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10th Annual Survey of Site Selection Consultants: Economy on a More Continuous Growth Track

As in years past, Area Development asked the consultants who work with corporate clients to tell us about their clients’ facilities plans and priorities in making a location decision. Fewer than half (43 percent) of those responding to our 2013 Corporate Survey say they use the services of consultants so let’s find out which companies the consultants are serving and how the Consultants Survey responses align with the Corporate Survey responses.

Q1 2014
(page 2 of 2)
Factors Influencing Clients’ Location Decisions
We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V. We then added the “very important” and “important” ratings in order to rank the factors in order of overall importance, as shown in Chart W.

Interestingly, the same two factors are ranked 1st and 2nd by the Corporate Survey and the Consultants Survey respondents - availability of skilled labor and highway accessibility. Availability of skilled labor is ranked as the most important site selection factor by the consultants with a combined 98.3 percent importance rating. This has become the primary concern of the consultants’ clients.

And more than three quarters of the responding consultants also say higher unemployment rates are not making it easier for their clients to find the labor they need, with more than two thirds saying the unemployed are primarily lacking advanced skills (Chart X). Additionally, because of this, three quarters of the consultants also say their clients have become very or somewhat dependent on contract workers (Chart Y), although 81 percent claim this contingent labor force comprises less than 25 percent of their clients’ work forces at any given time (Chart Z).
Slideshow10th Annual Survey of Site Selection Consultants Results Chart F
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  • Chart A: Percentage of respondents who have worked on a location or expansion project in the following industries Chart A: Percentage of respondents who have worked on a location or expansion project in the following industries
  • Chart AA: High energy costs impacting clients’ facility plans Chart AA: High energy costs impacting clients’ facility plans
  • Chart B: Percentage of respondents providing the following services to their clients Chart B: Percentage of respondents providing the following services to their clients
  • Chart BB: New unconventional sources of energy (e.g., through fracking) will drive down your clients’ energy costs Chart BB: New unconventional sources of energy (e.g., through fracking) will drive down your clients’ energy costs
  • Chart C: In terms of their employment numbers, client companies utilizing consultants' services are Chart C: In terms of their employment numbers, client companies utilizing consultants' services are
  • Chart CC: Sustainable development is more important to clients now than in the past Chart CC: Sustainable development is more important to clients now than in the past
  • Chart D: Departments of clients’ organizations significantly involved in the site selection process/project Chart D: Departments of clients’ organizations significantly involved in the site selection process/project
  • Chart DD: Relative importance of incentives to clients when making location decisions Chart DD: Relative importance of incentives to clients when making location decisions
  • Chart E: Most of the clients who ask consultant to perform a location search have Chart E: Most of the clients who ask consultant to perform a location search have
  • Chart EE: Type(s) of incentives clients consider most important when making a location decision Chart EE: Type(s) of incentives clients consider most important when making a location decision
  • Chart F: Effects of the slow economic recovery on clients’ facility plans Chart F: Effects of the slow economic recovery on clients’ facility plans
  • Chart FF: Clients have had to repay incentives monies because investment and/or job creation obligations were not met Chart FF: Clients have had to repay incentives monies because investment and/or job creation obligations were not met
  • Chart G: Expect the economy to achieve a more continuous growth track Chart G: Expect the economy to achieve a more continuous growth track
  • Chart GG: Communities are offering specific incentives for “green” initiatives? Chart GG: Communities are offering specific incentives for “green” initiatives?
  • Chart H: Most of the clients that expect to open new facilities plan to do so within Chart H: Most of the clients that expect to open new facilities plan to do so within
  • Chart HH: Clients have encountered “green performance” requirements as a stipulation for receiving incentives Chart HH: Clients have encountered “green performance” requirements as a stipulation for receiving incentives
  • Chart I: Number of new domestic facilities the average client plans to open Chart I: Number of new domestic facilities the average client plans to open
  • Chart II: Importance of the existence of an available building in clients’ site searches Chart II: Importance of the existence of an available building in clients’ site searches
  • Chart J:Domestic location projects consultants are working on are slated for the following regions (as a percentage of total new domestic projects) Chart J:Domestic location projects consultants are working on are slated for the following regions (as a percentage of total new domestic projects)
  • Chart JJ: Importance of the existence of a shovel-ready/pre-certified site in clients’ site searches: Chart JJ: Importance of the existence of a shovel-ready/pre-certified site in clients’ site searches:
  • Chart K: Types of new domestic facilities clients are opening (as a percentage of total new domestic projects) Chart K: Types of new domestic facilities clients are opening (as a percentage of total new domestic projects)
  • Chart KK: When site selecting, clients consider whether there are businesses performing similar activities to theirs in the area of search Chart KK: When site selecting, clients consider whether there are businesses performing similar activities to theirs in the area of search
  • Chart L: Number of new foreign facilities the average client plans to open Chart L: Number of new foreign facilities the average client plans to open
  • Chart LL: Clients consider weather-related factors in the location decision Chart LL: Clients consider weather-related factors in the location decision
  • Chart M: Foreign location projects consultants are working on are slated for the following regions (as a percentage of total new foreign projects) Chart M: Foreign location projects consultants are working on are slated for the following regions (as a percentage of total new foreign projects)
  • Chart N: New facilities slated for Asia will be located in the following countries (as a percentage of total planned Asian projects) Chart N: New facilities slated for Asia will be located in the following countries (as a percentage of total planned Asian projects)
  • Chart O: Types of new foreign facilities clients are opening (as a percentage of total new foreign projects) Chart O: Types of new foreign facilities clients are opening (as a percentage of total new foreign projects)
  • Chart P: Most clients that expect to expand facilities plan to do so within Chart P: Most clients that expect to expand facilities plan to do so within
  • Chart Q: Most clients that expect to relocate facilities plan to do so within Chart Q: Most clients that expect to expand facilities plan to do so within
  • Chart R: Of those clients planning a relocation, the primary reasons for doing so Chart R: Of those clients planning a relocation, the primary reasons for doing so
  • Chart S: Have seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones over the last year Chart S: Have seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones over the last year
  • Chart T: Clients have relocated a facility back to the U.S. from a foreign location Chart T: Clients have relocated a facility back to the U.S. from a foreign location
  • Chart U: Issues preventing clients from spending more of their earnings on investment in U.S. facilities Chart U: Issues preventing clients from spending more of their earnings on investment in U.S. facilities
  • Chart V Chart V: We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V.
  • Chart V (continued) Chart V (continued): We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V.
  • Chart W We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V. We then added the “very important” and “important” ratings in order to rank the factors in order of overall importance, as shown in Chart W.
  • Chart W (continued) Chart W (continued): We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V. We then added the “very important” and “important” ratings in order to rank the factors in order of overall importance, as shown in Chart W.
  • Chart X: Higher unemployment rates making it easier for clients to find the labor they need Chart X: Higher unemployment rates making it easier for clients to find the labor they need
  • Chart Y: Clients’ dependence on contract workers or contingent labor Chart Y: Clients’ dependence on contract workers or contingent labor
  • Chart Z: Percentage of contract labor clients employ at any given time Chart Z: Percentage of contract labor clients employ at any given time
The consultants’ 2nd ranked factor — highway accessibility — is considered “very important” or “important” by 97.4 percent of the respondents. Again, the respondents to both surveys agree that this factor is a priority when deciding where to site or expand a facility in order to get supplies in, products out, and employees and visitors to the workplace. In fact, 92.9 percent of the respondents to the Consultants Survey consider proximity to major markets as “very important” or “important,” placing this factor in a tie for 5th.

