Area Development Q4 Issue 2019

2019

ANNUAL LEADING METRO LOCATIONS

AREA SITE

AND

FACILITY

PLANNING

Q4/2019

the

MONEY issue

THE ROLE OF TAXES

IN LOCATION DECISIONS

NEGOTIATING & CAPTURING INCENTIVES PLUS:

What Should High-Growth Companies Look for in a Community?

Embracing Disruption — What It Means to Change the Game W W W . A R E A D E V E L O P M E N T. C O M

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CONTENTS Cover Story

18

the

MONEY

28 Radical

Transformation in the Food & Beverage Industry

issue

• The Role of Taxes in Location Decisions •N egotiating & Capturing Incentives The effect of TAXES in a prospective LOCATION on a company’s bottom line can be MINIMIZED through a properly negotiated INCENTIVE package. Additionally, the work required in actually CAPTURING the NEGOTIATED incentives cannot be overlooked.

Food processing, packaging, and delivery are all being disrupted by changes in technology, consumer preferences, and government regulations.

features

14 The Trade War and Its Impact on the Location Decision Process

12 What Should High-

Growth Companies Look for in a Community?

While there are many key factors to consider when selecting a location, the three “must haves” for entrepreneurial, highgrowth companies are an existing entrepreneurial ecosystem, an affordable cost of doing business, and the “cool factor.”

How can site selectors survive and also find fresh opportunities in a world where not only tariffs, but also national boundaries and trade barriers, will become more meaningful than they have been in the recent past?

54 Life Sciences’ Quest

for a Future-Friendly Real Estate Strategy

26 What Does It Mean to Change the Game?

Record-breaking R&D investment in the life sciences industry is spurring real estate innovation too.

Embracing “disruption” requires a shift in mindset, but those companies that welcome change can dramatically improve project outcomes.

Area Development® Site & Facility Planning (USPS 345-510) is published four times per year (Q1, Q2, Q3, and Q4) at Richmond, VA, by Halcyon Business Publications, Inc., 400 Post Ave., Westbury, NY 11590.

Periodicals postage paid at Westbury, NY, and additional offices. Single copies, $20. Yearly subscription U.S. & Canada, $75; foreign, $95.

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

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Volume 54 | Number 4 Q4/2019

Economics “The United States is still the most powerful economy in the world… an incredible engine for creativity and innovation…[with the] smartest, most effective workforce in the world. So we have a lot going for us, in spite of the fractiousness of our politics.”

Jay Carney (1965 – ), former White House press secretary to President Barack Obama

annual reports

ANNUAL

2020

SELECTSITES DIRECTORY

departments

4 Editor’s Note

35

Trade News Will Help to End the Year on a Positive Note

• Hiring Challenges Continue Throughout the U.S. • Has the Value of a Degree Changed?

• Hot Jobs: Growing Industrial Sectors

Taking Steps to Fill Your Company’s Talent Pipeline

Within the articles in this section, you will find statistical information on each state’s population and unemployment as well as educational attainment levels. States with the most manufacturing jobs are shown, as well as location of primary industry clusters. Contact information for economic development organizations that can help in your next location search is in the Select Sites Directory beginning on page 52.

L EA D ING

LOCATIONS

6 In Focus

8 Front Line

Trend Toward Microfactories Continues

10 First Person

Serguei Beloussov, CEO, Acronis

72 Ad Index/Web Directory

61 Leading Metro Locations for 2019

Metro areas that are hotbeds of technology lead the pack, joined by others showing manufacturing prowess, which has a large economic ripple effect.

special location reports

31 Kentucky Continues to Break Records in 2019

Low business costs are drawing businesses to Kentucky, as the state also tries to equalize opportunity in its rural areas through Opportunity Zone incentives.

57 Population and GDP Grow

online • How to Write a Smart RFI • Risk Assessment: The Key to Successful Data Center Planning and Design • Healthy Growth Marks Florida’s Economy • Positive Signs for the Mississippi Economy • Talented Workforce Makes Virginia a Top Business Location

in South Carolina

South Carolina’s business-friendly environment is drawing new businesses that can take advantage of its longstanding workforce training program to fulfill their needs.

Find these articles and more @ www.areadevelopment.com

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

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EDITORS NOTE

Q4/2019

Trade News Will Help to End Year on a Positive Note

F

or some time now, the uncertainty about trade relations — especially with China, but also with the United States’ North American neighbors — has caused company executives to hesitate in making location decisions. As Jay Rogers, partner at Nelson Mullins, says, “Uncertainty is the enemy of long-term capital investment.” Tariffs and counter-tariffs put into place give businesses short notice to adjust their supply chains. The good news is that proposals for some trade deals were announced as we went to press on this issue.

www.areadevelopment.com EDITORIAL Editor Geraldine Gambale editor@areadevelopment.com Staff and Contributing Editors Lisa Bastian Tom Gresham Dave Claborn Mark Schantz Mark Crawford Steve Kaelble Dan Emerson Karen Thuermer Tom Ewing

DESIGN/PRODUCTION Art & Design Patricia Zedalis

First, in early December, the U.S., Mexico, and Canada signed amendments to the United States-Mexico-Canada Agreement (USMCA), which seeks to modify the 25-year-old North American Free Trade Agreement (NAFTA) and bring it into the 21st century. Among the topics covered in the USMCA are intellectual property rights, digital trade and data storage markets, financial services markets, currency issues, as well as labor and environmental issues. The agreement still needs to be ratified by all three nations.

Production Manager Jessica Whitebook jessica@areadevelopment.com

Shortly thereafter, the United States settled on the final terms of a partial trade deal with China, wherein President Trump agreed to significant reductions in tariffs he has already placed on $360 billion worth of Chinese goods in return for China’s commitment to purchase U.S. farm products, among other concessions. As part of the deal, the administration would also cancel new tariffs on $160 billion worth of Chinese imports that were scheduled to go into effect on December 15th. Business groups welcomed this “phase-one” deal as a sign of easing tensions in the trade war.

ADVERTISING SALES

Of course, whether these new trade agreements actually go into effect — and whether they actually lower costs for businesses already hurt by countertariff measures — remains to be seen. But some positive economic news at year’s end is welcomed. We’ll deal with the fallout in 2020.

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

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

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

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

CIRCULATION

circ@areadevelopment.com

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

2019 Editorial Advisory Board Josh Bays, Principal, Site Selection Group, LLC Marc Beauchamp, President and CEO, The CAI Global Group H. Robert Boehringer, III, Managing Director, Global Location and Expansion Services, KPMG Brian Corde, Managing Partner, Atlas Insight, LLC Les Cranmer, Senior Managing Director, Savills Studley Kate Crowley, Principal, Baker Tilly Dennis Cuneo, Partner, Fisher & Phillips LLP

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

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

Stephen Gray, CEO, Gray Construction

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

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

Eric Stavriotis, Senior Vice President, Advisory & Transaction Services, CBRE Margy Sweeney, Founder & CEO, Akrete, Inc. Dan White, Senior Economist, Moody’s Analytics Joshua Wright, Vice President, Economic & Workforce Development, Emsi

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

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IN FOCUS Taking Steps to Fill Your Company’s Talent Pipeline

By Brian Gallagher, Vice President Corporate Development; and Shawn Buchanan, Vice President and General Manager, Graycor Southern

Companies must take the time to identify potential new hires, build a relationship, and follow up with training and support in order to build today’s — and tomorrow’s — workforce.

BRIAN GALLAGHER provides organizational strategic planning and leadership to the Graycor sales and marketing teams. He has extensive experience in executive-level leadership and frequently writes and speaks on strategic planning, marketing, business development, human resources, and leadership topics.

SHAWN BUCHANAN has over 20 years of experience in the petrochemical, process, and power markets, including multimillion-dollar capital construction, maintenance, and turnaround projects. Areas of technology expertise include Primavera, SAP, Hard Dollar, AutoCAD, Bluebeam and InEight.

It’s no secret the manufacturing and construction industries are facing a shortage of workers at every level. To build a talent pipeline, manufacturing and construction companies need to embrace the challenge, dedicate resources, and invest in programs to change the future. Building a solid talent pipeline requires a multifaceted approach that addresses internal and external factors of your organization.

One set of strategies is applicable to positions in management or

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other high-skill careers. Companies should establish programs to engage at the university and technical college levels by presenting to classes, sponsoring student competitions and organizations, developing internship programs, and recruiting on campus. It’s a good idea for recent hires and millennials to be involved in the recruiting process; their recent experience makes them relatable to students.

A key component of any outreach program should be to dispel myths about careers in construction and manufacturing. Advances in technology, training, safety, and quality have combined to make jobs in traditional trades cleaner, safer, and more skilled than they were in previous generations. These jobs now offer career tracks, with the potential for advancement and financial growth.

On-Boarding and Mentoring Once students become new hires, companies should follow up with on-boarding and mentoring programs to round out employees’ knowledge with more in-depth, hands-on experience and candid coaching. Small-group training sessions and rotations between processes, lines, projects, or departments are examples of how mentoring can be conducted. By working with experienced professionals, engineers and other specialists can build upon their understanding of technical concepts and theories.

Millennials and other workers from younger generations usually prove to be focused on growth and appreciate seeing what their career paths could look like. It’s up to the company to develop a framework of support that provides enrichment and encourages development. Companies need to own the development of their talent pipeline. Tasks that keep a company on track for this include identifying a champion for individual employees and initiatives, developing well-rounded recruitment and outreach programs, identifying targets, and setting concrete goals.

Recruiting veterans, minorities,

and women should be a priority; doing so not only expands the talent pool, but enhances company culture, which in itself goes a long way toward supporting employee development. Companies should deliberately create a culture of growth and inclusiveness that people want to be a part of.

Setting up company programs to help new hires pay back student loans is a recent trend. Not a lot of companies are doing it, so being one of the first to roll out such a program could be a differentiator.

Surveys indicate a lot of interest among job-seekers, with one survey1 finding that 45 percent of the respondents considered student loan repayment the single most compelling employee benefit.

Most industrial and construction companies will also benefit from working with partner organizations on programs that target middleand high-school students, giving them early, pre-apprenticeship training for the skilled trades.

Many industry associations, economic development organizations, chambers of commerce, and commerce departments now have such programs.

Structured Development Create opportunities for employees at every level to participate in structured development programs. These can take place on the job, in the classroom, or through eLearning. Equipment, process, and operator training will likely be key components of any mentorship program, but don’t leave out social gatherings, which can offer a more informal way to engage employees and allow for an exchange of information. Also consider developing a formal approach to knowledge-sharing so seasoned employees can transfer their knowledge to younger employees.

Each employee should have a learning “transcript” or skills inventory. This, along with performance and goals, can be tracked through an online system or app, helping management — as well as the employee — assess development.

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Changes impacting the manufacturing and construction world can ultimately have a positive impact on manufacturing and construction employment.

Companies that take the time to identify potential new hires, build a relationship, communicate with them, then follow up with training and support can build a workforce that makes them competitive in this new era.

1

Online Media Area Development.com & Newsletters The leading website for corporate site and facility planning

https://www.businesswire.com/news/home/20171017005611/en/Individuals-StudentLoan-Debt-Facing-“Unprecedented-Financial

FRONT LINE

Face to Face Consultants Forums The industry’s leading best practices conference events for economic developers Online Database Marketing The world’s most viewed building and site database Custom GIS Applications Affordable cutting-edge GIS technology for your website

Local Motors, an Arizona-based company, uses 3D printing to make customdesigned vehicles, including the Olli, a self-driving bus.

Trend Toward Microfactories Continues

By Dan Emerson

By utilizing microfactories, manufacturers can respond quickly to changes in product design and demand.

Let us work with you.

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Many consider manufacturing to be a relatively slow-moving industrial sector, i.e., not as quick as other sectors in adapting to new technologies and changing markets. But the manufacturing industry has become much nimbler, and part of that change has involved embracing the concept of microfactories.

Enabled by digital technology — including 3D printing — microfactories feature modular design and a small footprint, as small as 50 square meters.

They can be run by small teams of highly trained workers. Modules can be modified, subtracted or swapped out to adapt to changing market and consumer needs.

The microfactory concept was birthed at the Mechanical Engineer Laboratory (MEL) of Japan in 1990 and has been advanced by research institutes and universities, internationally. To date, perhaps the

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MANUFACTURERS CAN RESPOND MUCH MORE QUICKLY TO CHANGE IN PRODUCT DEMAND “IF THEY ARE NOT CONSTRAINED BY TRADITIONAL

ORGANIZATIONAL STRUCTURE.”

most high-profile manufacturer to employ microfactories has been General Electric, which opened its first two microfactories in AbuDhabi and Dubai, UAE. The AbuDhabi factory helps local industrial companies adopt additive manufacturing and design practices. The Dubai facility works with consumer goods and service companies.

GE’s partners in the region are Mubadala Development Company, an Abu-Dhabi-based investment and development company, and the Dubai Future Foundation.

Louis Librandi, a principal with Deloitte, says the micro trend has had the most impact in two manufacturing sectors: textiles and electronics. Librandi sees a link with the growing practice of “customized purchasing,” in which consumers can order and purchase clothing or other items which were — at least partially — made to their specifications. Microfactories are well suited for “small-batch production,” Librandi says.

Microfactories are also used in recycling — or reclaiming — rare earth materials from discarded electronic equipment, such as silver, iron, copper, and palladium.

Those materials are sometimes found in “conflict zones,” where mining is difficult or extremely expensive, so reclaiming is a viable substitution, adds Librandi.

In 2018, The Center for Sustainable Materials Research and Technology (SMaRT Center) at the University of New South Wales (UNSW) in Australia announced the opening of a microfactory that will be dedi-

cated to the recycling of electronic waste. This factory turns recycled plastic waste into 3D printing filaments. A robot can sift through discarded laptop and cell phone components to identify useful elements. A precision, small furnace melts down the parts. Metal alloys can be remade into various parts.

Innovation and Speed to Market Microfactories are relatively easy to set up and don’t require as much capital as traditional factories. Additionally, manufacturers can respond much more quickly to change in product demand “if they are not constrained by traditional manufacturing overhead and organizational structure,” says Librandi. “Microfactories offer much better opportunities for innovation and speed to market, potentially driving lower costs…A number of OEMs have been looking at how they can incorporate microfactories as part of their supply base and how to manage this new entity. From an OEM standpoint, they need a different skill set to manage that type of supplier and guarantee the quality of the product.”

One of the biggest drivers is being able to serve local markets. In the age of high transportation costs and tariffs, “It’s very beneficial if I don’t have to put products on a ship to spend eight weeks on the ocean,” Librandi says. Further, in the age of Amazon, consumers want to get what they want when they want it; waiting weeks or even months for something they ordered to arrive is a thing of the past. That

accelerated delivery trend increases the importance of accelerated supply chains and accelerated design and manufacturing.

For example, Local Motors, an Arizona-based company uses 3D printing to make custom-designed vehicles, calling itself the first digital OEM. They include Strati, the first 3Dprinted car, and the Olli, a self-driving bus. The primary material Local Motors uses to make its vehicles is carbon fiber-reinforced thermoplastics.

By using ultra-efficient 3D printing, Local Motors can reduce tooling costs by 50 percent and reduce overall production time by 90 percent.

Last year, Local Motors announced the formation of San Francisco-based LM Industries Group, which develops mobility products.

LM says it can turn a concept into a finished vehicle within one year.

“LM Industries is on a mission to transform mass manufacturing to micro-manufacturing in order to match the new pace of technology and quickly changing consumer needs,” LM Industries CEO and cofounder John B. Rogers, Jr. said in a statement.1 Part of that mission is sharing its technology with other manufacturers.

“For an entity or person who is going to start a microfactory, it’s really important to focus on strategy — how they are going to win and what is the value proposition,” Librandi explains. He expects the trend toward smaller, more mobile factories to continue developing.

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https://www.digitaltrends.com/cars/lm-industriesmicro-manufacturing/

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FIRST PERSON SERGUEI BELOUSSOV CEO ACRONIS Can you explain the convergence between data protection and cybersecurity?

Beloussov: Cyber protection solutions address the convergence of data protection and cybersecurity. Legacy approaches, like standalone backup or non-integrated security point solutions, are no longer effective. A modern approach is needed that addresses all five vectors of cyber protection.

Can you describe the five vectors of cyber protection?

Beloussov: It’s important for organizations to understand that as data volumes grow, the way data is accessed changes, and safeguarding that data involves complex and often competing considerations. Those considerations are the five vectors of cyber protection — also known by the acronym SAPAS: Safety — ensuring that a reliable copy of your data is always available; Accessibility — making your data easily available from anywhere at any time; Privacy — controlling who has visibility and access to your data; Authenticity — having undeniable proof that a copy is an exact replica of the original data; and Security — protecting your data, applications, and systems against malicious threats.

Cyber protection balances the access against the need to keep your data safe, private, authentic, and secure. The balance is important to deliver easy and efficient protection.

How do advances in blockchain figure into this?

Beloussov: Today’s digital world contains a huge number of assets whose originality and ownership are difficult and costly to define and track. Blockchain technology can solve this problem by providing a secure, publicly verifiable way to ensure the authenticity and integrity of data and transactions of any kind — reducing the cost and complexity of centralized systems while making data “tamper-proof.”

A blockchain-based service for file notarization, esigning, and verification enables customers to ensure the integrity of their business-critical data while achieving regulatory transparency and decreasing security risks. It also features an e-signature service where customers or required parties electronically sign documents (via a web

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console or API) while generating publicly verifiable proof of the time stamp and integrity of signatures.

What about machine learning and artificial intelligence?

Beloussov: With an ever-evolving threat like ransomware, it’s not enough to have traditional anti-virus software in place, which solely defends against known threats. Active protection must be integrated into your backup solution to effectively defend against evolving strains of malware, also known as zero-day threats. By employing artificial intelligence and machine learning models, ransomware attacks can be recognized and halted in real time.

Machine learning (ML) models are generated by artificial intelligence infrastructure that analyzes hundreds of thousands of computer processes — both legitimate and malicious. Those models are then incorporated into active protection, which monitors systems in real time, analyzing the behaviors of every process in order to detect unusual activities, such as unauthorized encryption. When a suspicious process is identified, the technology stops the attack and immediately notifies users or IT administrators — saving time and simplifying their response.

How does Acronis partner with cloud providers, software vendors, and other service providers?

Beloussov: With one SaaS solution, service providers and their customers gain access to hybrid cloud backup, disaster recovery, AI-based ransomware protection, file sync and share, and blockchain-based file nota-

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rization and e-signature services, all managed from a single console. By accessing our cyber platform, developers can support new data sources, new data locations, and integrate their applications with cyber protection solutions.

becoming a technology hub competing with the overpriced “silicon neighborhoods.”

I understand Acronis has selected Tempe, Ariz., for a new R&D center. How did that decision come about?

Beloussov: Yes, Acronis has pledged to invest $50 million dollars into the city over the next three years through innovative blockchain, machine learning, and artificial intelligence-based cyber protection research and development projects — all led by local talent with staff pulled from the thriving engineer and IT professional community of the city. Furthermore, to develop and enhance our innovative cyber protection services, Acronis plans close connections with Tempe’s engineering community and with local schools like Arizona State University.

Beloussov: Arizona is North America’s hub for data center operations and professional services, and companies who overlook Tempe miss out on the talent and opportunities that the location offers. A top technology center in Arizona, Tempe is a leading choice for major corporations and, in particular, a hotbed for technology — with tech companies from aerospace and nanotechnology to solar energy research and software development and manufacturing having a footprint in the city.

As the cyber protection industry continues to grow, our team is constantly working to develop services that make total protection easy, efficient, and secure for users. By opening this new research and development office in Tempe, we’re able to draw more experts to this effort and continue providing the innovative services that have made Acronis the success it is. Additionally, Acronis’ investments in R&D will contribute to Arizona

Will Acronis be partnering with the Tempe area’s educational institutions to fulfil its workforce needs at the R&D center?

THE ASSIGNMENT Acronis, a Singapore-based global leader in cyber protection, recently opened its operations center — featuring a cutting-edge R&D office as well as its largest and fastest-growing data center — in Tempe, Arizona. Area Development asked Acronis’ CEO Serguei Beloussov about the latest issues in cyber protection and why the company chose Tempe for its facility.

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>

SITE SELECTION

What Should High-Growth Companies Look for in a Community?

While there are many key factors to consider when selecting a location, the three “must haves” for entrepreneurial, high-growth companies are an existing entrepreneurial ecosystem, an affordable cost of doing business, and the “cool factor.”

By Jason M. Hamman, President and Founder, The Hamman Consulting Group, Inc.

I

’ll start off by stating the obvious…you’re reading this article because you understand the importance of selecting the optimal business location.

