Survey examines top site selection factors

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Published: July 31,2006

To be successful in economic development is to know one’s community assets, know what nationally expanding industries are searching for and somehow match the two. That, of course, is easier said than done, but fortunately there are tools that can help make one of the tasks easier.

One such tool is a survey of what nationally expanding industries are searching for in their quest for new sites. Area Development magazine, a trade publication of the economic development field, conducts an annual survey that lists and ranks the factors that site selection consultants and corporate CEOs identify as most influential in the selection process.

The 2005 survey has been completed and found that the following are the Top 10 factors in site selection:

1. Highway accessibility 91.4%*

2. Labor Costs 87.9%

3. Availability of skilled labor 87.2%

4. State and local incentives 86%

5. Availability of high-speed
Internet access 85.7%

6. Corporate tax rates 85%

7. Occupancy or
construction costs 83.7%

8. Tax exemptions 83.6%

9. Proximity to major markets 83.2%

10. Energy availability and costs 82.8%

(* Percentage indicates the number of respondents ranking the item as “Very Important” or “Important.”)

Catching the eye

For the most part, the factors listed are consistent with previous years’ surveys. Highway accessibility, which ranks at the top in this survey, was in the number two position in 2003 and in 2004. Labor costs and availability of skilled labor had been number one and two the past two years.

Two items in the list caught this writer’s eye.
Availability of high-speed Internet access was not even on the chart in 2003. When the 2004 survey rolled around, it came in at 80.7%, placing it at number ten. This year, it’s at number five. High-speed Internet access is already considered primary infrastructure by companies that handle a significant amount of electronic data. Such companies could not even consider a community without this feature. Some federal government officials have even equated it to the need for electricity in the 1930s.

Any community seriously competing for large, new industries will quickly be out of the running if high-speed Internet service is not available.

Broadband penetration

Research has shown that there is a relationship between what’s known as broadband penetration, e.g. how connected a community is to the Internet, and income and geographic dispersion. In other words, the poorer and more rural a community then the less likelihood that there will be availability of high-speed Internet access.

Why is this so? The answer is a simple matter of economics.
Telecommunication companies have no desire to provide high-speed Internet service to a community if they cannot make a profit. Who could fault them for that? After all, we live in a capitalistic society. Nevertheless, because high-speed Internet service is so vital to communities in the technology economy, it is now the policy of the federal government to assist communities in obtaining the service.
One of the leaders in making grants and loans to rural communities in this regard is USDA Rural Development. Unfortunately, Mississippi has no champion at the state level on this issue. Those who want a model for how to bring high-speed Internet access to rural communities might want to look to ConnectKentucky for some ideas.

Powering up

The other item on the list that caught my eye was energy availability and costs. At first, I wondered why it ranked only number 10 until I realized that this survey was taken last year before the rising costs of energy was fully realized and accepted as a cost of doing business.

In the past few months, high energy costs have begun affecting the ways companies, especially those that use a lot of energy, do business. Even companies that do not directly use a lot of energy are still affected because of high transportation costs due to energy prices. Consequently, energy availability and costs will probably move up in the rankings in next year’s survey.

Economic developers and community leaders can use such a survey to compare their area’s assets with the factors that site selectors and corporate executives are searching for.

With good communication, hard work and a little luck the perfect match may be not far away.

Phil Hardwick’s column on Mississippi Business appears regularly in the Mississippi Business Journal. His e-mail address is phil@philhardwick.com and his Web site is www.philhardwick.com.

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