed as a valuable employee retention tool. Employees who feel that their professional development is being prioritized are more likely to remain loyal to their company.

According to a survey by LinkedIn,1 94 percent of employees would stay longer at a company that invested in their career development, highlighting the direct correlation between upskilling and workforce retention.

Upskilling creates a pool of talented individuals within the organization who are ready for advancement. This internal talent pool promotes from within, which can enhance employee loyalty. Loyal employees who remain with the company can mentor and train newer hires, facilitating the transfer of critical knowledge and skills, leading to a stable workforce. A stable, upskilled workforce contributes to the overall productivity of the organization, which, in turn, can positively impact employee satisfaction and retention. This culture makes employees more likely to generate innovative ideas and solutions, giving the company a competitive edge in the market.

Retaining High Performers Through Upskilling In addition to impacting workforce retention in general, upskilling can lead an organization to be more efficient and effective in their talent strategy by specifically retaining high performers.

According to a Deloitte Global survey,2 employers are progressively shifting their workforce decisions to be more focused on skills than on jobs with fixed responsibilities. Deloitte’s survey findings show that skills-based organizations, which place skills and human capabilities at the center of their talent strategy, are 98 percent more likely to retain high performers, which can improve productivity and increase the likelihood of long-term success in the community.

Upskilling not only improves the quality of work produced but also enables employees to take on more significant responsibilities and tasks. This can lead to increased productivity, innovation, and efficiency within the organization. As the business landscape becomes increasingly competitive and technology-driven, the skills

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required to perform various tasks are evolving rapidly. By providing employees with opportunities to enhance their skills and stay updated with the latest industry trends, companies can ensure their workforce remains equipped to tackle new challenges. Companies that fail to invest in upskilling their employees may also risk falling behind their competitors and losing their competitive edge.

The Value of Workforce Retention One of the primary reasons why companies should focus on workforce retention is the significant cost associated with employee turnover. It is no secret that recruiting, hiring, and training new employees can be a time-consuming and expensive process.

According to a report by the Society for Human Resource Management,3 the average cost-per-hire for companies is around $4,129.

Moreover, it takes an average of 42 days to fill a position, resulting in lost productivity and increased workload for existing employees.

By investing in workforce retention, companies can save substantial resources that would otherwise be drained by a high turnover rate.

Beyond the financial implications, a high turnover rate can also lead to negative impacts on company culture and morale. According to LinkedIn research, employees that feel undervalued or unfulfilled within their roles are more likely to seek opportunities elsewhere.4

I m p l e m e n t i n g a Ta l e n t S t ra t e g y Fo c u s e d on Upskilling & Retention To integrate workforce retention and upskilling into an organization’s talent strategy, employers may consider the following strategies: • Customized training programs: One of the most effective paths to upskilling current employees is creating customized training programs tailored specifically to strategic areas in the organization in need of upskilling. Recognizing that employees have unique skill sets and areas for development, organizations should invest in tailored training solutions that address these specific needs.

Organizations can connect with local workforce development partners or higher education institutions to develop personalized training programs that can help employees enhance their skills, become more proficient in their roles, and ultimately feel valued and supported in their professional growth. This commitment to individual development not only enhances employees’ sense of job satisfaction but also equips them with the necessary tools to excel in their current roles and take on additional responsibilities in the future.

Community leaders can also be proactive in their business retention and expansion efforts by meeting with employers to understand their current workforce skills gaps and working together to identify resources in the community to build strategic partnerships and curate training opportunities for the employees.

• Career path development and growth opportunities: Career path development is another crucial element in a talent strategy focused on upskilling and retention. Employees have a natural desire for career progression and opportunities for

growth. By offering clear and structured career paths, organizations can demonstrate their commitment to employees’ professional development and motivate them to stay with the company for an extended period. This can be achieved through comprehensive performance management systems, mentorship programs, and providing opportunities for job rotations or cross-functional training. By investing in career path development, organizations not only keep their employees engaged and satisfied but also promote a culture of continuous learning and improvement.

Upskilling allows employers to be creative in their career path development by cultivating new routes in career development that may not have been historically available.

Skills-based organizations with internal training programs create opportunities for employees to stay with their current organization, while also reaping the benefit of a career change or career advancement. This allows employers to retain employees while also filling evolving workforce needs in the organization.

• Being creative with recognition and rewards: It is no secret that compensation and benefits have a direct relationship with employee retention. However, traditional forms and methods of compensation are not always necessary to improve employee satisfaction and well-being. Employees who feel appreciated and recognized for their hard work are more likely to remain engaged and motivated. Organizations can implement various recognition initiatives, including monthly or quarterly awards based on training/certification completions. These initiatives not only demonstrate appreciation for employees’ efforts but also serve as motivators to upskill employees.

Consequently, employees feel more connected to the organization and are more likely to remain committed and loyal over the long term.

Implementing a talent strategy focused on upskilling and retention requires a formal and deliberate approach. It involves identifying organizational skill gaps, designing and implementing customized training programs, establishing creative recognition initiatives, and creating alternative career development paths.

Companies must also foster a supportive and inclusive culture that encourages employees to continuously learn and invest in their own development. By doing so, organizations can grow and retain top talent, ensuring that years after the ribbon is cut, the organization is well positioned to fulfill its talent needs.

