Gray Swoope is the president & CEO of VisionFirst Advisors, a consulting group out of Florida. In addition to his work in site selection, Gray spent numerous years working in economic development. He served as Secretary of Commerce for the State of Florida, was the CEO of Enterprise Florida, the state’s public / private partnership similar to Enterprise Florida, and was the executive director of the Mississippi Development Authority. More recently, Gray and his team worked with Amazon Web Services (AWS), EDCUtah Project Magnum, that’s going into Salt Lake City. Gray joined us for a virtual town hall on COVID-19’s impact on the site selection process.

What trends are you seeing in terms of deal flow and demands for commercial real estate?

I’m going to segment deal flow into two categories in terms of what we are seeing. VisionFirst is very fortunate to work with five Fortune 500 companies and in that particular sector, what they’ve had on the books and what they’ve already planned is moving forward. In the other category are the more mid-sized, maybe family-owned companies that we work with. These companies are worried about capital, they’re worried about where the future is and they have hit the brakes on projects and are just kind of seeing where they are going to go. I do see a trend, and this is good for you guys in economic development, where our existing clients instead of looking where they’ve had projects or were considering moving forward with one, are looking at where they have the capacity to build out where they already are. That’s something you can do without a lot of travel and doesn’t require as much due diligence as trying to figure out a new location, but they can continue to build out. For clients that are growing like AWS right now, that were already growing but are now even more so than before this all started, the build out is especially important. We’re seeing a lot of clients wanting to know how to expand existing footprints.

As for commercial real estate, I think it may be too early to tell what the impacts are going to be, but I do think people are starting to think about office space and expanding working from home. One group we are working with out of Memphis Tennessee is re-evaluating a building that is the planning stage to see how they can make a more resilient space to accommodate and new distancing requirements and future pandemics. Personally, here inTallahassee, I look at our footprint and I’m just thinking “why am I paying for that?”

Have you heard or noticed any differences amongst industries? Does this situation seem to be hitting one industry more than another, and are there any we can expect to bounce back faster?

I would say there are two industries that we work with pretty closely of which one is going to be more impactful for Utah than the other. The first is automotive, there was already a softening in the automotive market before COVID-19 pandemic and now with travel effectively ceased the demand for new vehicles has had a huge supply chain impact. We do a lot of work with Tier One suppliers and that’s dead. There’s going to be a ripple effect that we will see and even some that has opened in the last year – can they keep their commitments will be the big question. The other industry that’s being heavily impacted that we work with is aviation, especially for those who were suppliers to Boeing and 737 mats, you were already having some issues there.With planes being taken off routes, it is having an impact for demand for future components that go on an aircraft from a maintenance, repair, and operations standpoint.

As for sectors that are growing, certainly any cloud-based technology; anything that has to do with working remotely. COVID-19 has forced people that were hesitant to work from home, those who said “oh, we think we can be productive working in an office and really don’t want to go to working at home;” well they are finding out that people are just as productive or even more so when working from home. We are still seeing a demand on logistics. From a distribution standpoint, are expanding their locations and even some of those are looking at new ways to improve on distributional logistics standpoint.Especially when you look at Florida, where you have a distribution network now where the wheels have kind of come off so to speak – where you have crops ripening in the field, people need food, and yet we can’t get crops out of the fields due to distribution hiccups. We’re seeing them plow under acres and acres of fresh vegetables all because the distribution chain has been disrupted. I think you’ll see investment there.

To that point, I think we will see food processing, but in particular cold storage will be one of those growth sectors; there’s no doubt and it will be more regionalized. Putting on my economic development hat for a moment – the good news there is they’re very capital-intensive so that is an opportunity to generate tax base through regional growth.

You were working in economic development in the gulf area during both Hurricane Katrina in 2005 and the BP Deepwater Horizon oil spill in 2010. Since you were in key economic development roles during both significant upheavals, are there any lessons you learned at that time, anything you’ve learned or advice you might have for economic developers as they are dealing with the current economic upheaval?

There’s a real delicate line between where we are today and when I look back on Katrina and the BP oil spill and then moving to Florida and dealing with double-digit unemployment when I got there; the state had 12 percent unemployment when I joined the team. There is a common element in all of those that can be seen in this situation, what in the recovery I call the “restore.”