I believe this to be true across the board, regardless of industry sector, company size, facility type (i.e. headquarters, distribution center, etc.) or other factors. But perhaps it is most important to entrepreneurs and highgrowth startup companies (herein referred to collectively as entrepreneurial companies). While companies listed on the Fortune 500 list may initially come to mind when thinking about corporate site selection projects, entrepreneurial companies have increasingly begun to recognize the value of utilizing a systematic evaluation process for selecting the optimal location to expand their businesses.

From the perspective of an economic development organization, entrepreneurial companies are desirable targets for several reasons. While some projects shift existing jobs within a region, entrepreneurial companies result in net new job creation. Entrepreneurial companies are often innovative with a focus on new and emerging technologies. The skilled positions created by entrepreneurial companies are less prone to being displaced by technology or relocated internationally for labor cost reasons. Entrepreneurial compa-

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nies are also attractive to young, educated job-seekers, who are a sought-after demographic group for many communities.

Entrepreneurial companies look for locations that will be conducive to growth and offer a thriving environment. This will be a key factor for talent attraction and retention. Economic development organizations that understand and highlight these key location factors that entrepreneurial companies seek in a location will compete most effectively for these project opportunities. While there are many key location factors to consider, this article will discuss three “must haves” for entrepreneurial companies: an existing entrepreneurial ecosystem, an affordable cost of doing business, and the “cool factor.” These “must haves” will be discussed using The Hamman Consulting Group’s recently completed “Project Sadie” for some background context.

Project Sadie is a high-growth startup company with its headquarters located in New York City. The company raised significant funds from prominent venture capital firms in order to accelerate its growth, which included selecting a location for its “HQ2.” This facility would include an inbound customer support operation, as well as lab, finance, and insurance functions. Employment at Project Sadie’s HQ2 is expected to reach 300 within three years.

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An Entrepreneurial Ecosystem The Kauffman Foundation1 defines an entrepreneurial ecosystem as “a network of people supporting entrepreneurs, and the culture of trust and collaboration that allows them to interact successfully.” A critical component of a location’s entrepreneurial ecosystem, as included in the Kauffman Foundation’s “Entrepreneurial Ecosystem Building Playbook,” is being home to other successful entrepreneurial companies. Economic development organizations that understand how to effectively share their success stories with prospective entrepreneurial companies can differentiate themselves from competing locations.

From the company’s and the consultant’s perspective, seeing is believing! This was certainly the case with Project Sadie as the regional economic development organization directly connected the client company with other successful entrepreneurial companies to hear firsthand accounts of how this location has allowed for their continued business growth.

Companies often select locations in which there is a cluster of companies in the same or a related industry sector. A primary reason for this is an existing workforce with skills and experience needed by the prospective company. This is especially true for entrepreneurial companies. Locations that have access to a talented regional labor pool, as well as an established talent pipeline, are given preference. Project Sadie’s final location decision was heavily influenced by both of these factors, as the regional labor market has a high concentration of customer support operations to recruit from, as well as a local university with a specialized degree program to help fulfill future workforce needs.

Locations that feature institutions providing support and resources (i.e., incentives) for entrepreneurial companies often emerge as top contenders for expansion or relocation project opportunities. Providing support to entrepreneurial companies in the form of introductions to community and business leaders, as well as networking opportunities, can be invaluable. Incentives can include assistance with recruiting new employees and creating customized workforce training programs.

These types of incentive programs can be critical to help ensure that fast-growing entrepreneurial companies can meet their employment ramp-up needs.

Affordable Cost of Doing Business Entrepreneurial companies are commonly associated with large expensive markets on the coasts such as New York City, Boston, Seattle, and Silicon Valley. However, in recent years, entrepreneurial companies have increasingly begun to select locations where operating costs are significantly lower.

In October 2018, Forbes2 published its Top-10 Rising Cities for Startups list. The list includes several mid-sized cities, in terms of population, that also tend to have lower costs of doing business. Several of the rising cities are located in the Midwest, with Columbus, Ohio, being listed as the top city. Targeting cities in the Midwest or other lower-cost of business locations makes sense for entrepreneurial companies as it can quickly become cost-prohibitive to scale up a new company in larger, more expensive markets.

A location’s cost of living can also have an impact on a company’s ability to attract and retain employees.

This is particularly true in terms of housing options.

According to data from Sperling’s Best Places,3 the housing component of the cost of living index — which is calculated as the median cost of a location’s average home (for both buying and renting) — for Columbus, Ohio, is 68.2 versus 294.3 for New York City (the U.S. average is 100.0). The overall cost of living index is 85.5 for Columbus versus 187.2 for NYC. In other words, an employee’s salary would need to be more than double in NYC versus Columbus in order to have the same spending power.

The “Cool Factor” Although entrepreneurial ecosystems and lower operating costs are critical location factors, the “cool factor” is the rising star among the “must haves” in any community. As this trend continues, lower-cost locations that offer the quality of place amenities that young, educated workers look for will compete more effectively on talent retention and attraction. Economic development organizations should keep an eye out for and, where possible, promote adaptive reuse opportunities with former industrial buildings or other unique properties that could be converted into loft-style office space.

One property that was considered by Project Sadie was a former elementary school that has been redeveloped into a multi-tenant facility geared toward entrepreneurial companies. The building features a coffee shop, workout facility, bike storage, and audio/video equipment for meetings and events. While this former elementary school was not selected by Project Sadie, it certainly passed the “no cubicles and no ceiling tiles” real estate rule!

Whether it’s a function of development stage, or perhaps based on a need or desire for flexibility, locations with business incubators, accelerators, and co-working spaces will be appealing to entrepreneurial companies.

These facilities typically work to create a community Continued on page 16 AREA DEVELOPMENT | Q4 2019

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GOVERNMENT POLICY/BUSINESS GLOBALIZATION

The Trade War and Its Impact on the Location Decision Process How can site selectors survive and also find fresh opportunities in a world where not only tariffs, but also national boundaries and trade barriers, will become more meaningful than they have been in the recent past?

By Jay Rogers, Partner, Nelson Mullins

relationship, including intellectual property protection.

The purpose of this article is not to give an opinion regarding the administration’s goals or tactics, but to give tips on how to survive, or even thrive, in the midst of the many changes under way in America’s trading relationships around the world.

Uncertainty and Opportunity

I

f you’ve picked up a newspaper, gone online or even walked past a television during the past two and a half years, you know that the U.S. government has been in an outright trade war with the People’s Republic of China and has levied, or threatened to levy, tariffs on friend and foe alike.

The Trump administration views tariffs as its primary weapon in addressing what it sees as global trade imbalances that are harmful to the economic and even national security interests of the United States.

The Trump administration’s trade ire has not been reserved for countries considered strategic adversaries but has also been directed at some of America’s oldest and staunchest geopolitical allies, such as Germany, France, South Korea, Canada, and others. The administration’s primary focus, however, has been on China, which it views as both a trade manipulator and the first significant geopolitical adversary the U.S. has faced since the end of the Cold War. Although recently (October 2019) the Trump administration announced a partial trade deal with China, that “deal” left in place Section 301 tariffs of 15–25 percent on $360 billion worth of Chinese goods and sidestepped many critical issues in the U.S.-China trade

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So, how does the trade war impact the site selection process? First, the bad news: Uncertainty is the enemy of long-term capital investment, and tariffs create uncertainty by the container shipload. Tariffs can be put on or taken off by simple Executive Order of the president, sometimes with no more than a few weeks’ notice.

Enacting laws via Congress, by contrast, frequently takes years, which can be frustrating but at least gives companies time to prepare.

Tariffs further ratchet up uncertainty by causing unpredictable knock-on effects, such as countertariffs by trading partners (e.g., the Boeing/Airbus squabble). Another common knock-on effect is that tariffs may suddenly make the importation of a U.S. manufacturer’s critical component prohibitively expensive, thus disrupting the manufacturer’s ability to churn out “Made in America” end products.

The Trump administration believes that the uncertainly created by tariffs is worth the pain

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in order to fundamentally re-route global trade on terms more advantageous to the United States.

And although the trade war has created difficulties for many, there are signs that the administration’s strategy is having its desired effect. One of these signs is the recent scramble by many multinationals to move production out of mainland China. This scramble creates opportunities.

Many of the multinationals scrambling to get out of China are U.S. companies that years ago offshored production to China with the intention of selling their products back into the American market. The Section 301 tariffs have taken dead aim at these companies, in hopes that they’ll move production back to the U.S. But will production move back to the U.S. or to other production platform countries such as Mexico, Vietnam, or Indonesia? The United States is experiencing its lowest unemployment levels in half a century, which will make many U.S. companies think twice before moving production back home, although many other factors (shorter supply lines, being closer to customers, etc.) will exert a homeward pull.

Substantial Transformation and Country of Origin Analysis But what exactly does “leaving China” mean? For example, a complete pullout may not be necessary. It may be possible to continue to manufacture in China and yet avoid producing “Made in China” goods so long as the goods are “substantially transformed” into their final, imported condition in another country.

This perhaps surprising result arises because, as a general rule (under U.S. Customs law dating back for decades), the country in which goods are “substantially transformed” into their final condition prior to importation into the U.S. is the “country of origin” for most purposes.

How is a good “substantially transformed” into its final state prior to importation? According to U.S. Customs Headquarter Ruling 734124 issued on July 16, 1991, there are several factors to consider in making this determination, including:

ONE Whether a physical change in the material or article has occurred as a result of the manufacturing or processing operation;

TWO The time involved in the manufacturing/processing operation;

THREE The complexity of the manufacturing/processing operation;

FOUR The level or degree or skill and/or technology required in the manufacturing or processing operation; and

FIVE The value added to the article or material in the purported country of origin when compared to its value when imported to the U.S.

Importantly, simple assembly in a foreign country is not sufficient to constitute substantial transformation. In the oft-cited case of National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), the Court of International Trade held that whether substantial transformation has occurred boils down to whether the name, character or use of the good has changed due to the manufacturing process in question. By way of an example, the same court held in an earlier case — Ferrostaal Metals Corporation v. United States, 11 C.I.T. 471,666 F. Supp. 535 (1987) — that the process of galvanizing and annealing steel in New Zealand was sufficient to “substantially transform” full hard cold rolled steel sheets from Japan into a product originating in New Zealand.

Trade agreements may, in some instances, alter the substantial transformation analysis. For example, under portions of the United States-Mexico-Canada Agreement (USMCA), substantial transformation may be deemed

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High-Growth Companies Continued from page 13

to have occurred under the USMCA’s “tariff shifting” rules without engaging in the name, character or use change analysis described in National Hand Tool. Under the “tariff shifting” paradigm, the fact that a good enters (for example) Mexico under a certain tariff code and is then worked upon in such a way that it leaves Mexico in a different tariff classification creates a presumption that it has been substantially transformed while in Mexico. Thus, the good’s country of origin becomes Mexico.

Practical Tips for Addressing Country of Origin Issues In an era of high tariffs, whether substantial transformation has occurred in a given foreign country is one of the critical questions which must be answered before deciding whether a site is appropriate for a given facility. For better or worse, it becomes one more column to add to the decision factors matrix (groan!).

Substantial transformation determines country of origin; country of origin in many cases determines whether a tariff applies, and tariffs help determine a site’s suitability.

Whether substantial transformation has occurred need not be a guessing game. The U.S. Customs and Border Protection Agency (CBP) provides a binding “advanced rulings” program that addresses many tariff and importation issues, including country of origin determinations. Although CBP will not rule on mere hypotheticals, to the extent that an importer has actual plans to import a product and is uncertain of its country of origin, CBP advanced rulings can help clarify the gray areas. Further, CBP publishes a large library of prior rulings, known as CROSS (Customs Rulings Online Search System), which provide historical precedents that can guide importers in making country of origin determinations.

A New World Since WWII, Americans have lived in an increasingly “flat” low tariff world from which we, as consumers, have benefited greatly. That world was always, however, to some extent an historical anomaly. It arose out of specific geopolitical considerations arising from the Cold War, which ended three decades ago. The world of the future will be much hillier, chunkier, and clunkier than the flat world we’ve become used to.

Accordingly, while the Trump administration may or may not cut some kind of trade deal with China, the world is irreversibly entering into an era where not only tariffs but also national boundaries and trade barriers, in general, will become more meaningful than they have been in the recent past. n

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vibe among member companies and provide a variety of attractive spaces with amenities that often include access to conference rooms, administrative support services, and kitchen/dining areas.

Entrepreneurial companies, and their employees, tend to prefer locations that allow their employees to easily walk or bike to work and have other amenities such as restaurants and retail shops. When communities are considering what to invest in that will attract and retain entrepreneurial companies, developing vibrant, mixed-use neighborhoods should be among those things considered. These investments function as incentive-style enhancements that add value that stays within the community.

For Project Sadie, a key differentiator between the two finalist locations was the company’s perception of the “coolness” of the neighborhoods. At a high level, one difference between the two finalist locations could be characterized by the restaurant options, with one location being seen as “franchise” and “corporate,” whereas the other location seen as more “local” and “unique.”

In Sum Selecting the optimal location for business operations is critical and warrants a thorough investigation of potential locations. Over the expected lifetime of a facility, operating cost differences between two locations, that on the surface may seem similar, can vary significantly — and also significantly impact a company’s long-term profitability and success. For Project Sadie, and other entrepreneurial companies, locations that have an established entrepreneurial ecosystem, a low cost of doing business, and the “cool factor” are much more likely to remain in consideration as one of the finalist locations for the project.

Site selection is a highly competitive process that is both a science and an art. During the initial investigation of potential locations, the evaluation is typically a data-driven process of elimination to filter out those locations that do not meet critical project requirements. Once the set of potential locations is narrowed to a few finalist locations, the evaluation typically shifts toward a more qualitative analysis.

There are many locations across the U.S. and abroad with environments that will be conducive to business growth. For entrepreneurial companies that may be undertaking the site selection process for the first time, it is important not to have a pre-determined location in mind at the beginning of the process. The optimal location for an entrepreneurial company’s growth is best identified by utilizing a systematic process that focuses on those key “must have” location factors. n 1

https://www.kauffman.org/what-we-do/research/a-research-compendium-entrepreneurship-ecosystems https://www.forbes.com/sites/kurtbadenhausen/2018/10/01/the-top-10-rising-cities-forstartups/#39ee048e6b37 3 https://www.bestplaces.net/cost-of-living/columbus-oh/new-york-ny/180000 2

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12/12/19 11:29 AM

Providing the Necessary Tools NV Energy’s Economic Development Team is your resource for relocation and business expansion information. We can assist you with site selection, labor force resources, training programs, information on Nevada’s tax advantages and any other intelligence you may need to make an informed decision about living and working in Nevada.

With extensive economic development experience and strong relationships with state and local development officials, we can help you manage every step of the site location decision process.

Our services are complimentary and confidential.

www.nvenergy.com/econdev Our team is here to help current and future customers, site consultants and real estate firms identify the perfect location for your business. Nevada offers affordable, large-scale commercial real estate with advantageous access to the West Coast market.

To search for available buildings and land within Nevada, please visit our comprehensive GIS based database.

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

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COVER STORY

the

MONEY issue

TAXES play a significant role in comparing location options, but their EFFECT on a company’s bottom line can be reduced through NEGOTIATING for INCENTIVES. However, the location team should keep in mind that an offer’s quantitative DOLLAR VALUE is just one aspect of a properly negotiated INCENTIVE package. Additionally, the work required in actually CAPTURING the negotiated incentives is just as IMPORTANT as any other step in the process.

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THE ROLE OF TAXES IN LOCATION DECISIONS The above- and below-the-line impact of taxes can sway a location decision among otherwise comparable sites.

BY JASON LAKE, SENIOR MANAGING DIRECTOR, BUSINESS INCENTIVES PRACTICE, CUSHMAN & WAKEFIELD

O

FTEN HOTLY DEBATED ON the floor of federal and local legislatures is the topic of tax policy’s effect on business decisions and economic performance. From supply-side “Reaganomics” and the Laffer curve to current negotiations with China and tariffs, government policies surely drive spirited academic and emotional engagement.

In this article, part one of a series of three, I will discuss the role of taxes in everyday location decisions made in the United States. The subsequent articles will examine the art of negotiating offsetting incentives as well as strategies to ensure those reductions are realized.

Are Taxes Material?

Within any business organization there are multiple influencers. On a local level, there is a local manager whose primary goal is to compete for

company resources to ensure the local operation is favored and grows — ensuring a future for him- or herself.

On the other end of the spectrum, there may be a new CEO trying to prove him- or herself by making a bold move in a new direction. In the middle there is human resources, concerned about the quality and availability of labor. The director of tax, measured by his or her ability to manage the overall effective tax rate, warns of the dangers of expanding into particularly aggressive or policyvolatile jurisdictions. The CFO tries to figure out the overall financial effect and whether certain options are more or less difficult to finance.

In the most objective exercises, third-party consultants are tasked to establish side-by-side analyses examining the quantitative (e.g., financial) and qualitative (e.g., labor availability) aspects with the goal of identifying a small subset of leading location options. While taxes may often seem to be an afterthought, their above- and below-the-line impact can be profound and certainly sway a location decision among otherwise comparable sites.

Consider a $3.00 per square foot property tax delta between

an urban and rural location for a 250,000-square-foot manufacturing plant. That equates to $750,000 in above-the-line impact per year, $7.5 million over a decade. If the same company’s margin is only 5 percent, that equates to an additional $150 million of sales required to achieve the same level of profitability.

Locating across a city or county line can strengthen financial performance and enable better access to debt and equity financing sources.

While these “zero-sum-game” decisions are often derided in the court of public opinion, the reality is the public votes with its pocketbook by investing in stocks and funds that represent the winners — the companies able to drive revenue and watch with an eagle eye to control their expenses.

Evolving Role of Taxes on Revenue in the Retail Space The e-commerce transformation from brick and mortar stores to industrial picking operations, the underlying shift in consumer motives, and structural changes in how states can tax remote operations have fundamentally changed location behaviors.

When the internet was young, speeds slow, and SKUs limited, consumers often purchased largeticket items online to save taxes — visiting physical stores only to see and touch the product. For that reason, many picking facilities were purposely located in lower sales tax rate jurisdictions.

As browsing speed, product selection, and delivery and ease of returns increased, the consumer began buying online for convenience. The efficiency at which an e-commerce provider can deliver products to the door often exceeds the ability of a consumer to travel and retrieve goods themselves at a physical store.

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THE PRIORITIZATION OF CERTAIN TAXES OVER OTHERS IS SOMEWHAT OF AN ENIGMA.

The competitive drive to reduce delivery times, coupled with decreasing consumer sensitivity to sales tax rates (and related refocus to service), has allowed e-commerce to select locations in high sales tax rate jurisdictions heretofore off-limits.

The shift by many states to require collection of sales taxes by in- and out-of-state retailers based on destination has also made the location of the picking facility irrelevant to the imposition of tax. For these reasons, sales tax imposed on the business’s customers is lessening in importance, leaving property and sales tax on things like consumables (e.g., boxes) all the more relevant.

Which Taxes Matter the Most?

The prioritization of certain taxes over others is somewhat of an enigma. Through GAAP (gener-

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the

MONEY issue

ally accepted accounting principles) and the focus on EBIDTA (earnings before interest, taxes, depreciation, and amortization), leaders are conditioned to focus on above-theline, non-income–based taxes. These include property tax, employment tax, sales and use tax on purchases, and other mostly transactional types.

This is despite the fact every dollar of tax ultimately has the same impact to an investor — whether through the reduction of cash available for dividend to a public shareholder or a loss of a dollar of distribution to a family business owner.

Landmark income tax cases going back to the 1990s, such as Geoffrey and more recently KFC, have validated states’ efforts to tax companies availing themselves of their marketplace without requiring physical presence to do so. This trajectory has rendered some traditional locationbased income tax planning largely moot. Although this has arguably leveled the playing field, income taxes still account for a sizable cost for profitable companies — the very companies economic developers desire the most. Tax policies that include of-right or negotiated tax credits can provide a very effective differentiator.

For those companies with low taxable income, perhaps due to depreciation of large investments in technology, non-income–based taxes become relatively more important. Again, property taxes are often the largest tax consideration and affect nearly all businesses. Each

industry or use will have its own unique perspective.

For example, how taxes affect a vertically integrated consumer products company will vary by use. At the headquarters, property taxes passed through the lease and sales and use taxes on consumables or leased equipment like copiers can have the biggest impact. When siting manufacturing plants, the existence of an unabated personal property tax can be punitive for investment in machinery and technology. The existence and reach of a manufacturing sales tax exemption on machinery and equipment can differentiate sites. For data centers, where there is typically a very high turnover/refresh rate on expensive technological assets, the same personal property and sales tax consideration can render some locations off-limits without relief.

