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Technology Upending the Location Decision Process

Technology’s radical transformations of industry are changing not only company operations but also how sites are selected.

Q3 2018
A fluid-cooling panel designed by Shanhui Fan, professor of electrical engineering at Stanford, and former research associates Aaswath Raman and Eli Goldstein being tested on the roof of the Packard Electrical Engineering Building at Stanford University
A fluid-cooling panel designed by Shanhui Fan, professor of electrical engineering at Stanford, and former research associates Aaswath Raman and Eli Goldstein being tested on the roof of the Packard Electrical Engineering Building at Stanford University
The exponential progress of technology has brought an overwhelming sense of change to industries of all kinds, and those advances are showing no signs of slowing. Businesses and organizations of every stripe are pursuing new ways of working with the benefit of rapidly developing technologies such as augmented and virtual reality, 3D printing, robotics, computer processing, blockchain, nanotechnology, and the Internet of Things (IoT), among other advances.

Jack Uldrich, a global futurist and author, says centuries-old industries could be poised for radical, sweeping transformation from new technological developments. Additionally these tech-based changes will have widespread impact on site selection and economic development. That’s because, in myriad ways, technology is changing how commercial properties are used, located, and operated — and those changes are coming quickly.

“There are a lot of new dynamics taking place right now, and it’s creating a lot of change,” says Tom Stringer, managing director of Corporate Real Estate Advisory - Site Selection and Incentives for BDO, which provides accounting, tax, audit, and consulting services. “The one consistency is speed,” he notes. “Everything is much, much faster than ever before.”

Tech-Fueled Operations
Technology already affects the way sites operate on a day-to-day basis, and more changes are imminent as existing technology blossoms and its capabilities grow. For instance, Uldrich points to artificial intelligence and the evolution of smart buildings that use AI to more efficiently manage energy and water usage, among other tasks.

Advances in material science could overhaul the way temperatures in buildings are maintained, Uldrich says. SkyCool Systems, for instance, uses cooling panels to provide renewable cooling to buildings and reduce cooling costs for facility owners.

Uldrich says the technology may require more development to become affordable and impactful for most sites but “I can almost guarantee you it’s going to get more affordable and it’s going to get better over time. As it does, that world could change,” he projects. “If I’m a property developer or owner, I want to start investigating that material and making sure I know what’s happening with it.”

Another innovator that Uldrich cites to demonstrate the potential of technology to make a major impact on the commercial real estate sector is Katerra, a tech-based global construction company. The company leverages AI, robotics, 3D printing, and sophisticated use of data “to fundamentally rethink how buildings can be built.” Katerra’s employment of tech-based solutions to construction challenges opens a new door in the field and could serve as an example that will lead to more efficient construction projects that accelerate the development process, getting buildings built and operational at light speed when compared to the current standard, Uldrich says.

The accelerated progress of technology has not only changed the way companies do business — it also has changed the way they choose where to do business. Selecting a Site
The accelerated progress of technology has not only changed the way companies do business — it also has changed the way they choose where to do business. Stringer says companies often employ sophisticated data analysis to narrow their sights to locations that make sense for their businesses. He notes that it’s “truncating the site selection process because a lot of folks really understand where they need to be and what their pain points are. There’s not as much time spent figuring that out.” According to Stringer, “There are so many new diagnostic tools. It means better-educated clients who really know what they want.”

Technology companies are proliferating in the current environment, and they have somewhat distinctive needs when selecting a site. However, the most important factor in site selection decisions for technology companies — one they share with other industries — continues to be access to a skilled workforce.

As an example of the emphasis on access to talent among tech companies, Gregory Burkart, managing director and leader of the Site Selection and Incentives Advisory Practice at Duff & Phelps, points to the highly publicized Amazon RFP for a new headquarters and the stress it placed on the availability of a skilled workforce. Tech companies especially prize highly educated millennials, so they gravitate toward communities that appeal to that demographic, Burkart says.

The eternal search for the best talent pools means tech companies often are grouped around similar communities, such as Silicon Valley; Austin, Texas; and Nashville, Tennessee. Burkart says tech companies are always looking for the next hot tech market because they know they can’t afford to miss the workers who will populate it.

Because talent is in high demand, tech companies are locked in a highly competitive battle to secure it, Stringer says. “In the tech space, the hunt for talent is pretty extreme. That is really driving a lot of the decisions that are being made. They’re looking at the university systems in the area and whether the ecosystem is there to support the workforce flow that they need, so tracking the number of people with the requisite engineering, computer science, and mathematics degrees is really important from a site selection standpoint in the tech world,” notes Stringer. In that search for talent, Stringer also says that a key consideration for tech companies often is where their competitors have locations. Being close to the competition offers another way to access talent in the appropriate field.

Tech companies especially prize highly educated millennials, so they gravitate toward communities that appeal to that demographic. Gregory Burkart, managing director and leader, Site Selection and Incentives Advisory Practice, Duff & Phelps Increasingly, tech companies also are considering the political landscape when determining where to open a new location. Stringer says companies want to make sure they don’t settle somewhere that would potentially prove alienating for their employees, such as through legislation that makes some of them feel unwelcome. In addition, he says companies seek locations where the relationship between government and industry is a positive one — and unlikely to vary greatly by the political party in power. “If you look at it that way, you’ll find that some states really rise to the top,” Stringer says.

Of course, tech companies must ensure that communities possess the infrastructure to support them in a potential new home. As a result, Stringer says data centers continue to gain importance: “They seem to be growing by the day in terms of scope and size, whether it’s shared or it’s for a sole user” and they are “a huge economic development boon for certain communities.” Decisions for choosing sites for data centers tend to be driven by an assessment of the power costs and reliability. Companies will consider the stability of the local power grid and how prone the area is to natural disasters.

Tech’s Transformative Power
According to Uldrich, the ripples from technological advances could increasingly become waves that wash away whole systems and well-established practices. As an example of the way technology seems likely to create a series of seismic shifts, Uldrich points to 3D printing, which he believes could disrupt the global supply chain. For instance, Adidas has begun to 3D print shoes. If Adidas and other shoe companies begin to 3D print shoes on a massive scale, Uldrich believes shoes no longer will be made in factories that are located far from most of their consumers. Instead, the shoes will be printed close to the consumers in smaller facilities.

“It’s not just going to be shoes,” Uldrich says. “It’s going to be aircraft engine parts, which General Electric has said they’re going to start 3D printing in a couple of years. It’s going to be lots of different things. As that happens, not only are the shipping and trucking industries disrupted but so is the storage industry and how we think about where we locate new manufacturing facilities.”

There are few, if any, industries unlikely to see major changes in the coming years. And although the scope of tech-driven change promises to be momentous, the specific shape of that change can be difficult to project — in part because innovations yet to be seen will emerge. One thing is certain, though, Uldrich says, “It will be interesting.”
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