Trying to restore an economy to some semblance of what it was, so you can create some economic base and begin generating some revenue again. And regardless of it being Katrina then or COVID-19 now, the question is when do you start the process of restoring the economy? People are in survival mode. You’ve got people who are sick, you’ve got people facing disruption in income. People are worried about where they’re next meal is going to come from, if they will be able to make rent, and making sure they stay safe. And then trying to come in and start talking about restarting the economy when people are dealing with all that, it’s a difficult situation.

But I will tell you this: the sooner you can start having those conversations the better. I think back and Governor Barbour, the week after Katrina hit, he wanted me to go down to the coast and have conversations with some of the mayors. I personally thought it was too soon, but I will tell you that for them to just know people cared, that people were thinking about recovery, it gave them hope.

So, if there’s a time to have those conversations it’s now and I would focus on a couple of things. I would focus on the vision for the future.The conversation needs to focus on yes, we want to restore the economy as much as possible but do so in a safe manner. The recovery and restoration is going to have happen locally and regionally before you can start to even think about state-wide or nationally. You’ve got to think about resiliency now and that goes into the planning. You have to plan to restore an economy that is resilient to things like this. In Utah you have several counties that rely heavily or strictly on the tourism and hospitality industries. And so, it is time to think about how they can create an economy that is resilient to things like this. Those are the types of conservations to have now.

One final thought on this, I look at my state of Florida, and the state does this every time there’s a recession. They talk about diversification but then the economy heats up and it’s “ahh, we don’t care.” You look at Moody’s Index of States that are going to be hit hardest by a moderate or severe recession, unfortunately Florida’s at the top. Luckily forUtah, you’re in the middle of the pack for severe recessions, but for a moderate recession you’re in a really good position. Those rankings are based on“rainy day funds” and Medicaid needs. But all that said, I still those conversation about resiliency have to start now.

On that note of resiliency, what steps do you think states and communities can start taking to plan for resilient economies as we look to the recovery phase?

I think it’s time to look the areas where you’ve had continued issued in your economic development efforts. You look at rural America and you have some very rural counties there in Utah. Is there an opportunity now to help in terms of allowing affordable high-speed internet to some of these areas so that they can do what we are doing today, so that you could have telemedicine and support for healthcare? When you are planning for resiliency, I think it’s also an opportunity to look at how you can use the federal stimulus funds to some things you otherwise couldn’t do.

It's also an opportunity, just because of the amount of stimulus that’ll be out there; through traditional entities that will have plus-up funds, like US Economic Development Association (EDA), United States Department of Housing and Urban Development (HUD) through cities, disaster recovery funds – you can do things with those funds that can leap frog an economy to a different area. I look back at 2002 or 2003 when Florida was hit with about five hurricanes in a row. EDA put $11 million into an innovation hub at the University of Florida in Gainesville, and today that facility now has a second building and they’ve been able to generate a whole biotech research lab around what was a transformational type fund that came out of a disaster and was leveraged to move the area forward. So, I definitely think there are opportunities here. I don’t know if you guys are looking at it, but for the local people, I would be thinking about what do we have that we’ve been talking about that we really can put some legs on and there’s some opportunities for us to get additional funding to make that happen.

There’s been quite a bit of talk of reshoring key supply chain from China. Japan for example has set aside some of their stimulus to bring those key suppliers back to Japan. We’ve been through these talks before, but do you think this time is different? Do you think the talk is more real this time and we will see a real surge?

I do. I suspect we’re actually going to see federal policy that is going to mandate some industries to have facilities back in the UnitedStates. We don’t want to be in the position we are in today where we are reliant on other resources outside the country for things, we need to protect ourselves. My friends in DC are pretty much saying that there will be some policy we will see moving forward. For Japan to mandate reshoring when they are such a resource-needy country, I think it is a tell-tale sign of the future.