~

1 https://www.linkedin.com/posts/linkedinlearning_94-of-employees-say-thatthey-would-stay-activity-6372632932300963840-k9hI/ 2 https://www.deloitte.com/global/en/issues/work/skills-based-organizations. html?id=us:2el:3dp:wsjspon:awa:WSJCIO:2024:WSJFY24 3 https://www.shrm.org/hr-today/news/hr-news/pages/shrm-benchmarkingreport-$4,100-average-cost-per-hire.aspx 4 https://www.linkedin.com/pulse/unveiling-phenomenon-quiet-quittingunderstanding-its/

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SWEEPING TAX REFORMS HAVE DONE WONDERS FOR NORTH CAROLINA BUSINESSES. LET THEM DO WONDERS FOR YOU. At just 2.5% and falling, North Carolina’s corporate tax rate helps businesses across industries expand, invest, compete, attract talent and create jobs. That’s only a part of why the state has been named America’s Top State for Business in 2022 & 2023 by CNBC.

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LOOK BEYOND THE NOW WHEN CONSIDERING WORKFORCE PRIORITIES Industrial site selectors must consider not only a prospective location’s current labor pool but also its recruiting reach and unanticipated future demands and costs of a particular market.

W

orkforce trends have been changing at a rapid pace. And it’s no secret that recent years have brought on a myriad of significant workforce disruptions. Along with these disruptions, there has been a stubbornly tight labor environment across the United States.

The industrial workforce, in particular, has faced talent constraints over the past several years. Not only has the industrial labor market been tight but the struggle to retain a stable entry-level workforce has proved to be an obstacle.

While quit rates have calmed from their peaks in the past two years, the entry-level workforce for operations like distribution centers are still reporting elevated quit levels. Additionally, other industries like Leisure and Hospitality are fighting for similar entry-level talent. Leisure and Hospitality combined

with Trade, Transportation & Utilities accounted for roughly 1.6 million quits for the month of August in 2023.1 As industrial employers navigate these choppy labor waters there are several areas of focus that can offset risk for long-term staffing success. Looking at critical areas surrounding talent depth, recruiting reach, and assessing wage pressures can assist in understanding the risk outlook for industrial occupiers.

L o n g - Te r m T a l e n t D e p t h It is common to concentrate on the “now” in site selection.

The talent pool that resides in markets and the current cost of the labor are always important but other factors can influence the long-term viability of a market from a talent perspective.

In understanding labor environment risks, supply is still king.

Labor Availability v. Demand 175,000 170,000 165,000 160,000 155,000 150,000 145,000 140,000 135,000 Jan-12 Nov-12 Sept-13Jul-14 May-15 Mar-16 Jan-17 Nov-17 Sep-18 Jul-19 May-20 Mar-21 Jan-22 Nov-22

Labor Force (supply)

Employment + Job Openings (demand)

Source: Bureau of Labor Statistics

By Kevin Major, Senior Manager, Client Strategy Consulting, CBRE 64 • WORKFORCE

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Quit Rates 900

Number of Quits (000s)

800

5

700 600

4

500

3

400 300

2

200

1

100

Percent change from previous year

6

0

0

ty g n t es ties itali ices tion ging ctio ities ervices rnmen urin rvic utili osp rma ctiv serv and log onstru alth se fact e s h d a v u l s n l d o n a s a a Info n a i n e C G e a n c g o n M h i i o n n t e i i ur ca bus and rtat Fina Min Edu Leis and spo tion nal uca tran o , d i e E s fes Trad Pro

Source: Bureau of Labor Statistics

# Quits – Aug.

Regardless of other conditions, if the talent pool in a market is insufficient it can lead to ongoing operational and financial struggles. Looking at the supply in a market to only understand if it can accommodate initial headcounts is risky. To understand the market’s ability to provide the needed talent over many years, it is helpful to anticipate future disruptive conditions. For example, as illustrated in the accompanying graphic, demand on a market can increase significantly through unanticipated events such as competition entering the market or turnover creating a need for more applicants.

The sample demand illustration contemplates just a few of the areas that assist in understanding how much supply is needed to sustain industrial operations in a market. It should be noted that the actual supply needed in this example can be much higher depending on additional areas considered.

In anticipating areas like additional demand, hiring difficulties, and potential growth needs, site selectors can get a more accurate understanding of risk that may exist in a market over the duration of their operational presence. This type of forward-thinking assessment can provide a more accurate outlook regarding supply in a market to understand if talent is deep enough for the operation’s long-term talent needs.

K n o w Yo u r R e c r u i t i n g R a d i u s In further understanding the depth of talent in markets, another critical aspect to review is the recruitment radius. Influences such as virtual work and cost of transportation have made the workforce more sensitive to drive times.

A survey conducted by thezebra.com2 showed that 35 percent of the people surveyed would take a pay cut in exchange for a shorter commute. The survey also broke down the average com-

Quit Rate – Aug.

mute time spent over a year, which was 212 hours. This amounts to roughly 26.5 workdays (assuming a 40-hour work week) added to an employee’s year spent away from home due to work. Taking these calculations and applying the average entry-level wage for a machine operator across the United States, the hours spent commuting would amount to $3,848 in unpaid time. In most markets, applicants have options, and if an individual can save time and reduce their expenses, they likely will.

