4th Annual Consultants Survey

Area Development's editors also polled the consultants who work with our corporate executive readers - as well as with economic development agencies that are trying to lure these readers to locate facilities in their areas. We asked the consultants about the types of clients they have worked with, the site selection priorities of these clients, and their plans for the next several years in terms of new and expanded facilities. Here's what they had to say:

Consultants' Clients
The consultants responding to our 2007 survey have worked on projects in a broad range of industries (Slideshow, Chart A). A third have worked with food and beverage companies, and about a fifth with wood products/furniture manufacturers and with chemicals, plastics and rubber, and electrical equipment/components firms, as well as with IT companies. About a quarter have also worked with fabricated metal producers. Yet, a much larger percentage have worked on site projects in the warehouse and distribution sector (50 percent) as well as in the financial services sector (39 percent). Interestingly, these last two groups - along with IT firms - were not well represented among the respondents to our 2007 Corporate Survey so we can expect the consultants' experiences and responses to differ somewhat from those reported by our corporate executive survey-takers.

More than 40 percent of the responding consultants have provided location studies and nearly 30 percent have been involved in negotiating incentives for their clients. It's quite significant that 41 percent of those responding also said they have made their clients' site selection decisions for them (Slideshow, Chart B). And while more than 40 percent of the respondents said their clients had narrowed down the geographic area in which they wished to locate, 28 percent said their clients expected the consultants to narrow or make the location decision for them (Slideshow, Chart G).

Additionally, 81 percent of those responding to our 2007 Consultants Survey said the number of firms employing their services over the past year has either held steady (32 percent) or increased (49 percent), and 45 percent said those employing their services were new clients (Slideshow, Charts C and D). Last year, only a quarter of those responding to the 2006 Consultants Survey said clients were new.

In terms of employment numbers, a third of those responding said they have worked with mid-size companies (100-499 employees), and about a quarter each with large (500-999 employees) or very large (1,000 employees or more) firms. Moreover, two-thirds of the responding consultants have worked with both investor-owned and privately held firms (Slideshow, Charts E and F).

Their Clients' Plans
Of those responding to our 2007 Consultants Survey, 90 percent said their clients expect to open new facilities within one or two years. None reported client plans beyond the three-year range (Chart H). Obviously, consultants are not called in until plans are ready to be set in motion.

Three-quarters of the respondents said their clients only expect to open one facility (Slideshow, Chart I). The consultants also reported that about 30 percent of the planned U.S. projects would be manufacturing operations; 29 percent, warehouse/distribution facilities; 14 percent, headquarters; and 15 percent, back offices or call centers (Chart J). For comparison's sake, we note that of the planned domestic projects reported by the respondents to our 2007 Corporate Survey, 50 percent will be manufacturing plants; 30 percent, warehouse/distribution operations; only 3 percent will be headquarters facilities; and 4 percent, back offices or call centers. From charts A and J we can conclude that the responding consultants will work on fewer of the domestic manufacturing-type projects planned by our corporate respondents and more of the U.S. headquarters and back-office operations planned by those clients other than the ones responding to our Corporate Survey.

However, the respondents to this year's Consultants Survey and Corporate Survey do agree somewhat on which areas of the country will garner the largest percentage of planned new facilities. Those responding to our 2007 Consultants Survey said 15 percent of the domestic projects planned by their clients would be located in the South (Alabama, Florida, Georgia, Louisiana, and Mississippi), 13 percent in the South Atlantic (North Carolina, South Carolina, Virginia, and West Virginia), and 12 percent in the Midwest (Illinois, Indiana, Michigan, Ohio, and Wisconsin) (Slideshow, Chart K). The corporate respondents' percentages for these areas were 14 percent for the South, 14 percent for the Midwest, and 10 percent for the South Atlantic. The respondents to our 2007 Corporate Survey also said a larger percentage of their planned domestic projects (13 percent) would end up in the West (California, Nevada, Oregon, and Washington) than the consultants reported as being planned by their clients for the West (only 9 percent of the total projects). And nearly two-thirds of the responding consultants said their clients were choosing to establish domestic facilities in a range of U.S. locations (Slideshow, Chart L).

Those responding to our 2007 Consultants Survey reported that more than a quarter of the foreign location projects being planned by their clients are slated for Canada, 13 percent for Asia, and 11 for Eastern Europe (Slideshow, Chart M). Interestingly, 42 percent of the total foreign projects planned by the respondents to our 2007 Corporate Survey will be located in Asia, and only 7 percent in Canada and 6 percent in Eastern Europe. These discrepant responses are another indication that the responding consultants may not be working for many of those firms represented by the respondents to our 2007 Corporate Survey.

Of those foreign facilities to be opened by the clients of the responding consultants, 40 percent are expected to be manufacturing operations (Slideshow, Chart N). In fact, 48 percent of the responding consultants said they have seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones over the last year, although only 39 percent said these foreign facilities are actually replacing domestic ones (Slideshow, Charts O and P).

While helping their clients to set up foreign facilities, about a fifth of the respondents to our Consultants Survey said they had encountered or foresee encountering legal, regulatory, utility and transportation infrastructure, and social/cultural problems (Slideshow, Chart Q).