Considerations for Decision-Makers In comparing location options, taxes certainly play a significant role and, as previously stated, can be a relatively large differentiator between two otherwise comparable sites. It can be difficult to distinguish between marketing fluff and realizable benefits when evaluating potential offsets in the form of incentives. The amount negotiated versus realized can often be very different.

In the next two articles, we will explore negotiation and monetization strategies that are effective in reducing risk and promoting predictability. $$$

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NEGOTIATING FOR INCENTIVES Employing a standardized process when negotiating for incentives will optimize the results and allow a company to compare various offers on a consistent basis.

BY SHANNON O’HARE, MANAGING DIRECTOR, BUSINESS INCENTIVES PRACTICE, CUSHMAN & WAKEFIELD

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S DETAILED IN THE PRIOR article, “The Role of Taxes,” taxes and associated reductions are critical components in site location decisions. Significant reductions to taxes are often obtained via negotiated incentives, which have been a hot topic for the past several years with flashy headlines and purported large awards. An observer would think companies make location decisions based on the biggest incentive offered. In reality, an offer’s quantitative dollar value is just one aspect of a properly negotiated incentive.

Negotiating for financial incentives might seem mysterious, but employing a standardized process optimizes results and allows a company to compare various offers on a consistent basis. A strategic negotiation process is comprised of the following key components: request for proposal, feasibility analysis, negotiation, and approval.

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Request for Proposal An incentive Request for Proposal (RFP) is submitted to each shortlisted site to determine what incentives will be offered. Crafting the RFP is an important step. The RFP details project parameters, timing, and a request for assistance. An RFP should also include both quantitative and qualitative benefits to the community; just as the company is seeking a good community partner, communities are seeking good corporate citizens.

When developing the RFP, the company should evaluate its job, wage, and investment statements carefully. Initial statements are often the benchmark for negotiation, and future downgrade adjustments may result in corresponding incentive reductions. Each incentive program will have its own requirements — some negotiable and some not. Incentive requirements should be considered when determining job, wage, and investment levels to represent in the RFP.

Feasibility Analysis Once RFP responses are received, it is time for a comparative analysis to determine feasibility of incentives.

A comparative analysis includes in-

centive values and qualitative factors to determine true “value” of incentives offered.

When evaluating incentives, total dollars are important, but the biggest incentive dollar amount is often not the best solution as incentives are the mitigation or reduction of costs, and incentives values are often higher where the costs are higher.

Incentives are not all created equal.

Qualitative factors such as incentive payout term, form of incentive, required commitments, and recapture are key considerations in the feasibility analysis.

For example, $100 of an upfront cash grant does not have the same value as $100 of property tax benefit over five years. Some incentives may be unusable all together. A nonrefundable income tax credit is of no value to a company running net operating losses. However, if the same tax credit is usable against withholding taxes, it has value. Incentives must be evaluated based on each company and project’s facts and circumstances.

Negotiation After evaluation of offers, the company should have a clear picture of incentive value and feasibility at each site. Developing an appropriate negotiation strategy is paramount to success. Determining optimal, acceptable, and unacceptable outcomes can help a company develop a negotiation strategy. What are the negotiation priorities? What is the justification for a requested increase?

What evidence can be supplied to bolster the argument? What items are deal killers vs. extra bells and whistles?

Overall dollar value is the most obvious item to negotiate. However, just as qualitative factors must be analyzed in the feasibility stage, they should also be considered for

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12/16/19 12:53 PM

negotiation. For example, if the incentive is “all or nothing� based on achieving a job commitment, it may be more valuable to negotiate a 20 percent commitment buffer rather than increasing the total dollar amount.

As part of negotiation, it may be prudent to supply supplementary information to justify requests. Appropriate evidence will depend upon the negotiation strategy implemented and request. Typical evidence may include a gap analysis, a cost differential comparing shortlisted sites, a specific extraordinary cost required at the site or as part of the project, or additional information regarding participation as a corporate citizen, community involvement, and outreach.

Overall, the goal of the negotiated incentive package should be a win-win for the company and community. An incentive agreement can be the first step in an ongoing productive partnership between business and government.

efits, default and cure provisions, and compliance and administrative reporting requirements.

Administration of the reporting requirements is as important as any

other step in the process. Fulfilling administrative requirements ensures monetization of negotiated benefits.

This is discussed in detail in the next article. $$$

Approval The process does not end with negotiation. Each incentive has its own required application and approval documentation and procedures. Since incentives are a use of public funds, requirements must be strictly followed.

The order of approval and agreement depends on the municipality.

Sometimes the agreement must be finalized before approval and sometimes the reverse. Often the approval must occur in a public meeting.

Once the parties agree upon the value, form, and terms of the incentives, the incentive will be memorialized in an incentive agreement, typically executed by both parties. The agreement delineates company commitments and requirements, incentives ben-

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CAPTURING THE INCENTIVES

who will hold the lease, real estate, headcount, etc.?

•D oes the incentive flow to the entity making the investment or the entity causing the investment?

Identifying the Team

With many moving pieces and partners, a company needs a well-structured team and implementation plan in order to capture all of the incentives to which it is entitled.

BY AMY GERBER, EXECUTIVE MANAGING DIRECTOR, BUSINESS INCENTIVES PRACTICE, CUSHMAN & WAKEFIELD

T

HE ADMINISTRATION WORK associated with capturing negotiated incentives, as noted in the prior article, “Negotiating for Incentives,” is as important as any other step in the process. You would think that with all the analytics, site visits, negotiations, and contract reviews that the majority of the work is done, but that is often not the case. Some of the biggest complexities lie in the administration details.

As anyone who has negotiated an incentive will tell you, an incentive only has value when it is realized. Often, when a project’s budget is approved, that budget includes the value of the incentives, whether cost avoidance, reimbursement or reduction, and the facility’s financial performance can be negatively impacted if the negotiated incentives are not realized. This is not only true for financial incentives. There

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are those incentives that reduce project time, whether it is obtaining permits, acquiring land or installing infrastructure. Achieving the “time” incentives can be equally as critical to a project’s success and require the same attention during the incentive administration process.

Let’s Start at the Beginning The administration process begins as far back as the start of the incentive negotiation. The way a project is framed during the negotiations will impact how the incentives are administered. The best way to ensure the incentives are received is to make sure they are negotiated properly.

Some deal points that impact incentive administration success include: • Are the commitments all achievable? Were there any performance cushions built in?

• Is the performance window accurate? Does it account for any potential construction or hiring delays?

• What triggers a clawback and is the clawback a pro-rated clawback or is it all or nothing?

• Do the incentive agreements capture the appropriate legal entities

Once the site location decision has been made, often the team that led the site selection and incentive negotiation efforts is now focused on getting the facility up and running, presenting a challenge in capturing the negotiated incentives. Therefore, it is critical to establish a team and an administration lead early in the site selection process.

A recurring issue that we see in incentive administration is a lack of consistency in the administration team. The administration period could last for more than 10 years so it is important that a team is constructed that can ensure a smooth transition as changes in the team occur. Another factor to assembling the right team is to identify points of contact — both within and outside of the organization — who will be responsible for providing the required reporting data. This could be headcount, payroll, taxes, construction spend, utility usage, and port activities to name a few.

Understand the External Parties There are some universal performance and measuring requirements when it comes to incentives such as headcount, payroll, and investment among other things, and companies tend to understand how to gather and manage that data internally.

However, as incentive programs continue to evolve, the methods for receipt of benefits, parties to incentive agreements, and filing requirements will continue to evolve as well. Some of the more creative and valuable incentives have a more com-

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plex process to realize the incentives and often involve external entities.

When this is the case, it is important to educate these external entities, as early in the process as possible, about their role in the incentives and what data will be required from them in order to ensure successful administration of the respective incentive.

Some examples where these external entities will play a key role in the administration of the incentives may include: • Infrastructure Incentives — There are several types of incentives that require a partnership with a third party in order to realize the incentive.

A good example of this is funding for infrastructure such as road improvements. A developer may need to go through certain bidding processes, which can impact the timeline for the work as well as vendor selection. In addition, the developer may need to provide invoices in order to complete the administration of the incentive.

• Contract labor — Several states and communities are now allowing the inclusion of contract labor. Typically, when this is allowed, there is a high level of detail required in order to demonstrate performance since the payroll is not being made directly by the entity receiving the incentive.

In these scenarios, it is important to share these reporting requirements with the third party prior to entering into a contract labor agreement.

In some cases, there may even be a separate agreement between the company and the contract labor firm to address a pass-through of the incentive.

• Spend requirements — There are several incentive programs that can impact the real property investment in a facility. In some cases, a certain percentage of both the up-front capital spend and even ongoing

operational spend must be with specific contractors, which can directly impact the contractor and sub-contractor bidding process.

Implementation Plan Incentive administration is a combination of project activity monitoring, regularly scheduled performance reporting, and filings and claims to realize the incentives. It is critical to remember that a missed deadline or commitment can create a clawback and potentially put a project in default. With so many moving pieces and partners, an implementation plan and action calendar are effective tools to manage the administration.

There are a vast number of items that should be included in a complete implementation plan; some of these items should include: • Incentive program summaries to include an overview of clawbacks • Offer letters, approvals, and other negotiation documentation • Contracts, statutes or ordinance awarding the incentive • Calendar indicating due date for each action item required to remain in compliance • Internal and external points of contact • Performance requirements and tracking of achievements • Copies of all previously filed reports and claims

“

SOME OF THE MORE CREATIVE AND VALUABLE INCENTIVES HAVE A MORE COMPLEX PROCESS AND OFTEN INVOLVE EXTERNAL ENTITIES.

As the saying goes, “Nothing worthwhile is ever easy.” The same can be true for capturing incentives, but if a well-structured team is identified early in the site selection process, there is an understanding of all external parties, and time is taken to prepare a structured implementation plan and calendar, the company should successfully realize 100 percent of the negotiated incentives. $$$

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CONSTRUCTION/PROJECT PLANNING

What Does It Mean to Change the Game?

Embracing “disruption” requires a shift in mindset, but those companies that welcome change can dramatically improve project outcomes.

By Brian Gallagher, Vice President, Corporate Development, Graycor Southern

D

isruption is about more than just technology. It’s even about more than the rapid rollout and development of technology that we’ve seen in recent years.

The word “disruption” refers to processes or products that are gamechangers — fundamentally different from what is currently in use and that render unforeseen, large-scale changes. Disruption is impacting the construction and manufacturing industries significantly, but companies can learn from other industries’ mistakes and embrace disruption, turning it into innovation.

When industries and companies fail to quickly adopt innovation, new technologies, or workflows, it is usually due to entrenched mindsets and failure to imagine sweeping change. Companies that are already experiencing success rely heavily on whatever formula gained them that success. But this approach can result in resistance to change. The desire to protect a successful business model leads to the rejection of

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new things — and by the time those new things are widespread in the marketplace, it can be too late to catch up.

A company can be well-managed and responsive to customer feedback, but still fail when disruptive changes seem to “come out of left field.” Sometimes these changes are products or services that were initially considered inferior, but then mushroomed and cut into existing markets. In fact, a 2015 Harvard Business Review article — “What Is Disruptive Innovation?” by Clayton M. Christensen, Michael E. Raynor, and Rory McDonald1 — noted that it is entry into lower-end, neglected markets that allows new competitors to get a foothold, positioning them to move upmarket and challenge existing companies.

Another reason disruptive products or services can seem to come out of nowhere is that they are developed in other fields and/or start out being viewed as mere novelties.

Oren Harari’s famous observation — “The electric light did not come from the continuous improvement of candles” — is worth keeping in mind.

The good news is it’s possible to poise your company to excel at the “next big thing” without being a futurist. The first hurdle is to change your company’s fundamental approach and attitude and embrace

innovation and disruption. Begin with evolutionary, strategic thinking.

For example, hold off-site sessions dedicated to the effort, where an entire team examines areas in which your business might be disrupted and considers new business models; or address disruption in planning and leadership meetings. It also helps to seek outside partnerships and alliances. Technologies and their related changes tend to function in ecosystems; find the ecosystem that is going to impact your business and establish connections.

When deciding which changes might be worth investing in, pursue multiple options. Invest in talent that will bring different perspectives when hiring, then give employees the freedom to act and explore ideas. To keep such exploration within productive parameters, encourage a mindset shift toward accountability, and establish conditions for piloting and scaling new technologies and services. Finally, recognize that the approach to address and embrace disruption requires a shift in mindset and the allocation of significant resources.

It cannot be accomplished as a sideline or afterthought.

Use the Right Tools In addition to shifts in culture and attitude, companies should use available tools now to identify where

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are hard to spot using traditional processes are falling short as sketches and drawings, as well as well as find new paths forward.

Data bases populated helping stakeholders who aren’t Consider capital projects. The with actual historical used to reading drawing sets capital investment and approproject costs — and achieve a better understanding priations phases of a new-build updated with current of what’s being discussed. facility are areas in which many market pricing — can be companies stick with the old used during early • Building information modelway of doing things, because ing (BIM). BIM is now in wide teaming with new partners or planning to produce use, with recent program verinvesting in new workflows and accurate numbers sions broadening the range of resources can initially seem and minimize information contained within a to threaten productivity. But as fluctuations. model. Conceptual models can disruption experts have pointed be created for use during capital out, protecting existing models appropriations and early planning can set companies up for future phases, exploring various building failure. design options and informing budWhen it comes to site selecgets; the models are then built upon during the design tion and planning, outdated methodologies — such as phase. Preliminary project schedules should reflect the basing cost estimates on rough sketches or on nonBIM process for document development. comparable facilities — cause capital projects to have huge disadvantages built in from the beginning. Using • Laser scanning. Field measurements performed with cutting-edge technology and innovative approaches can laser scanners capture very detailed geometric inforhelp companies avoid missed deadlines, cost overruns, mation in the form of “point cloud” data — that is, a and financially infeasible capital projects. Having a prelarge set of points on a coordinate system — which construction process is critical for aligning members can be fed into BIM or CAD files to generate highly deof the project team, which enhances collaboration and tailed, accurate drawings. information-sharing. And a preconstruction process that leverages technology can do more than identify chal• Drones and geolocation. Drones, which continue to lenges at an early stage — it can result in predictable become more proficient in communicating with software outcomes. on the receiving end, can collect information in locations The right combination of technology, software, data, that are hard for humans to access. Captured images and project planning approaches can help decision-makcan support site assessment, construction progress, and ers dramatically improve project outcomes. Examples inspections. Some companies are taking drone footage include: and converting it into three-dimensional pictures and videos that can be compared to architectural plans.

• Big data and analytics. Cost estimates can fluctuate Drones can also work in conjunction with geolodramatically if large changes take place during planning, cation technology, being outfitted with GPS, taking design, or construction. Data bases populated with achigh-definition photos and/or generating images using tual historical project costs — and updated with current light-detection-and-ranging (LIDAR). Once incorporated market pricing — can be used during early planning to into 3D models, this information can improve a project produce accurate numbers and minimize fluctuations. team’s understanding of ground conditions, which can be especially helpful during early planning. Having drone • Simulation, virtual reality (VR), and augmented footage of existing site conditions prior to construction reality (AR). VR is an interactive computer-simulated has another benefit: it can serve as documentation for environment — more akin to walking through a space future reference. than viewing a model of it. AR, while similar, uses the Companies that are nimble, agile, proactive, and willreal world as a visual backdrop and superimposes ing to embrace change will be future industry leaders. computer-generated information. Because these types The question is, how many manufacturing companies of simulation can be quite realistic, they represent a new will be among them? n era in architecture, engineering, and construction. They show great promise in improving the accuracy of deci1 https://hbr.org/2015/12/what-is-disruptive-innovation sions made during project planning, catching issues that AREA DEVELOPMENT | Q4 2019

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INDUSTRY REPORT

Radical Transformation in the Food & Beverage Industry Food processing, packaging, and delivery are all being disrupted by changes in technology, consumer preferences, and government regulations.

By Stephen Gray, CEO, Gray

T

he world’s population is expected to reach nearly ten billion by 2050,1 an increase of two billion people within 30 years. What impact is this growth having on the food and beverage industry? Simply put, food supply must increase to accommodate additional mouths, a trend that impacts agriculture as well as food processors.

This is just one of the many factors facing the food and beverage industry today. The sector is always changing, but it is experiencing a true evolution with food production, packaging, and delivery all undergoing rapid changes.

Food processors are learning to adapt and keep up with consumer trends, millennial demands, and regulation shifts while also taking necessary steps to prepare for the next round of changes. Though change often corresponds with challenges, this industry revolution ultimately coincides with growth in the sector.

Defining Modern Food Processing The food industry is at a very pivotal time. It’s technical, advanced, and fast. Still, the modern food landscape requires more. Modern food processing is being built around three simple concepts — speed, efficiency, and customization.

“Consumer tastes are evolving faster than ever before, and we can see with the spread of social media and other technologies that companies can

measure the relative success or demand for a new product at an increasingly fast pace,” says Walker Mattox, president of GraySolutions, a Gray company. “As a result, manufacturers must have the necessary processing and manufacturing capabilities to respond.”

What Do Consumers Want?

In this age of information in which we live, awareness is everywhere, including the food supply.

Consumers have more insight into the food they eat than ever before, and therefore expect more from food processors, suppliers, and farmers. And, like it or not, these expectations are a direct reflection of how consumers shop and make purchases.

A state-of-the-art meat processing and packaging facility for leading food and beverage company, Kraft Heinz, in Davenport, Iowa

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energy usage and the overall footprint. Ultimately, manuConsumer trends are putting increased pressure on facturers need fully integrated solutions to meet current the entire industry. As processors respond to current and future demands. demands and prepare to be proactive for the future, they must think about specialized processing, packaging, and equipment. Some are looking to new facilities, and othWhy Food Safety Is Always Paramount ers are looking to expand current operations.

While efficiency, flexibility, and automation are all Consumer demand for varied product selections key catalysts for modern food processing, food safety means that production and packaging lines need to be remains at the core and is the driving force behind many designed for maximum flexibility. When this flexibility major investments in the food space. The romaine letis designed into a facility, all adjacent spaces need to tuce recall2 provided even further validation of the imbe thoroughly evaluated to understand the ripple effect. portance of food safety, and it’s clear the marketplace is Line changeover operations or multiple packaging lines very punitive to companies and brands having product for various products greatly affect people flow, mainterecalls. nance needs, egress requirements, and equipment acDriven largely by the implementation of the Food cessibility — translating to comprehensive plant design Safety Modernization Act (FSMA) and consumer destudies. mands, modern food safety is all about verification and Similarly, a ready-to-eat (RTE) facility needs a information. As a result, automation integration is bringcomprehensive assessment to ensure that all crossing about increased improvements in food safety. contamination risks are studied relating to the flow With the advancement of the Industrial Internet of of people, product, air, and waste stream. Gray reThings (IIoT), companies can collect and store data on cently designed and built a new 382,000-square-foot readyto-eat (RTE) meat processing and packaging facility for Kraft Heinz. Instead of segregating raw and RTE employees within a central administrative office complex for this project, we worked with the customer to implement a total separation strategy that resulted in two separate offices for raw and RTE on opposite ends of the facility.

Another form of flexibility consumers are demanding concerns food packaging. The single-serve packaging category continues to grow due to increased business 7 Three Industrial Parks with existing infrastructure and the need for more convenient 7 Nearly 40 million cubic feet of cold storage capacity food offerings. However, consum7 Several Third Party Logistics Providers ers don’t want to sacrifice taste, 7 Major interstate, rail, port, and air access meaning the quality cannot be 7 Low cost utility rates through the Vineland Municipal Utilities compromised.

7 Available workforce, job training, and financing programs As part of the growing awareness for how foods and For more information, please call 856.794.4100, beverages are processed, conor visit our website at www.VinelandCity.org. sumers are also demanding operational changes pertaining to efficiencies and increased uptimes. For processors, this means specialized, often cusVineland Department of Economic Development tom, equipment that escalates 640 E. Wood Street • Vineland, NJ 08362 profitability and minimizes

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“

some operations, they also present numerous their cleaning processes, Hazard Analysis opportunities for companies to consider straand Critical Control Point (HACCP) programs, tegic investments in their future and a myriad of other safety and quality pro. grams. This helps to better manage operationKeeping up Looking Into the Future al schedules, resources, labor, maintenance, and, of course, food safety.