When evaluating an existing site for long-term viability or expansion, a good risk-avoidance measure is to look at where employee hires occurred (geographically) before 2020 and where hires occurred after 2020. This assists in clarifying the true current recruiting reach. Even in markets where occupiers have recruited at longer-distance radii for many years, there could be a shift that has occurred due to recent conditions and trends.

When evaluating a new market for a new operation, it is best to understand the market’s transportation dynamics so that an accurate measurement of supply can be assessed. If this recruiting radius is not fully understood before entering a new market, the projections could be too rosy, leading to an inflated outlook.

Additionally, looking at areas like public transportation can assist in understanding how much talent is accessible. However, it is also worth reviewing the adoption rates of local public transportation. Just because the infrastructure exists to transport people near an industrial site does not mean that the public utilizes it.

Projecting an accurate supply in a market is crucial to understanding the sustainability of operations in that market. Along with these forward-looking supply considerations, evaluating cost pressures can assist in determining if the environment poses future risks due to what it will cost to access the local talent pool.

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Sample Applicant Demand Model Demand Impact

Year 1 Demand 1,500 Applicants

Year 2 Demand 3,100 Applicants

Year 3 Demand 3,200 Applicants

Year 4 Demand 4,200 Applicants

Your Operation 400 Headcount +Assumed Attrition at 25% = 500

+ Additional Competitors 5 at 400 Headcount +Assumed Attrition at 25% = 2,500

10 Competitors 400 Headcount + Assumed Attrition at 25% = 1,000

12,000 Applicants Needed over 1st 4 years

Attrition rises Attrition levels rise for you and all competitors to 50%

Competitors Grow 4 add 250 Headcount +Assumed Attrition at 50% = 500 (Annual Need)

48,750 Applicants Needed over 20 years

HOURS

26.5 DAYS

Wages Unpaid in Commute

212

Additional Days in Commute*

Hours Spent in Commute

Sample Annual Transportation Cost Impact

$3,848

Sources: the zebra.com, US Census, ERI. Based on average commute times and the average wages of an entry-level machine operator for a 40-hour work week.

Average Entry-Level Wage Growth — Past 5 Years (2017–2022) Packer Crater

Warehouse Worker

Manufacturing Worker

Machine Op. Helper

Avg.

US Avg.

16.21%

19.62%

18.66%

17.67%

18.04%.

Riverside

32.71%

34.45%

36.49%

29.49%

33.28%

Austin

26.48%

30.71%

27.90%

27.23%

28.08%

Phoenix

26.54%

29.35%

26.71%

24.14%

26.68%

Dallas-Ft. Worth

26.12%

30.43%

23.37%

22.94%

25.72%

Houston

22.79%

27.03%

24.23%

23.62%

24.42%

Orlando

21.82%

25.93%

21.59%

22.24%

22.89%

Atlanta

18.85%

22.80%

21.91%

21.53%

21.27%

Source: ERI

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Future Wage Positioning & Cost Pressures Wage positioning for talent has always been an area of focus in site selection. However, often the due diligence focuses on current pay disparity between markets. While it is important to understand what it takes to competitively enter a market, combining it with an outlook on wage trajectories and pressures can help to determine how much a market is susceptible to future higher talent costs.

Industrial talent wages have been on the rise for several years, but certain markets have significantly outpaced others.

The Sun Belt region has benefitted from employers looking for deep talent and large-market demographics that offer a wage positioning opportunity. The growth in demand for these areas has put pressure on industrial wages, as shown in the accompanying table.

Along with the competitive environment pushing wages up in these markets, many of the markets have seen housing costs rise significantly over the past decade. Just over the last five years, based on redfin.com,3 the median sales price across the U.S. went from $281,000 to $412,000 (August 2018-August 2023, seasonally adjusted). Redfin.com also reported that inventory for all homes was down 15.8 percent year-over-year from September 2023. This low residential supply could keep housing prices high even though interest rates have risen notably. Additionally, rents across the country went from $1,637 to $2,052 over a fouryear period (August 2019-August 2023),4 according to rent.com.

Since housing costs are often the largest expense for cost-ofliving, the housing conditions can influence the trajectory of wage expectations in established and emerging industrial markets.

Along with wages being influenced by local demand and cost-of-living, there is also the legislative aspect to consider. For example, Riverside and The Inland Empire have recorded notably high wage growth rates over the past several years driven by high demand in the distribution center workforce. Looking forward, additional wage pressures may continue in the Southern California market as the state minimum wage for fast food workers will be rising to $20/hr. Fast food operations can be a vital source of applicants and a source of competition for entry-level work. As a result, this may put pressure on entry-level industrial wages to continue to rise in the future.

In evaluating a market for an industrial site, these wage pressure conditions should be considered to understand the potential cost of labor for the long-term and how to be competitive in the market in future years.

Look Ahead for Success Each employer has to consider their own strategic priorities.

In conjunction with these priorities, evaluating for the long-term talent pipeline, knowing the recruiting reach, and understanding potential wage pressures can help prevent staffing complications in the future.

