The past year has seen a wave of headlines that may impact facility and expansion planning. From the economic policies of the Trump administration — such as reduced corporate tax rates, regulatory reforms, threatened tariffs, and withdrawal from trade agreements — to technology advancements and rising supply chain costs, the U.S. is confronting economic opportunity (and uncertainty!) at levels not seen since the last major tax overhaul in 1986. Businesses across the globe and in all industry segments are currently assessing their geographic portfolios and growth strategies in order to determine whether — and where — to locate workforce and investment in the U.S.
Area Development’s Corporate Survey, which solicits corporate executives’ input about a myriad of location factors, offers great insight into their strategies to maximize return on investment while optimizing their geographic “footprint.” The bottom line — a close analysis of the data indicates that the U.S. will likely see billions of dollars of cumulative investment and tens of thousands of new jobs in 2018, in a multitude of new, expanded, relocated, and consolidated facilities.
These facilities will be geographically diverse, and state and local jurisdictions offering impactful incentives — deemed “somewhat” to “very” important [to a project moving forward in a particular location] by more than two thirds of survey respondents — can favorably differentiate themselves in a competitive location analysis. The use of incentives to address project needs may be decisive in business location decisions, enabling communities to secure projects with long-term economic and fiscal impact providing far greater value than the cost of the incentives, and providing “win/win” results — a viable return on investment for businesses and tax revenue, quality jobs, and a stronger economic base for the locality, region, and state.
Another incentive-related “takeaway” from the survey is the diversity of incentives that executives consider important. From our perspective, this highlights the importance of offering flexible, creative incentive packages that can be tailored to meet specific project needs — offsetting upfront costs; providing sites, buildings, and critical infrastructure; facilitating workforce development; and/or mitigating ongoing tax, research, or operating expenses — enabling the attraction (or retention) of the industry sectors, projects, jobs, and investment deemed important by a particular state or locality.
With a limited supply of quality sites, tight labor pools, and a rapidly shifting tax and economic policy environment, businesses must move quickly and strategically to optimize and maximize the opportunities presented by the last year’s headlines. Based on Area Development’s survey, we expect that those strategies are being formulated right now, and companies will be moving quickly to begin executing them — making 2018 an exciting and highly consequential year for corporate location decisions.