Future food processing will continually hold with food “Manufacturers want their food processes food safety in the highest regard, always lookprotected from foreign materials in the plant ing to improve sanitary procedures and consafety and environment and within the actual process ditions in operations to reduce any potential consumer equipment through sanitary design and provrisks. While the actual production processes en sanitation procedures,” points out Gregg may not change significantly, Coleman bedemand is Coleman, president of InLine Engineers, a lieves there will be a greater awareness of enarguably Gray company. “Processors drive quality in ergy consumption and waste reduction. their process through documented and veriAccording to Brian Bernard of Spec Enthe greatest gineering, fied procedures at all operational units and a Gray company, there will be two critical control points.” distinct areas of focus in the near future. For challenge.

Traceability has become progressively imstarters, there will continually be a rise of portant to ensure the safety of the food supmore locally sourced products to consumers, ply, especially in recall scenarios. Advancewith a focus on wholesome and natural ingrements in traceability allow food processors to dients. Secondly, large-scale processors of have visibility into the source of their food from farm to protein (e.g., plant-based) and sustainable ingredients table. Manufacturers are also adding sensor data into derived from agriculture and processing will increasingly traceability data, not just to track critical control points, work together. but also to confirm temperatures for product storage, “Automation and digital technology adoption will specifically in cold storage facilities. The verification be the largest shifts in food processing from its curof these temperatures can lead to better quality and rent state,” says Mattox. “Similar to other sectors, the improved customer satisfaction, not to mention overall food industry is dealing with labor shortages across the food safety. world. Some processors are looking at automation to alIn today’s landscape, companies are moving beyond leviate their labor concerns in order to expand capacity. exploring what new technology can do and are instead Processors will continue to invest in automation in order determining how they can integrate it. If not, they will fall to meet evolving consumer tastes.” behind others in the space that are making the technolHe continues: “Processors will also begin investing ogy investment toward stronger food safety measures. in two very specific processing models — one for mass production and another platform to deliver highly customized products. Companies that are strategic in this Challenges Ahead investment model will have the upper hand as the marThere’s no way around it — food and beverage comket evolves.” panies face growing uncertainty ahead. From a global Even with all the automated elements, processors perspective, trade tensions are expected to continue must remember that food is very personal to consumfor the foreseeable future impacting both supply and ers. From the research and shopping to the actual cookdemand. The labor market, both with rising wages and ing and consumption of food, consumers truly make an tight availability of workers, is also cause for manufacexperience out of food. The processing challenge lies in turers to look toward innovative solutions to stay relative balancing customization, technology, safety, and quality and compete in the global marketplace. to ensure personalization expectations are met.

Still, keeping up with food safety and consumer deAdditionally, smaller companies can penetrate broad mand is arguably the greatest challenge for food and markets easier today than ever before, and smaller beverage processors. Many of the changes in regulation producers are now faced with the challenges of their and food safety are driven heavily by consumers. larger, older competitors. Despite changes, the future Tackling big data and understanding how to adopt of the food and beverage industry holds promise and blockchain and IIoT also weigh heavy on all companies, opportunity for every facet — lab-grown plant and anibut food processors must embrace the challenge. Tramal proteins, ready-to-prepare meals on your doorstep, ditionally, food processors have adopted technologies healthy-eating trends that change with the seasons, and behind their counterparts in other industries. Food a transparent and traceable food supply. The food and processors that decide to invest now will see a greater beverage industry has never been more exciting — or pay off from these technologies as they permeate the more challenging. The next few years are sure to bring marketplace. radical transformation. n Other areas hitting the industry are distribution (lo1 gistics) and supply chain infrastructure. While all of https://www.un.org/development/desa/en/news/population/world-populationprospects-2019.html 2 these challenges have the potential to make or break https://www.cdc.gov/ecoli/2018/o157h7-11-18/index.htmlº

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Kentucky

SPECIAL LOCATION REPORT

Kentucky Continues to Break Records in 2019 Low business costs are drawing businesses to Kentucky, as the state also tries to equalize opportunity in its rural areas through Opportunity Zone incentives.

UPS plans a $750 million expansion at its World Port distribution hub in Louisville.

K

Kentucky is on a roll. According to Kentucky Cabinet for Economic Development, for 2019 through mid-October, the commonwealth has announced 135 capital investment projects, with a total value of about $4.85 billion, and nearly 8,500 new fulltime jobs. Unemployment has stayed low — 4.4 percent in September,1 continuing a year-plus streak of record-low unemployment. And Kentucky’s 59 percent labor force participation rate in July is the highest in Kentucky history.2 Exports — another key indicator of economic performance — reached a total of $18.9 billion at the end of July 2019, a 3.4 percent increase over the same period a year ago and on track to set another new export record for the fourth consecutive year.

Kentucky has the lowest cost of doing business in the nation, according to a recent CNBC poll.3 Its

B y M a r k C r a w f o rd

many tax incentive programs provide the funding options necessary to create customized incentive packages that meet the specific needs of businesses investing in the state. This proactive and pro-business approach has generated nearly $23.5 billion in announced capital investments across the state over the last four years.

The number-one priority for businesses is a skilled and plentiful workforce. Kentucky provides expert workforce recruiting and training assistance, for both new and existing employees, through its Kentucky Skills Network. Kentucky colleges and universities work with the state to create the job skills and training that businesses need. With both existing and incoming companies needing workers, Kentucky and its partners are collaborating to develop “pipelines” of qualified workers for various industries, using methods such as apprenticeships and innovative science, technology, engineering, and math (STEM) programs for K-12 schools.

“Kentucky job growth will continue in its top five sectors of advanced manufacturing, healthcare, transportation/logistics, business services/IT, and construction/trades,” says Dr. Jay Box, president of the Kentucky Community and Technical College System in the Lane Report.4 “Last year 75 percent of the credentials we awarded were in these five sectors.

We will continue to push secondary and postsecondary education to align programming in these areas to better prepare skilled workers to meet the needs of business and industry.”

Key Industries Major industries in Kentucky include automotive, aerospace, primary metals, food and beverage, logistics/distribution, manufacturing, chemicals, plastics, rubber, and healthcare. Automotive, steel and aluminum, aerospace, pharmaceuticals, distribution/ AREA DEVELOPMENT | Q4 2019

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SPECIAL LOCATION REPORT

logistics, and food and beverage have dominated new project announcements since 2016.

Automotive-sector growth has been especially sustained. Over the last four years, 222 automotive projects have been announced, totaling more than $6.3 billion in capital investment and creating 11,000-plus jobs.5 For example, Ford plans to invest $550 million in an expansion at its assembly plants in Louisville to help with the launches of the new Ford Escape and Lincoln Corsair.6 Toyota will undertake a $238 million expansion at its Georgetown plant to create production lines for the Lexus ES Hybrid and RAV4 Hybrid.7 Steel and aluminum fabrication are key industries that supply the automotive industry with parts; these industries are also expanding to keep up with increased production at automotive facilities across Kentucky. A recent example is Kobelco Aluminum Products and Extrusions, which manufactures aluminum bumper and sub-frame materials and had just reached full capacity at its new facility in Bowling Green; it just recently announced a $42 million, 90-job expansion to keep up with customer needs.8 With its central U.S. location (within a one-day drive of two-thirds of the U.S. population) and excellent transportation infrastructure network, Kentucky also has one of the strongest logistics/distribution industries in the country, which continues to expand.

In Louisville, UPS plans a $750 million expansion at its World Port distribution hub.9 Infrastructure upgrades include a new maintenance hangar, runway improvements, and flight training facilities. The Kentucky Skills Network will provide recruitment and job placement assistance and customized training.

A Job for Every Kentuckian Despite the overall low unemployment rate in Kentucky, many employers still need workers to fill open positions. This lack of skilled workers slows down the overall economy and growth opportunities for these companies, especially manufacturers.

“Workforce issues continue to top the business community’s list of serious concerns, and we will make major efforts to engage employers in creating ‘talent pipelines’ as a solution,” notes Dave Adkisson, president and CEO of Kentucky Chamber of Commerce, in the Lane Report.

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and the deepest declines in the rural eastern part of the state. For example, over the past eight years, Louisville added 2,700 businesses and 80,000 jobs, with $13 billion in capital investment announced in the last four years.10 In contrast, however, outside its MSAs, especially in the eastern coalfields, unemployment can be as high as 15 percent.11 More equal economic growth across the state would better distribute capital investment and tap into plentiful labor pools that are eager for work and training.

“It is a challenge our Cabinet and many partners continue to tackle,” says Jack Mazurak, communications director for the Kentucky Cabinet for Economic Development. “The goal is to get employers to select these rural counties to build their operations and hire local workers for good-paying positions.”

One approach is through Opportunity Zones, which are low-income, distressed, and contiguous districts where companies can receive significant federal tax breaks and deferrals for investing in a variety of economic development projects. In 2018 Kentucky was among the first U.S. states to have its Opportunity Zones certified by the U.S. Department of Treasury.12 Kentucky’s Opportunity Zone (KYOZ) initiative provides the runway for regions that are lagging in economic development success to move forward.

“It aims to encourage and attract significant institutional, corporate, and individual investment into these regions and the Cabinet will work with local partners to ensure the commonwealth takes full advantage of the federal policy,” adds Mazurak.

Kentucky offers 144 Opportunity Zones across 84 of the state’s 120 counties. It also offers an enhanced incentive version of its main tax-incentive program — qualifying projects opting to locate in enhancedincentive counties can receive performance-based tax incentives over a 15-year period, instead of the usual 10-year term.

Other efforts to boost employment include retraining, apprenticeships, and site and building development initiatives. “Even if they’re smaller parcels, workforce re-education is key to landing base-hit projects that might employ 30–100 people and not require a major metro population to draw upon,” says Mazurak. “By taking a comprehensive, all-hands approach, we are confident we can extend economic development opportunities across the state and continue to increase Kentucky’s labor force participation rate, especially in our more rural areas.” for free site information, visit us online at www.areadevelopment.com

12/12/19 11:49 AM

1

http://cber.uky.edu/news/2019/kentucky’s-unemployment-rate-remains-steady-44-september https://fred.stlouisfed.org/series/LBSSA21 3 https://www.cnbc.com/2019/07/09/top-states-forbusiness-kentucky.html 4 https://www.lanereport.com/109343/2019/01/kentuckyexpecting-ongoing-growth-in-2019/ 5 https://kentucky.gov/Pages/Activity-stream.aspx?n= KentuckyGovernor&prId=981 6 https://www.courier-journal.com/story/money/ companies/2019/08/29/ford-motor-co-invest-millionslouisville-kentucky-assembly-plant/2124179001/ 7 https://www.areadevelopment.com/newsItems/3-15-2019/toyota-motor-manufacturing-assemblyplant-georgetown-kentucky.shtml 8 https://www.areadevelopment.com/newsItems/9-23-2019/kobelco-aluminum-products--extrusionswarren-county-kentucky.shtml 9 https://www.usnews.com/news/best-states/kentucky/ articles/2019-10-04/ups-announces-750m-expansionin-kentucky-to-add-1-000-jobs 10 https://louisvilleky.gov/government/louisville-progressreport-2018 11 https://www.urban.org/urban-wire/how-kentuckyseconomic-realities-pose-challenge-work-requirements 12 https://thinkkentucky.com/newsroom/NewsPage. aspx?x=04092018_Opportunity_Zones.html 2

Kentucky Cabinet for Economic Development Kentucky helps new and existing companies of all sizes meet their workforce needs.

Kentucky fosters growth through a variety of services designed to raise capital, increase business and encourage investment within the food processing and other industries.

Explore the many advantages of the commonwealth and you’ll find Kentucky will go the extra mile to exceed your needs.

Erran Persley, Commissioner of Business Development Kentucky Cabinet for Economic Development Old Capitol Annex 300 W. Broadway Frankfort, KY 40601 502-564-7670 or 1-800-626-2930 www.ThinkKentucky.com Commerce Lexington Inc. Commerce Lexington Inc. focuses its energies and resources on the core components of its comprehensive approach to regional economic development including assisting business retention and expansion, encouraging entrepreneurial activity, and recruiting new business investment. Regionalism is a key effort and Commerce Lexington works closely with all its partners to promote the region.

Gina Greathouse, Executive Vice President Commerce Lexington Inc. 330 East Main Street, Suite 205 Lexington, KY 40507 859-225-5005 ggreathouse@commercelexington.com www.locateinlexington.com

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2020

SELECT SITES DIRECTORY ARTICLES BY STEVE KAELBLE

• H IRING CHALLENGES CONTINUE THROUGHOUT THE U.S. • HAS THE VALUE OF A DEGREE CHANGED? • H OT JOBS: GROWING INDUSTRIAL SECTORS • 2020 SELECT SITES DIRECTORY Within the articles in this section, you will find statistical information on each state’s population and unemployment as well as educational attainment levels.

States with the most manufacturing jobs are shown, as well as location of primary industry clusters — manufacturing and nonmanufacturing.

ontact information for economic development organizations that can help in your C next location search is in the Select Sites Directory beginning on page 52.

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

AREA DEVELOPMENT | 2020 Select Sites Directory

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HIRING CHALLENGES CONTINUE THROUGHOUT THE U.S. With record-low unemployment numbers continuing, many states are engaging in creative tactics to draw in new residents and workers — and keep the ones already there.

W

WHEN IT COMES TO EMPLOYMENT, the U.S. economy

has continued on its roll, according to a variety of statistics. That is, of course, excellent news for those with jobs and those looking for work.

Employers, on the other hand, are often having a tough time hiring all the help they need.

Jobless rates, as calculated by the labor market and economic analytics firm Emsi (see chart), were as low as Vermont’s 2.3 percent in March, and as high as the 7.2 percent recorded in Alaska. All but three states had rates under 5.0 percent, a level that traditionally has been seen as near full employment.

And the picture just kept getting better as 2019 progressed, according to the U.S. Bureau of Labor Statistics, which pegged the national unemployment rate at 3.6 percent by October,1 two-tenths of a point below what it was a year earlier. The BLS found that nonfarm payroll counts increased by a full two million people over the course of 12 months.2 There remains plenty of room to grow that count even further, if employers could have their way and fill all the jobs they’ve posted. According to the BLS, by the end of September there were some seven million job openings,3 which is actually a quarter million job vacancies lower than a month earlier. Other reports have indicated that the number of people looking for work remains below the total number of job openings,4 a challenging situation for employers that has been the reality for nearly two years now.

2020

SELECT SITES DIRECTORY 36

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Labor Shortages All Over The labor issue is widespread across lots of different industries. There’s long been talk about a dearth of qualified applicants in highskill white-collar pursuits, including science and technology jobs. But these days, according to The Conference Board5 and others, the problem is often even more acute in lower-wage and blue-collar occupations.

The biggest gaps are in education and health services, as well as in professional and business services. But the more-jobs-than-seekers problem is noteworthy across a wide swath of such industries as mining and logging, durable goods, leisure and hospitality, transportation, and wholesale/retail trade.6 Indeed, to take transportation as an example, consider what it pays to be a trucker working for Walmart. The retailer doesn’t exactly have a reputation for high pay, but earlier this year it found the need to offer its truckers a raise,7 upping the average to more than $87,000. The company also promised more predictable schedules, more paid time off, and the potential for bonuses.

The transportation industry as a whole deals with significant turnover challenges. Researchers report a lot of churn in the industry, and its tendency to rely on older workers makes it susceptible to retirement pressures. The constant uptick in online ordering of everything from furniture to groceries puts an added strain on the labor picture.

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12/12/19 12:03 PM

Population/Labor Force State Alabama Alaska

Solutions from the States Vermont has the lowest jobless rate on Emsi’s list, and the state’s employer community is certainly feeling the pinch. The state is hoping that its new Remote Worker Grant Program will make a difference.8 The aim is to bring in new residents by offering financial incentives to people who are able to work remotely. Why not do their work from a home base in Vermont, especially if the state picks up the tab for many of their relocation expenses?

Ultimately, Vermont hopes to build its labor force with younger workers. Though new residents lured by the grant program are already employed elsewhere and working remotely, once they put down roots, some may eventually switch to a local job. They also tend to bring family with them when they make the move, building the workforce even more.

A different Vermont approach that state officials tried out last year involved a tourism campaign9 promoting not only the state’s natural beauty, recreational opportunities and breweries, but also its long-term job opportunities. The campaign offered certain tourists access to events and resources aimed at potential new residents.

Iowa is taking proactive steps to attract new residents as well, as it also deals with an extra-low jobless rate. The state has done a good job of attracting startups and tech companies, but knows that much of the rest of the country still sees Iowa as having a mostly agricultural economy.

An online campaign10 seeks to educate outsiders about Iowa’s lesserknown attributes and solid qualityof-life. There are also ongoing efforts to target younger Iowans about the benefits of sticking close to home once their education is complete.

Iowa also has boosted its workforce

Arizona

Population (Jan. 2019)

Labor Force (March 2019)

Unemployment Rate (March 2019)

4,899,037

2,235,701

3.80%

746,239

350,051

7.20%

7,197,598

3,507,157

4.60%

Arkansas

3,027,565

1,357,711

3.40%

California

40,118,031

19,511,565

4.60%

Colorado

5,761,545

3,123,251

3.00%

Connecticut

3,589,282

1,904,314

4.20%

Delaware

978,812

488,474

3.20%

Florida

21,591,414

10,313,366

3.30%

Georgia

10,632,162

5,110,810

3.70%

1,442,716

668,996

2.90%

Hawaii Idaho

1,760,041

867,630

3.40%

Illinois

12,793,072

6,470,217

4.50%

Indiana

6,714,254

3,418,657

3.90%

Iowa

3,170,630

1,714,663

2.80%

Kansas

2,925,590

1,472,495

3.70%

Kentucky

4,482,795

2,078,149

4.50%

Louisiana

4,723,380

2,090,704

3.80%

Maine

1,338,849

687,468

3.80%

Maryland

6,116,241

3,206,058

3.90%

Massachusetts

6,929,933

3,833,112

3.10%

Michigan

9,982,754

4,950,457

4.40%

Minnesota

5,645,917

3,089,667

4.10%

Mississippi

2,986,949

1,260,141

4.80%

Missouri

6,151,654

3,041,347

3.90%

Montana

1,066,809

526,999

4.20%

Nebraska

1,943,858

1,031,708

3.20%

Nevada

3,092,896

1,516,791

3.70%

New Hampshire

1,350,940

766,653

2.80%

New Jersey

9,054,814

4,450,720

4.10%

New Mexico

2,098,019

950,026

4.60%

New York

19,934,374

9,591,301

4.10%

North Carolina

10,468,589

5,065,790

4.10%

771,487

403,354

3.00%

11,691,216

5,809,998

4.10%

Oklahoma

3,974,778

1,824,851

3.20%

Oregon

4,234,459

2,113,623

4.60%

Pennsylvania

12,826,511

6,452,011

3.90%

Rhode Island

1,061,716

545,704

3.70%

South Carolina

5,136,212

2,367,680

3.30%

882,760

463,139

3.10%

6,814,909

3,330,612

3.30%

Texas

29,132,904

14,058,833

3.50%

Utah

3,192,399

1,585,435

3.00%

623,011

345,262

2.30%

Virginia

8,584,503

4,373,811

3.00%

Washington

7,588,266

3,892,962

5.20%

West Virginia

1,806,057

783,672

5.30%

Wisconsin

5,827,064

3,121,546

3.30%

Wyoming

582,893

287,756

3.80%

North Dakota Ohio

South Dakota Tennessee

Vermont

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have traditionally provided. training initiatives to help fill advanced manufacturing job In the Hampton Roads region of Virginia, local leaders openings. commissioned a workforce analysis14 this year to help Like Iowa, New Hampshire will get a lot of attention in 2020 during the political primary season. And like Iowa, tackle labor shortages there. The area saw some 30,000 New Hampshire will continue to battle labor shortages in new jobs added over the past five years, but the workingthe months ahead. The Granite State has its own efforts age population increased by just a third of that number. under way to educate young residents about local job As in so many places, there are lots of working-age opportunities and connect them with internships and people moving toward or into retirement. shadowing opportunities. Its attempts to stem the brain That said, the report found ongoing improvements in drain, though, are complicated by housing affordability career training and pathways, and educational attainment issues.11 above national averages. A variety of programs address the labor shortage, including a Build Virginia initiative ofMeanwhile, Colorado is turning workforce challenges fering training in skilled trades and an expanded program into workforce opportunities. For example, the growing aimed at helping military memproblem of wildfires creates bers who are retiring and their opportunities in fire mitigation, ONE POTENTIAL families transition into tradesso there are training options for based careers. that. Another career program Officials in North Dakota have aims to educate Colorado resiSOLUTION TO been accustomed to filling a dents for conservation-related large number of job openings, careers for dealing with future THE WORKER thanks to the oil boom that water shortages. And many attracted workers following the Colorado employers are taking last recession. The problem now their own steps toward opening SHORTAGE: GET is there are more opportunithe doors to more job-seekers. ties all over the U.S., and fewer For example, some are loosenWORKERS TO people find it necessary to move ing drug-testing policies and for work. Job openings in North revising their hiring procedures Dakota are double what they for applicants with criminal STOP RETIRING were a decade ago, and some records.12 are staying open for months.15 Utah is blessed because a lot of people want to plant It’s not an easy problem to permanent roots in the state — solve, but state officials are dothe number of housing permits ing what they can. For example, issued last year was the highest in more than a decade. a new licensing reciprocity initiative is aimed at military The problem is, who is going to build all that housing? As spouses who are in licensed professions and have certificain many states, there’s a labor shortage in the constructions from other states. The state university system also has tion sector. Construction companies in Utah are upping new scholarships and loan forgiveness programs aimed their benefits packages and offering generous raises as at boosting the two-year degrees needed for many of the they compete for workers, and industry organizations are in-demand jobs. establishing recruiting initiatives.

