Key Site Selection Tips in a Hyper-Competitive Industrial Market

Site Selection Group, an independent location advisory, economic incentives and real estate services firm, completes more than 100 corporate projects per year for a variety of companies including those with manufacturing plants and distribution centers.

The current hyper-active industrial marketplace has had a profound impact on timelines associated with the site selection process. Either a company has a speed-to-market concern, i.e., it needs to add capacity now. Or, it is being forced to move quickly to box out the competition, i.e., the best community and site options are getting spoken for.

Navigating the site selection process with lightning speed has become the new normal. The following are five relevant themes industrial companies should be aware of as they commence their site selection projects.

1. The industrial real estate market has reached unprecedented levels of activity

Those involved in all aspects of the industrial real estate market will tell you they’ve never seen activity like what’s occurring in the current marketplace. Buildings are being leased and sold in record time, and the industrial development community is banking land at a record pace especially in attractive markets such as Dallas, Atlanta and Phoenix. This is forcing industrial companies to make very quick transaction related decisions, and it is rapidly escalating overall occupancy costs. Additionally, it is making it more difficult for industrial companies to own their property in larger markets without moving to the far periphery of the metro area or considering secondary or tertiary markets.

2. It is critical to have a complete internal team built from the beginning

Properly navigating the site selection process can be a complex endeavor that requires a high degree of cooperation and coordination across multiple disciplines. Given compressed timelines, having all internal business units aligned with the process and their roles on the project team will help mitigate unnecessary delays.

Based on Site Selection Group’s experience, a complete project team should include stakeholders from operations, supply chain, finance, human resources, real estate and tax. In addition, it is imperative that all stakeholders be informed throughout the entire process even though their individual involvement might ebb and flow as the project progresses. Furthermore, Site Selection Group recommends companies designate an internal project manager that has the authority and internal respect to keep the project moving.

3. Invest in the resources to hone your project specifications before starting the site selection process

Often, companies are typically anxious to commence the process, but unfortunately their hastiness sacrifices the accuracy of their project specifications. In a dynamic marketplace where decisions have to be made quickly and candidate options are being gobbled up by the competition, starting the process before these are properly defined (or changing specifications mid-course) can have a costly effect on the ultimate location decision. At a minimum, Site Selection Group recommends spending the proper time and resources to tighten up headcount, wage and capital investment figures, as well as technical real estate and utility requirements prior to starting the search. In fact, we often help clients engage technical design and engineering resources to aide in the process.

4. Underestimating how the economic incentive process can impact project timelines

Some companies can become enamored with the topic of economic incentives to a fault. It is natural for companies to enjoy being monetarily rewarded for creating jobs and investing capital into a community. However, many companies underestimate realistic timelines associated with securing incentives and how that impacts the site selection process. More specifically, there are instances when companies simply cannot wait on the approval process for a certain program due to the dynamism of the real estate market or their own speed-to-market needs.

One of Site Selection Group’s core philosophies is to find the optimal locations that ensure our clients’ on-going operational successes, and to only use economic incentives to draw meaningful distinctions between a set of competitive semi-finalist locations. And because we recommend not letting incentives drive the process, there have been recent instances where we’ve had to help companies weigh the cost-benefit of foregoing a certain incentive to keep a project on schedule.  

5. Benchmark existing locations in the site selection process

Site Selection Group strongly recommends companies benchmark their existing locations throughout the site selection process. There are two fundamental benefits that are derived from employing this practice. First, it enables the company to understand what options they have in expanding (or shifting) capacity within their existing footprint prior to making a new location decision. Logistics and risk mitigation notwithstanding, it is usually more cost-effective to expand an existing operation than commence a greenfield project. Secondly, it provides companies a relative sense when comparing qualitative and quantitative data points of new candidate locations. It is always easier to make sense of a new candidate location when comparing it to somewhere in which you have operational experience.