25th Annual Corporate Survey
The economy's gradual recovery during 2010 has resulted in increased business optimism, a rise in new facility plans, and some changes in site selection priorities.
Geraldine Gambale, Editor, Area Development Magazine (Winter 2011)
(page 2 of 6)
Businesses continued to respond to the recession's effects by mostly opting to maintain their facility portfolios. See the slideshow for all charts.
The sluggish pace of economic recovery is reflected by the responses of this year's survey-takers. Let's now examine these respondents' plans for new and expanded facilities to see if they also reflect their longer-range outlook for economic improvement.
New and Expanded Facility
& Relocation Plans
Last year, 54 percent of the Corporate Survey respondents had no new facility plans; this year, that number is down to 43 percent - a significant improvement. Thirty-eight percent of the 2010 Corporate Survey respondents have one- to two-year new facility plans, with another 18 percent planning for new facilities over a longer time frame. In 2009, 34 percent of the Corporate Survey respondents had one- to two-year new facility plans and just 12 percent were planning for new facilities over the three- to four-year time frame (Slideshow, Figure 11).
Of those with plans, half only expect to open one new facility; a fifth have plans for two; and 15 percent say they will open five or more new facilities (Slideshow, Figure 12).
The 2010 Corporate Survey respondents say the Midwest region (Illinois, Indiana, Michigan, Ohio, and Wisconsin), which had seen a decline in new facilities activity over the last several years, will garner the greatest percentage of their new domestic facilities (14 percent). This region is closely followed by the Middle Atlantic (Delaware, Maryland, New Jersey, New York, and Pennsylvania) and South Atlantic (North Carolina, South Carolina, Virginia, and West Virginia) regions, each expected to see 13 percent of the new domestic facilities. The Mid-South (Arkansas, Kentucky, Missouri, and Tennessee), the Plains (Iowa, Kansas, Minnesota, Nebraska and the Dakotas), the Southwest (Arizona, New Mexico, Oklahoma, and Texas), and the West (California, Nevada, Oregon, and Washington) tied for 10 percent of the new domestic facilities apiece (Slideshow, Figure 13). The Plains, in fact, saw the greatest increase in interest: in 2009, only 4 percent of the projected new facilities were planned for that region.
About a third of the new facilities planned by the 2010 Corporate Survey respondents will house manufacturing operations and another 30 percent will be warehouse/distribution centers (Slideshow, Figure 14). These results aren't surprising, considering the respondent population, i.e., two-thirds are with manufacturing firms. Unfortunately, nearly half of these new facilities will create fewer than 20 new jobs. All told, 77 percent will create fewer than 100 jobs (Figure 15). Nonetheless, this is an improvement over last year, when more than 80 percent of the projected facilities were expected to create fewer than 100 jobs.
Once again, the majority of the 2010 Corporate Survey respondents' new foreign facilities are slated for Asia - 48 percent this year. Of these, about a third will go to China and nearly 30 percent to India. Overall plans for Asia are actually up from last year, when the 2009 respondents reported that 39 percent of their new facilities were planned for Asia. Nonetheless, half of those were planned for China and only 20 percent for India. It seems that this year, activity is moving to other Asian locales, perhaps in response to rising Chinese labor costs (Slideshow, Figures 16 and 16a).
Coming in at a distant second place, South America will garner 11 percent of the planned new facilities - up from just 6 percent reported in 2009.
And our neighbor to the north, Canada, is expected to garner 9 percent of our 2010 Corporate Survey respondents' new facilities - up from just 4 percent reported by the 2009 Corporate Survey respondents. A reduction in Canada's corporate tax rate to 16.5 percent on January 1 could account for this surge in interest.
Our neighbor to the south, Mexico, did not fare as well. Only 6 percent of the planned new foreign facilities are projected to go to Mexico - down from 14 percent and the second-place choice last year (along with Western Europe). Apparently, recent spates of violence in certain areas of Mexico have had an effect on our 2010 Corporate Survey respondents' new facility plans.