Corporate Survey Analysis: Costs Still Top Concern, But Building Availability Importance Growing by Kathy Mussio, Atlas Insight
Cost concerns still lead the Corporate Survey's top site selection factors, but building availability is becoming more important.
Winter 2011
Two words that ruled the day in 2010 were "consolidation" and "optimization." Whether through company mergers or simply existing portfolio optimizations/rationalizations, companies were looking for ways to shrink footprints and shed lower-performing/higher-cost locations as part of cost-cutting measures. This has clearly been a trend that will continue through 2011 and beyond. Consolidation and optimization are two reasons why it is notable, once again, that those companies that are undertaking expansions do not anticipate a large number of new jobs to be created. Executives responded that this is the trend both domestically and abroad. In the current uncertain economic environment, many companies are taking baby steps into new markets, with smaller capital expenditure initiatives, rather than taking on the risk.
It's not surprising that seven of the 10 top ranked site selection factors are cost-related. Finding ways to reduce or control costs has been the name of the game in 2010. Incentives continue to trend up in importance over the past few years, with about 90 percent of respondents citing state and local incentives and tax exemptions as important site selection factors for projects. Anecdotally, we have found this to be true, with our clients placing a much greater weight on the incentives factor than in past years. Straight tax credits have been much less appealing to companies, with much more importance placed on "usable" incentives, such as grants or refundable/saleable credits.
Also notable is the increased importance of availability of buildings, now ranking 10th among the site selection factors. The cost and time involved in "ground up" is prohibitive in most cases - and since there has been a shortage of viable existing manufacturing buildings available in certain communities, this has been a source of frustration for companies.
While consolidation of existing locations will continue to be strong for 2011 and beyond, the immediate prognosis for new facilities looks weak. In 2009, more than 70 percent of the executives responding to the Corporate Survey believed that the economy would significantly improve by the end of 2010 or in early 2011; now, only 15 percent of the executives surveyed in 2010 believe the economy will improve early this year. At the risk of sounding too "bearish," it is unlikely that the site selection community will attain the pre-2007 new project expansion numbers until 2013 or beyond. Be prepared for a very shallow upward slope economic recovery, which will translate into fewer new jobs and true expansion projects.
Project Announcements
Albemarle Corporation Plans Chester County, South Carolina, Lithium Hydroxide Processing Plant
03/23/2023
Tillamook County Creamery Association Plans Decatur, Illinois, Ice Cream Manufacturing Plant
03/23/2023
ENTEK Plans Terre Haute, Indiana, ‘Wet-Process’ Lithium-ion Battery Plant
03/23/2023
Dr. Marty Pets Establishes Richfield, Wisconsin, Manufacturing Operations
03/23/2023
Schrödinger Expands New York, New York, Research Operations
03/23/2023
Swiss-Based Glencore-ZEB Plan Moncks Corner, South Carolina, Aluminum Recycling Plant
03/23/2023
Most Read
-
37th Annual Corporate Survey: Economic Pressures Exerting Greatest Effect on Decision-Makers
Q1 2023
-
19th Annual Consultants Survey: Clients Challenged by Tight Labor Market, Energy Availability
Q1 2023
-
The Top Investment Location Prospects for Aerospace Manufacturing
Q1 2023
-
2022 Top States for Doing Business Provide an Environment for Business Growth
Q3 2022
-
36th Annual Corporate Survey: Executives Focus on Labor, Energy, Shipping Costs
Q1 2022
-
Strategies to Overcome Intensifying Industrial Real Estate Challenges
Q1 2023
-
How Are Economic Developers Partnering to Solve Workforce Challenges?
Q1 2023