Business organizations in Utah also say their state has Changing the Culture been negatively impacted North Dakota’s push for something other than fourby the federal government’s year degrees reflects a broader and growing understandefforts to reduce immigration ing nationwide that America’s higher-education policies and refugee resettlement. The of the past are part of the reason for today’s problems.

Salt Lake Chamber of ComHigh schools have been judged by college placement, yet merce, for example, has been a bachelor’s degree isn’t the best fit for some people and pushing for increases in legal isn’t necessary for a lot of in-demand jobs. immigration,13 arguing that the economy needs the labor contribution that immigrants 2020

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At the federal level, there are proposals in the works to beef up benefits and incentives for pursuing technical education. Legislation to that effect has been introduced in Congress,16 though as of the end of November, it had not yet made it far through the legislative process.

One other potential solution: Get workers to stop retiring. The Bureau of Labor Statistics notes that a number of industries are drawing a disproportionate share of workers 55 or older.17 Popular possibilities include medical transcriptionists, property managers, bus drivers, travel agents, and museum workers.

Forward-thinking employers are also finding ways to avoid losing their most seasoned and skilled workers.

Some, for example, offer reduced work schedules that keep otherwise-retirees on the job for a bit, ready to pass along their knowledge to the next generation. The idea is seen as a way to share and even spark innovation, and it happens to also be good for the financial and mental health of the workers who are putting off their full retirement.

1

https://data.bls.gov/timeseries/LNS14000000 https://www.bls.gov/web/empsit/ceseeb1a.htm https://www.bls.gov/news.release/jolts.nr0.htm 4 https://www.vox.com/2019/8/12/20801941/us-labor-shortage-workers-quit 5 https://www.conference-board.org/press/pressdetail.cfm?pressid=7622 6 https://www.cbsnews.com/news/these-are-the-industries-with-the-biggestlabor-shortages/ 7 https://www.cbsnews.com/news/walmart-wants-to-hire-900-truckers-andpay-them-nearly-90000-a-year/ 8 https://www.cnbc.com/2019/08/02/vermont-tackles-labor-problems-by-payingworkers-to-relocate-there.html 9 https://www.washingtonpost.com/news/wonk/wp/2018/04/20/vermont-wants-toturn-tourists-into-workers/ 10 https://www.foxnews.com/us/worker-shortage-iowa-high-tech-midwest-campaign 11 h ttps://www.unionleader.com/news/business/what-s-working-nh-needs-morehousing-young-people-to/article_c2716e73-8c00-5818-bec2-4a36ac660af7.html 12 https://www.fisherphillips.com/resources-articles-colorado-employers-arecombatting-labor-shortage 13 h ttps://www.kuer.org/post/utah-faces-labor-shortage-refugee-resettlementdeclines#stream/0 14 h ttps://www.pilotonline.com/inside-business/article_3855e02a-9131-11e9a5fb-5fdda7cabfea.html 15 h ttps://bismarcktribune.com/business/i-recruit-hard-north-dakota-worker-shortagepersists-amid-low/article_793c0d05-c974-5ec0-abd7-93eacfcca382.html 16 https://www.congress.gov/bill/116th-congress/house-bill/3497 17 https://www.bls.gov/careeroutlook/2017/article/older-workers.htm 2 3

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HAS THE VALUE OF A DEGREE CHANGED? Although higher educational attainment generally correlates with the greatest occupational stability, degree programs still leave some gaps in worker readiness for certain occupations.

I

IF EDUCATION IS THE TICKET

to employment opportunities, it should logically follow that the job picture is brightest in areas with the highest educational attainment. The statistics from labor market analytics firm Emsi (see chart) certainly support that hypothesis. Eight of the states with the lowest jobless rates also rank among those with the highest rates of residents who have earned an associate’s degree or higher.

Massachusetts, for example, ranks at the top of the educational attainment charts — 49 percent sport an associate’s degree or higher, according to the data, which pegged the jobless rate at an enviable 3.1 percent as of March. Colorado ranks second in educational attainment by this measure, with 46.9 percent having earned at least an associate’s degree, and the Centennial State had a 3 percent jobless rate. In third is New Hampshire, with 45.6 percent educational attainment at this level, and a still-lower jobless rate of 2.8 percent.

It’s also worth noting that Massachusetts leads the way in attainment at the very highest levels, with 18.4 percent having a graduate degree or higher — only a few points behind the share with a bachelor’s degree. With 17.5 percent reporting a graduate degree, Maryland places second in that category, and Connecticut boasts 16.6 percent with graduate degrees or higher — also just a few notches below bachelor’s-level attainment.

2020

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Opportunity Knocks and Pays Well Bureau of Labor Statistics data also support the notion that higher educational attainment correlates with the greatest occupational stability. A report from September1 indicates those with a doctoral degree had an unemployment rate of just 1.6 percent, while those with a professional degree had a jobless rate of 1.5 percent. A master’s degree was associated with an unemployment rate of 2.1 percent; only 2.2 percent of those with a bachelor’s degree were shown as unemployed; and the unemployment rate for those with an associate’s degree was 2.8 percent. In fact, a degree of any kind correlates with a jobless rate below the national average, while those without a degree had unemployment rates above the national average.

The same BLS report showed similar trends with regard to earnings — the higher the degree, the higher the earnings. The only exception was that a doctorate may be considered the highest degree, but a professional degree edged it out slightly in weekly earnings: $1,884 to $1,825. Heading down the list: master’s, $1,434; bachelor’s, $1,198; associate’s, $862; some college but no degree, $802; high school diploma, $730; and, less than high school diploma, $553. The average for all workers was $932, so a bachelor’s was required to beat the average.

Taking a look from a geographic perspective,2 BLS data shows an annual mean wage of $63,910 in Massachusetts — the state that tops Emsi’s ranking by percentage with an associate’s

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2019 Educational Attainment State

Less Than 9th Grade

9th Grade to 12th Grade

High School Diploma

Some College

Associate’s Degree

Bachelor’s Degree

Graduate Degree and Higher

Alabama

5.6%

9.6%

31.1%

21.5%

8.0%

15.2%

9.0%

Alaska

3.2%

5.1%

28.0%

27.5%

8.3%

17.9%

10.0%

Arizona

7.5%

6.9%

24.3%

25.2%

8.4%

17.4%

10.4%

Arkansas

6.3%

8.8%

34.3%

22.3%

6.5%

14.0%

7.7%

California

11.2%

7.0%

20.8%

21.4%

7.7%

20.1%

11.8%

Colorado

4.6%

4.9%

21.9%

21.7%

8.1%

24.6%

14.2%

Connecticut

4.9%

5.6%

27.5%

17.0%

7.5%

20.9%

16.6%

Delaware

4.6%

6.5%

31.6%

19.5%

7.7%

17.5%

12.8%

Florida

6.1%

6.9%

29.2%

20.3%

9.6%

17.7%

10.2%

Georgia

6.0%

8.2%

28.3%

20.5%

7.4%

18.5%

11.2%

Hawaii

4.1%

4.6%

28.5%

21.4%

10.4%

20.7%

10.4%

Idaho

5.0%

5.3%

27.5%

26.5%

9.2%

18.0%

8.4%

Illinois

6.1%

6.0%

26.5%

20.8%

7.7%

20.2%

12.7%

Indiana

4.6%

7.6%

33.9%

20.5%

8.2%

16.0%

9.2%

Iowa

4.0%

4.8%

31.8%

21.2%

10.8%

18.5%

8.9%

Kansas

4.6%

5.3%

26.6%

23.3%

8.1%

20.6%

11.7%

Kentucky

7.0%

8.4%

33.4%

20.8%

7.6%

13.4%

9.4%

Louisiana

6.2%

10.0%

34.1%

21.2%

5.6%

15.1%

7.9%

Maine

3.3%

5.0%

32.7%

19.4%

9.7%

19.1%

10.9%

Maryland

4.8%

6.0%

25.2%

19.3%

6.5%

20.7%

17.5%

Massachusetts

5.4%

5.0%

24.8%

15.8%

7.6%

23.0%

18.4%

Michigan

3.6%

6.6%

29.5%

23.5%

9.0%

16.9%

10.9%

Minnesota

3.5%

4.2%

25.7%

21.6%

10.8%

22.6%

11.6%

Mississippi

6.4%

10.8%

30.5%

22.2%

8.9%

13.2%

7.8%

Missouri

4.0%

7.3%

31.2%

22.3%

7.5%

17.2%

10.5%

Montana

2.5%

5.0%

29.4%

23.9%

8.5%

20.7%

9.9%

Nebraska

5.1%

4.4%

27.1%

23.4%

9.7%

20.1%

10.2%

Nevada

7.3%

7.6%

28.6%

25.6%

7.9%

15.2%

7.9%

New

2.7%

4.9%

28.1%

18.7%

9.9%

22.1%

13.6%

New Jersey

5.9%

5.6%

28.1%

16.7%

6.4%

22.9%

14.5%

New Mexico

7.6%

8.0%

26.8%

23.4%

8.0%

15.0%

11.3%

New York

7.3%

7.3%

26.5%

15.9%

8.5%

19.5%

15.0%

North Carolina

5.9%

7.6%

26.3%

21.5%

9.0%

19.1%

10.5%

North Dakota

3.8%

4.5%

27.1%

22.6%

13.2%

20.9%

8.0%

Ohio

3.5%

7.3%

33.9%

20.4%

8.2%

16.7%

10.1%

Oklahoma

5.4%

7.7%

31.5%

23.5%

7.5%

16.3%

8.1%

Oregon

5.1%

5.3%

23.7%

25.7%

8.5%

19.8%

11.8%

Pennsylvania

4.0%

6.7%

35.8%

16.0%

7.9%

17.9%

11.6%

Rhode Island

6.6%

7.0%

28.0%

18.0%

8.0%

19.6%

12.8%

South Carolina

5.3%

8.6%

29.8%

20.5%

9.1%

17.0%

9.6%

South Dakota

4.0%

5.1%

31.0%

21.6%

10.8%

19.0%

8.4% 9.3%

Hampshire

Tennessee

6.0%

8.1%

32.6%

20.8%

6.8%

16.4%

Texas

10.6%

7.5%

25.1%

21.8%

6.8%

18.6%

9.7%

Utah

3.7%

5.0%

23.3%

26.7%

9.4%

21.2%

10.8%

Vermont

2.9%

5.0%

29.9%

17.2%

8.6%

21.6%

14.9%

Virginia

5.3%

6.3%

24.5%

19.5%

7.4%

21.3%

15.8%

Washington

4.8%

4.9%

22.6%

24.0%

9.7%

21.5%

12.5%

West Virginia

5.7%

8.7%

41.0%

18.5%

6.6%

11.8%

7.8%

Wisconsin

3.4%

5.4%

31.7%

20.8%

10.2%

18.8%

9.8%

Wyoming

2.6%

5.0%

29.2%

26.5%

10.5%

17.0%

9.2%

HasThe.indd 42

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Location Economics

degree or higher. Mean annual pay for the rest of the top 10 on that chart is as follows: Colorado, $55,820; Vermont, $50,150; New Hampshire, $52,350; Minnesota, $54,200; Connecticut, $60,780; Maryland, $58,770; Virginia, $55,310; New Jersey, $58,210; and Washington, $59,410.

THE NEW SCIENCE FOR A DVA N C E D S I T E S E L E C T I O N

Meeting the Needs of Businesses Achieving a well-educated workforce doesn’t just happen, of course. It takes a combination of strong educational opportunities, supportive programs and policies, and cultural traditions that honor the value of education. That said, today’s wins are never a guarantee for tomorrow’s successes, and degree programs may still leave some gaps in worker readiness for certain occupations. Success at the state level requires ongoing commitment and innovation.

In Colorado, for example, there’s a wealth of workers with strong educational credentials, and plenty of jobs to go around. Yet there are always specific situations in which an employer may need some assistance finding the right workers at the right time.

The Colorado Community College System3 and the state’s Office of Economic Development and International Trade operate such programs as Colorado First and the Existing Industry program to facilitate training as needed for relocating or expanding companies.

Higher-education institutions also work to meet the needs of expanding businesses through the Rural Jump-Start Program.

Minnesotans also boast a high level of educational attainment (with 45 percent having an associate’s degree or higher), but the state recognizes the need to continually build upon those achievements. Nearly three dozen public colleges and universities collectively provide training services for more than 6,000 employers each year — usually customized programs that are often made from scratch for each employer’s specific situation. Department of Employment and Economic Development Job Skills Partnership Grants also help with training and retraining.

The Job Training Fund in New Hampshire also works to fill in the gaps that remain despite the impressive educational attainment of that state’s residents. Businesses are able to tap into funds to support skills development, and the state has made hundreds of grants that have upgraded skills for 2020

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thousands of workers.

Even the state at the top of the educational attainment list, Massachusetts, finds it vital to fill in gaps through supplemental programs. Grant programs, for example, support employers’ training or retraining programs, especially those that target job growth for workers presently in low-wage or lower-skill jobs. Companies of any size may apply, as long as they employ workers in Massachusetts.

• Bookkeeping, accounting, and auditing clerks • Maintenance and repair workers • Carpenters • Electricians • Licensed practical and licensed vocational nurses • Supervisors of office and administrative support workers • General and operations managers • Sales representatives, wholesale and manufacturing

The researchers also projected which of the opportunity occupations are likely to have the greatest growth potential in the next several years. They projected the As the programs above suggest, a degree is certainly most promising prospects for those in plumbing and piphelpful but isn’t always a panacea for all workforce efitting, for RNs, those in the HVAC business, construcneeds. Indeed, statistics indicate plenty of unfilled jobs tion workers and their superviacross the board, including in sors, LPNs, and computer-user blue-collar professions that don’t THERE ARE SOME support specialists. always require higher levels of As it happens, some of the education. places further down the list of Though a bachelor’s degree 140 MILLION educational attainment fared has long been hailed as a ticket quite well when it comes to to a more lucrative job, there AMERICANS OVER opportunity occupations — are some 140 million Americans those that pay well without over 25 who don’t have one. requiring a four-year degree.

For them, there is still a path 25 WHO DO NOT HAVE The Fed researchers ranked to above-average pay, but it’s a metropolitan areas that have trickier road.

A BACHELOR’S the biggest shares of opportuFederal Reserve researchers nity employment. Topping the earlier this year examined the list was Toledo, and seventh prospects for what they termed DEGREE. was Cleveland, both in a state “sub-baccalaureate” workers4 that ranks in the bottom third — those whose education hasn’t when it comes to the percentreached the level of a bachelor’s age with a bachelor’s degree degree. The sweet spot these reor higher, according to Emsi searchers were seeking to shine data. Iowa was in that bottom third, too, and yet Des a light on was the ability to earn pay above the national Moines ranked third in opportunity employment, while median income, even without a four-year degree. They Cedar Rapids was sixth. termed such jobs as “opportunity occupations.”

There were also healthy shares of opportunity employThey found registered nurses to be the most comment spotlighted in Missouri’s two biggest metro areas, mon workers to fit this bill. Many RNs have a bachelor’s as well as in some of the major cities of Alabama, Kendegree or higher, but generally speaking, it takes only tucky, and Alaska. Only one metro area was in the top 10 an associate’s degree to break into the field, so that’s for opportunity employment while also being in a state in the degree many RNs have. Here are the top 10 roles the top third in bachelor’s or higher educational attainthat the researchers identiment: Spokane, Washington. fied as opportunity occupations, ranked by the number 1 https://www.bls.gov/emp/chart-unemployment-earnings-education.htm of people working in these 2 https://www.bls.gov/emp/chart-unemployment-earnings-education.htm 3 roles nationally: https://internal.cccs.edu/academic-affairs/training-funds/

Opportunities Without Four-Year Degrees

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• Registered nurses • Heavy and tractor-trailer truck drivers

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Industry is at a Crossroads.

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

With these attributes Woodstock has attracted more than $2 billion in new investment and created more than 4500 private sector jobs over the last decade.

At the intersections of industry, productivity and sustainability, it’s not surprising why economic powerhouses such as Toyota, Sysco & General Motors continue to invest in the City of Woodstock.

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HOT JOBS: GROWING INDUSTRIAL SECTORS Although the number of jobs lost during the Great Recession have been regained, not all regions or industry sectors have experienced the same recovery.

W

WHERE ARE THE BEST JOB OPPORTUNITIES, and in what sectors? The research from market analytics consultant Emsi suggests that some of the most attractive sectors in terms of decent-paying jobs are also doing fairly well in terms of job growth.

Most states will welcome all the manufacturing activity they can get, for example, and many states have been seeing healthy manufacturing job growth in recent years. Auto manufacturing is in respectable shape, biopharm is healthier all the time, and there’s always a need to make more food. Some job sectors are relatively flat, but even the one that has suffered the most in the past few years — oil and gas — seems to be on the mend.

The State of Manufacturing Manufacturing jobs continue to be a bit of a wild card. It’s a U.S. sector that by most measures isn’t what it used to be, thanks to everincreasing competition from overseas locations.

And according to projections from the Bureau of Labor Statistics,1 it’s not a hot sector overall, with total employment expected to drop by half a percent between 2018 and 2028.

Despite the projections, the trend line2 in the near term has been moving in a positive direction. By late 2017, the sector had finally recovered all of the jobs it lost in the Great Recession, and the numbers kept moving upward before appearing to level off as 2019 progressed.

Even if the sector as a whole is only lukewarm, the 2020

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state-by-state tallies from Emsi indicate that some areas are downright on fire. Nevada continues to be a runaway leader in the percentage of manufacturing jobs added since 2015, up an astonishing 35.1 percent. Idaho has upped its count by 10.7 percent. Florida’s manufacturing total grew by 9.3 percent, and Arizona’s by 9.1 percent.

By Emsi’s count, California remains the nation’s leading manufacturing state in terms of total jobs, at nearly 1.4 million, up 2.9 percent between 2015 and 2019. Of the top 10 manufacturing states by job total, only one has shown a decline since 2015: New York. In that group of the 10 biggest makers-of-things, Michigan recorded the highest growth since 2015, at 7.5 percent, followed by Indiana’s 4.7 percent manufacturing expansion.

Overall, according to one BLS report,3 manufacturing output is higher than it was two decades ago, by at least 5 percent — but the growth is more capital-intensive than labor-intensive. There are fewer jobs than two decades ago, and those that remain are more likely to require higher levels of education, in many cases calling for at least some college.

Drilling Down into Manufacturing Industries Among the states with the most manufacturing employees, one of the biggest common denominators is the automotive sector. Simply put, a lot of American jobs have ties to the wheels we drive.

