23rd Annual Corporate Survey Analysis by Gary Yates
Gary Yates, Director of Site Selection, Jones Lang LaSalle (Dec/Jan 09)
When asked about how the downturn in the U.S. economy (up until late summer 2008) had affected their facility plans, just 24 percent of the respondents said their new facility plans had been put on hold, while 22 percent said they were still planning to open new facilities.
The question everyone is asking: "How will the economic crisis affect business expansions?" As the father of three children, I'm always hearing the good news/bad news jokes. You know the type.the good news is you don't have to clean your room; the bad news is your uncle rented the room and you're sleeping on the sofa.
Well, I've got good news and I've got bad news. The bad news is that planned new facilities and planned expansions are down for this year. The good news is that both planned new facilities and planned expansions are reportedly higher for next year. While many of the respondents say the economy has affected growth plans, 62 percent have new facilities planned in one to four years (and that's up from 51 percent in 2007, 54 percent in 2006, and 55 percent in 2005). In the world of economic development and site selection consulting, this translates to a lot of due diligence work now.but with delayed gratification.
While delayed growth appears optimistic, the volatility of the marketplace could have a greater impact than respondents indicated. Only 32 percent of respondents said the tightening credit market would affect their facility plans. However, recent events - such as the Big Three automakers asking Congress for $34 billion, and the inability of many businesses to get loans just to cover the cash flow cycle - will definitely impact optimism. Look for better flowing credit as the leading indicator of facility expansions and new facility developments.
It is clear that cost savings will be driving all near-future site selections. Four of the top-five site selection factors are directly related to cost. The number-one factor, highway accessibility, could arguably be a cost component. Tax exemptions have shot from tenth place to fourth, despite 50 percent of respondents saying tax incentives have fallen short. This is an opportunity for communities.in this time of high unemployment, job creation opportunities should be viewed as a win for the community, and the tax breaks to the new companies are a win for them. In 2009, expect many companies to be shopping for reduced cost locations in preparation for an optimistic economic market.