Until recently, increased scrutiny on costs created a very high “risk premium” for out-of-footprint sites. Given capital constraints, the short-term savings of staying within the existing footprint outweighed other long-term considerations. If a manufacturing concern planned to expand, for example, it would invest in an existing site — even if an out-of-footprint location offered a superior combination of attributes.
As evidenced by the Leading Locations research, companies are continuing to migrate from higher-cost to lower-cost locations, but are not restricting their options to existing sites. Winning locations include cities in the Heartland, as well as inland western and eastern U.S. locations where real estate and labor costs can be 10 to 30 percent lower than in the major coastal cities. Of the top 50 Leading Location markets, only 12 are coastal markets. The remainder are toward the middle, a finding that aligns with what we are seeing among our clients.
Top 50 cities such as Columbus, Ind.; Austin; Holland, Mich.; and Oklahoma City, for instance, offer less expensive land and facilities costs than the coasts, but also provide different kinds of work force capabilities. Thirty-eight of the top 50 are in the “flyover” states, areas that many companies avoided in the past. Midwest cities dominate the top 100 overall rankings, capturing 24.25 percent of this group.
Work force considerations are also affecting some location decisions. For instance, Omaha-Council Bluffs ranks among the top 10 leading “Big Cities,” and jumps dramatically up the overall rankings, from 133 last year to 21 this year. While Omaha may not have been traditionally viewed as a large Tier 1 market in the United States, major corporations such as PayPal, TD Ameritrade, Yahoo, and Google have been making substantial investments in Omaha for years.
The resurgence of manufacturing in the United States has made work force development a key selection factor for manufacturing concerns facing labor shortages. States and cities that have aggressively invested in work force development programs are winning the competition for these companies.
In fact, the return of manufacturing jobs has led some secondary markets out of the recession. While most of the top 20 overall markets are characterized by technology and “knowledge worker” companies or by the energy boom, Columbus, Ind.; Holland-Grand Haven, Mich.; and Dubuque, Iowa are among the cities that are thriving largely because of major manufacturing companies such as Cummins, Johnson Controls, Herman Miller Furniture, Whirlpool, and others.
Leading Locations for 2013 Results