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Manufacturing Jobs State

2019 Jobs

2015 - 2019 % Job Change

Automotive State

Jobs 2019

Job Change % 2015 - 2019

California

1,369,616

2.90%

Texas

911,900

1.30%

Michigan

197,878

10%

Ohio

712,049

2.20%

Ohio

115,379

0%

Michigan

638,091

7.50%

Indiana

97,599

9%

Illinois

594,401

1.30%

Tennessee

72,629

15%

Pennsylvania

583,177

0.80%

Kentucky

66,530

15%

Indiana

548,573

4.70%

Alabama

48,629

5%

North Carolina

486,139

3.50%

Illinois

47,511

10%

Wisconsin

484,485

2.90%

California

45,496

33%

New York

453,568

-2.50%

Texas

40,252

6%

Georgia

414,086

8.40%

South Carolina

37,455

37%

Florida

385,917

9.30%

Wisconsin

31,197

4%

Tennessee

360,433

6.20%

Georgia

30,275

24%

Minnesota

330,075

2.00%

North Carolina

29,994

6%

Washington

293,855

-0.20%

Missouri

28,544

12%

Missouri

279,598

5.20%

Pennsylvania

27,455

5%

Alabama

271,137

3.90%

South Carolina

256,149

7.10%

Kentucky

255,005

4.40%

New Jersey

252,255

4.50%

Massachusetts

250,161

-1.60%

Virginia

244,637

3.30%

Iowa

227,010

3.80%

Oregon

202,937

5.70%

California

Arizona

177,160

9.10%

Kansas

168,211

3.00%

Connecticut

164,436

1.30%

Arkansas

164,008

4.30%

Colorado

152,980

5.20%

Mississippi

147,145

2.70%

Oklahoma

141,717

1.60%

Louisiana

139,340

-5.00%

Utah

136,536

8.60%

Maryland

113,024

Nebraska

101,327

A e r o s p a c e Ve h i c l e s & Defense Jobs 2019

Job Change % 2015 - 2019

102,999

-4%

Washington

84,344

-12%

Texas

51,007

1%

Florida

34,702

22%

Arizona

33,867

10%

Kansas

31,636

3%

Connecticut

31,528

12%

Georgia

21,748

-1%

Ohio

20,944

11%

Missouri

16,247

-4%

6.20%

Oklahoma

14,947

97%

2.90%

Massachusetts

14,856

-5%

State

New Hampshire

73,148

5.80%

New York

14,733

-2%

Idaho

71,437

10.70%

Maryland

14,219

19%

Nevada

59,633

35.10%

Alabama

13,419

2%

Maine

54,183

3.10%

West Virginia

48,203

-1.00%

South Dakota

45,479

5.20%

Rhode Island

41,003

-2.50%

Vermont

31,387

-2.90%

New Mexico

30,899

-1.30%

Delaware

27,792

0.70%

North Dakota

26,635

3.20%

Montana

22,447

8.80%

Hawaii

15,928

0.70%

Alaska Wyoming

13,480 10,107

-9.10% 1.00%

The well-known automotive capital of Michigan, for example, is the fourth-biggest manufacturing state by overall employment, according to Emsi data. About 639,000 Michigan residents take home a manufacturing paycheck, and nearly 200,000 of those jobs are in the auto sector. And the sector is growing there — Michigan has seen 10 percent growth in auto jobs since 2015.

Similarly, Ohio ranks third in overall manufacturing and

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Biopharmaceuticals Jobs 2019

State second in auto manufacturing, though its auto number hasn’t really budged in the past few years. Indiana is third in auto making, seventh in overall manufacturing jobs.

Much of the major job growth in auto manufacturing has been in the newer auto hotbed: the South. For example, there has been 37 percent auto job growth in South Carolina, according to Emsi data, where it’s a $27 billion industry that really got rolling in the 1990s when BMW started making cars there. Georgia has seen 24 percent growth, with Kia a big name on the list of many employers. In California, meanwhile, the auto jobs picture has been heading well into positive territory in the past few years, up 33 percent. A major player there is Tesla, which a decade ago took over ownership of the former General Motors-Toyota joint venture assembly plant in Fremont and now employs thousands.

While the automotive sector has been flying, the business of aerospace vehicles and defense has been a bit grounded. There are pockets of significant growth, but some of the busiest aerospace states have seen employment decline in the past few years. California and Washington lead the way in employment in this sector, but in both cases their numbers are down since 2015.

The sector is certainly evolving, as more companies are reaching for the stars. California, for example, has historically built airplanes, but these days there’s a lot of focus on space vehicles. That space-focused trend certainly has helped fuel the significant increase in Florida’s aerospace sector, and fast-growing Oklahoma has been getting a lot of attention in the area of unmanned aerial vehicles, including combat drones.4 Overall, the BLS sees aerospace product and parts manufacturing5 as a sector that’s at least slowly growing, and definitely lucrative.

The biopharmaceuticals sector is, overall, on a healthy trend, according to Emsi statistics. Though jobs leader California has seen a slight dip in employment since 2015 — as have New Jersey, Indiana, and Massachusetts — the rest of the top 10 states have seen stable to growing job counts. That trend is even more pronounced a little further down the chart.

Biopharm is, as a whole, a growth sector, according to industry researchers.6 Its products continue to gain acceptance and use, as they tackle diseases that were previously seen as untreatable, and in some cases offer potential cures rather than just 2020

Job Change % 2015 - 2019

California

48,214

-1%

New York

21,988

14%

North Carolina

21,946

1%

New Jersey

21,432

-5%

Illinois

20,486

4%

Pennsylvania

17,755

0%

Indiana

16,815

-4%

Texas

13,069

16%

Massachusetts

10,241

-4%

Maryland

9,198

26%

Michigan

8,811

1%

Florida

6,905

37%

Utah

6,903

10%

Missouri

5,707

10%

Ohio

5,516

15%

Food Processing State California

Jobs 2019

Job Change % 2015 - 2019

178,166

9%

Illinois

65,969

10%

Texas

64,449

20%

Pennsylvania

57,177

7%

Ohio

55,879

12%

Wisconsin

54,546

16%

New York

45,419

16%

Minnesota

36,979

3%

Washington

34,870

19%

Michigan

33,952

14%

Iowa

32,965

6%

Indiana

32,798

7%

Florida

32,314

19%

Georgia

31,378

18%

Oregon

31,013

12%

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HotJobs.indd 48

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I n f o Te c h n o l o g y & Analytical Instruments State California

Oil & Gas

Jobs 2019

Job Change % 2015 - 2019

State

Jobs 2019

Job Change % 2015 - 2019

Texas

322,726

-10%

334,517

16%

Texas

98,426

2%

Washington

84,260

Massachusetts New York Oregon

51,594

Minnesota

48,168

North Carolina

47,696

Florida

44,014

Pennsylvania Colorado

Oklahoma

67,467

-1%

16%

Louisiana

52,789

-22%

81,028

1%

Colorado

29,837

-1%

60,294

11%

California

29,648

-20%

6%

Pennsylvania

26,149

-8%

-1%

New Mexico

24,373

9%

12%

North Dakota

22,172

-1%

11%

Wyoming

14,911

-11%

35,268

10%

Ohio

12,771

6%

32,577

9%

Alaska

10,221

-35%

Illinois

31,809

4%

West Virginia

8,657

-12%

Wisconsin

31,346

5%

Kansas

8,436

-20%

Arizona

30,790

1%

Illinois

6,412

-9%

Georgia

26,451

15%

Mississippi

6,300

-18%

CALI F O R NIA 951.413.3460 | www.morenovalleybusiness.com | edteam@morenovalleybusiness.com

21st

20,000

JOBS

square

MILES

largest city in CALIFORNIA

created in 6 years

213,914

20-mile radius population

2,342,656

Moreno Valley Population 2020

Inland Empire ONE OF THE FASTEST GROWING REGIONS

IN THE US

TRANSPORTATION

SERVED BY

4.55% annual growth

RATE

Home to numerous

Fortune 500

AND INTERNATIONAL COMPANIES

CALIFORNIA STATE ROUTE 60 | INTERSTATE 215 METROLINK CHARTER & CARGO FLIGHTS FROM MARCH INLAND PORT AIRPORT INTERNATIONAL FLIGHTS FROM ONTARIO AIRPORT

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Transportation & Logistics

Financial Services

State

Jobs 2019

Job Change % 2015 - 2019

Texas

251,871

7%

California

209,589

Florida

137,843

Illinois

Jobs 2019

Job Change % 2015 - 2019

New York

273,890

2%

18%

California

237,184

2%

15%

Texas

207,232

6%

125,933

5%

Florida

128,606

6%

Georgia

105,802

7%

Illinois

100,947

1%

New York

100,942

7%

Pennsylvania

76,458

9%

Ohio

74,265

1%

Arizona

74,825

22%

Pennsylvania

69,578

0%

Massachusetts

70,692

1%

Tennessee

61,851

-1%

New Jersey

68,659

-3%

New Jersey

59,913

13%

Ohio

66,346

10%

North Carolina

58,479

12%

Virginia

60,866

9%

Michigan

56,684

8%

Georgia

58,712

6%

Indiana

53,626

-2%

North Carolina

52,349

15%

Washington

52,423

13%

Colorado

50,180

11%

Missouri

52,036

5%

Michigan

46,527

5%

State

Business Services symptomatic treatment. It’s a business with challenging manufacturing requirements and complex supply-chain needs,7 so locations that hope to succeed in this area will need to check off a lot of location factor boxes.

It should be no surprise that food processing and manufacturing is an ever-growing industry, given that there are ever-more mouths to feed. According to Emsi research, every state is involved in this sector in one way or another, and since 2015 only two states have seen a drop in employment. California is the biggest player here and has seen 9 percent job growth, while employment is up 10 percent in Illinois and 20 percent in Texas.

Food manufacturers are plugging billions of dollars into such capital expenditures as machinery and equipment, hiring more people, and paying them more.

Meanwhile, cultural shifts and business challenges continue to alter the playing field for the future.8 New modes of delivery, from Amazon to sophisticated vending machines, are poised to have an impact, along with growing interest 2020

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Jobs 2019

Job Change % 2015 - 2019

1,325,824

12%

Texas

879,016

16%

Florida

639,270

17%

New York

638,257

16%

Virginia

476,481

12%

Illinois

419,495

7%

Pennsylvania

382,185

7%

Ohio

353,807

7%

Georgia

345,868

14%

New Jersey

315,480

5%

North Carolina

305,251

6%

Massachusetts

303,887

13%

Michigan

300,645

11%

Arizona

246,436

13%

Colorado

240,609

14%

State California

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in plant-based foods and items containing cannabis. And as in many sectors, transportation issues such as driver shortages are making life difficult.

It makes sense that, as technological advances hit virtually all aspects of life, there are growing job opportunities in information technology and analytical instruments.

Multiple states have seen employment in this sector grow, Emsi reports, including sector leaders California and Washington.

Ups and Downs Elsewhere The oil and gas sector was the bleakest of all as of last year’s report. The job change picture was blinking red across-the-board, with double-digit declines in most states with a big role in oil and gas. Make no mistake, it’s still not pretty, but now that the timeframe has shifted a year to reflect employment changes from 2015 to 2019, the picture is not nearly as ugly. Texas, the job-leader in oil and gas, has picked up more than 20,000 jobs in this sector since last report, and several thousand more jobs are now showing up in Oklahoma.

Indicators keep pointing up in transportation and logistics, too. The growth rate in Texas and Florida is holding steady, and it’s accelerating in California, Georgia, and Illinois. Over the longer-term, BLS projections peg this sector as growing a bit faster in employment than the all-industries growth rate.

Financial services continues to add jobs, growing at a healthy pace in Arizona, North Carolina, Colorado, and Ohio. It’s a field of ever-increasing automation, so the bright side is that there are only a few places where the sector is actually shrinking.

Finally, there continues to be very healthy growth in the area of business services, with more than half a million jobs added in that sector last year alone — the most in any sector — according to BLS data.9 California, Texas, Florida, and New York continue to lead in business services employment overall.

1

https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm https://data.bls.gov/timeseries/CES3000000001 https://www.bls.gov/opub/mlr/2018/beyond-bls/the-fall-of-employment-in-themanufacturing-sector.htm 4 https://kfor.com/2019/04/17/unmanned-aerospace-combat-drone-productionbrings-new-jobs-to-oklahoma/ 5 https://www.bls.gov/oes/current/naics4_336400.htm 6 https://www.mordorintelligence.com/industry-reports/global-biopharmaceuticalsmarket-industry 7 https://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/ our-insights/rapid-growth-in-biopharma 8 http://www.agrinews-pubs.com/news/the-end-of-the-food-industry-as-we-know-it/ article_6de32295-5fc2-56f0-9213-fc903104e579.html 9 https://www.bls.gov/opub/mlr/2019/article/employment-growth-accelerates-in2018.htm 2

3

CLASS A OFFICE & MODERN FLEX/R&D Space is available NOW in one of the largest cities in Maryland. Bowie is an excellent business location, with easy access to and from Washington D.C. and Reagan National Airport, Annapolis, Baltimore and BWI Airport. Bowie’s proximity to these major cities brings business and workforce into the area. Bowie has more than 90 restaurants and 200 shops. With this winning combination of location, access and amenities businesses will grow and succeed.

University of Maryland – Bowie Health Center David Wills, 301.918.2929 1,000 sq. ft. to 6,900 sq. ft. Medical 16410 Heritage Blvd Kevin Greaney, 410.953.6689 1,500 sq. ft. to 3,800 sq. ft. Office Melford at US 50 & US 301 Bill Jautze, 410.369.1213 1,000 sq. ft. to 96,000 sq. ft. Class A Office 2,000 sq. ft. to 70,000 sq. ft. Flex or R&D 200,000 sq. ft. of R&D space possible, just ask!

One Town Center Brent Prossner, 410.659.1234 x 22 1,250 sq. ft. to 30,000 sq. ft. Class A office 4201 Mitchellville Road Dave McClatchy, 410.953.0366 1,500 sq. ft. to 22,800 sq. ft. Office or Medical South Lake Mike Isen, 301.918.2908 Up to 200,000 sq. ft. Class A or Medical 4175 N. Hanson Court (AAMC Building) Dennis Murphy, 410.266.1113 1,200 sq. ft. to 6,100 sq. ft. Medical Whitehall Professional Building Beverly Addison, 301.459.0004 300 sq. ft. to 10,000 sq. ft. Office or Medical For more information contact John Henry King at: 301.809.3042 | jhking@cityofbowie.org www.cityofbowie.org/biz

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SELECT SITES DIRECTORY 2020

ALABAMA

INDIANA

CALIFORNIA

KENTUCKY

Ted Clem, Director of Business Development Alabama Department of Commerce 401 Adams Ave # 600 Montgomery, AL 36104 334-242-0400 Ted.Clem@commerce.alabama.gov www.madeinalabama.com

Mike Lee, Economic Development Director City of Moreno Valley 14177 Frederick Street P.O. Box 88005 Moreno Valley, CA 92552 951-413-3460 edteam@morenovalleybusiness.com www.morenovalleybusiness.com

CONNECTICUT

Gerald L. Sitko Cheshire Economic Development Department 84 South Main Street Cheshire, CT 06410 jsitko@cheshirect.org www.cheshirect.org

FLORIDA

Tim Vanderhoof, Senior VP, Business Development Enterprise Florida, Inc. 800 N. Magnolia Ave, Suite 1100 Orlando, FL 32803 407-956-5600 tvanderhoof@EnterpriseFlorida.com www.floridathefutureishere.com David Coddington, Vice President Business Development Greater Fort Lauderdale Alliance 110 E. Broward Blvd. Suite 1990 Fort Lauderdale, FL 33301 Toll Free: 800-741-1420 954-524-3113 Fax: 954-524-3167 info@gflalliance.org www.gflalliance.org

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Jason Hester, CEcD Greater Columbus Indiana EDC 440 5th Street Columbus, IN 47201 812-378-7300 info@columbusin.org www.ColumbusIN.org

Gina Greathouse, Executive Vice President Commerce Lexington 330 East Main Street, Suite 205 Lexington, KY 40507 859-225-5005 ggreathouse@commercelexington.com www.locateinlexington.com Erran Persley, Commissioner of Business Development Kentucky Cabinet for Economic Development Old Capitol Annex 300 W. Broadway Frankfort, KY 40601 502-564-7670 or 1-800-626-2930 www.ThinkKentucky.com

LOUISIANA

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

MARYLAND

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

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MISSISSIPPI

Tracey Giles, Deputy Chief of Economic Development Mississippi Development Authority P.O. Box 849 Jackson, MS 39205 800-360-3323 Fax: 601-359-4339 tgiles@mississippi.org www.mississippi.org

MISSOURI

Kristie Davis, Director Missouri One Start P.O. Box 478, 301 W. High Street Jefferson City, MO 65102 573-526-9239 MissouriOneStart.com

NEVADA

Derek Armstrong City of Henderson Economic Development Department 280 Water Street Henderson, NV 89009-5050 702-267-1650 or 702-267-1654 Derek.Armstrong@cityofhenderson.com www.hendersonnow.com

NEW JERSEY

Sandy Forosisky, Director, Economic Development Department City of Vineland 640 E. Wood St., P.O. Box 150 Vineland, NJ 08362 856-794-4100 sforosisky@vinelandcity.org www.vinelandcity.org

OHIO

Andrew Deye, Managing Director of Strategy, Business Development & Research JobsOhio 41 S. High St. #1500 Columbus, OH 43215 1-855-874-2530 deye@jobsohio.com JobsOhio.com

PENNSYLVANIA

Matthew Tuerk, Vice President of Economic Development and Marketing Lehigh Valley Economic Development Corporation 2158 Avenue C, Suite 200 Bethlehem, PA 18017 610-266-2216 MTuerk@LehighValley.org www.LehighValley.org

SOUTH CAROLINA

Bill McCall, Economic Development Specialist Santee Cooper One Riverwood Drive Moncks Corner, SC 29461 843-761-8000 ext. 5381 wmccall@SanteeCooper.com www.PoweringSC.com

TEXAS

Lubbock Economic Development Alliance 1500 Broadway Ave., 6th floor Lubbock, Texas 79401 806-749-4500 800-687-5330 www.Lubbockeda.org Kelly Violette, CEcD, Executive Director Tomball Economic Development Corporation 29201 Quinn Rd., Suite B Tomball, TX 77375 281-401-4086 kviolette@tomballtxedc.org www.tomballtxedc.org

CANADA

Len Magyar, Development Commissioner City of Woodstock 500 Dundas Street P. O. Box 1539 Woodstock, ON Canada N4S 0A7 519-539-2382 x 2112 Fax: 519-539-3275 lmagyar@cityofwoodstock.ca www.cometothecrossroads.com www.cityofwoodstock.ca Chris King, CEO Quinte Economic Development Commission P.O. Box 610 284B Walbridge Loyalist Rd. Belleville, Ontario Canada K8N 5B3 613-961-7990 Toll Free: 1-866-961-7990 Fax: 613-961-7998 chris@quintedevelopment.com www.quintedevelopment.com

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>

INDUSTRY REPORT

Life Sciences’ Quest for a Future-Friendly Real Estate Strategy Record-breaking R&D investment in the life sciences industry is spurring real estate innovation too.

By Roger Humphrey, Division President, Industries, and Leader of JLL’s Life Sciences Group

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LifeSciences.indd 54

Courtesy of National Science Foundation

I

nvestment in new drug discovery is at an all-time high, creating opportunity and demand for more innovative real estate strategies.

Last year, U.S. biopharma firms spent a record-breaking $179 billion on research and development (R&D) to improve their future pipelines, according to JLL’s Life Sciences Outlook 2019 report.1 And their investment is projected to grow by $34 billion by 2024, suggesting that there’s nowhere to go but up in this industry.

This investment momentum is making waves even outside the sector, with today’s life sciences industry proving a key economic driver in the U.S. After all, biotech and pharmaceutical leaders are revolutionizing the way we treat illness, with upwards of 7,000 medicines in clinical development globally and a record number of drug approvals by the FDA. And venture capital funding to the sector has also surged, growing 40 percent in the U.S. over the past year alone.

But soaring investment doesn’t do away with pre-existing industry pressures. Upward momentum, for any one firm, means not resting on the laurels of innovation, but rather on simultaneously fueling innovation while finding new ways to become more efficient with operations. According to JLL research, big pharma R&D returns have sunk to their lowest levels in nine years, with the

cost of bringing a new drug therapy to market having shot up from $1.2 billion in 2010 to nearly $2.2 billion in 2018.

Meanwhile the war for talent is also becoming more cut-throat than ever, with life sciences companies now competing not only against their own — picture big pharma players pitted against small-batch, nimble early-stage players — but also increasingly vying against the tech sector for the brightest employees. And industry wages are also growing faster than all other employment sectors, further turning up the heat on R&D costs. As of 2018, life sciences sector wages were

more than 70 percent higher than the national average of all other occupations, according to the U.S. Bureau of Labor Statistics, as cited in the JLL report.

A state-of-the-art lab in an innovation-rich ecosystem can help mitigate the drop in average returns and offset the high cost of innovation.

Our research shows that neighborhood and facilities can play a significant role in attracting talent, as well as supporting access to capital. And forward-looking operational efficiencies can help offset the soaring cost of rent.

Leveraging real estate innovation to stay ahead of cost pressures,

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while supporting a culture of innovation, demands a careful balancing act from corporate leaders. But companies can master this art by staying ahead of key trends affecting life sciences real estate today.

Three Top Considerations in Life Sciences Real Estate Strategy The quest is on for future-friendly real estate strategy, from major big pharma firms to breakthrough drug developers in small incubators. Following are three key considerations for all those looking to give life sciences talent what they want, while rising to the challenge of rising rents and dwindling space: 1. Life sciences leaders are eager to drive recruitment and retention with locations and facilities that today’s top talent crave.