The consultants generally rank state and local incentives as more important than do the Corporate Survey respondents, and this year is no exception: 93.8 percent of the respondents to our Consultants Survey rate this factor as “very important” or “important,” placing it 3rd in the rankings. This comes as no surprise since about 70 percent of the respondents say they provide incentives negotiation and management services to their clients. A related factor, tax exemptions placed 7th with a 91.9 percent combined importance rating. In a related question about types of incentives, nearly 70 percent of the responding consultants say cash grants and tax incentives, including credits and exemptions, are the two most important types (Chart EE).

The factor showing the largest jump in the consultants’ rankings — eight positions to 4th place — is available land, which also has the largest percentage increase in the Corporate Survey. The responding consultants give available land a 93 percent combined importance rating. This appears to be a determining factor when consultants assist with build-to-suit projects — especially those requiring large parcels of land such as new state-of-the art distribution centers to support the growing e-commerce sector. Moreover, 78 percent of those responding to our Consultants Survey say the existence of a shovel-ready or pre-certified site is very or somewhat important in their clients’ site searches (Chart JJ).
Chart JJ: Importance of the existence of a shovel-ready/pre-certified site in clients’ site searches
Chart JJ: Importance of the existence of a shovel-ready/pre-certified site in clients’ site searches
Although labor costs are bumped down and tied for 5th position in the Consultants Survey rankings, they are still considered “very important” or “important” by 92.9 percent of the respondents. It’s believed that labor costs are lower in a right-to-work state so it stands to reason that this factor shows the second-highest jump in the rankings — up from 20th position last year to 13th in this year’s Consultants Survey. It also has the greatest overall increase in importance among the site selection factors — up 10.1 percentage points and now considered “very important” or “important” by 86 percent of the responding consultants.