~

for

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1 https://www.bls.gov/news.release/jolts.t04.htm 2 https://www.thezebra.com/resources/research/commutesurvey/ 3 https://www.redfin.com/us-housing-market 4 https://www.expensivity.com/institutional-investors-hous ing-market-crisis/

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INSIGHTS ON STAFFING AND THE LOCATION DECISION When selecting a new site, companies today confront an ever-changing landscape of factors to consider, from site and facility planning to workforce analytics and training.

C

hristine Chandler, president of AdvantaStaff, and Lovora Brown, AdvantaStaff’s director of Operations, who bring a combined 50 years’ experience in the manufacturing and distribution industry, provide their perspective on workforce issues that are important to companies’ location decisions.

have finally stabilized to a degree. Still, it remains challenging for individual companies to predict without the benefit of a wide lens that accounts for different factors, skillsets, and requirements. It is important for a company establishing a new site to gather information on current rates for a variety of positions within a range of manufacturing settings.

What insights can you offer on realtime pay rates?

Can you share some perspective on the availability of skillsets?

Chandler: That is an especially important question because pay rates have increased dramatically in the past 12 months, and this is having an enormous impact on staffing. Companies are losing talent simply because they haven’t been able to keep current — or ideally, get ahead of, instead of chasing — the prevailing rates and workforce analytics for common positions.

Brown: On a positive note, we are seeing signs that pay rates

Chandler: A company entering the market today needs to be very thoughtful about its approach to attracting a specific, qualified skillset. One important consideration is how positions are changing over time. The skills foundational to core positions like managers have remained somewhat of a constant, while manufacturing positions overall are becoming more technical.

Companies must investigate the availability of the desired skillset in the workforce, not only to see if there’s a strong match for the company’s needs, but also whether the area has the right education and training opportunities. When site planning, the company will want to look at the full range of available educational and workforce training resources — four-year colleges and universities, community colleges, workforce development programs, and programs for veterans re-entering the workforce.

Brown: To use Virginia as an example, programs include the Community College Workforce Alliance, which provides training on workforce-ready skills at facilities. There are several four-year colleges with excellent engineering schools, and community colleges that partner with engineering and tech programs. The state also is a strong

By Christine Chandler, President; and Lovora Brown, Director of Operations; AdvantaStaff 68 • WORKFORCE

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base for veterans, which is another hub of recruitment for employers. By delving into a region’s specifics, companies might uncover resources that aren’t apparent at first glance, especially given the rapidly changing manufacturing landscape in the U.S. right now.

What are some other considerations that companies need to keep in mind?

Chandler: Considerations may differ depending on factors like the proximity and demographic of the target employee. With high competition for qualified workers, companies need to understand what it will take to attract employees, but also how to set themselves up for longevity. An employer might be more focused on attracting fulltime employees but find more available skillsets in the temporary pool. It is also important to gauge what employees in the area are accustomed to in terms of extras like shift differentials, schedules, benefits, holidays, and days off.

Brown: When appealing to a particular demographic, companies must be up to speed on expectations. The younger generation might want to know if there’s free Wi-Fi in the breakroom and whether they are allowed to wear headphones on break. They might be wondering whether the employer offers quality-of-life perks, like having a food truck come on site.

How should companies be thinking about pay and benefits?

sors are keenly attuned to whether a facility is clean and safe, communicating about related practices is key. This includes expectations around tech. You can better position a company to attract and keep employees with technology like geofencing that allows people to check in and out on a smartphone and mass, two-way texting to reach all employees at once when time-sensitive issues arise.

Brown: With regard to management and supervision, employees want to feel like they’re a part of a team, have positive relationships and interactions with coworkers, and be proud of where they work.

The younger generation expects to understand the “why” behind the tasks they are asked to do. Identifying managers and supervisors who excel at this, or training them in this skill, will go a long way toward keeping those employees.

It is important for a company establishing a new site to gather information on current rates for a variety of positions within a range of manufacturing settings.

Brown: It is critical that companies understand a specific region’s fair wage for the work to be completed, especially with hourly employees. Salaried employees will likely be more interested in the overall package including benefits, and employees across the board are considering opportunities for growth.

Chandler: Employees want to understand, “If I do a good job, what are the opportunities that could be available to me next? How do I get there? What are the training and evaluation processes?”

Employers must make clear from the outset what paths for growth look like, and continuously communicate how employees are doing in their current positions and what they need to do to access future opportunities.

What can you say about work environment considerations?

Chandler: Regarding the physical work environment, the COVID-19 pandemic elevated expectations. Because employees and supervi-

When international companies are new to a market, what unique issues do they face compared to domestic companies?

Chandler: When locating a facility in the U.S. for the first time, international companies might have a learning curve regarding infrastructure and processes. There’s a risk they will get bogged down setting up payroll and establishing federal and state ID numbers. Domestic companies already have that experience, so they have the luxury of focusing on the other important elements we mentioned, i.e., getting to know the local workforce and market, the available skillsets, the prevailing wages, and expectations around benefits and desirable shifts and hours. There are other facility planning obstacles that can affect the timetables of companies across the board, from the time involved in retrofitting a building to region-specific concerns like heat safety and natural disaster preparedness.

