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 4 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.
As in the past, three related tax factors made the 2010 Corporate Survey respondents' "top 10" - tax exemptions (ranking third with a 90.9 percent importance rating), state and local incentives (ranking fifth at 89.3 percent), and corporate tax rate (ranking sixth with an 86.3 percent importance rating). State and local incentives actually jumped three spots in the rankings - from eighth place in 2009 to the fifth spot this year, and its importance rating increased 4.4 percentage points. The onerous tax burden placed on U.S. companies always results in the tax factors being deemed a primary concern in the location and expansion decision process. If we look at the 25-year perspective, it appears these factors are receiving even greater scrutiny today than they did years ago.
Separately, we asked our survey-takers whether their firms had considered applying for U.S. government stimulus funds. Nearly four-fifths say they have not (Figure 30). However, more than 60 percent of the Corporate Survey respondents say their companies have received some sort of incentives, with the majority of respondents (58 percent) considering tax incentives, including credits and exemptions, the most important type (Slideshow, figures 31 and 32).
Occupancy and construction costs is the fourth-place factor, jumping from seventh place last year and receiving a combined 89.8 percent importance rating. Although overall construction costs did not increase in 2010, there was a mid-year spike in the cost of construction materials (lumber and steel, in particular), which may account for this factor's combined "very important" or "important" rating increasing 3.1 percentage points.
Availability of skilled labor is always of great importance to our corporate executive readers, and this year is no exception. Our 2010 Corporate Survey respondents ranked this factor seventh with a combined 85.9 percent importance rating. A look back reveals the consistency of this factor's importance over our survey's 25-year track.
Interestingly, availability of unskilled labor, which was ranked in the 23rd spot for 2010, showed the second-largest drop in importance among all the site selection factors - it was rated 45.4 percent in importance, a drop of 10.1 percentage points from 2009. Again, high unemployment rates have resulted in an expanded labor pool - many unskilled and some actually overqualified or skilled workers - from which companies can draw.
In the number-eight spot is inbound/outbound shipping costs, with an 84 percent importance rating. Rising fuel costs come into play here and influence distance from suppliers and markets served.
And energy availability and costs is ranked ninth, with 82.1 percent of the 2010 Corporate Survey respondents rating this factor as "very important" or "important." Surprisingly, this factor declined in importance by 5.9 percentage points in 2010, from an 88 percent importance rating and a fourth place ranking in 2009. This might be a reflection of the types of companies responding, i.e., perhaps not as energy-intensive. In fact, when asked about the impact of rising energy costs on facility plans, oddly enough, nearly half of the survey respondents say there is no impact (Slideshow, Figure 27).
Nonetheless, the factor showing the largest increase in its importance rating is railroad service. Although this factor still falls near the bottom of the list (ranked 25th), its importance rating increased 8.6 percentage points over last year, and it is now considered "very important" or "important" by more than a third of the survey respondents. Rising fuel costs may have also resulted in a new respect for railroad service.