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 3 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.
Only 8 percent of the 2010 corporate respondents' planned new foreign facilities are slated for Western Europe, a traditional favorite, also down from 14 percent last year. The financial crisis in Europe is most likely responsible for this decline in interest. However, projected new facility activity for Eastern Europe, as reported by the 2010 Corporate Survey respondents, jumps to 12 percent - up from 8 percent projected by the 2009 Corporate Survey respondents.
As with the planned new domestic facilities, about a third of the new foreign facilities planned by our 2010 corporate respondents will house manufacturing operations, and a quarter will be warehouse/distribution centers (Slideshow, Figure 18).
It's not surprising that the new foreign facilities will create more jobs than the new domestic facilities, i.e., manufacturing jobs are still being outsourced. Although more than 60 percent of the new foreign facilities will create fewer than 100 jobs, a quarter will be responsible for 100-499 new jobs, and 12 percent for the creation of between 500 and 1,000+ jobs - double the percentage represented by the new domestic facilities (Slideshow, Figure 19).
An improving economy is also reflected in our 2010 Corporate Survey respondents' facility expansion plans. Forty-one percent of the 2010 respondents say they will expand facilities over the next two years (Slideshow, Figure 20), as compared with only 27 percent who reported one- or two-year expansion plans in 2009. Nearly a quarter of the 2010 respondents claim these expansions will create 100 to 1,000+ jobs (Slideshow, Figure 21), as compared with only 15 percent of 2009's Corporate Survey respondents who projected such job creation to result from expansions.
Relocation activity is to remain consistent on a year-over-year basis: 21 percent of the 2010 Corporate Survey respondents expect to relocate a domestic facility in a year or two, similar to the results reported last year (Slideshow, Figure 22). Of those with plans, abut 40 percent say the relocation will result from a need to be in closer proximity to suppliers and/or markets served, approximately a fifth cite the need for an improved business climate, and 16 percent claim their relocation is based on lowering operating/occupancy costs (Slideshow, Figure 23).
Finally, despite sporadic reports of U.S. firms moving foreign operations back to the states, no significant onshoring or offshoring activity is reported by the 2010 Corporate Survey respondents. Just a mere 4 percent expect to relocate a domestic facility to an offshore location, and nearly all of the respondents (98 percent) with foreign facilities will not be relocating any of them back to the United States (Slideshow, Figure 24).
The Site Selection Factors
In order to evaluate the site selection factors on which our readers base their location and expansion decisions, we asked our survey-takers to rate these factors as either "very important," "important," "minor consideration," or "of no importance." As in years past, we then added the "very important" and "important" ratings together in order to rank the factors in order of importance. The factor ratings and rankings are shown in figures 25 and 26. This year, we also present a 25-year comparison of the ratings of the survey factors, which is shown in Figure 26a.
Over the course of our survey's 25-year history, highway accessibility and labor costs have invariably been the top-two ranked factors and this year is no different than past years. Highway accessibility is the number-one factor, considered "very important" or "important" by 97.3 percent of the 2010 Corporate Survey respondents. In other words, sites lacking good infrastructure access are automatically eliminated from consideration.
Labor costs follows in second place with a 91 percent importance rating. In general, labor costs are a company's largest operating expense. Nevertheless, this factor's importance rating actually declined by 5.7 percentage points from 2009. Persistently high unemployment rates may have allowed companies to keep wages in check, resulting in the decline in this factor's importance rating.