Brown: When a company establishes a new geographic location, they have an important opportunity to step back and see what appeals to their workforce now and set it in place, versus trying to make changes down the road. Although the many factors involved might make the prospect intimidating, companies new to market have the advantage of being able to design processes, programs, and a facility to support how people work today with competitive pay rates — and reap the benefits in the long term.

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~

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IMMIGRATION: A POTENTIAL FIX FOR LABOR SHORTAGES? Reforms to U.S. immigration policy may help to supply more of the workers needed by companies that might otherwise choose to locate in other countries.

I

t has been a continuous refrain since the pandemic upended many understandings about how the American economy is supposed to work: Across widely varying fields of work, there just aren’t enough people to fill all the available jobs.

The reality, though, is that while the pandemic may have exacerbated the problem and called a lot of new attention to it, this was an issue that was brewing well before the coronavirus began stirring up trouble. That means the solutions go beyond getting a handle on COVID-19, and it has had some observers wondering if the workers America needs can be found elsewhere in the world. Could changes in immigration policy help fill in the labor gaps?

“Without a doubt, this is the most acute workforce shortage I have seen in 15 or 20 years,” observes Larry Gigerich, executive managing director of Ginovus, a location and site selection consulting firm based in the Indianapolis suburb of Fishers. “It has been magnified by the fact that from before COVID to today, we’ve had four million people leave the

workforce. That is a huge number of people to lose. The second thing is longer-term, a 15-year trend line of the birthrate dropping so much.”

Indeed, statistics suggest that the number of job openings has for more than a decade increased far more quickly than the working-age population. A policy paper from the nonprofit Niskanen Center1 notes that job openings rose about 12 percent a year between 2011 and 2021, while the working-age population grew annually by just a third of a percent. That suggests a significant long-term problem emerging well before the “Great Resignation” amid the pandemic.

A Mismatch of Skillsets Adding to the population challenges, Gigerich says, is a mismatch in skillsets between what’s needed and what’s available.

“Part of it is technology disruption, whether in the office environment or even more so in manufacturing and logistics. There’s a vast amount of robotics and automation, which has changed the kinds of people needed to work in those facilities and how many,” he says. But he adds, the problem “ranges from highly skilled professional engineering jobs all the way through entry-level positions in retail, hospitality, and food services.”

Chris Volney, a managing director of client strategy with CBRE’s labor analytics team, works a lot with technology and life-sciences companies with big needs from the knowledge-based workforce. He agrees that the issue predates COVID, when there seemed to be slowdown in the availability of candidates arriving from overseas by way of H-1B visas, which allow American employers to bring in foreign workers to fill various specialty occupations.

Immigration, particularly through the

By Steve Kaelble

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H-1B process, has provided a good source of expertise among the kinds of tech and life sciences companies with which he often works. That source is just not what it used to be, and Volney concurs that it’s an issue across a wide range of sectors. For example, “it’s also manufacturing and warehousing — they have historically relied on immigrant labor, too, and they are suffering also.”

Navigating the H-1B Visa Process Part of the problem may lie in the H-1B process itself, he says. “It’s difficult to navigate people through that process,” Volney explains. “It could take months or years.”

Indeed, hiring a foreign worker through the H-1B process requires multiple applications. Employers must prove that they’re planning to pay potential immigrant workers whatever the prevailing wage that American workers would receive for that job in that area. They must file a separate application establishing the job’s qualifications in a specialty occupation. Meanwhile, citizens of most other countries must make application at their U.S. consulate to obtain an H-1B visa. And once they are headed to America, they must apply for admittance at the port of entry.

Beyond that complicated process, a major H-1B roadblock is the annual quota, according to Maria Kallmeyer, Chicago-based immigration counsel for the firm Quarles & Brady. “There are only 85,000 H-1Bs a year, and they run out immediately,” she observes. A lottery in March determines who may be eligible to come to the U.S. and start work in October, and Kallmeyer says the chances of winning that lottery are as low as one in 10.

One more issue is that current immigration law only has mechanisms for welcoming foreign workers with at least a bachelor’s degree. “There is no real category for people with less than a bachelor’s degree,” Kallmeyer says, which can stand in the way of hiring immigrants for many different jobs, from welders to assemblers to nurses.

Canada offers a highly instructive contrast when it comes to the welcome mat that foreign workers observe, he suggests.

“What has happened in Canada [is that] they saw an opportunity with what was going on in the U.S.,” he says. “Their immigration system is more merit-based. If you have a degree in computer science or other technology fields, they’re approving those guest worker visas in two weeks. That takes away a lot of risk for people emigrating and adds a lot more certainty.”

That’s one reason why a lot of top technology talent is now headed for Canada, Europe, and elsewhere, rather than the U.S. Volney points to a recent analysis in The New York Times2 in which the author interviewed more than a dozen highly educated professionals who were educated in China and then left for greener pastures elsewhere. “I was most surprised to find that most of them had moved to countries other than the United States,” writes the interviewer, Li Yuan. “China is facing a brain drain, and the United States isn’t taking advantage of it.”

Why is that? The author observes, “most of the emigrants I spoke to, explaining why they did not pick the United States, cited America’s complicated and unpredictable process for applying for visas and permanent resident status.”

