Are Southern States Better Positioned for Technology Projects?
A skilled, available work force, a favorable cost environment, the necessary infrastructure, and generous financial support have created a near-perfect environment for technology companies to thrive in the South.
Jonathan L. Sangster, Senior Managing Director, CB Richard Ellis (Southern Tech Sites 2008)
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Favorable Cost Environment
According to numerous surveys of business location decision-makers, the ability for business operations to be cost-competitive ranks very high, along with the availability of a qualified work force. A review of nationally recognized cost-of-living (COL) and cost-of-doing-business (COB) indices in the major cities throughout the Southern states clearly indicates a more favorable cost environment than in many other regions of the country. The vast majority of Southern cities' indices range from the high 80s (88) to the mid-90s (92-97), well below the national average of 100.
Labor costs across much of the South remain among the lowest in the country across a broad range of job categories and industry sectors, linked to the lower cost of living in much of the region. While the Southern states' industrial electricity costs are not the lowest in the country, most are competitive due in large part to the fact that deregulation of the industry failed to materialize during the past decade. Relative to Midwest and Northeast states, the Southern States' rates remain competitive. Additionally, the South's real estate costs (rental rates, construction costs, and land) continue to be among the lowest in the country primarily due to abundant supply.
Whether it will serve a large data center operation, a research and development project, or an advanced manufacturing facility, a fully developed and reliable infrastructure must be in place for the operation to be successful.
Much of the South is served by a fully developed electrical grid, with capacity margins among the highest in the country. Reliability rates are strong, and utilities demonstrate a willingness to create solutions for redundant service options for high-demand projects. Many of the Southern states have exhibited success in attracting large data center projects in recent years due to these factors.
Similarly, the telecommunications network throughout the Southern states is extensive and offers significant provider options through much of the region, according to a review of information obtained from Telegeography, a division of PriMetrica. Major markets with research university capabilities are especially well developed, as are the major corridors between the Northeast and the Southeast (Virginia, North Carolina, South Carolina, Georgia, and Florida).
The Southern states also benefit from an interstate highway system that has been well maintained and does not experience much of the negative impact of adverse weather conditions. Highway accessibility to major ports along the Eastern Seaboard (Jacksonville, Savannah, Charleston, Wilmington, and Norfolk) and the Gulf Coast offers multiple options for technology industries to move products and supplies, avoiding the congestion of West Coast and Northeast ports.
Financial needs vary based upon the development stage of the technology operation. Startups and early-stage through late-stage development operations are seeking venture capital or angel fund dollars, while more mature operations may look to state and local jurisdictions to provide economic incentive packages to offset startup and long-term operating costs.
Venture capital activity in the Southern states continues to increase, but significantly trails the traditional leaders including California and several Northeast states. Activity has been strongest in Florida, Georgia, and North Carolina and is advancing due to significant research and development activity in biotech, life sciences, nanotechnology, and advanced material sciences.
A strength of the region is the availability of traditional and nontraditional economic incentive programs to support the technology activity. Many of the Southern states have developed customized incentives programs that target biotech, research and development, and technology operations; in general, the Southern states have the reputation of being much more aggressive when it comes to incentives offerings than many other regions of the country. The concept of deal-closing funds continues to gain traction in these states, and legislatures funding of these programs has grown.
The decision to locate a technology project, like any project, should not be taken lightly. The ultimate objective is to find the optimal location that best aligns with those variables, which typically include work force availability, a favorable cost environment, necessary infrastructure, and financial support for the business case. Many regions of the country excel in one or more of these areas, but few can be evaluated well in all of them. As a result, the Southern states have been successful in attracting a broad range of technology industries and companies and are well positioned for continued success going forward.