More productive, inspired R&D innovation is only possible when the right people show up to do the hard work each day. Today’s scientists and tech innovators aren’t going to be impressed with the lackluster, cookie-cutter offerings of yesteryear. They’re looking for meaningful work in dynamic livework-play environments within innovationrich neighborhoods where they might run into other innovators from other world-class research centers, at work, on the way to lunch, or at a trendy corner café or bar.

For all these reasons, and more, the high rents can be well worth the price of admission into expensive areas like San Francisco and Boston. These markets teem with coveted, naturally flowing talent, some of whom could be the next innovation star on any given life sciences R&D team.

Meanwhile, next-generation lab facilities will also help appeal to the brilliant minds who may be behind that next big medical breakthrough. Flexible, experience-driven design can support efficient, desirable laboratory locations and workplaces. And today’s tech talent won’t settle for subpar technology amenities.

nation’s top clusters. As with any other industry, life sciences firms all start small too — but the need for pricy equipment, quality lab space, and investor support often drives them to seek out traditional space sooner than in other sectors.

Enter the growing concept of co-working labs, which can prove to be a great fit for the high-stakes world of life sciences research. Rising real estate costs compounded by a dearth of available lab space have spurred the rise of co-working and shared lab spaces across the country in an industry where a collaborative environment is proving to be a key to success.

Rank*

Cluster

Weighted Score

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Gr eater B os ton A r ea S an Fr ancis co B ay A r ea S an D iego Metr o A r ea R aleigh- D ur ham Metr o A r ea S ubur b an Mar y land/ Metr o D C S eattle Metr o A r ea N ew J er s ey P hiladelphia Metr o A r ea C hicago Metr o A r ea Los A ngeles / Or ange C ounty D env er Metr o A r ea H ous ton N ew Yor k C ity Minneapolis - S t. Paul Metr o A r ea Wes tches ter C ounty Long Is land

89.2 81.6 71.6 64.3 52.5 49.9 48.2 47.2 43.5 41.1 38.8 35.7 34.1 30.8 27.4 23.7

*Based on weighted score of life sciences employment concentration, venture capital funding, total lab supply, employment growth, establishments concentration, National Institutes of Health funding, market occupancy rate, average asking rent Source: JLL research

2. L ife sciences firms get creative to score a spot in the hottest R&D markets.

Suitable space is dwindling in the nation’s most popular life sciences markets, with big pharma occupiers and emerging companies alike crowding the market.

But there’s no longer a one-size-fits-all approach when it comes to scooping up lab space within, and near, the

In Philadelphia’s King of Prussia submarket, for example, MLP Ventures’ Discovery Labs is on pace to become the largest co-working ecosystem in the U.S. for healthcare, life sciences, and technology-enabled firms.

When complete, the $500 million, 1.6-million-square-foot campus will comprise 12 connected buildings, including 50,000- to 125,000-square-foot range R&D spaces.

The results may be well worth the effort in terms of plugging into local talent pipelines. Consider, for inAREA DEVELOPMENT | Q4 2019

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stance, the fact that job growth in the most desirable life sciences clusters far outpaces overall U.S. job growth (11 percent), with growth rates of 26 percent in the San Francisco Bay area, 16 percent in Denver and Boston, and 12 percent in Raleigh-Durham.

3. Emerging markets are also attracting life sciences leaders’ attention — often for good reason.

Top markets can indeed be well worth the top rents — but such knowledge helps no one when there’s no suitable space to be found. Currently, vacancies in the nation’s tightest life sciences submarkets are hovering at less than 2 percent, and exorbitant rents are just one signal of the shortage. In San Francisco’s MidPeninsula neighborhood, for example, rents have nearly doubled from $32 per square foot to $58 per square foot since 2014, with vacancy below 6 percent over that same period.

It’s worth noting that Boston and San Francisco top the list for new life sciences development, with more than 3.3 million square feet of new lab space under construction in each market. And yet, developers here and in other top-tier markets simply can’t keep up with demand.

The good news is that other clusters are also picking up steam, nurturing innovation-rich ecosystems.

In Houston, for example, the number of life sciences establishments jumped 15.5 percent over the past five years, trailing only Boston and Raleigh-Durham. Denver is also well positioned to support growth, with a 14 percent vacancy rate and a 15 percent employment growth rate.

Calling All Innovators: Lab Breakthroughs Demand Real Estate Breakthroughs Too Location and quality of space can play a vital role in

life sciences R&D. To capture that opportunity, real estate leaders need to understand how any given location and facility could support their firm’s innovation needs.

There are no hard and fast rules here. In fact, new ways of thinking will help CRE leaders unveil new ways of delivering value.

But some rules remain. The right location will most likely include a mix of world-class academic institutions, leading-edge research facilities, and a close, tight-knit medical community. And the right facilities will help support a dynamic workplace culture, driving engagement and productivity across a broad range of spaces — from flexible, easily re-configurable lab benches and furnishings, to casual collaboration spaces, to analytical spaces where data analysts can crunch the numbers.

To tap into the vast potential, CRE leaders can help advance life sciences goals by leveraging advances in real estate data and insights. They can ensure real estate goals are in lock-step alignment with corporate goals. And they can deliver a data-informed roadmap for the future that supports long-term scalability and resiliency.

Technological advances in medical development, compounded by growing demand from emerging economies, are projected to propel worldwide prescription drug sales from $900 billion in 2019 to $1.2 trillion by 2024. That’s going to require a lot of innovation — and, in turn, the right lab space to accommodate effective — and rapid — discovery and development.

In a time of fast evolving and advancing global trends, the biopharmaceutical industry is paving the way for a new future for healthcare. And so, in turn, are the real estate leaders helping deliver the space for discovery to happen. n 1

https://www.us.jll.com/en/trends-and-insights/research/2019-life-sciences-outlookinnovation-is-alive-and-well

LOCATION. LOCATION. LOCATION. The best LOCATION on the web to help with your corporate LOCATION needs.

The best LOCATION to start your site and facility search.

The best LOCATION to stay on top of industry needs.

The best LOCATION for the newest and most relevant industry produced studies and research papers.

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

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South Carolina

SPECIAL LOCATION REPORT

Population and GDP Grow in South Carolina South Carolina’s business-friendly environment is drawing new businesses that can take advantage of its longstanding workforce training program to fulfill their needs.

By the Numbers

GE Appliances plans to invest $60 million to create a Manufacturing Center of Excellence for the production of water heaters at its existing plant in Camden, S.C.

I

In September, GE Appliances announced that it would invest $60 million to create a Manufacturing Center of Excellence for the production of water heaters at its existing plant in Camden, S.C. The investment represents the next step in a strong, ongoing relationship between the company and the state.

According to Frank Scheffel, plant manager, this relationship can be traced in part to South Carolina’s commitment to its business community.

“South Carolina is a very welcoming state to new and existing businesses,” Scheffel says. “The economic development teams are committed to growing the employment base in the state and are very efficient and responsive to requests and ideas. They are focused on creating an environment where large and small high-tech businesses can thrive.”

B y To m G re s h a m

South Carolina ranked 26th in the country in GDP (about $234 billion) in 2018 and enjoyed an unemployment rate of just 2.9 percent, as of September 2019, the lowest in the state’s history.1 And South Carolina’s 4.7 percent GDP growth in the past five years is the 11th-largest increase in the United States over that time, according to 24/7 Wall St.2 The state’s top industries include advanced manufacturing, advanced materials, aerospace, agribusiness, automotive, and life sciences. No Fortune 500 company is based in South Carolina, though four in the Fortune 1000 do call the state home — Domtar Corp., Sonoco Products, ScanSource, and SCANA Corp. More than 1,200 international companies have operations in the state, according to the South Carolina Department of Commerce.

South Carolina’s Secretary of Commerce Bobby Hitt points to “business-friendly” regulations and taxation (no state property tax, income tax, or inventory tax) that help keep operating and capital costs subdued as a crucial selling point to companies considering the state. Those regulations combined with energy infrastructure investments lead to affordable power costs, with South Carolina’s industrial power costs averaging more than 12 percent less than the U.S. average, according to the state’s Department of Commerce.3 Manufacturers in South Carolina account for about 17 percent of the total output in the state — $37.15 billion in 2017 — and employ nearly 12 percent of the workforce. — nearly 248,000 in 2018, according to NAM.4 Major manufacturing sectors comprise aerospace products/parts, pharmaceuticals/medicine, motor vehicle parts, and machinery, among others.

In addition, South Carolina recruited more than 4,100 office, headquarters, and R&D jobs last AREA DEVELOPMENT | Q4 2019

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SPECIAL LOCATION REPORT

“

The ReadySC program, which offers customized workforce training for eligible companies, has trained nearly 300,000 people and has served more than 2,000 companies since 1961.

year. The state also ranks 27th for net tech employment (nearly 6 percent of its workforce) and had the 21st-highest net tech employment growth in the U.S. for 2017–2018, according to a Cyberstates 2019 report.5

Other Advantages Among the state’s other key advantages for businesses, says Hitt, are South Carolina’s favorable location and robust transportation infrastructure. The state is served by five interstate highways, one of the most productive container ports in the U.S. (the Port of Charleston), two inland ports, two Class I rail carriers, and three major airports.

“South Carolina’s central East Coast location, coupled with an integrated transportation system of highways, airports, seaports, and railways, ensures companies can easily reach every one of their markets, domestically and internationally,” Hitt notes.

Scheffel agrees that the state’s transportation infrastructure boosted companies’ operations: “Having major ports nearby in Charleston and Savannah (Ga.) helps manufacturers like ours and other businesses with access to efficient shipping of components and raw materials…Interstate 20 connects us to other major hubs in the state and region.”

Charleston’s port, as well as its status as a popular destination for tourists, helps make it the state’s busiest metropolitan area. The city’s regional economy was ranked No. 16 in the country, buoyed by cargo growth, according to the Milken Institute’s 2019 rankings.6 A 2019 analysis from the State Ports Authority detailed that the Port of Charleston generates 10 percent of the state’s economy in partnership with its inland port partners.7 58

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A Common Challenge Despite all its advantages, an economic development challenge that South Carolina faces — one common among its peers — is workforce availability.

“Much like our neighboring southeastern states, South Carolina is experiencing historically low unemployment,” Hitt says. “To ensure we have a ready workforce for both existing and future industry, we have to think creatively about our approach to workforce solutions.”

Scheffel agrees that workforce development and filling the skills gap represent a challenge for supporting a growing manufacturing base: “Companies, government, and schools must work together to create programs to develop this vital pipeline,” he notes.

“While the labor market continues to be tight — especially skilled trades — we continue to have employees drive more than 30 miles to work at our plant.”

South Carolina is home to three research universities, and the South Carolina Technical College System has 16 community-based technical colleges, which are helping to address workforce challenges.

The technical colleges feature the readySC program, which offers customized workforce training for eligible companies. The program has trained nearly 300,000 people and has served more than 2,000 companies since 1961.

Additionally, last year, the state launched the ManufirstSC program, which is a 62-hour program that enables prospective employees to prepare for manufacturing careers with a certificate rather than experience.

More than 1,000 people have graduated from the program, and more than 100 companies have committed to accepting the certificate from job applicants. for free site information, visit us online at www.areadevelopment.com

12/12/19 11:42 AM

Two other recent workforce-related programs include the South Carolina Fraunhofer USA Alliance, a partnership with the South Carolina Competitiveness Council that aims to bring the problem-solving needs of companies to the state’s universities, and SC Codes, which provides a free online coding curriculum and mentoring services.

“Workforce development is about getting the right people in the right jobs at the right time,” Hitt explains. “And the state’s programs for preparing workers are an essential tool in recruiting new companies and supporting existing industry.”

And South Carolina’s low cost of living is luring new residents to the state who may help to fulfill workforce needs as well. Its population increased 7.8 percent due to net migration from 2010 to 2018, the fifth highest in the nation, according to 24/7 Wall St.8

1

1 https://www.postandcourier.com/business/south-carolina-posted-lowest-unemploymentrate-ever-in-september/article_726e1bee-f1c4-11e9-a898-67d4b9590d78.html https://www.usatoday.com/story/money/2019/07/06/jobs-gdp-unemployment-states-withbest-worst-economies/39651531/ 3 https://www.sccommerce.com/why-south-carolina 4 https://www.nam.org/state-manufacturing-data/2019-south-carolina-manufacturing-facts/ 5 https://www.cyberstates.org/pdf/CompTIA_Cyberstates_2019.pdf 6 https://www.postandcourier.com/business/charleston-region-s-economic-growth-amongbest-in-us-but/article_a5239f6c-2318-11e9-a641-e7d3d32909ba.html 7 http://scspa.com/economic-impact/ 8 https://www.usatoday.com/story/money/2019/07/06/jobs-gdp-unemployment-states-withbest-worst-economies/39651531/ 2

Santee Cooper Santee Cooper supports South Carolina’s business community by providing low-cost, safe, reliable power that improves your bottom line and the quality of life for South Carolinians. In addition to residential and commercial customers, Santee Cooper powers 27 large industrial customers, 13 municipalities, Charleston Air Force Base, and electric cooperatives in all 46 counties of the state.

Bill McCall, Economic Development Specialist Santee Cooper One Riverwood Drive Moncks Corner, SC 29461 843-761-8000 ext. 5381 wmccall@SanteeCooper.com www.PoweringSC.com

POWER

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Thanks to Santee Cooper resources like low-cost, reliable power, creative incentive packages and a wide-ranging property portfolio, South Carolina shatters the standard for business growth.

In fact, since 1988, Santee Cooper has helped drive more than $15 billion in investment and helped bring nearly 78,000 new jobs to our state. It’s how we’re driving Brighter Tomorrows, Today.

www.poweringSC.com

AREA DEVELOPMENT | Q4 2019

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2019 LEADI N G

LOC ATI ONS

METRO AREAS t h a t are hotbeds of technology lead the pack, joined by others showing manufacturing prowess, which has a large economic ripple effect.

Area Development’s ninth annual Leading Metro Locations report uncovers many key economic growth trends in the U.S. economy.

This research document took a wide-spectrum, analytical view of 399 Metropolitan Statistical Areas (MSAs) and ranked them using 16 total indicators to flush out sometimes hidden “change and growth” attributes.

These efforts yielded revealing lists identifying the top largest metros; the top leading metros with small, mid-size, or large population; and the top metros for economic strength, prime workforces, and with the best year-over-year growth and five-year economic growth success. This number-crunching exercise created an extremely positive scorecard for the U.S. economy overall.

By Lisa A. Bastian

NOTE: A rea Development’s research desk compiled the statistics for this report. Locations were ranked according to the methodology explained herein. Interactive report available at

www. areadevelopment.com/LeadingLocations2019

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LEADI NG

LOCAT IONS

“As of December 2019, the nation is in its

regions with relatively large manufacturing

longest expansion (125 months) in modern

sectors benefitted greatly, and we see that

history,” explains Dr. Christine Chmura, CEO

in some of the rankings,” says Chmura. And

and chief economist at Chmura Economics & Analytics. “The second-longest expansion (120

2019

although investments slowed in the beginning of the second half of 2019 due to uncertainty

months) was from March 1991 to March 2001,

related to trade wars, particularly with China,

while the third-longest (106 months) occurred

“we still expect to see real GDP of 2 percent

February 1961 to December 1969.”

in 2020. That’s due to the consumer sector

Over the past few years the U.S. has seen

remaining strong; that’s important since

a significant amount of business investment in

consumers comprise about 70 percent of

equipment and plants, she notes, partly due

GDP growth,” Chmura explains.

to new tax cuts and a notable reduction in

More good news: As of October 2019, the

regulations holding back growth. “As a result,

nation’s unemployment rate was 3.6 percent,1

Methodology Area Development ranked 399 MSAs across 16 economic and workforce indicators. These 16 indicators were pulled from six (6) data sets (sub-categories) originating from the Bureau of Labor Statistics and U.S. Census American Community Survey.

Each MSA earned a ranking within each of the 16 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 “399.”

To calculate “Overall Ranking,” we added the total ranking across all indicators for each MSA and then divided by the total number of indicators to reach an average ranking. The MSA with the lowest average earned the #1 overall ranking, while the MSA with the highest average ranked #399 overall.

We also calculated overall ranking across four categories: “Prime Workforce,” “Economic Strength,”

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“Five-Year Growth,” and “Year-Over-Year Growth.” To calculate the overall ranking within these four categories, we produced an average ranking across only certain indicators. An indicator did not have to be exclusive to our category rankings. For instance, the “Employment Growth Net 5-Year Change as Percentage of Population” is used within both the “Economic Strength” and “Five-Year Growth” categories.

We have also produced a set of lists, using our overall results and category results, grouping the MSAs by region and size: “small” (population < 160,000), “mid-size” (population 160,000– 600,000), and “big” (population > 600,000). We ranked the cities within each size group against our overall rankings and “Prime Work Force, ” “Economic Strength,” “Five-Year Growth,” and “Year-Over-Year Growth” categories.

For the full report and explanation of the methodology behind it, go to www.areadevelopment.com/LeadingLocations2019

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

12/12/19 12:57 PM

TOP 50 Leading Metro Locations Rank CITY/MSA

1 Reno 2 San Jose-Sunnyvale-Santa Clara 3 Napa San Francisco-Redwood City- 4 South

San Francisco 5 Columbus 6 Oakland-Hayward-Berkeley 7 Seattle-Bellevue-Everett 8 Spartanburg

State

Region

NV

Mountain

CA

Pacific

CA

Pacific

CA

Pacific

IN

Midwest

CA

Pacific

WA

Pacific

Rank CITY/MSA

State

Region

CO

Mountain

Palm Bay-Melbourne-Titusville FL

South Atlantic

27 28 29 30

Colorado Springs

Portland-Vancouver-Hillsboro

Charleston-North Charleston SC

31 Carson City 32 Camden

South Atlantic

33

9 Orlando-Kissimmee-Sanford FL

South Atlantic

34

Midwest

35T Chattanooga 35T Florence

17 Decatur 18 Ogden-Clearfield 19 Jacksonville

IL UT

FL

20 Santa Cruz-Watsonville 21 Salinas 22 Bloomsburg-Berwick

South Pacific Pacific South Atlantic Midwest Mountain South Atlantic

TN-GA

SC

37 Santa Rosa 38 Wheeling

CA

WV-OH

39 40 41 42

AL

ME

South New England

New England

South South Atlantic Pacific South Atlantic

Anaheim-Santa Ana-Irvine

CA

Pacific

Provo-Orem

UT

Mountain

Ocean City NJ

43 Asheville

NC

44

CO

South Atlantic

MidAtlantic

Midwest

Pacific

Mountain

Mountain

IL-WI

CA

CO

South Atlantic

Lake County-Kenosha County

Baltimore-Columbia-Towson MD

MidAtlantic

Pacific

New York-Jersey City- NY-NJ Mid White Plains -Atlantic

Pacific

FL

25T Tuscaloosa 25T Bangor

South Atlantic

Portland-South Portland ME

CA

PA

23 Boulder 24 Naples-Immokalee-Marco Island

South

NV

NJ

SC

10 St. Louis MO-IL 11 Decatur AL Hilton Head Island- SC 12 Bluffton-Beaufort 13 Huntsville AL 14 San Diego-Carlsbad CA Sacramento--Roseville-- CA 15 Arden-Arcade 16 Gainesville GA

OR-WA

45T Denver-Aurora-Lakewood 45T Medford Chicago-Naperville- 47

Arlington Heights 48 Fort Wayne Los Angeles-Long Beach- 49 Glendale 50 Davenport-Moline-Rock Island

OR

MidAtlantic SouthAtlantic MidAtlantic Mountain Pacific

IL

Midwest

IN

Midwest

CA

Pacific

IA-IL

Midwest

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TOP 20 Large Metros Rank CITY/MSA

1

San Jose-Sunnyvale-Santa Clara

2 San Francisco-Redwood City- South San Francisco

3 Oakland-Hayward-Berkeley 4 Seattle-Bellevue-Everett 5 Orlando-Kissimmee-Sanford 6 St. Louis 7 San Diego-Carlsbad

8 Sacramento--Roseville-

Arden-Arcade

9 Jacksonville 10 Colorado Springs 11 Portland-Vancouver-Hillsboro 12 Charleston-North Charleston 13 Camden New York-Jersey City- 14 White Plains 15 Lake County-Kenosha County 16 Anaheim-Santa Ana-Irvine 17 Baltimore-Columbia-Towson 18 Denver-Aurora-Lakewood Chicago-Naperville- 19 Arlington Heights

Los Angeles-Long Beach- 20 Glendale

State

LOCAT IONS

TOP 20 Mid-Size Metros

Rank Within Leading Locations

Rank

CITY/MSA

1 Reno 2 Spartanburg

CA

2

CA

4

CA

6

Head Island-

3 Hilton Bluffton-Beaufort

WA

7

FL

9

MO-IL

10

CA

14

CA

15

FL

19

CO OR-WA

NV

1

SC

8

SC

12

AL

13

GA

16

UT

18

CA

20

CA

21

CO

23

27

10 Naples-Immokalee-

Marco Island

FL

24

29

11 Tuscaloosa

AL

25

FL

28

SC

30

NJ

32

NY-NJ

34

IL-WI

39

CA

40

MD

44

CO

45

IL

47

CA

49

4 Huntsville 5 Gainesville 6 Ogden-Clearfield 7 Santa Cruz-Watsonville 8 Salinas 9 Boulder

State

Rank Within Leading Locations

Palm Bay-Melbourne- 12 Titusville 13 Portland-South Portland 14T Chattanooga 14T Florence 16 Santa Rosa 17 Provo-Orem 18 Asheville 19 Medford 20 Fort Wayne

ME

33

TN-GA

35T

SC

35T

CA

37

UT

41

NC

43

OR

46

IN

48

PACIFIC REGION BEST REFLECTS A BOOMING ECONOMY

and wages grew 4.89 percent year over year (from October 2018 to October 2019). 2 If

Broadly speaking, 14 of the top 50 leading

these kinds of positive trends continue and the consumer sector remains strong, Chmura

metro locations reflecting the nation’s continuous

predicts America will continue to grow and

economic expansion are in the Pacific region.

prosper in 2020. “And if we see an end to

“Looking at the first five, they’re all high-tech

the uncertainty about the trade wars soon,

hubs with a relatively young, highly educated

we could see even higher growth than what

workforce, typically well compensated,” says

economists are forecasting,” she notes.

