What Are Their Clients' Site Selection Priorities?
The consultants were asked to rate the same site selection and quality-of-life factors as the Corporate Survey-takers as either "very important," "important," "minor consideration," or "of no importance." We once again added the "very important" and "important" ratings together and rounded to the nearest tenth of a percent in order to rank the factors in priority order (Chart Q).
This year the consultants ranked state and local incentives as the number-one priority of their clients, with 96.1 percent of the respondents rating this factor as either "very important" or "important (up from 90.9 percent last year, and compared to the 87.2 percent combined rating given this factor by the respondents to our 2008 Corporate Survey). The increased need to reduce costs in these tough economic times, as well as the fact that consultants consider incentives negotiation one of their primary responsibilities, is probably reflected by the heightened importance of state and local incentives.
In fact, more than half of the respondents to our 2008 Consultants Survey said they believe incentives have always been of great importance to their clients, and more than a third of the respondents felt incentives were more important now than in the past (Chart R). Nearly 60 percent of the responding consultants thought tax incentives, exemptions, and the like were more important (up from 39 percent last year); and nearly half said other financial incentives such as grants, bonds, and loans were paramount in their clients' site selection decisions (up from 37 percent in 2007) (Chart S).
More than a third of the respondents to our Consultants Survey also reported that more communities were instituting investment and/or job creation requirements as a condition of awarding incentives than had done so in the past (Chart T). In response to a related question, more than a third of the responding consultants said they found incentives closing funds lacking when performing location studies (Chart U).
It should also be noted that the tax exemptions factor received an 89.9 percent combined rating in importance from the consultants this year and was ranked fifth among the factors. The corporate tax rate factor was ranked seventh with an 86.8 percent combined rating. This factor showed the second-largest gain in importance (12.4 percentage points) among the site selection factors rated by the consultants.
Interestingly, although more than two-thirds of those responding to our Consultants Survey said tightening credit markets were affecting their clients' facility plans (Chart V), only 58.5 percent rated availability of long-term financing as "very important" or "important." However, this was an 8.5 percentage point increase over last year - the third-highest jump in importance among the site selection factors.
Highway accessibility, which was ranked as the number-one site selection factor by the respondents to our 2008 Corporate Survey, was ranked second in importance by the respondents to our Consultants Survey, with a 95.8 percent combined rating. A related factor, proximity to markets was ranked eighth with an 86.3 percent combined rating. The respondents to our Corporate Survey only ranked this factor 12th with a 78.7 percent combined rating. As previously noted, the responding consultants' priorities often diverge from those of the Corporate Survey respondents; remember that only about half of the respondents to our Corporate Survey reported they use consultants' services when site selecting.
The respondents to our Consultants Survey ranked availability of skilled labor as third in importance among the site selection factors, with a 94.9 percent combined rating, down from second place last year. However, this is higher than the sixth-place ranking given this factor by the respondents to our Corporate Survey. Consultants are keenly aware that a low-cost location won't spell success for a company if skilled labor is not available.