What Site Selection Consultants are Saying Lately - Part 1: Deal Flow, Incentives, and Reshoring

EDCUtah business development staff recently listened to three webinars that had panels comprised of some of the top site selection consultants in the country.

To assist our public sector investors, here are some notes from those sessions.

 

Deal flow volume

  • One consultant remarked: “We’re seeing many more RFPs now than we were in April when things were largely at a standstill.”
  • Another said: “Lots of projects are still planning to be in the field this summer – activity hasn’t slowed down that much.”
  • A third observed that a general balance has been struck. “Some industries have obviously been hit incredibly hard, but industries like food manufacturing, distribution, and life sciences have picked up immensely.”
  • Hurry up and wait, then hurry even more. Those projects that have been put on hold, have NOT had their delivery date pushed back; this is going to create immense stress on timelines and deliverables for all parties involved.
  • Going forward, project scope and requirements are bound to be different from the pre-pandemic norm given the changes that will occur regarding teleworking, necessary office space, etc.

 

Incentives

  • Declining tax revenues and the continued demand for incentives may cause friction in some jurisdictions.
  • Incentive priorities remain 1) access to capital, 2) entrepreneurial/workforce development, and 3) infrastructure.
  • “Leverage your assets” – don’t try to be all things to all people.
  • Offsetting project costs, rather than ongoing operational costs, may become more important in light of COVID-19.
  • Open and honest feedback/dialogue during incentive negotiations will become more important than ever. 
  • At one session there was discussion around the topic of bringing remote workers into compliance with incentives.
    • More communities are moving toward allowing this, even before the pandemic hit. In addition, consultants are trying to re-negotiate existing incentives that were already in place due to challenges being faced by companies.
    • States should consider including remote workers in their incentive packages if they do not already. Virginia made this change last year; Tulsa has an incentive to bring non-residents to Tulsa to specifically work remotely.

 

Reshoring

  • A large majority of the Site Selectors Guild thinks that COVID-19 will have a major impact on supply chains but:
    • Reshoring is easier said than done.
    • Many companies may pursue a China +1 or an Asia +1 strategy.
  • Historically, “cost has been king” with labor as the key cost driver, however:
    • U.S. labor costs were 32X China in 1980 but today they are closer to 4X China.
    • Reshoring has been dampened by the rise of domestic consumption in China.
  • Risk is becoming a more important part of the decision-making matrix.
  • Industries most likely to reshore: Transportation equipment, Basic Chemicals, Navigational equipment, etc.
  • Another consultant’s opinion: Short of heavy federal subsidization or regulation, reshoring of pharmaceuticals does not make financial sense. If it’s not heavily subsidized, it has to be heavily automated. The consultant expects to see diversification out of China and India, but to other markets in Asia, not back to the U.S.
  • One consultant notes an increasing push for transparency around “Made in the U.S.” provisions.
  • U.S. withdrawal from international trade agreements could encourage reshoring.

 

As you can see, there is some variation in opinion, nonetheless these insights and comments can inform your planning for future projects and site visits. Questions? Please reach out to our Business Development team at https://edcutah.org/about-us.

 

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Tue, 06/23/2020 - 09:53