Clients' Perceived Priorities
We also asked those consultants taking our Consultants Survey to rate the same site selection and quality-of-life factors rated by those taking our Corporate Survey as either "very important," "important," "minor consideration," or "of no importance." We then added up the "very important" and "important" ratings in order to rank the factors (Chart R).

It's interesting to note that, this year, the same factor is ranked first in importance by those responding to both surveys - highway accessibility. It was rated as either "very important" or "important" by 97.6 percent of the responding consultants. Labor costs, which was ranked second by the Corporate Survey respondents, was ranked third by those responding to the 2007 Consultants Survey, with a 93.8 percent rating. Availability of skilled labor was the second most important factor according to the consultants, receiving a 97.5 percent rating. The Corporate Survey takers ranked availability of skilled labor in fourth place.

The consultants ranked available land as fourth in importance, with a 93.6 percent rating. This factor was in sixth place in the Corporate Survey. Additionally, those responding to our Consultants Survey ranked expedited or "fast-track" permitting fifth, with a 92.4 percent rating. This factor is new to our survey this year, as is availability of buildings, which holds the number 12 spot in the Consultants Survey with an 82.3 percent rating. Consultants are aware that the need for speed to market has shortened project turnaround times for many firms and they need available buildings and shovel-ready sites. In response to a related question about which factors they found to be most deficient for their clients' recent location or expansion projects, 30 percent of the responding consultants cited pre-qualified sites (Slideshow, Chart V).

With all the concern about high energy costs, we thought those taking our 2007 Consultants Survey would have ranked energy availability and costs higher than ninth place, with an 85.7 percent rating. After all, our Corporate Survey respondents ranked this factor third. Nevertheless, proximity to major markets is in the eighth-place spot, considered "very important" or "important" by 87.4 percent of the responding consultants, a possible indication of the need to keep fuel or transportation costs down.

It's no surprise that the consultants ranked state and local incentives and tax exemptions so high - sixth and seventh place, respectively (with 90.9 percent and 88.5 percent ratings) - when we consider that incentives negotiations are one of the consultants' primary functions. In fact, 37 percent of those responding to our 2007 Consultants Survey said incentives are now more important than in the past to their clients who are making location decisions, while 48 percent of the respondents said incentives have always been of great importance to their clients. And nearly 40 percent of the responding consultants consider tax credits, exemptions, and the like to be among the most important incentives sought by their clients (Slideshow, Charts S and T).

Additionally, more than half of those responding to the Consultants Survey said that today more communities are instituting investment and/or job-creation criteria that must be met by companies receiving incentives and, if the companies do not satisfy the investment or job-creation projections, the incentives will have to be paid back to the communities (clawbacks) (Slideshow, Chart U).

Two factors showing the largest increases in importance ratings in our Consultants Survey on a year-over-year basis are proximity to technical university (+16.8 percent) and training programs (+9.4 percent). Perhaps the responding consultants are finding that their clients need access to these resources in order to meet their future work force requirements. The responding consultants also ranked ratings of public schools first among the quality-of-life factors - with a 78.5 percent rating and tied with low crime rate. Continuing this focus on education, they placed colleges and universities in area in fourth position among the quality-of-life factors, with a 65.8 percent rating. This factor was ranked eighth among the nine quality-of-life factors by the respondents to our 2007 Corporate Survey, with only 47.3 percent rating it as "very important" or "important."

Finally, according to the consultants, an "unranked" location factor considered by their clients is whether or not there are businesses performing activities similar to theirs in the area of search (Slideshow, Chart X). More than 90 percent of the respondents to our Consultants Survey said this was a consideration, although only 65 percent of those responding to our 2007 Corporate Survey made a similar claim. And 45 percent of the responding consultants also said that their clients meet with representatives of similar businesses, with nearly two-thirds saying their clients also meet with community representatives (Slideshow, Chart W).

Consultants' Sources of Information
The respondents to our 2007 Consultants Survey are more computer-savvy than the respondents to our Corporate Survey. Fully 80 percent of the responding consultants said they use the Internet to obtain site selection information (as compared to just 55 percent of the corporate respondents). Thirty percent of the responding consultants also use CDs and other software (as compared with just 8 percent of the corporate respondents), and 56 percent of the responding consultants use site magazines like Area Development (Slideshow, Chart Y).

Additionally, two-thirds of the responding consultants find economic development websites to be most useful, and a third find online site magazines (like Area Development Online) and online property databases (like FastFacility.com) to be most useful.

Three quarters of the consultants using the Internet for site information get website addresses from search engines like Google or Yahoo, and a third also get them from ads in magazines like ours (Slideshow, Chart Z).

As in past years, there are similarities and differences between the responses of the corporate group and consultants group taking our surveys. As noted, a larger percentage of those responding to our Consultants Survey have worked with warehouse/distribution (50 percent), financial services (39 percent), information technology (21 percent), and other types of firms that are not well represented among the respondents to our Corporate Survey. And let's not forget that more than half of the respondents to our 2007 Corporate Survey said they do not use consultants when making location decisions - hence the disparate factor ratings and differing perspectives. Nonetheless, both groups' responses provide insight into industries' overall location priorities and plans for the future.