There have been a boom of multimillion-dollar projects springing up around the U.S. over the past few months, but budgets are tight for companies relocating and expanding, and transportation and labor costs are becoming key considerations in location decisions, according to a panel of site selection experts at the recent Tennessee ECD Governor’s Conference.
“Companies must have the costs worked out, and they need people in communities to be more highly trained and flexible than ever,” said Mark Williams, president of Strategic Development Group, Inc. “It’s not just about having an available workforce; it’s about having a workforce they can build on for the next 20 years.”
Companies are cramped for space and looking for room to grow, but the biggest challenge is finding a place with the right skills as well as financial incentives to offset costs, said Michelle Comerford, managing director of Austin Consulting. For instance, companies moving to states with higher tax burdens, “want to know what tax credits they can receive from communities,” she said.
Incentives “don’t buy deals,” said Mike Mullis, president and CEO of J.M. Mullis, Inc., but companies constructing or adding to sites are expected to show a return on investment in 18 months, so they want communities to be cognizant of that. “CEOs are asking themselves two questions: ‘What do we need to account for unknowns in the future, and what are the risks that our costs will increase?’” Mullis said.
Currently, more than 50 percent of relocation and expansion projects stem from foreign direct investment, Mullis said. “International clients are looking for a place where they will be welcomed,” he said. “They can sense whether the business climate will support them and allow them to operate.”
Panel experts also weighed in on a few other site selection topics, including:
Websites: Site selectors do look at these, but more as a way to compare information they have gathered elsewhere, according to panel experts. Keeping information up to date is the single most important thing economic development groups can do for their websites. Including online testimonials from companies who have located in the region is also useful. “Having good information doesn’t replace your position or the need for it,” Comerford told economic developers, “but it’s added value.”
Requests for Information (RFIs): Communities that receive these documents “have already been shortlisted,” Mullis said, so the more specifics they provide, the better. “Lack of detail (on RFIs) is the biggest problem we have,” he said. For example, “If a question involves a civil engineering issue that you can’t answer, you need to bring in the professionals who can help you answer it,” he added. Because RFIs are “used to eliminate communities as quickly as possible,” Comerford said, it’s vital to get it right and show an understanding of “what assets you have and how that benefits the process.” The more economic development groups can organize and simplify information for companies, the better their chances for making it to the next round. “It’s your job to know everything there is to know about your community — or how to find it,” she said.
Prospect Visits: Many companies, especially foreign ones, still prefer to visit finalist communities in the running for projects, according to the panel. Rather than putting together an entourage of community leaders, Mullis recommended choosing two or three key people to escort prospects around town. “The first impression is critical — it’s the only shot you’ve got,” Mullis said. Communities should never take these visits lightly and go the extra mile to prepare for them, experts agreed. “The first thing you want to do (when they arrive) is orient them,” said Comerford, who recommends pulling out a map so “you can be showing them things while you’re talking to them.” CEOs can detect any kind of dissension within local leadership, so it’s important to “eliminate the voodoo,” Williams said. He recalled an Asian investor who was sold on a community — until he had dinner with local leaders who were at odds. “He felt the tension in the group would ultimately cause problems getting deals done in the community, so he decided not to locate there,” Williams said.
Economic development professionals have every reason to be optimistic about attracting projects in the future, Mullis said, especially with the recent wave of reshoring due to the rising costs of operating abroad and unrest in the international labor market. His best advice to economic development professionals?
“Be a jack of all trades,” he said. “Learn how to put networks of people together.”