It’s official — manufacturing projects are the hottest ticket in town. Manufacturing projects are among the most competitive investments in today’s site selection landscape. For companies evaluating expansion or relocation, a single manufacturing facility can represent a multiyear commitment of capital, labor and operational risk. Construction costs, supplier contracts, salaries and long-term capital expenditures combine to shape not only the performance of a facility but also its strategic value to the business. With so much at stake, what are companies actually looking for when evaluating candidate manufacturing sites?

Cash Is King

In a capital-intensive industry, money talks. Lowering capital expenditures is a major consideration for board members evaluating where to expand or locate a manufacturing project. Direct grants from federal, state and local entities that offset costs such as land acquisition, construction and infrastructure can materially affect total project economics. Locations able to reduce upfront capital pressure often rise to the top of a site selection shortlist by improving return profiles and reducing early-stage risk.

Get Ready

By the time a manufacturer initiates a formal site search, the window for meaningful site preparation has largely closed. Manufacturing investments are rarely made lightly; they often develop over years but can also be accelerated by sudden market shifts or external shocks, as seen during the COVID-19 pandemic. In either scenario, companies favor locations where key readiness factors are already in place.

Water and sewer infrastructure are frequently among the most significant constraints. Many otherwise attractive sites lack systems capable of supporting modern manufacturing operations at scale. Heavy infrastructure upgrades can materially affect project timelines and capital budgets, introducing risk that manufacturers must account for early in the decision-making process. Locations with funding mechanisms already established to address infrastructure gaps provide manufacturers with greater confidence and fewer unknowns.

Permitting is another critical variable. Lengthy or unpredictable permitting processes can delay projects, increase carrying costs and disrupt operational timelines. Bottlenecks often arise from staffing shortages, overlapping jurisdictions or regulatory requirements that evolve between project announcement and groundbreaking. Manufacturers increasingly prioritize locations where permitting processes are coordinated, transparent and predictable, allowing project teams to plan with confidence. Effective coordination with federal agencies further reduces schedule risk for complex projects.

More Power, Please

The rapid growth of data centers has intensified competition for reliable, affordable electricity, placing power availability squarely on the radar of manufacturers planning expansion. Power cost and access now function as gating factors in many site selection decisions, particularly for energy-intensive operations.

Manufacturers are paying closer attention to locations investing in long-term power capacity, including alternative energy sources such as nuclear, battery storage and renewables. Some states have taken steps to support large-scale energy infrastructure investment through targeted financing mechanisms. Alabama, for example, established an Energy Infrastructure Bank to provide financing for power-related projects, helping manufacturers assess long-term reliability and cost stability when evaluating sites.

Workforce

Workforce considerations consistently rank among the top factors in manufacturing site selection. Availability, skill alignment and long-term pipeline sustainability all influence whether a location can support current operations and future growth. A site’s workforce profile is not only a reflection of labor supply but also an indicator of operational risk and scalability.

Manufacturers continue to face workforce challenges as experienced workers retire and fewer younger workers enter skilled trades pipelines. Locations demonstrating active engagement with community colleges, apprenticeship programs and certification initiatives signal a readiness to support workforce needs over time. Clear workforce strategies reassure manufacturers that labor constraints will not undermine long-term operational plans.

Incentives, Tax Credits and Favorable Law

When manufacturers identify multiple sites that meet operational and logistical requirements, incentives often become a decisive factor. These programs are closely scrutinized for their impact on total cost of ownership and long-term financial performance.

Capital investment incentives frequently carry more weight than job- or wage-based programs for manufacturers with large upfront expenditures. Many withholding- and income tax-based incentives scale with job creation, while capital expenditures often dwarf employment figures in manufacturing projects. Incentives tied directly to investment can better align with project economics. Examples include Arizona’s Qualified Facility Tax Credit, West Virginia’s Investment Tax Credit and Arkansas’ Tax Back Program.

Flexibility within incentive programs is also critical. Manufacturing projects frequently evolve over time due to tariffs, market conditions or supply chain disruptions. Programs allowing overachievement in certain metrics to offset underperformance in others provide manufacturers with needed latitude when planning projects five to 10 years in advance. Missouri and Indiana, for example, permit wage overachievement to increase incentive benefits even if job or investment targets are not fully met.

Property tax treatment remains a core consideration for capital-intensive facilities. In states that tax both real and personal property, competitive locations often offer low base rates, accelerated depreciation or long-term reduction mechanisms. Some states allow manufacturing property to depreciate to a tax base as low as 10 percent, improving long-term cost profiles. Bond structures that place legal title with a public entity and lease property back to manufacturers can further reduce property tax exposure in exchange for payments in lieu of taxes. While administratively complex, these arrangements often provide the longest benefit horizons, commonly ranging from 20 to 40 years. Examples include Arkansas, Georgia and Kentucky. Other states, such as South Carolina, allow long-term payments in lieu of taxes without bonds. States offering full abatement of certain non-educational property taxes, such as Florida, or grants equal to a large percentage of the local tax base, such as North Carolina, can also be attractive, though these programs often offer shorter durations.

Manufacturing sales tax exemptions also materially affect project costs. Given the scale of manufacturing investment, sales tax exposure during construction and ongoing operations can be significant. While many states offer manufacturing exemptions, definitions vary. Whether equipment must be “directly used” in production or merely “necessary and integral” determines the breadth of the exemption. Treatment of electricity, natural gas, repairs and services further shapes ongoing tax liability. These distinctions can produce substantial differences in both initial and long-term operating costs.

Conclusion

Modern manufacturing site selection reflects a complex balancing of capital efficiency, operational certainty and long-term risk management. Companies evaluating new facilities are increasingly focused on locations that offer predictable infrastructure, reliable power, workforce alignment and incentive structures that match capital intensity. Sites that meet these criteria allow manufacturers to deploy capital with greater confidence and position facilities for sustained performance over time.