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2019

Chmura. “Unfortunately, since home prices are

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

12/12/19 12:58 PM

Commentary

TOP 20 Small Metros Rank CITY/MSA

1 Napa 2 Columbus 3 Decatur 4 Decatur 5 Bloomsburg-Berwick 6 Bangor 7 Carson City 8 Wheeling 9 Ocean City 10 Hattiesburg 11 Wausau 12T Kokomo 12T Sumter 14 Vineland-Bridgeton 15 Valdosta 16 Kankakee 17 Bend-Redmond 18 Walla Walla 19 Midland 20 Missoula

State

Rank Within Leading Locations

CA

3

IN

5

AL

11

IL

17

PA

22

ME

25

NV

31

WV-OH

38

NJ

42

MS

51

WI

55

IN

57T

SC

57T

NJ

60

GA

63

IL

65

OR

68

WA

71

TX

78

MT

80

South and South Atlantic Metros Emerge as Leading Locations* Newcomers in the top 30 of this year’s rankings highlight a shift away from Pacific and Mountain region’s dominance. In 2016 and 2017, one community from the South and South Atlantic regions made the top 20. In 2018, there were none. But 2019 sees seven metros in the top 20, and 11 in the top 30, from these regions.

Familiar locations, such as the San Francisco area MSA, make up the top tier. And Reno, Nev., a mainstay in the top 20 since 2015, climbed three spots to the No. 1 ranking.

But the top 20 looks much different after that. Decatur, Ala., leapt from No. 373 to No. 11, and its neighbor to the east, Huntsville, Ala., came in at No. 13 — a jump of 100 spots from last year. South Carolina also placed two metros in the top 20: Spartanburg (No. 8) and Hilton Head IslandBluffton-Beaufort (No. 12). Both made significant climbs at No. 74 and No. 215 respectively from 2018.

Sometimes the new recruitment press release doesn’t live up to the hype. That doesn’t appear to be the case in Alabama, where a slew of investments in the rocket industry over the last few years are now registering on economic indicators. Decatur is No. 1 in economic strength, No. 3 in five-year economic growth, and No. 5 in year-over-year growth.

Spartanburg is benefitting from a diversified industrial economy resulting in manufacturing job growth (8.1 percent from 2015 to 2017) and low unemployment (3.3 percent in 2018). The approach of expanding on a core industry, in this case automotive, again is proving successful. Spartanburg has methodically climbed the ranks since 2016 (No. 137).

While a definite shift occurred in the rankings, it can’t yet be called a trend. The next few years will be telling if the South and South Atlantic can maintain their growth.

By Drew Repp, Content Manager, Emsi

so high in those areas, they’re often unaffordable to the young workforce they’re attracting. But that simply helps nearby metros.” For example, Portland benefits from housing overflow from California and Seattle.

The second-most-represented region among the leading metro locations is the South Atlantic, with 11 metros on the list. This is due mainly to its manufacturing-intensive activity, says Chmura. For

* Editor’s Note: A change in methodology has led to some newcomers in the top of the rankings while past leading metros still make an appearance. Specifically, GMP data was unavailable and is omitted as an indicator in this year’s report. Also, all economic indicator rankings from BLS are based on one-year, three-year, or five-year changes and not snapshots of the most recent unemployment indicator.

We are using 16 total indicators this year instead of 21 as in years past. These changes have served to make the report rankings a reflection of change and growth more than ever before. Without the GMP data the report is also more slanted toward labor and workforce quality and growth.

example, the Charleston region “has benefitted greatly

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TOP 30

TOP 30

Metros Prime Workforce Rank CITY/MSA Francisco-Redwood

1 San City-South San Francisco

State

Rank Within Leading Locations

CA

4

2 San Jose-Sunnyvale-Santa Clara CA 2 3 Ithaca NY 104 4 Seattle-Bellevue-Everett WA 7 5 Philadelphia PA 112 6 Columbus IN 5 7 Napa CA 3 8 Orlando-Kissimmee-Sanford FL 9 9 Oakland-Hayward-Berkeley CA 6 10 Idaho Falls ID 103 11 Dallas-Plano-Irving TX 56 12 Portland-Vancouver-Hillsboro OR-WA 29 13 Hattiesburg MS 51 14 Asheville NC 43 15 Carson City NV 31 16 Trenton NJ 130 17 Reno NV 1 18 Boulder CO 23

New York-Jersey City- 19 White Plains

20 San Diego-Carlsbad Nashville-Davidson-- 21 Murfreesboro--Franklin

22 Salt Lake City 23 State College 24 Denver-Aurora-Lakewood 25 Baltimore-Columbia-Towson 26 Corvallis 27 Huntsville 28 Cincinnati 29 Ogden-Clearfield 30 Ames

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NY-NJ

34

CA

14

TN 53 UT

66

PA

166

CO

45

MD

44

OR

116

AL

13

OH-KY-IN

91

UT

18

IA

87

Metros Economic Strength Rank CITY/MSA

1 Decatur 2 Decatur 3 Reno 4 Spartanburg 5 Gainesville 6 Davenport-Moline-Rock Island 7 Kankakee 8 Florence 9 Clarksville 10 St. Louis 11 Sumter 12 Barnstable Town 13 San Jose-Sunnyvale-Santa Clara

State AL

11

IL

17

NV

1

SC

8

GA

16

IA-IL

50

IL

65

SC

35

TN-KY

54

MO-IL

10

SC

57

MA

69

CA

Hilton Head Island- SC 14 Bluffton-Beaufort

15 St. Joseph 16 Napa 17 Camden 18 Kokomo 19 Charleston-North Charleston 20 Columbus 21 Vineland-Bridgeton 22 Columbus 23 Chattanooga 24 Valdosta 25 Huntsville 26 Jacksonville

Rank Within Leading Locations

2 12

MO-KS

136

CA

3

NJ

32

IN

57

SC

30

GA-AL

61

NJ

60

IN

5

TN-GA

35

GA

63

AL

13

FL

19

Sacramento-Roseville- CA 27 Arden-Arcade

15

28 Salinas 29 Bangor 30 Fort Wayne

CA

21

ME

25

IN

48

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

12/12/19 1:00 PM

LE ADI NG

LOCAT IONS

from Boeing’s expansion in the past decade, and the Volvo plant that opened in June 2018 will continue to expand over at least the next three years.” In the near-term, Chmura expects to see population and employment continuing to shift to the Pacific and South Atlantic.

The Mountain and the Midwest regions each include seven leading metro locations, while the Mid-Atlantic region has five, the South has four, and the New England region, only two.

WORKFORCE POWERHOUSES Four of the top 10 metros tagged as prime workforce locales are in California: San-FranciscoRedwood City-S. San Francisco, San Jose-SunnyvaleSanta Clara, Napa, and Oakland-Hayward-Berkeley.

A major reason setting San Francisco apart from other cities in the state is its sub-region of Silicon Valley (3.1 million people), supporting a whopping 1.6 million jobs averaging $139,775 in annual pay.

In November 2019, a California government agency announced the state’s unemployment rate fell to a new record low of 3.9 percent in October, and that employers had added 23,600 nonfarm payroll jobs.3 Those new positions concretely contributed to the current country-wide job expansion. Specifically, since the expansion began in February 2010 in California, the state gained 3,377,900 jobs which made up over 15 percent of America’s 22,230,000 job gain recorded

Commentary

Leading Locations: A Tale of Demographics Area Development’s Leading Metro Locations report reaffirms that most of the growth throughout the U.S. over the past several years, though broad, has been especially concentrated in the Western and Southern regions of the country. This is largely a tale of demographics, as both regions have benefitted greatly from in-migration, a high-quality of life, and strong workforce gains.

The West in particular has benefitted from positive demographic trends, but what sets it most apart from the rest of the country is its core dynamic industry mix and exceptional workforce. Seven of the top 10 large metros and five of the top 10 mid-size metros are located in the West.

Dynamic industry growth coupled with the high-quality of life west of the Rocky Mountains continues to outmatch rising costs.

However, within the region, rising costs are becoming more of a concern. This is evident when looking at the overall ranking of leading metros, with Reno, Nev., taking the top spot. Metro areas like Reno, Ogden, Boulder, and Colorado Springs are becoming increasingly attractive, lower-cost alternatives to the usual Western powerhouse metros like San Jose and San Francisco. Five years from now, this list is likely to be peppered further with Mountain-West metro areas benefitting from lower costs, while maintaining strong workforces and a relatively high quality of life.

By Dan White Director, Government Consulting and Fiscal Policy Research Moody’s Analytics

in the same timeframe.

Other particularly strong workforce showings are in locations widely spread across the U.S., such as Ithaca, N.Y.; Seattle-Bellevue-Everett, Wash.; Philadelphia, Pa.; Columbus, Ind.; Orlando-Kissimmee-Sanford, Fla.; and

are cities named Decatur. The one in Alabama took spot #1,

Idaho Falls, Idaho.

while the other in Illinois earned spot #2. Both also were ranked high among small metros and in the top 20 overall.

ECONOMIC GROWTH TITANS

These cities are followed by Reno, Nev., Spartanburg, S.C., and Gainesville, Ga., in the economic strength category. Reno also

In the category of economic strength, the leading two metros identified by Area Development research

attained the #1 ranking for year-over-year growth as well as five-year economic growth and is the #1 leading metro location overall.

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The Reno-Sparks metro area (population: over 500,000)

TOP 30

is no longer heavily focused on gaming and entertainment.

Metros Year-Over-Year Growth Rank CITY/MSA

1 Reno 2 Decatur 3 Vineland-Bridgeton 4 Ogden-Clearfield 5 Decatur 6 Bangor 7 Gainesville 8 Kokomo 9 Columbus 10 Seattle-Bellevue-Everett 11 Danville 12 Bloomington 13 St. Louis 14 Lake County-Kenosha County 15 Florence 16T Davenport-Moline-Rock Island 16T Springfield 18 Hilton Head Island-

Bluffton-Beaufort

19 San Jose-Sunnyvale-Santa Clara 20T Champaign-Urbana 20T Rome 22 Ocean City 23 Spartanburg 24 Logan 25 Salinas 26 Springfield 27 Colorado Springs 28 Tuscaloosa 29 Sumter 30 Bloomsburg-Berwick 30T Gadsden

State

Today, about 65 percent of Reno’s workforce is employed in Rank Within Leading Locations

the trade and services sector, and its total employment rate is more than triple the national average.4 Corporate citizens now include diverse players in healthcare, technology, and

NV

1

IL

17

NJ

60

UT

18

Gigafactory 1, the world’s highest-volume battery plant,

AL

11

built just outside Reno. Meanwhile New Deantronics is set

ME

25

to open a $40 million, 200-job medical device R&D and

GA

16

manufacturing campus in the Reno-Sparks area in 2020.

IN

57T

Not surprisingly, the metro is now enjoying an expansion in

IN

5

WA

7

entrepreneurial startup businesses.

A notable regional addition is Elon Musk’s Tesla

distribution and warehousing facilities as well.

Chmura points out that the commonality shared by metros

IL

199

flexing brawny economic strength muscles is their emphasis

IN

129

on attracting, supporting, and retaining manufacturing

MO-IL

10

companies. “Communities that champion their manufacturing

IL-WI

39

sector benefit not only from the success of those firms,

35

but also from the large ripple effect they cause,” she says.

IA-IL

50

“For every one manufacturing job, typically two to three

MA

75

additional jobs are created; that’s a large multiplier for any

SC

12

region of any size.”

SC

Looking at the top 30 metros for economic strength, CA

2

IL

59

rankings. For example, Decatur, Ala., saw employment growth

GA

94

in the food, metals, and chemical manufacturing industries,

NJ

42

while Decatur, Ill., has found success with help from its

SC UT-ID CA IL

8 117 21 183

Chmura sees manufacturing again is behind their excellent

prominent construction machinery manufacturing players.

In the last three years alone, Reno added 12,000 jobs in battery manufacturing; Spartanburg, S.C., saw growth in auto-related manufacturing; and Gainesville, Ga., boosted

CO

27

AL

25

SC

57T

in addition to Reno and Decatur, Ala., and Decatur, Ill. —

PA

22

other metros posting remarkable year-over-year economic

AL 149

its economy with food and machinery manufacturing.

When it comes to year-over-year economic growth —

growth stats include Vineland-Bridgeton, N.J. (flush with jobs from temp health agencies and wholesale trade “possibly due to quick delivery operations,” notes Chmura); plus manufacturing-friendly Ogden-Clearfield, Utah.

Not surprisingly, most of the top-ranked metros for five-

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Commentary

In the Search for STEM Skills, Look to the Data

TOP 30

Metros Five Year Economic Growth Rank CITY/MSA

1 Reno 2 Spartanburg 3 Decatur 4 Gainesville 5 Napa 6 Kankakee 7 Florence 8 Decatur 9 San Jose-Sunnyvale-Santa Clara 10 Oakland-Hayward-Berkeley 11 San Francisco-Redwood City-

South San Francisco

12 Santa Cruz-Watsonville 13 Jacksonville 14 Barnstable Town 15 Sacramento--Roseville-- Arden-Arcade 16 Detroit-Dearborn-Livonia 17 Chattanooga 18 Huntsville 19 Elkhart-Goshen 20 Naples-Immokalee-Marco Island 21 Anaheim-Santa Ana-Irvine 22 Salinas 23 San Diego-Carlsbad 24 Warner Robins 25 Santa Rosa 26 Kokomo 27 Redding 28 Las Vegas-Henderson-Paradise 29 Sumter 30T Fort Wayne 30T Riverside-San Bernardino- Ontario

State

Rank Within Leading Locations

NV

1

SC

8

AL

11

GA

16

CA

3

IL

65

SC

35T

IL

17

CA

2

CA

6

CA

4

CA

20

FL

19

MA

69

CA 15 MI

76

TN-GA

35T

AL

13

IN

208

FL

24

CA

40

CA

21

CA

14

GA

84

CA

37

IN

57T

CA

90

NV

131

SC

57T

IN

48

CA

107

As every site selection executive knows, what defines a leading location is in the eye of the beholder. While many communities enjoy cross-industry appeal, the factors that make up location decisions are ultimately unique to the organization in need of a location.

For the majority of companies, the need for skilled talent is a top consideration. For example, in manufacturing, factory automation has created a growing demand for mechatronics engineers who have both electrical and mechanical engineering skills. In Cognizant’s 2019 annual Jobs of the Future Index,1 the biggest growth in skills demand was for robotics technicians, with a 121 percent leap since 2017, followed closely by robotics engineers.

Unfortunately, mechatronics engineers are hard to find.

Only 294 bachelor’s degrees in mechatronics, robotics, and automation engineering were awarded among U.S. institutions of higher education in 2018, according to U.S. Department of Education statistics. And, those degrees were awarded by only 10 colleges and universities.

Given the demand for STEM skills in manufacturing and other industries, it’s not surprising that 10 of the top 25 of Area Development’s leading metro locations are leaders in producing graduates with STEM degrees in biology, computer information sciences, engineering, mathematics, and physical sciences. What is somewhat surprising is that the metropolitan areas with the largest populations don’t necessarily produce the largest number of STEM-related graduates.

Houston, for example, is the fifth-largest U.S. metropolitan area in terms of population but is 23rd in terms of the above-mentioned STEM graduates — even though the city employs an above-average number of workers in engineering services. Boston is the 10th most populated U.S. city, but ranks third in terms of these STEM degrees granted — no wonder it is a cluster location for sectors such as technology and life sciences. Outliers also exist, like the State College, Penn., metropolitan area, which is only the 263rd-largest in terms of population but ranks 13th in terms of these STEM graduates.

Of course, many factors go into the site selection decision as companies seek the best possible balance of talent, quality of life, economic vitality, cost of living, and myriad other considerations. Where in-demand skills are concerned, the right location may not be the most obvious, but companies making decisions can use data to ferret out the best fit for their businesses.

By Calandra Cruickshank, Founder and CEO, StateBook International® 1

https://www.cognizant.com/jobs-of-the-future-index

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LOCAT IONS

year economic growth are “fairly dependent upon manufacturing, which has shown fairly good growth in last few years,” says Chmura.

“Remember, after the last recession ended in

2019

June 2009, we went through a jobless recovery, and it wasn’t until early 2015 that we recovered all the jobs lost in that downturn.”

UPBEAT ECONOMIC PREDICTIONS Will the economy continue to expand? “We do not have a recession in our forecast any time soon,” says Chmura, who sees “more of the same” economic growth in the next year or two.

“In early 2019 some analysts were predicting a recession for 2020, but those concerns have now dropped off as the stock market has grown, and short-term interest rates were lowered by the Fed.” At some point “we’ll see a recession,” she predicts, but it’s not expected to happen until 2021 or 2022. “When it does come, many areas with a large manufacturing base will feel the brunt of that recession the most. But as long

Not surprisingly, most of the

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are “fairly dependent upon

Weekly news & updates

manufacturing,

twitter.com/ areadevelopment

which has shown

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fairly good

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growth in last

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few years,”says Dr. Christine Chmura.

fastfacility.com Building & site database

as businesses continue to grow and add jobs, we’ll only have good news for the future.”

1

https://www.bls.gov/opub/ted/2019/unemployment-rate-was3-point-6-percent-in-october-2019.htm?view_full https://tradingeconomics.com/united-states/wage-growth 3 https://edd.ca.gov/newsroom/unemployment-november-2019.htm 4 https://www.usatoday.com/story/money/2019/07/30/jobs-thesecities-adding-most-jobs-employment-growth/39806157/ 2

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CONNECTICUT Cheshire Economic Development Department 15 JSitko@CheshireCT.org www.CheshireCT.org FLORIDA Enterprise Florida tvanderhoof@EnterpriseFlorida.com www.floridathefutureishere.com Greater Fort Lauderdale Alliance info@gflalliance.org www.GFLAlliance.org

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IDAHO Emsi 1 www.EconomicModeling.com INDIANA Greater Columbus Indiana Economic Development Corporation 60 info@ColumbusIN.org www.ColumbusIN.org

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MARYLAND City of Bowie Economic Development 51 jhking@cityofbowie.org www.CityOfBowie.org/biz MISSISSIPPI Mississippi Development Authority tgiles@mississippi.org www.Mississippi.org

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TEXAS

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City of Henderson Economic Development 34 Derek.Armstrong@cityofhenderson.com www.CityofHenderson.com www.HendersonNow.com/wreb

Tomball Economic Development Corporation kviolette@tomballtxedc.org www.TomballTXedc.org

Nevada Energy www.NVEnergy.com

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

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NEW JERSEY City of Vineland Economic Development sforosisky@vinelandcity.org www.VinelandCity.org

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Quinte Economic Development Commission info@quintedevelopment.com chris@quintedevelopment.com www.QuinteDevelopment.com

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