6-Step Site Selection Process to Finding the Optimal Location
by King White, on Feb 15, 2022 9:30:00 AM
Like most industries over the last decade, site selection has become more data-driven due to greater access to more data and information. Cloud-based programs and software tools can quickly analyze large amounts of economic and site selection data to evaluate locations. City, regional, state, and international databases can help you evaluate vast geographies quickly as long as you have access to reliable data.
However, data only goes so far. It is critical to understand that data only solves a part of the site selection equation. For example, demographic data is often obsolete the day it is released, especially in turbulent changes in the economy like we have seen during the covid pandemic. As a result, data must be supplemented with original market research to uncover true market conditions. The impact of making the wrong location decisions can be costly when trying to locate capital-intensive corporate facilities such as manufacturing plants, distribution centers, headquarters, IT/software engineering and design, call centers, data centers, and other large-scale projects.
Below are six key site selection steps that help companies find the best locations, whether just around the corner or on the other side of the globe.
Step 1: Assemble the project team.
The project team includes individuals from the executive team, real estate department, business unit, logistics department, human resources, tax department, and site selection experts. This multidisciplinary team moves forward on all fronts together, maximizing collaboration, communication, and speed.
Step 2: Understand the project drivers.
Project requirements must be thoroughly understood at the deepest level. Asking the right questions is aided by the cross-collaboration of skills and knowledge of the project team. Team members work together to analyze data, technology requirements, timelines and schedules, labor needs, capital investment, transportation and infrastructure, and real estate needs.
Step 3: Filter geographic locations.
The team implements a geographic filtering process that evaluates hundreds of locations, eventually identifying the 5-10 sites with the best potential to meet the project’s goals. Key site selection factors include demographics, workforce, cost of living, utility costs, business climate, tax rates, logistics/distribution, inbound/outbound materials, and other variables.
Step 4: Take a deeper dive.
An in-depth analysis of the 5-10 sites is then conducted to identify the top two or three contenders. This rigorous process factors in many other site selection considerations. This process utilizes input from economic development experts in these states and locations which are then evaluated by the site selection and economic incentive experts. A model that scores each location based on a number of quantitative and qualitative factors is then used to identify a shortlist of the top two to three sites.
Step 5: Boots on the ground.
The project team then carries out due diligence through on-site visits to see what each community has to offer. Tours typically take one-two day per location in the U.S. and up to a week for international destinations. The information exchanged during communications with community leaders and economic development officials help the site selection team understand at a deeper level the qualitative differences between each finalist location.
Step 6: Picking your new location.
It is possible the winning location will be obvious after the tours are finished. If not, the project team will start simultaneous negotiations with the communities involved regarding economic incentives and real estate needs to see which location can provide the best economic/financial terms. Critical factors include rental rate/purchase price, site infrastructure, inducements, improvements, renewals, expansion, and contraction rights.
Economic incentive compliance is often overlooked
Once the deal is signed, the traditional site selection process may be over; however, companies often lose sight of the compliance required to receive and maintain the local, state, and federal economic incentives that were such a vital part in making the final decision. Such compliance requires hitting investment/hiring benchmarks, which are verified through the submittal of payroll reports, employee training expenses, capital investment, and real and personal property tax information to multiple economic developments and government entities. This financial data is submitted monthly, quarterly, or annually; if the business fails to meet its obligations as outlined in the agreement, it may lose some or all of these economic incentives.
Even with high-powered search engines, 24/7 databases, and data analytics, the site selection process is highly knowledge-intensive and is very difficult for companies to accurately self-perform, especially within a compressed timeline. To minimize the risks of making a bad location decision, many companies hire experts who proactively maintain global location intelligence data, possess the tools to evaluate locations and have the hands-on-experience across various locations. Most importantly, they know where the data is, how to access it quickly, and have strong working relationships with all the state economic development agencies, that are hungry for new projects and willing to act quickly and creatively to seal the deal.