How Industrial Companies Can Maximize Interest from Economic Development
by Josh Bays, on Feb 10, 2023 9:30:00 AM
The unprecedented growth of industrial activity in the United States has been well documented. Judging by the collective pipelines of site selection professionals and economic development organizations, industrial investment seems as if it will remain strong in 2023.
But as manufacturing activity rises, so does the competition for resources such as workers, real estate, utilities, transportation service providers, support services, and economic incentives. In this highly competitive landscape, there is an additional resource that is becoming more constrained, which impacts the way manufacturers should approach their site selection process. This less-than-obvious constrained resource is the support provided by economic development organizations (EDOs).
Broadly speaking, support from EDOs can come in the form of proactive investments in sites and infrastructure, initial project location assistance, the granting of economic incentives (and in extreme cases, changes in legislation), and/or general business assistance after a company has chosen a location for its investment. Often, a successful project benefits from all phases of economic development support.
Traditionally, EDOs allocate their support on the merit of a project’s job creation, payroll schedule, and capital investment commitments, as well as the project’s alignment with the region’s target industry objectives. And in today’s recent industrial boom, it is safe to add “project legitimacy” to that list.
As industrial activity has increased in recent years, so has the perception among EDOs as to what constitutes “a quality manufacturing project.” In an era where an unprecedented number of large mega projects in sectors such as electric vehicles, semiconductors, and green technology are investing billions in capital and creating thousands of high-paying jobs, the threshold of interest from economic development is rising quickly. EDOs can be faced with tough choices to determine how to spend their scarce time and resources: Should it be working to attract the next brand-name EV plant or the next phantom technology company?
Site Selection Group, a full-service location advisory, economic incentives, and corporate real estate services firm, strongly believes companies are better served knowing what exactly will move the proverbial needle prior to commencing their site selection projects. Based on recent project experience, Site Selection Group recommends companies consider the following five methods for better positioning their site selection projects to maximize support from EDOs.
1. Demonstrate the project’s legitimacy and sincere interest before talking about economic incentives
Site Selection Group firmly believes that location decisions should be based on a community’s ability to satisfy a project’s operational needs such as workforce, logistics’ efficiencies, business environment, regulatory climate, and other factors. However, economic incentive packages for most manufacturing projects can be substantial enough to help companies draw distinctions between a set of competitive semifinalist options. Therefore, Site Selection Group believes it is critical to navigate the site selection process in a manner that prioritizes operational factors yet maximizes leverage for economic incentives.
Unfortunately, EDOs (and Site Selection Group for that matter) have been inundated in recent years with requests from “less-than-legitimate” projects that may have unbelievable job counts and fast ramp-up periods, unrealistic utility requirements, and other far-fetched numbers. Too often, these types of projects place economic incentives at the core of their initial or ongoing business plan and, as a result, let the prospect of economic incentives steer the project too early in the process.
Simply stated, EDOs have become weary of confidential companies that start the conversation by asking for hefty economic incentive proposals. As a result, Site Selection Group recommends that manufacturing companies demonstrate the legitimacy of their project and showcase the prudent manner in which they’ve narrowed their geographic focus before seriously addressing economic incentive proposals.
2. Tell the company’s story in a way that resonates with the community
EDOs want to get as much public relations mileage out of project announcements as possible. Site Selection Group recommends companies position their project in a manner that gets EDOs excited about the company’s story and products early in the process, even when a project is still strictly confidential to the broader public. If an EDO believes the company’s story will generate positive publicity post announcement, they will prioritize the project over one with similar specifications, but which has a less compelling narrative. Site Selection Group suggests incorporating product demonstrations and corporate videos, environmental, social, and governance (ESG) policies, as well as diversity, equity, and inclusion programs into the courting process.
3. Express the desire to be a good corporate citizen
EDOs want companies that will ingrain themselves in the community through charitable causes, support for economic development, participation in industry organizations and involvement in community functions. Site Selection Group recommends companies showcase to prospective communities how they’ve achieved the same level of involvement in their existing locations. In fact, Site Selection Group recommends that ease of establishing themselves in the community should be part of the overall site selection scoring criteria.
4. Ensure the project’s timing requirements are realistic
Far too often, companies internally generate project timelines that are painfully unrealistic. An unfortunate truth of the manufacturing site selection process is that it typically takes longer than most companies hope, especially if it is done correctly. In a hyper-competitive landscape where EDOs must prioritize projects to which they’ll dedicate resources, those projects that have realistic timelines will undoubtedly get preferential treatment. Site Selection Group recommends companies fully vet their project timelines with the various service providers that can confirm the timing of each project stage.
5. Consider disclosing identity once the geographic focus is narrowed
Site Selection Group recommends companies consider confidentially disclosing the company’s identity once the geographic focus is narrowed to the semifinalist communities to demonstrate project legitimacy. In Site Selection Group’s experience, EDOs will justify dedicating more resources to a known project than it will a nameless project with only a codename. Of course, this requires a thorough approach to navigating the nondisclosure agreement process, but confidentiality is something most EDOs take very seriously.
Each of these five methods for maximizing support from EDOs might not be applicable for every manufacturing site selection project but checking as many of these boxes as possible can go a long way toward generating the best result. In this competitive economic cycle, it is more important than ever for companies to have the proper advisers in place to best position their projects.