Gigerich agrees that Canada has found successful ways to tap into immigration to support specific needs in its economy. For example, Canadian leaders recognized the need to bolster the workforce in areas related to technology, research and development, and countless other fields.

Their realization: “You can’t create them fast enough organically in your own workforce, so you have to turn to immigration as a tool,” he says. “Canada has done a very good job addressing that from the top end.”

STATISTICS SUGGEST that the

number of job openings has for more than a decade increased far more quickly than the working-age population.

An Easier Process in Canada Volney imagines how the American bureaucratic challenge might appear to a foreign opportunity-seeker who just earned a technology degree and is ready to apply that knowledge somewhere. The United States has historically been an attractive place to pursue a career, but what if some of your graduating classmates are finding it a whole lot faster, easier, and more certain to aim for a place like Canada?

The Effect on Companies’ Location Decisions The big picture, Volney says, is that immigration as a labor source — enabled by such tools as the H-1B visas — has not kept up with the needs of American employers. “That was a talent pool that a lot of tech companies were relying on, and they’re being forced to source that more from the domestic audience,” he says.

That leads to another concerning twist — will that trend cause some expansion projects to land in other countries? Volney says some location searches that in the past might have focused mostly on U.S. sites seem to be turning more global in their gaze.

“I think that is in part due to immigration policies,” he notes.

Gigerich agrees that it’s an issue that complicates the important task of growing American business: “We need to figure it out, because if we can’t have the talent that is needed to fill positions, they’ll be forced to go other places where they can find that talent.”

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What Changes Are Needed?

If changes to immigration policy might help fill vacant positions in the U.S., what might those changes look like? It should come as little surprise that any solutions will be a challenge to create and implement. Immigration policy has been a political dilemma for years.

“Immigration reform is the answer we certainly need, and it has been many years, since the 1990s, that we have had any real immigration reform,” Kallmeyer says. “I don’t think there is an appetite for it.” If policymakers were to develop that hunger for change, she offers a number of ways they could make a difference. One of the simplest would be to get rid of the 85,000 quota for H-1B visas and establish a market-based cap instead. “There is no reason for an artificial quota,” she says.

Then there’s the issue of no easy path for immigrants eager to fill jobs needing less than a bachelor’s degree. Creating more immigration categories is a potential solution waiting to happen, Kallmeyer adds.

She also notes the irony that America has been simultaneously experiencing a major influx of migrants at the southern border while lamenting a labor shortage to the north. “I have people calling me from both angles,” she says. “I have clients calling me

saying ‘I need people to work here.’ And I have clients calling saying ‘we want to help the migrants, is there something we can do for them?’”

Of course, connecting those dots or implementing any kind of immigration solution is not the least bit simple, or else it might have happened by now. Gigerich notes that the sometimes-chaotic situation at the southern border can complicate the political climate needed to find immigration solutions.

That said, he imagines there could be a path toward increasing the number of work visas, which would provide some labor relief. “That’s probably where you could get fairly good discussion on a bipartisan basis,” he says. “We are an innovation services economy — we need to fix that part. I think you are seeing the business community in the last two years become the most united they ever have been, saying we are putting our economic future at risk.

~

1 https://www.niskanencenter.org/the-case-for-updating-schedule-a/ 2 https://www.nytimes.com/2023/10/03/business/china-braindrain.html#:~:text=Chinese%20—%20from%20young%20people%20 to,%2Deducated%20middle%2Dclass%20Chinese

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>

DISTRIBUTION/LOGISTICS

Clustering Distribution Near Manufacturing Operations: An Old Idea Gaining New Traction Real estate, labor, and transportation needs must be considered by companies considering a clustering strategy if they are to reap its full benefits.

By Bruce Herbert, Strategic Advisor, TMX Transform

I

n the complex world of supply chain management, the pursuit of operational excellence is constant. Every organization aims to streamline processes, cut costs, and respond swiftly to market shifts. Recent disruptions like the pandemic and geopolitical tensions have forced a reevaluation of distribution strategies.

In this evolving landscape, clustering distribution centers near manufacturing operations is getting renewed attention as a strategic move in modern supply chain management, especially for food and beverage, textiles, consumer goods, and pharmaceutical companies. This strategy minimizes the gap between production and distribution, leading to improved operational efficiency, cost reduction, lower inventory, and a competitive edge.

A tried-and-tested model is reemerging in which manu-

facturers understand that goods should be stored as close as possible to where they were made before delivery to customers. When executing a clustering strategy, companies should follow these key steps to be successful:

• Perform a comprehensive financial analysis and create a well-structured budget. Warehousing was only ever separated from manufacturing to save costs. Clustering should also be to save costs. Establishing distribution centers near your manufacturing facilities demands an upfront financial commitment that goes beyond mere dollars and cents. It involves acquiring land, coordinating construction, procuring state-of-the-art equipment, and seamlessly integrating innovative technology. But — before you dismiss this strategy as too costly — consider that the size and location of your distribution center should align with your ambition. Can you afford to let the gap between manufacturing and distribution widen, or should you seize the opportunity to bridge it?

Not all industries can easily embrace this transformation.

