24th Annual Corporate Survey Results
After 2009's economic woes, businesses
look to balance their cost-related priorities
with their 2010 growth strategies.
Area Development Special Presentation (Dec/Jan 10)
(page 3 of 4)
Relocation plans are not much changed from last year: 20 percent of the 2009 Corporate Survey respondents plan to relocate a domestic facility within the new year or two (Figure 22).
Plans for expansion of existing facilities bear witness to the economic downturn as well. Sixty percent of the 2009 Corporate Survey respondents said they had no plans to expand existing facilities - up from 51 percent who made that statement in last year's survey (Figure 20). Just 27 percent all told had one- or two-year expansion plans, down from 38 percent last year. Of those with expansion plans, 84 percent said their expansions would create fewer than 100 jobs (Figure 21).
Relocation plans, on the other hand, are not much changed from last year: 20 percent of the 2009 Corporate Survey respondents plan to relocate a domestic facility within the new year or two (Figure 22). Of those with relocation plans, 58 percent cited a need to address operating/occupancy costs at their present location, and 22 percent said labor costs as well as the need for an "improved business climate" were among their reasons for planning a relocation (Figure 23).
Interestingly, plans to move operations either offshore or onshore seem to cancel each other out: just 3 percent of the 2009 Corporate Survey respondents said they expect to relocate a domestic facility offshore, with another 3 percent saying they expect to relocate a foreign facility back to the United States (Figure 24).
Now let's examine the site selection factors that determine how our readers make their location decisions.
Site Selection Priorities
Once again, we asked our survey-takers to rate the factors upon which they base their site and facility planning decisions as either "very important," "important," "minor consideration," or "of no importance." We then added the "very important" and "important" ratings together in order to rank the factors in order of priority. These ratings and rankings are shown in Figures 25 and 26.
The two factors - labor costs and highway accessibility - historically ranked on top remain in that position. This year, labor costs moved into first position from second last year, considered "very important" or "important" by 96.7 percent of the 2009 Corporate Survey respondents. In fact, labor costs showed the second-largest gain in importance among the site selection factors, increasing by 5.3 percentage points. Costs have become paramount during this recessionary period.
Nonetheless, highway accessibility takes the number-two spot, with 92.9 percent of the respondents to our 24th Annual Corporate Survey ranking this factor as either "very important" or "important." If a site does not have good infrastructure access for suppliers, customers, and employees, it will be eliminated from consideration.
Tax-related factors are also a top concern in the minds of our 2009 Corporate Survey respondents. Tax exemptions ranked third, considered "very important" or "important" by 88.4 percent of the 2009 Corporate Survey respondents; corporate tax rate itself placed fifth, with an 87 percent importance rating; and state and local incentives was ranked eighth, with an 84.9 percent importance rating. All of these factors remained in the top-10 rankings from last year.
When asked separately about the types of incentives they considered most important, half of the survey respondents cited tax incentives (Figure 27). And more than a third said incentives for land, utility-rate subsidies, infrastructure support, and the like were most important. However, only slightly more than half of the respondents to our 24th Annual Corporate Survey said they had actually received incentives in the past (Figure 28). We also asked our survey-takers if funding from the U.S. government's Stimulus Plan was affecting their site and facility plans, and nearly all (96 percent) said no (Figure 29).
Another cost-related factor - energy availability and costs - was ranked fourth this year, considered "very important" or "important" by 88 percent of the Corporate Survey respondents. In fact, when asked whether energy costs were affecting their facility plans, two-thirds of the respondents said they were affecting facility operations and/or supply/distribution network decisions (Figure 30).
Another energy-related question posed to our survey-takers was about sustainable development. More than 70 percent of the respondents said that sustainable development was more important now than in the past (Figure 31), and many of the respondents said they were taking steps to reduce their carbon footprint (Figure 32). In fact, the same percentage of respondents who have a heightened awareness of sustainability are making energy-saving modifications to their facilities (72 percent), and more than half the respondents are even recycling or re-using their facility's waste products. However, 68 percent of the respondents said that, unfortunately, communities were not offering specific incentives for "green" initiatives (Figure 33). Interestingly, though, 73 percent of the Corporate Survey respondents said pending cap-and-trade legislation was having no effect on their facility plans (Figure 34).
Availability of skilled labor is always high on the list of our survey respondents' site selection criteria and this year was no exception. This factor retained its sixth place ranking from 2008, receiving an 86.9 percent rating in importance from the 2009 Corporate Survey respondents.
Ranking seventh is another cost-related factor - occupancy or construction costs - although this factor actually fell from third position in 2008, with a 90.4 percent importance rating, to seventh place for 2009, with an 86.7 percent rating in importance. Stalled construction projects across the nation and the world have pushed construction and materials costs down, and this may account for the drop in this factor's ranking.
The site selection factor showing the greatest change in rating (+27.7 percent) and ranking overall is availability of advanced ICT services. This factor jumped from 21st place in 2008 with a 55.5 percent importance rating to ninth place this year, with 83.2 percent of the 2009 Corporate Survey respondents rating this factor as "very important" or "important." Last year, I described the low rating given this factor as an anomaly caused by the description of advanced ICT services as "T1, T3, or OC" - esoteric terms. In 2007 this factor was ranked 12th with an 82.2 percent importance rating; the 2009 rating returns this factor to its rightful place among the site selection criteria.
Rounding out the top-10 site selection factors is one that was just added to the list this year - inbound/outbound-shipping costs. Some 81.7 percent of the respondents to our 24th Annual Corporate Survey gave this factor a "very important" or "important" rating to rank it 10th among the factors. It comes as no surprise during this recessionary economic period that seven of the top-10 factors are cost-related.
The site selection factor showing the second-largest change (-7.4 percent) is availability of unskilled labor, which was ranked 22nd this year, only considered "very important" or "important" by 55.5 percent of the survey respondents; last year this factor was ranked 18th with a 62.9 percent rating in importance. With unemployment being at its highest level in decades, there's no shortage of unskilled labor to fill the number of dwindling positions actually available, and this situation is probably responsible for our respondents' decreased concern about this factor.