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Area Development - Site Selection, Facility Planning and Workforce Development

5th Annual Consultants Survey

Dec/Jan 09
For the fifth year in a row, Area Development's editors have asked the consultants who work with industrial companies, as well as with economic development agencies, to take a survey similar to the one administered to our corporate executive readers. As was expected, the consultants rated the site selection factors differently than our corporate readers did, and the consultants' clients' plans differ from those of the corporate readership as well. Considering the fact that only slightly more than half of our Corporate Survey respondents (52 percent) said they use consultants' services when site selecting, these disparities come as no surprise.

What Types of Companies Are Consultants Serving?
First let's look at the types of companies that the responding consultants are serving (Chart A). Forty-seven percent of the responding consultants said their clients include warehouse/distribution firms; only 14 percent of those executives responding to our Corporate Survey were from this sector. A quarter of those responding to our Consultants Survey said they work with financial services firms, another group with little representation (just 3 percent) among our Corporate Survey respondents. To recap, 64 percent of the respondents to our 2008 Corporate Survey were with manufacturing firms; fewer than 40 percent of those responding to our 2008 Consultants Survey noted they have worked on a location or expansion project in one or more manufacturing sector.

Only 37 percent of the responding consultants have performed location studies for their clients, and 31 percent have engaged in incentives negotiations on their clients' behalf. Yet, the responding consultants seem to be the deal "closers," with more than half of them claiming they have ultimately been responsible for their clients' final site selection decisions (Chart B).

Of those consultants who claimed they do perform location studies for their clients, nearly half said their clients had already narrowed down the geographic area of search before calling them in; but 25 percent also said their clients expect the consultants to make the location decision for them (Chart C).

The majority of the respondents to our Consultants Survey (63 percent) are working for smaller companies in terms of employment numbers (fewer than 500 employees). More than half have worked with both investor-owned and privately held firms (Charts D and E).

Do Their Clients Have New Facilities Plans?
Once again I must note that this survey was conducted in late summer 2008; therefore, the responses might not reflect the events that took place during the year's final quarter. Nonetheless, the respondents to our 2008 Consultants Survey were about equally divided when asked if the downturn in the U.S. economy had affected their clients' facility plans: 50 percent of the responding consultants said their clients' new facility plans had been put on hold, with 28 percent saying their clients were closing/consolidating facilities. However, 47 percent of the responding consultants said their clients still planned to open new facilities (Chart F).

Of those respondents who claimed their clients expected to open new facilities, a third said they planned to do so within one year, and more than half said their clients had two-year new facility plans (Chart G). Only 11 percent said their clients had longer-range new facility plans (compared to the 20 percent of the Corporate Survey respondents with plans three or more years out). This might be an indication of the fact that the consultants' services are not utilized until their clients' plans are more firmly in place.

Nearly two-thirds of the respondents to our 2008 Consultants Survey said their clients who have new facility plans expect to open only one new facility. Just 13 percent said their clients had plans for three or more new facilities (Chart H). Interestingly, 28 percent of the Corporate Survey respondents with new facility plans expect to open three or more new facilities within the next five years.

Whereas nearly half of the 2008 Corporate Survey respondents' new facilities are planned as manufacturing establishments, only 27 percent of the consultants' clients' new facilities are expected to house manufacturing operations (Chart I). Nearly half (47 percent) of the responding consultants' clients' new facilities are expected to be headquarters, R&D, back office/call center, and other types of facilities. This is nearly double the percentage of these types of facilities expected to be opened by the Corporate Survey respondents.

Many of the new facilities projects being worked on by the respondents to our 2008 Consultants Survey are slated for the South Atlantic (13 percent of the projects) - North Carolina, South Carolina, Virginia, West Virginia - and South (also 13 percent) - Alabama, Florida, Georgia, Louisiana, Mississippi. These regions are followed by the Midwest (12 percent) - Illinois, Indiana, Michigan, Ohio, Wisconsin - and the Middle Atlantic (12 percent) - Delaware, Maryland, New Jersey, New York, Pennsylvania (Chart J). Although only 7 percent of the Corporate Survey respondents planned new facilities for the Middle Atlantic region, the many more financial and information technology firms represented by the responding consultants might account for the difference in response between the two groups of survey-takers when it comes to activity in this region.

The responding consultants' clients plan more than a third (36 percent) of their new foreign facilities for Asia, with 16 percent slated for Mexico and 10 percent each for Canada and Eastern Europe (Chart K). These percentages are comparable to those reported by the Corporate Survey respondents.

However, fewer of the consultants' clients planned new foreign facilities will go to China than those projected to be established by the Corporate Survey respondents (35 percent of the consultants' clients' facilities as compared to 44 percent of the corporate respondents' facilities) as well as to India (16 percent as compared to 25 percent) (Chart L). Again, the disparities may be explained by the differences in operations between the responding consultants' client base and the corporate respondents.

Although about 40 percent+ of each group's (consultants' clients and corporate respondents) new foreign projects will be manufacturing facilities, a fifth of the foreign projects that the consultants' clients are working on are slated to be back office or call center type of operations (Chart M). Only 5 percent of the new foreign facilities to be established by the respondents to our Corporate Survey will fit this description.

When asked if they had seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones, only 29 percent of the respondents to our 2008 Consultants Survey said, "Yes" (Chart N). Last year, 48 percent said, "yes" in response to this question. In fact, 35 percent of the 2008 responding consultants said their clients had actually located a foreign facility back to the United States (Chart O). The respondents continue to see problems when helping clients to locate overseas, including regulatory and social/cultural issues (each type seen by 29 percent of the respondents), utility infrastructure (25 percent), and legal (22 percent) among others (Chart P).

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