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Area Development - Site Selection, Facility Planning and Workforce Development

The Risks and Realities of Megasite Mania: Navigating the Mid-Tier Client Landscape

The recent focus on projects requiring megasites may cause communities to lose sight of developing smaller-scale sites that could bring mid-tier companies to their communities, fostering job creation and diversified economic growth.

Q2 2024
In the realm of economic development, the allure of megasite projects is undeniable. The promise of massive investment, job creation, and economic revitalization often captures the attention of policymakers, economic development professionals, and communities alike. However, amid the frenzy surrounding these colossal undertakings, there lies a segment of clients often overlooked — the mid-tier businesses and projects that contribute to the economic fabric in a different, yet significant, way.

The Challenges
In recent years, the economic development landscape has seen a surge in megasite projects. These mammoth endeavors, often boasting billions in capital investment and thousands of jobs, have dominated discussions and garnered substantial attention. From semiconductor manufacturing to renewable energy initiatives, the appeal of these projects extends far beyond their immediate economic impact.

Yet while megasite mania grips the attention of stakeholders and policymakers, it's essential not to lose sight of the clients occupying the mid-tier, a segment often overshadowed by the allure of grandiose projects. These clients represent a vital component of economic development, contributing to job creation, innovation, and community prosperity on a more modest scale.

While megasite mania grips the attention of stakeholders and policymakers, it's essential not to lose sight of the clients occupying the mid-tier. One of the primary challenges stems from overbuilt service capacities, particularly in utilities infrastructure. Megaprojects require significant upgrades to utilities, from power distribution to water and wastewater systems. However, the mismatch between projected and actual capacity utilization poses a financial risk to utilities and, ultimately, ratepayers. The hyper focus on megaprojects has led to a neglect of smaller-scale industrial sites and projects. Communities find themselves scrambling to meet the demands of megaprojects while neglecting the identification and development of smaller sites that could cater to a broader range of businesses. This lack of diversification poses risks to economic stability and resilience.

The concentration of resources and incentives on megaprojects has the potential to distort tax policies and incentives, favoring large-scale employers at the expense of smaller businesses. Communities may find themselves overly reliant on a single employer, jeopardizing long-term economic sustainability.

Case Studies: Navigating the Mid-Tier Landscape
Amid the excitement surrounding megasites, it's crucial to maintain a balanced approach to economic development. While megaprojects offer undeniable benefits, they must be complemented by efforts to support mid-tier clients and smaller-scale projects.

For example, a state in the Midwest had significant involvement in electric vehicle manufacturing. The state and its leadership demonstrated enthusiasm for the potential of electric vehicle production, with plans to begin production announced approximately two and half to three years prior. The state government made considerable efforts to support the project, including changes to tax policies and infrastructure adjustments by the electric provider to accommodate the site. Despite initial excitement and efforts, the status indicates limited manufacturing activity, with leased office space in the state’s capital city instead of manufacturing facilities. It was noted that the project has faced challenges in securing funding and progressing toward production.

Communities find themselves scrambling to meet the demands of megaprojects while neglecting the identification and development of smaller sites that could cater to a broader range of businesses.. The discussion also addressed recent developments involving a project pause amounting to $5 billion, an indication of the substantial investments required for site readiness and development. Despite significant initial investment and preparations, the project faced delays with an undetermined timeline for future implementation. This underscores the uncertainties and challenges associated with megaprojects, with an estimated 65 percent failure rate according to the Construction Industry Institute. Factors contributing to project failures include engineering, procurement, and construction issues, as well as reliance on federal funding that may not materialize as expected.

However, opportunities are plentiful in mid-tier industries, particularly in sectors such as metals, plastics, equipment manufacturing, bioscience, pharmaceuticals, and alternative energy. Growth in industries requiring moderate-sized facilities — employing 150 to 750 individuals and occupying 50- to 200-acre sites — indicates a shift toward smaller-scale but sustainable economic development initiatives. The emphasis on mid-tier industries highlights the importance of focusing on realistic job-creation targets and leveraging existing assets and resources for community development.

To capitalize on opportunities in mid-tier industries, economic developers must consider critical siting factors, including rail service capabilities, land prices, utility infrastructure, permitting processes, logistics, tax policies, and workforce capabilities. Additionally, workforce demands, and technological advancements necessitate policy adaptations to accommodate automation and evolving industry needs. Utilities play a crucial role in meeting capacity demands, particularly for renewable energy sources, requiring strategic planning and collaboration between economic developers and utility providers to support industrial growth effectively.

Growth in industries requiring moderate-sized facilities — employing 150 to 750 individuals and occupying 50- to 200-acre sites. Driving Positive Outcomes
The integration of retention and expansion efforts, collaboration with utility partners, policy adaptations, and master planning initiatives are essential components of a proactive and effective economic development strategy. By prioritizing industry needs, fostering collaboration, and optimizing site selection and planning, communities can position themselves for long-term success and sustainable economic growth. Developers should approach each opportunity with a thorough understanding of the business case, leveraging partnerships and resources to maximize the impact of their efforts and drive positive outcomes for businesses and communities alike.

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