The Recession’s Impact on Corporate Site Selection – Trends Economic Developers Need to Know

By: Matt McQuade, Ohio Sales Manager, Ohio Business Development Coalition

Knowledge of corporate location trends can be leveraged into more effective planning and better sales execution. A significant portion of my time is dedicated to managing relationships with site selection consultants. Through such interaction, I have been able to obtain valuable feedback on how current economic conditions have changed the corporate investment landscape. This blog post details some of the more notable capital investment trends and their influencing factors.

The recession has not halted investment activity. The impetus for capital investment and the weighing of certain factors, however, are changing. More investments are being driven by companies trying to reduce costs and improve efficiencies. Many companies with decreasing revenue are trying to become leaner and more agile. As a result, many location advisors are experiencing the same workload, but it’s a different kind of work. More projects are driven by companies interested in “rightsizing,” which is a nicer term for consolidation.

The struggle to cut costs has resulted in many reassessing and optimizing their corporate footprint. Furthermore, projects tend to hover longer as the client requires more due diligence before moving forward. The good news is that companies are still expanding, often in an existing location. The bad news is that those same operations could move elsewhere under a consolidation. Following this trend is the fact that there has been less activity in identifying new sites. Just as companies are consolidating operations to leverage existing assets, growing companies tend to first consider return on investment at an existing location before considering siting a new one.

The weight given to certain elements that drive an investment decision are also changing. Incentives are beginning to be evaluated earlier in the process.  It is still unlikely that incentives will drive the decision, but requests for incentive information are coming earlier and at a higher frequency. Cash and up-front grants are generating more interest than ever, demonstrating the demand for a near-term bottom line impact. Training programs are also generating more interest than ever. A location’s ability to provide training assistance will help a company reduce operating costs and increase productivity. Training collaboration with institutions of higher education is in particular demand, such as programs where custom a curriculum can be developed such as the Ohio Bioscience Workforce Training Center in Cleveland.

Given that there are even fewer opportunities to attract new companies, today’s capital investment trends place an even higher value on making retention and expansion calls. Chances are much better, as usual, that investment oportunity will come from existing operations. So where should economic developers focus time during this recession?

1. Focus on retention and expansion. Meet with your companies to see how they are weathering the storm and to leverage their industry-intelligence.
2. Consider evaluating your local incentive programs to see if they can be modified to more closely align with what is in demand, such as local training options. Workforce development will likely be one of the first things mentioned by a company executive in a retention and expansion call and you may need to find ways to be creative.
3. Meet with your local institutions of higher education and master their capabilities. See what you can leverage and make relevant companies aware.

Despite economic conditions, there are still plenty of opportunities for a location to secure its economic future if sales opportunities are correctly prioritized.

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• Published under Ohio Business Climate Improvement, Region 8 - Northern Ohio