Industries with specialized and oversized equipment, such as petrochemicals, may encounter significant expenses. In contrast, industries with more manageable equipment and inventory, like textiles, might find the transition more viable.

Without a comprehensive financial analysis, where potential savings in transportation and inventory are pitted against the upfront costs of land acquisition and construction, you risk not just delays but also budget overruns that could erode the very benefits you are seeking.

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• Ensure that the local workforce can meet the demands of both manufacturing and distribution. Labor availability is constantly changing — and a skilled workforce is fundamental to the successful centralization of manufacturing and distribution. Companies must possess the ability to attract and cultivate the skilled labor required to master the intricacies of distribution center operations. This requires a deep understanding of the local talent pool and crafting a strategy that aligns with the community’s demographics.

A multifaceted approach is required to meet the criteria for a skilled workforce. This includes the recruitment of seasoned professionals, the provision of training and development opportunities, and the establishment of a culture that not only attracts talent but also retains it. A skilled workforce is not merely valuable; it is an invaluable asset for the seamless operation of distribution centers located near manufacturing facilities.

• Assess the existing transportation infrastructure. Clustering distribution centers near manufacturing can only yield its full benefits if transportation and connectivity are both reliable and efficient. Challenges like traffic congestion, insufficient road infrastructure, and unreliable public transportation can disrupt the smooth flow of goods and materials between manufacturing and distribution centers, directly impacting the supply chain.

When considering the clustering strategy, assessing transportation infrastructure and costs is essential.

Companies should evaluate the adequacy of transportation infrastructure to ensure the efficient and cost-effective movement of goods. Depending on the location, this may involve seeing if there are adequate roads, railways, or ports nearby. Overlooking the evaluation of transportation costs can result in delays and increased expenditure.

In Sum Clustering distribution centers near manufacturing facilities is a promising strategy for companies seeking to optimize their supply chains. It offers numerous advantages, including reduced transportation costs, quicker response to market demands, improved inventory management, and a more environmentally sustainable footprint.

However, implementing this strategy requires meticulous financial planning and analysis. Companies must thoroughly evaluate real estate expenses, labor requirements, transportation infrastructure, and scalability to ensure a seamless transition and to fully reap the long-term benefits. For leaders, it requires the same courage to invest in and commit to improvement as those who built today’s industries. After all, the pursuit of operational excellence is a constant. for free site information, visit us online at www.areadevelopment.com

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SITE SELECTION

A Message to CREs: What’s Old Is New Again It seems that face-to-face meetings with community leaders and anecdotal research about a prospective location are back in style again as companies make location decisions.

By Katie Culp, CEO, KSM Location Advisors

I

’ve spent the last 25 years working in and around economic development. The last 18 have been spent in the private sector working with companies interested in locating new or expanded facilities and exploring economic incentives that support their growth plans. I’ve been in the industry so long, in fact, that I remember working on RFP responses to site selection consultants in the late 1990s that required hard copies to be snail-mailed back to the recipient. We had months to meet deadlines, and we faxed relevant components of our response to other stakeholders for review.

Whether it was the worldview from my then-inexperienced lens, or it was actually the case, personal relationships seemed to be at the backbone of every large economic development deal. Site selection consultants and developers or general contractors had longstanding relationships with the communities that won the big deals.

Direct research, anecdotal evidence about workforce and other community characteristics, and personal interviews with local employers and placement agencies were the things that moved the needle for final location decisions.

Then in the early 2000s came the automation of everything. Turnaround time on RFPs became weeks, not months; data was expected more quickly; and companies had increasingly tighter — some might even say unreasonable — deadlines. It also seemed like final location decisions were made without much conversation, if any, with communities themselves. Less time was spent with “boots on the ground,” engaging with community leaders to learn about the qualitative information gleaned from a narrative that doesn’t exist in any database. And more time was spent around conference tables pouring through the quantitative data as a means of directing a final location decision. Personal relationships mattered, but generally, they mattered less than the bottom line.

Fast forward to today. Relationships matter but are still less relevant than they were 30 years ago. Prospective sites and communities must make a compelling case on paper, oftentimes before they even know they are being considered. Having access to certain types of data (especially the type you purchase) is the expectaAREA DEVELOPMENT | Q4 2023

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tion rather than an impressive extra. Fax machines are somehow even more extinct than household telephones, and RFPs are not the primary way most companies conduct a site selection assignment.

And yet, other site selection practices that dominated my early career are coming back around.

Practices that were considered somewhat outdated just a few years ago are becoming a prominent part of the final location decision. Namely, face-to-face interactions with community leaders and anecdotal research.

Getting the Whole Story

IN THE EARLY 2000S…

more time was spent around conference tables POURING

THROUGH THE

QUANTITATIVE

DATA, as a means

As the employer, you know better than anyone how important an available, reliable, and affordable workforce is to your bottom line. Data points about unemployment trends and growth in specific occupational areas are important, but they do not tell the whole story. I’ve seen more and more clients who are laser-focused on wanting to know what is really going on with a community’s workforce. Obtaining that knowledge requires live humans to meet. Interviewing community stakeholders and local employers in order to understand where there are pockets of underemployed workers is invaluable. In the final few meetings I attend leading up to a final location decision, there is more airtime spent on this anecdotal and qualitative data than I’ve ever seen before.

