6th Annual Consultants Survey Results
Area Development Special Presentation (Dec/Jan 10)
(page 2 of 3)
Only 26 percent of the responding consultants said their clients plan to open more than one new facility — down from 36 percent last year (Chart H).
Surprisingly, just 26 percent of the projects the responding consultants' clients have slated for offshore locations will go to Asia (down from 36 percent reported by the consultants last year, and compared to 39 percent of the projects slated for Asia by the 2009 Corporate Survey respondents). However, the consultants' clients have a heightened interest in Canada (up from 10 percent of the projects reported by the consultants in 2008 to 16 percent of the planned new foreign facilities this year). This is also a much better showing than the mere 4 percent of the projects the 2009 Corporate Survey respondents have slated for Canada. And Western Europe - a favorite among the 2009 Corporate Survey respondents, who said they were planning 14 percent of their new foreign facilities for this region of the world - will receive only 9 percent of the responding consultants' clients' new facilities (Chart K).
The consultants' clients show more diversity in their plans for Asia than do the respondents to our Corporate Survey. Of those facilities that the consultants reported are planned for Asia, just 34 percent will go to China and 28 percent to India (Chart L), with the rest slated for other Asian nations. And nearly a third of the planned foreign facilities will be manufacturing operations, with about a fifth expected to be used for distribution/warehouse purposes (Chart M).
Of note, the respondents to our 2009 Consultants Survey have seen a sizable amount of offshoring and onshoring activity. More than a quarter of the responding consultants said they have seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones; a similar percentage said they have seen clients relocating offshore facilities back to the United States (Chart N), creating a sort of "wash" effect.
Many of the responding consultants cite problems encountered by their clients operating offshore, including trouble finding qualified and/or English-speaking labor (cited by 22 percent of the respondents); 20 percent said there were product quality issues - as the latest hazards of China-made products bear out; and 28 percent said the cost of transporting supplies and/or finished products was burdensome to their clients (Chart O).
Site Selection Priorities
We asked the consultants to rate the same site selection and quality-of-life factors rated by the corporate executives as either "very important," "important," "minor consideration," or "of no importance." We then added together the "very important" and "important" ratings to rank the factors in order of priority, as shown in Chart P.
This year, our responding consultants are of the same mindset as our responding corporate executives when it comes to the site selection factors. The respondents to our 2009 Consultants Survey have ranked highway accessibility first (98.9 percent of the respondents gave it a "very important" or "important" rating) and labor costs in second position, with a 94.3 percent rating in importance. Last year, the labor costs factor was only ranked 10th by the consultants with an 82.8 percent rating.
With costs being paramount in everyone's minds, the respondents to our 6th Annual Consultants Survey gave occupancy and construction costs a 92.9 percent importance rating, ranking this factor third - up from sixth position in 2008 with an 87.1 importance rating.
Availability of skilled labor, which is always a great concern, was ranked fourth by the responding consultants, with 92.2 percent importance rating. And it may be that this year's responding consultants are working on build-to-suit projects for their clients because 90.8 percent of them rated availability of land as "very important" or "important," ranking this factor sixth.
The "tax" factors - state and local incentives, tax exemptions, and corporate tax rate - ranked fifth, eighth, and tenth, with respective importance ratings of 92 percent, 89.6 percent, and 87.4 percent.
When asked separately about incentives, 44 percent of the respondents to our 2009 Consultants Survey said incentives are now more important than in the past (Chart Q). Slightly less than half said tax incentives and other financial incentives such as grants and bonds are considered most important by their clients (Chart R). And a quarter of the respondents said that more communities than in the past are instituting criteria that must be met in order for companies to receive the promised incentives (Chart S).
Additionally, 41 percent of the responding consultants said they have found incentives closing funds to be the most deficient among the factors recently evaluated for location or expansion projects (Chart T), with 78 percent of the respondents saying that funds from the federal government's Stimulus Plan were having no effect on their clients' facility plans (Chart U).
The responding consultants ranked energy availability and costs seventh with an 89.7 percent rating in importance. In response to a separate question, 42 percent of the respondents said energy costs were affecting their clients' facility operations, and a quarter said they were affecting their clients' supply/distribution network decisions (Chart V).
A related factor - inbound/outbound shipping costs - is new to the list this year. The responding consultants only ranked this factor 20th with a 67.5 percent importance rating. It should be noted that the respondents to our Corporate Survey ranked inbound/outbound-shipping costs tenth, with 81.7 rating this factor as "very important" or "important."
In a separate energy-related question, the consultants were asked about the implications of pending cap-and-trade legislation on their clients' facility plans. Nearly half said the legislation was having an effect, with 23 percent of the respondents noting it was causing their clients to delay scheduled investments, and nearly a fifth saying the proposed legislation was making their clients question the attractiveness of the United States for investment (Chart W). Interestingly, more than 70 percent of the respondents to the Corporate Survey said this legislation was having no effect on their facility plans.
In another energy-related question, the 2009 Consultants Survey-takers were also asked whether sustainable development was more important to their clients now than in the past, and 68 percent said yes. More than 60 percent of the respondents said their clients were undertaking energy-saving modifications to their existing facilities to reduce their companies' carbon footprint, and more than 40 percent said their clients were seeking LEED certification (Chart X). More than half of the responding consultants also said the communities they were working with were, in fact, offering specific incentives for "green" initiatives (Chart Y).