What is Site Selection

Feb. 4th, 2012
Julie Engel

Generally speaking, to find the most appropriate site for a business from an economic and operational perspective. Varying approaches range from holistic analysis that considers the best region for a firm to locate based from a long-term strategic perspective in which the actual building or site is an afterthought; to the actual physical facility determining the location. Internet usage and the increase in international sales have created an evolution in the Site Selection process. There is a significant increase in the number of companies providing site selection services, with multiple specialized consultants working a single project or simply a real estate broker making the case for the company based upon available buildings. Recent large announcements have garnered a great deal of press due to the enormous cash incentives used to “win” projects. Volkswagen chose to locate in Tennessee and was awarded $250 million by the state. This has created an environment that demands an increase in the use of incentives. Gov. Brewer responded to this pressure last year by creating the Competitiveness Fund. Site Selection used to involve much more face-to-face interaction, more personal involvement in the decision making process. Decisions have been reduced to a few short months as opposed to a year or 18 months. Site visits have been condensed into one or two days, where before the client would want to spend three to five days interviewing the local college, workforce, utilities and peer companies to ensure the community was a good fit. Today the tour consists of seeing a building or land site, lunch with a peer company or workforce team, maybe a meeting with the college if time permits and then they are off to another location to repeat the same agenda with a different community. An evolving trend is the use of multiple consultants; real estate broker, an incentives/tax specialist and a workforce analyst will all work the same project. The client wants to buy specialization, sometimes this is done by contracting each specialty or by hiring a large firm that has all three specialties within their scope of service. The first approach creates a lengthier process towards the decision making. When utilizing one company, the work is usually conducted in tandem. It is imperative the Economic Development Organization (EDO) know what types of projects will be successful in their communities and need to be able to respond to all the requests for information regarding the three specialties mentioned above as well as demonstrate a company’s return on their investment if they locate in their community. Ultimately the site selector’s goal is to eliminate the communities with the greatest disadvantages and the fewest advantages for their client. They aim to ensure their client will succeed in a location, not just today but for the future as well. Site Selectors do not make the final decision, they make recommendations to their clients and they prepare detailed analysis for their clients in order for them to make the decision as to where to locate. In some cases this is when the president, owner or plant manager will actually tour the top three communities recommended by the consultant; they may also add a community the consultant didn’t recommend but they personally wanted to see on their list based upon their own perceptions. Key factors considered in the initial search: • Business Strategy — This involves a comprehensive look at the business’s development strategy and all its nuances. Untapped markets, accessing a new workforce (talent), improving accessibility to clients or suppliers, reducing their overall costs or a competitive advantage within their industry. Mergers and acquisitions also play a role. • Operating Costs — Tax structure, transportation, labor, occupancy, utilities and the regulatory environment all fall into this category. • Risk Factors — Risk minimization within the three prior factors is a driving force in every project. Operational interruptions from natural disasters, labor unions, supply chain, etc. Utilities reliability or uncertainty. Rolling brownouts or recurring blackouts are intolerable. Meeting a company’s construction deadline if a build-to-suit or extensive building improvements are required for an existing site. Predictability in state and local government is considered a risk factor as well as the ability to demonstrate a stable tax environment. Each of these concerns must be mitigated and clearly demonstrated to the Site Selection consultant and the company; they can, with confidence, eliminate or mitigate these risk factors. The process begins for the Site Selection consultant by defining the project requirements, broad screening and cuts, identifying the shortlist and conducting site tours, negotiations (land/building, utilities, and incentives) then finalizing the deal. The role of the EDO is to be prepared in advance to supply the information necessary for the Site Selector to conduct their analysis, be able to mitigate and hopefully eliminate all risk factors, have broker controlled sites that are ready for occupancy with little modification needed and be able to showcase the community as a viable location for their project. This can only be done through partnerships with the state and local governments, local educational institutions, work force, brokers and our existing businesses who have clearly found success by choosing this location for their expansion or relocation projects. The number of jobs we are competing for continues to decline while competition continues to increase exponentially. To compete at the level required, there must be a commitment from all the partners listed. Cuts to economic development will diminish our chances to deliver all the necessary components in the Site Selection Process. Funding economic development is investing in our communities and our future. We have been doing more with less year after year and we have reached the point where we have to do less with less. We need the support of the public sector and the private sector in order to increase our capabilities and perform at the level necessary to succeed. Julie Engel is president/CEO of the Greater Yuma Economic Development Corp.

Julie Engel
President/CEO, Greater Yuma EDC
The Sun
Feb. 4th, 2012