Company real estate leaders like you are slowing things down just a tiny bit in order to ensure all meaningful inputs are gathered. While it’s still true that communities are expected to provide any needed and current hard data — which helps narrow a long list of candidate communities down to a short list — it’s also true that the data and corresponding conclusions are then parked for a bit while the more human side of site selection takes the lead. I believe this change is occurring for two reasons. First, nobody actually knows what the heck is going on with our current and future workforce. Second, as we head into a projected eco-

of directing a final location decision.

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nomic slowdown, the always-present desire to avoid risk is growing in intensity.

You and your peers are more regularly making space in the process to fully vet finalist locations with the hope that this extra time will help alleviate risk. In addition, those of you responsible for the site selection decisions for multiple operations have seen how much more unpredictable state and local approval processes have become. My guess is that this is a result of the increased political polarity that runs through our entire country. Even the communities with solid economic development track records and a history of success are facing unexpected timing delays, and even unexpected outcomes, after robust and sometimes volatile public meetings.

Importance of the Human Part I’m speaking in generalities, of course. It isn’t that personal relationships stopped mattering or that real estate professionals and their peers stopped wanting to know how other employers were faring with their own hiring experiences. But like everything, it’s a pendulum that swings back and forth. Right now, the human part of site selection work is of paramount importance.

I’d like to thank you for allowing us site selection consultants to spend a little more time doing direct due diligence so that we can meet our shared objective of finding locations that mitigate risk and maximize success.

I hope our friends in the public/quasi-public sector economic development agencies are listening. The most successful communities that tout the biggest wins are those that can anticipate our questions before they’re asked — and that can provide a mix of qualitative and quantitative data resulting in enough comfort to make a location decision.

In the meantime, I think we can all coalesce around a shared desire to never return to hard-copy RFP responses that are faxed and snail-mailed!

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

11/28/23 4:47 PM

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Reshoring and manufacturing job announcements exceeded 360,000 in 2022, a record-breaking 53 percent increase from 2021.

Last

WORD

Yet, with revived efforts to begin reshoring and nearshoring manufacturing to and toward the U.S., several challenges have surfaced.

By Jason Price, Head of Logistics & Industrial Research, Cushman & Wakefield

MADE IN THE USA: SHORING UP OPTIONS FOR U.S. MANUFACTURING’S RESURGENCE The U.S. manufacturing sector has been quietly undergoing a resurgence as the widespread disruptions caused by the pandemic brought into sharper focus the criticality of having secure, resilient, well-functioning supply chains. Accelerated by legislative incentives such as the Inflation Reduction Act and the CHIPS and Science Act, this paradigm shift is taking hold as onshoring, reshoring, and nearshoring considerations have significantly intensified among U.S. businesses and governments alike.

This raises the question, is the U.S. ready for a manufacturing renaissance?

With revived efforts to begin reshoring and nearshoring manufacturing to and toward the U.S., several challenges have surfaced, namely the lack of available manufacturing space, labor and talent shortfalls, as well as significant infrastructure improvements required for much-need supply chain efficiency and, ultimately, success.

According to Cushman & Wakefield Research,1 U.S. manufacturing vacancy currently sits at a tight 2 percent, and with only 59.9 msf under construction, leasing conditions for occupiers who have yet to secure facilities will prove to be challenging in the near term.

Yet despite tight market conditions, in the first quarter of 2023, “reshoring” considerations announced on earnings calls by several S&P 500 companies were up 128 percent year-overyear. Further, reshoring and manufacturing job announcements exceeded 360,000 in 2022, a record-breaking

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53 percent increase from 2021; and since 2020, private companies have announced $470 billion in manufacturing investments — in addition to the Biden administration’s $220 billion.

While encouraging, the recent boom in investment has not necessarily translated to an outsized increase in jobs as the composition of U.S. manufacturing has evolved requiring a more diverse group of laborers and skillsets, such as highly skilled scientists and engineers — placing more pressure on an already strained labor market and headwinds for sustained expansion.

Aging infrastructure is another challenge facing the sector, as inventory tends to be older, with nearly two-thirds of it built before 1990, and nearly three-quarters built before 2000. Additionally, the American Society of Civil Engineers gave the nation’s infrastructure a C-minus grade on its 2021 quadrennial Infrastructure Report Card,2 citing that the nation is spending only half of what it needs to invest in infrastructure improvements to bring systems up to par.

This is only counter-challenged by the fact that there are limited land options with sufficient power to support the development of new manufacturing sites, creating additional complexities for site selections, and limiting investment opportunities for investors and space for manufacturing users.

Despite these challenges, corporate interest in expanding manufacturing in the U.S. and in nearby countries will continue to drive new development. With the right planning and strategic analysis of the real estate including location analysis, supply chain optimization, and scenario planning, both investors and occupiers have a unique opportunity to make a transformative investment into reshaping the future of the U.S. and Americas-wide manufacturing sector.

1 https://www.cushmanwakefield.com/en/ united-states/insights/exploring-the-challenges-and-factors-driving-onshoring-andnearshoring#challenges\ 2 https://infrastructurereportcard.org/asce2021-infrastructure-report-card-gives-u-s-cgrade/

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