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PHIL HARDWICK — Pandemic expected to have an effect on site selection factors

PHIL HARDWICK

Each year, Area Development magazine publishes the results of its survey of corporate executives regarding their expansion plans and the factors that rank highest in their site selection decisions. In this column, we will look back seven years and compare those site selection factors with those in 2019. We will also speculate about which factors will be most affected by the coronavirus outbreak in next year’s survey.

Below is a list of the 2019 Top 10 site selection factors. The number in parentheses after each factor is where that ranking appeared in the 2012 survey. If there is no parentheses, it means that the factor was not listed in the Top 10 survey in 2012.

Highway accessibility (2)
Availability of skilled labor (3)
Labor costs (1)
Quality-of-life
Occupancy or construction costs (5)
Corporate tax rate (7)
Energy availability and costs (6)
Tax exemptions (9)
Environmental regulations
10. Proximity to major markets

The most obvious differences were Quality-of-life, Environmental regulations, and Proximity to major markets, none of which appeared in the survey of seven years earlier.

Businesses don’t like uncertainty because it makes planning for the future more difficult. The Environmental regulations category was certainly unsettled because the current administration had made rolling back federal regulations a priority. No less than 90 rules and regulations had been rolled back or were in the process of being rolled back. At the top of the list were air pollution and emissions, drilling and extractions, and infrastructure and planning. Although many of these rollbacks were championed by business interests, the threat of litigation and the prospect of a change in future administrations created uncertainty.

Quality-of-life appears at number four on the list for the first time. However, it is noted that Area Development had quality-of-life as a sub-survey in its 2012 and 2013 surveys. Respondents to the survey were interested in this factor as it is becoming increasingly important in attracting skilled labor. So what are Quality-of-life factors? In the earlier surveys, Quality-of-life factors included the following:

Low crime rate
Healthcare facilities
Housing costs
Ratings of public schools
Housing availability
Recreational opportunities
Colleges and universities in the area
Climate
Cultural opportunities

Back in 2012, the number four factor in the survey was Availability of advanced ICT services. That issue is deemed to be resolved as those services are now assumed to be available. Available buildings was ranked number eight.

Back to number one on the list, Highway accessibility. With 80% of U.S. communities served exclusively by trucks and more products being delivered to the customer, it is no surprise that this factor is so important.

State and local incentives was becoming a factor in 2012, when it was ranked number 13 on the list, and had moved up to number 8 on the 2012 list. It did not make the Top 10 in either 2018 or 2019.

Low union profile was ranked at number 10 in the 2012 survey but was absent in the 2019 survey.

What was on the list in 2012 survey, but not on the 2019 survey? Availability of advanced ICT services was ranked number four.

Looking ahead, it is speculated that factors two, three, seven and nine will be most affected by the coronavirus outbreak.

There will be no shortage of labor, only shortage of jobs. Before, respondents to the survey cited Availability of skilled labor as the number two site selection factor. Because of what amounted to full employment, companies had to hire the “already employed.” Doing so, tended to drive up labor costs in many areas. Now, with so many layoffs, skilled labor should be easier to find. That may even drive down average wages.

Energy availability and costs will not be a factor for a while because of current low and falling energy costs. The nationwide average for a gallon of regular gasoline was $1.85 and the average for diesel was $2.51, according to the U.S. Energy Information Administration’s April 13 Gasoline and Diesel Fuel Update. Because of the global oversupply of oil, prices have also dropped, which will result in lower energy costs to run manufacturing plants and heat and cool commercial buildings.

For more information and details about the survey, check out Area Development’s 34th Annual Corporate Survey online at
https://www.areadevelopment.com/Corporate-Consultants-Survey-Results/Q1-2020/34th-annual-corporate-survey-16th-annual-consultants-survey.shtml.

» PHIL HARDWICK is a regular Mississippi Business Journal columnist. His email address is phil@philhardwick.com.

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