A new survey released recently from the Site Selectors Guild on corporate location decisions finds that as the U.S. emerges from the COVID-induced economic slump, the number of new manufacturing projects has increased rapidly while projects tied to office growth have slowed in the face of uncertainty about the future of the office and the impact of remote work. The survey also showed that corporations are putting increased emphasis on technology, diversity, equity & inclusion, and sustainability in the site selection and expansion process.
“Today's findings underscore the role of the pandemic in accelerating existing trends, while also debunking other popular claims that have arisen, including the demise of big cities,” said Chris Lloyd, Chairman of the Site Selectors Guild and the Senior Vice President and Director of Infrastructure and Economic Development at McGuireWoods Consulting. “Our members are among the first to have their fingers on the pulse of what’s driving corporate location decisions, so this survey provides strong evidence of how site selection has been impacted by the COVID pandemic and other current events. These key findings will shed light on the site selection concerns of corporate decision makers and how communities can stay competitive for projects in their target industries.”
The findings from the online survey and one-on-one interviews with Guild members, conducted in late May and early June 2021, are the fourth in a series of research conducted by the Guild since April 2020 to outline the impact of the ongoing Covid-19 pandemic and current events on economic development and site selection trends.
Office Projects Slow; Manufacturing in Full Gear
Location decisions for office projects remain largely halted as companies continue remote work policies. Guild members noted that it is too early to predict permanent changes to site selection for office projects including the size of such facilities and the changed work environments which could emerge. While hybrid remote work/in-office models are expected to become more commonplace, how those decisions impact real estate decisions are still unclear.
Guild members reported that manufacturing location decisions, meanwhile, continue to be especially active due to high demand for consumer goods and industrial durables. States that reopened quickly, and with clear and consistent rules, have been perceived more favorably by companies when deciding where to add jobs and make new investments.
Changes in office work environments and increased manufacturing output are resulting in two real estate implications, according to Guild members. Empty offices are giving older office and commercial buildings a second act as residential units or last-mile delivery hubs, while developers of industrial and warehouse space are struggling to keep up with demand as the production and distribution of goods have skyrocketed during the pandemic.
Tech Savvy Communities Gain Competitive Advantage; Virtual Due Diligence on the Rise
The pandemic has accelerated the use of technology across nearly all aspects of business. Guild members say that economic development organizations (EDOs) need to keep up with these technologies and find ways to make their communities shine virtually to stay competitive. This includes strategically leveraging virtual platforms for meetings that don’t require being in-person and investing in and making available quality drone footage and other virtual reality methods to showcase their communities. Guild members say that EDOs should also ensure they keep online resources up-to-date that showcase their communities.
Despite the rising importance of technology, Guild members noted that it cannot recreate human interaction and relationship building which is an essential factor in nearly all site selection transactions. As a result, while initial interviews and data analysis may take place virtually, Guild members say companies will still push for in-person site visits and meetings prior to making a final location decision.
Diversity, Equity & Inclusion (DE&I) Grows in Importance, Especially for B2C Companies
When asked how various industries are factoring diversity, equity & inclusion into the site selection process, Guild members reported the greatest increase in prevalence among large, multinational publicly traded companies and mid-to-large-sized IT companies, particularly those which are consumer facing. Guild members added that as DE&I becomes more important for talent attraction and retention efforts, a growing number of companies are seeking out markets where a diverse workforce with tech talent exists.
Across all sectors, Guild members say they’ve seen the biggest change in diverse representation at the board level which could impact future site selection decisions. They added that DE&I is more likely to be considered for site and expansion decisions for office locations, but talent accessibility and operating costs remain the top priority for most companies.
Green Energy Grows as a Site Location Factor, But High Costs Remain a Concern
Guild members reported that sustainability and green energy as a site selection factor is increasing among nearly all industries as companies strive for reduced carbon footprints and regulatory compliance, but the higher cost and perceived lower reliability of wind and solar energy remains an obstacle to its deployment. Industries such as heavy manufacturing, which require large and consistent amounts of power, are increasingly interested in incentives for renewable and green energy.
Outside of the manufacturing industry, Guild members say that tech companies have been looking for green power for some time but also want that power to be affordable. Many consumer facing companies are using more sustainable and renewable energy, but more questions are being asked about the cost.
The Demise of Big Cities is Overblown
Guild members agree that the demise of big cities is overblown, adding that migration patterns indicate demand for high-value locations. As people migrate, Guild members say a new generation of city dwellers will move to metropolitan environments, which will coincide with the new remote-work era. Guild members added that rising vaccination rates and decreased Covid-19 infections will spur a rebound in downtown recovery, tourism, and other industries centered on service and social interaction.