Looking at it from China’s standpoint, from a policy standpoint you need to address how to prevent something like this from happening again. It’s certainly not a positive factor from a global standpoint to see the wet markets of Wuhan opening back up in the last couple of weeks when there’s debate about if this started there or not. It just goes to show, when the world is uneasy, we are going to move forward and not make changes, then investment will be driven by risk and if risk is still great in an area, the private sector investment will go elsewhere.

What do you anticipate in terms of where we will be in the recovery come October? What sort of policies do you think will have been implemented by then? If you had a crystal ball what do you think it would show? 

We talk about this every day and you know my opinion changes daily. It’s hard to mitigate the risk of COVID-19. When you have a natural disaster, you can at least figure out if there’s going to be a finite end. That’s where our current situation is very different, we can’t determine out when this is going to end. We don’t know when we will have a vaccine or if there is a treatment, you’d don’t have to worry about have significant risk itself? Those are the big unknowns. I’m optimistic, I am always one that is going to look on the bright side. I feel that as a country, as people who are creative and innovative, we will figure out ways to move forward in new ways.It’ll be a very different manner, but we will continue to see people with new ideas. You already see it weekly and that by October, I think we will have a pretty good look at what the new normal will look like until the virus is truly eradicated.

Two months ago, we had sub 3% unemployment and now we are in a much different environment. Where do you see things going with talent in the short term?

People were spending tons of money trying to figure out the talent issue. I still think talent is going to be a driver in the site selection process, but when you start looking at the impact of people that are unemployed, the question is do they have the skills to do something different?I also worry about the marginal businesses that operate on such small margins and if they can really recover. The longer they’re closed, even if we put money into relief programs, they were so marginal in nature that I don’t know if they will be able to come back and it’s going to leave a lot of people without jobs. I’m hopeful the recovery from this won’t be as long as that of the 2008 recession, but I don’t think it will be a quick dip and we’re back to normal; the recovery will take time. To recover, to get people back to work it will take a transfer of skills, and so hopefully the country will put programs in place that will give people the opportunity to upgrade and change skills.

Have you seen any state or communities take some of the funds available aggressively invest in workforce development? Is this a transformational opportunity for our workforce, we have people out of work, you’re going to have a lot of resources, is there anybody doing anything innovative here?

I haven’t seen it happening yet, but I think we will. From a higher education standpoint with not having people on campus, is this the time that we could really do something to upgrade community and technical colleges; to upgrade skills in an online setting? Are there things that have little to no cost to people while they’re home and trying to figure out what the future looks like? We’re already seeing it from the private sector, but I haven’t seen it from the public universities at this point, but I think it’s a great concept.

What we’re seeing most people doing, just as you in Utah are doing, is supplementing federal programs with state programs and then some local areas, like here in Tallahassee, they’ve taken some of their economic development funds and dispersed it to businesses, as they’ve called it “the bridge to the bridge.” Now they’re doing it the same thing for some regional C6s – the not-for-profits that were not included in the CARE Act, they are doing the same thing, giving them a bridge to hopefully help them survive and especially for our needed services like mental health. A lot of those types of programs have been left with no future funding.

Last question for you Gray, and this is something we’re contemplating now with a couple projects is, what if any, changes do you think we’ll see in the site selection process? How do think do virtual site visits change going forward and do you see any technology solutions right now that help iron out some of the rough spots?

Yes, I think there’s affordable technology out there for local groups and I’d be glad to share that with you. There are several sites that you can actually put video on – Greg Word, our team’s technical guru can help you if you were interested in that – he knows how to program the drone, use a cheap virtual reality website you can base it on, link it to your site, and it’s been used before. We’ve actually used it, but it is still a little clunky as we continue trying to figure it out.

At the end of the day, I think this is exactly the reason what I said when we started this conversation – it is easier if you have capacity to expand where you already have a footprint. And I think that’s where you going to see expansion. It’s answering the question of how much risk can I mitigate virtually without having to put a foot on the ground and actually see for myself things that cannot see or may not feel through a virtual tour? I think this all gets better with time, but I still think at the end of the day to make the whole deal happen virtually is pretty difficult. Regardless, you have to be prepared, in fact we are working with another client on the economic development side to set up their own virtual site tours, and there’s some really inexpensive tools out there that can make you look good in front of the client and I would be happy to share those with you.

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