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 6 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.
Interestingly, about two thirds of the respondents are looking for listings of available sites and buildings online, and more than half are seeking location-specific information, names of contacts at economic development agencies, and just general industry news (Slideshow, Figure 39). However, less than 30 percent of the respondents use the Internet to obtain this type of information on a daily or weekly basis (Slideshow, Figure 40).
This makes sense considering the fact that 68 percent of the Corporate Survey respondents say they start the information-gathering process one to two-plus years prior to making a location decision, and 40 percent of the respondents claim they only contact the locations of interest six months or more after initiating their search. Nearly all of the respondents (92 percent) put just one to five locations on their "short list," with 86 percent actually visiting between one and five of the finalist locations (Slideshow, Figures 41-44).
On a final note, only half of the respondents to our 2010 Corporate Survey use outside consultants when site selecting (Slideshow, Figure 45). The majority of those using consultants employ them to perform the real estate transaction (70 percent), conduct location studies/comparative analyses (64 percent), and engage in incentives comparisons and negotiations (Slideshow, Figure 46). Following this report are the results and analysis of our 2010 Consultants Survey. Since only half of our corporate respondents say they use consultants in the site selection process, we would expect the results of our Consultants Survey to differ somewhat from those of our 2010 Corporate Survey.
The results of our 2010 Corporate Survey indicate a more positive investment environment overall - plans for new facilities and facility expansions are up over last year. Recent economic reports also bear out our survey respondents' optimism. The ISM's index of manufacturing activity continued to rise in January 2011 for the 17th straight month, reaching 57 (50+ indicates growth).
"The ISM report shows that manufacturing activity is maintaining relatively strong growth momentum that is allowing the industry to recover from the devastating recession," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. "The Manufacturers Alliance/MAPI remains optimistic about the continuation of the industrial recovery and predicts that manufacturing production will increase 4 percent in 2011."
Additionally, with Congress' passage of the tax-cut bill in mid-December 2010 slashing wage earners' Social Security taxes and putting more money in their pockets, expect consumer spending to continue to rise.
The tax-cut bill is also expected to help businesses, large and small, to expand and hire. It gives businesses an incentive to invest in new equipment this year by allowing them to expense 100 percent of their capital expenditures in 2011. The bill also renews various tax breaks for specific industries, including renewable energy.
About 8.5 million jobs were lost in 2008 and 2009, and only one million have been added back since the recovery began in June 2009. As the economy grows and orders increase, employers will most certainly begin to hire and put a further dent in unemployment numbers.
As we were analyzing our 2010 Corporate Survey results at year's end, the Federal Reserve predicted the U.S. economy would expand by 3-3.6 percent in 2011. If this holds true, next year's results should indicate even greater facility location and expansion activity, as well as more job creation. In addition, there may well be a shift in site selection priorities to reflect better times ahead.