In 2011, Mark Sweeney, Principal of McCallum Sweeney Consulting, provided some insight into the role of a state’s right-to-work status in the site selection process, in testimony to the Missouri State Senate. “Companies believe this gives them greater work force flexibility, thereby allowing them to compete more effectively and in a more timely manner," Sweeney explained. “Manufacturing clients express an interest in considering [locations] only in right-to-work states,” Sweeney added, although his firm recommends that right-to-work state be just “another scoring criteria” and not a “pass-fail” decision.

The respondents to our Consultants Survey rank energy availability and costs 8th among the site selection factors, with a combined 88.6 percent importance rating. A third of the respondents say energy costs are primarily affecting their clients facility operations and a fifth claim they are primarily affecting their clients’ supply/distribution network decisions (Chart AA). Nevertheless, more than 60 percent say they believe new unconventional sources of energy will drive down their clients’ energy costs, with more than half also believing this will affect their clients’ location decisions (Chart BB).

Three quarters of the respondents to our Consultants Survey also say sustainable development is more important to their clients now than in the past. In response to this, more than 80 percent claim their clients are making energy-saving modifications to their facilities (Chart CC). A like percentage of respondents to the Corporate Survey made this claim as well. And half the responding consultants say they are seeing communities offering incentives specifically for “green” initiatives (Chart GG).
Chart BB: New unconventional sources of energy (e.g., through fracking) will drive down your clients’ energy costs
Chart BB: New unconventional sources of energy (e.g., through fracking) will drive down your clients’ energy costs
And while only half of the respondents to our Corporate Survey claim to consider weather-related factors in their location decisions, three quarters of the respondents to our Consultants Survey say their clients do consider these factors, with more than 60 percent saying weather-related factors are very or somewhat important (Chart LL). It’s important to note that 18 of the 26 site selection factors are rated higher in importance by the consultants than any of the nine quality-of-life factors. That being said, when ranking the quality-of-life factors, the consultants place colleges and universities in area in 1st place — with an 82.5 percent combined importance rating. With availability of skilled labor being the primary site selection concern, it follows there is a need for the work force to acquire new and advanced skills at institutions of higher learning.

Low crime rate, which is always ranked 1st by our Corporate Survey respondents, is ranked 2nd in the Consultants Survey with 78 percent of the respondents considering this factor “very important” or “important.”

The quality-of-life factor showing the largest increase in importance (21.6 percentage points) is housing costs. Housing availability also shows the second-largest increase in its importance rating — up 10.9 percentage points to achieve a 68.4 percent rating. These results may seem surprising considering the precipitous housing price declines and market glut of the recent past. However, the increased importance given to these two quality-of-life factors may be in anticipation of a turnaround in the housing situation, with lower inventories and price increases in many markets.
Chart Z: Percentage of contract labor clients employ at any given time
Chart Z: Percentage of contract labor clients employ at any given time
Consultants’ Information Sources and Project Timelines
Just like the Corporate Survey respondents, the majority of Consultants Survey respondents (78 percent) use site magazines like Area Development for information when helping their clients make location and expansion decisions. Three quarters of the consultants also utilize economic data aggregators, while two thirds also depend on financial publications.

More than half of the responding consultants claim to maintain their own site selection database. Nearly all of them (93 percent) have searched the Internet for site and facility planning information (only about 60 percent of those responding to the Corporate Survey claim to do that). When searching online, 90 percent of the consultants are looking for data on specific locations and contact information for economic development agencies. About 70 percent are also looking for listings of available sites and buildings on sites like FastFacility, and for industry related news on websites like AreaDevelopment.com.

More than 70 percent of those responding to our Consultants Survey say their clients put between one and five locations on their “short list” when seeking a new site; however, a quarter of the respondents say their clients have five to 10 locations on that list. About 60 percent say their clients visit up to five locations before making the final decision, with around the same percentage claiming a location decision is generally reached about six months to a year after a client engages their services.
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