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15th Annual Corporate Survey Our 15th Annual Corporate Survey provides a glimpse into our readers’ relocation, expansion, and new facility plans for 2001 and beyond, while gauging their site selection priorities. By Geraldine Gambale, Editor ... Clark Sutton Gillespy, Principal, Fluor Global Services-Global Location Strategies The new millennium ushered in a banner year for site selection projects and economic development endeavors. As reflected in Area Development’s 2000 Corporate Survey, economic expansion has continued at a robust pace. More than 40 percent of this year’s respondents were companies with over 1,000 employees. This is indicative of the mega-merger and acquisition trend of the past 12-month business cycle. Companies are becoming larger or are forming partnering relationships in order to expand their product offerings, extend their global reach, fill more consumer niches, and provide more customer services. Most notably, e-commerce is playing an ever-increasing role in how companies conduct business. Call center operations jumped 16 percentage points from 1999 to 2000, with 74 percent of the respondents stating that their companies are currently engaged in electronic commerce. An interesting point to note is that 41 percent of the respondents increased their number of facilities over the past 12 months. Primary reasons for expansion included increased sales and production, along with new product lines. We have found this trend to be in line with our clients’ actions and expect it to continue for the near future. Meanwhile, 55 percent of the respondents did not significantly change their number of facilities. We credit this trend to “asset optimization.” In essence, more and more companies are trying to increase both their ROI (return on investments) and ROA (return on assets). In doing so, companies are modeling their facilities to optimize network efficiency, thereby minimizing transportation costs, maximizing patronage, and enhancing the quality of service to customers. The net gain is optimization of financial and physical resources. This is further supported by the survey results indicating 75 percent (of those who decreased their number of facilities) consolidated their existing operations and 50 percent (of this same group) did so in order to lower operating/labor costs. With regard to site selection factors, availability of skilled labor and labor costs remain among the most highly rated factors. We expect this to continue as competition for both skilled and unskilled labor escalates. Companies are becoming more creative in their means of both attracting and retaining qualified employees. Training, training incentives, and access to technical universities will continue to be dominant factors in finding and hiring qualified labor. In the area of transportation/telecommunications, two major factors continue to stand out across most industry lines — highway accessibility and availability of telecommunications services. This trend will undoubtedly continue as the number of call/data center operations continues to grow, transportation costs increase, and companies minimize the time/distance to the ultimate consumer. Of particular importance is that regardless of the type of industry, telecommunications/fiberoptics/broadband telecom services are playing an increasing role in infrastructure design for both existing and new facilities. Another important trend to note is that containerized shipping is growing exponentially. This is substantiated by a comparison of Area Development’s 1999 and 2000 survey results, showing an 8 percent increase in the significance of waterway or ocean port accessibility. Containerized shipping has proven to be a cost-effective means of transporting goods to international markets. In support of this trend, one needs only to look at the infrastructure developments currently taking place in waterway and ocean ports globally. Other trends include the importance of the world’s deepwater ports, increased number of containerized shipments and RORO (roll-on, roll-off) vessels, and the growth of intermodal centers. As companies look to maximize their ROI, several different financing methods will continue to be a factor in site selection activities. Most notably, state and local incentives coupled with tax exemptions and corporate tax rate will be the most important financial considerations. However, it is important to remember that even though financial incentives do play a vital role in site selection endeavors, incentives alone cannot overcome an unwarranted site. Instead, incentives provide an offset against some costs associated with site selection projects. More importantly, incentives are usually used to tip the scales among several competing sites, given similar characteristics. Other trends and factors that are supported by Area Development’s survey include the importance of cost of land, the availability of land, occupancy or construction costs, environmental regulations, and nearness to suppliers. Of these factors, environmental regulations will continue to be a critical element in site availability and project time lines (length of permitting process). Companies are demanding shorter permitting times; therefore, states and communities are moving toward one-stop-permitting processes. As for quality-of-life factors, these will tend to remain constant. Factors such as climate, housing availability, education (i.e., ratings of public schools), housing costs, crime, health facilities, and cultural/recreational opportunities tend to vary in importance from company to company. These factors relate more to a particular company’s needs or wants when deciding upon a specific community in which to locate. Manufacturing facilities continue to dominate the expansion and new site location projects. However, warehouse/distribution and call/data centers are growing at a phenomenal pace. We believe this will continue as companies push the envelope in creative ways of balancing nearness to suppliers with nearness to customers. In relation to the above-mentioned factors, the Midwest, Southwest, Southeast, and South Atlantic regions tend to be most noted for future domestic growth. Internationally, companies appear to be concentrating mostly on Mexico, Europe, and Asia as three primary regions for locating new foreign facilities. It appears that the current economic strength in world markets will warrant similar growth trends in site selection projects and economic development endeavors for 2001. Companies appear to be optimistic about consumer demand and will continue to develop new and innovative ways of addressing labor costs and availability, transportation costs, occupancy/operating costs, and proximity to suppliers and markets served. Today’s technological advancements have changed the landscape of site selection activities and created a more sophisticated company-supplier/company-customer relationship. In meeting the needs and demands of the customer, companies are streamlining their production processes, increasing their use of IT, shortening the time and distance between their suppliers and their customers, developing innovative ways of attracting and retaining employees, and becoming far more globally competitive. ... Published December 2000 by Area Development
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