Area Development’s Critical Site Selection Factors

Over the past few months, Area Development Magazine has published its latest look at the top factors in site selection. While the specific criteria can vary project to project, here’s a summary of the ten most important location drivers as voted on by the magazine’s readers.

Energy Availability and Costs
Energy availability and costs is ranked tenth on the list and for a very good reason—it is important for every project and increasingly more important for businesses using large amounts of power. There are many energy–related considerations, including capacity, reliability, rates, generation sources and ability to meet timelines. It is becoming increasingly more important to find an energy partner that generates power from renewable energy sources.

State and Local Incentives
While incentives tend to be the cherry on top as opposed to a main attraction for any location, they are still a major site selection factor, which is why state and local incentives are ranked ninth. Incentives can make any package more attractive and nudge out the competition in the final stages of the selection process, especially if there are unique incentives.

It is becoming increasingly more popular to offer creative incentives that address the shortcomings of any location—such as the skills gap. Offering incentives that include job training and education to the labor pool so that the right talent is available can create a huge advantage when competing for any project.

Proximity to Major Markets
While being close to consumers has always been a focus for industry, it has become even more critical in recent years as products need to be delivered faster. This is why proximity to major markets is included on the list of critical site selection factors in eighth place.

Corporate Tax Rate
As companies increasingly have more options globally as to where they can place their business, corporate tax rates are the seventh most important factor to be considered. Corporate tax rates don’t necessarily need to be the lowest to land a new project. Companies are willing to pay moderate taxes if they are able to see a return on investment in infrastructure, education, healthcare and public safety that have benefit for both the company and its employees.

Labor Costs
The cost of labor is always one of the largest percentages of total cost for any company’s operations, which is why labor cost is ranked sixth. And when highly skilled workers are needed, quality matters just as much as cost. Right to work states typically have lower wages and are less unionized, which can be a big draw for some manufacturing companies.

Available Buildings
With vacancies at an all time low and many companies competing for the same spaces in major markets, available buildings are increasingly becoming a factor in the site selection process and are ranked fifth on the list. Finding vacant buildings instead of building new ones is important for companies who want to start operations quickly.

Occupancy or Construction Costs
Occupancy or construction costs land fourth on the list as these costs are trending upward as much as 25 percent in some markets. While these costs don’t typically drive the location selection, they are still an important consideration.

Quality of Life
It is easy to understand why quality of life lands in the number three spot. While attractiveness is different for everyone, it is important that quality of life focuses on retaining employees as their lives evolve. The trend now is to attract Millennials, but eventually they will settle down and raise families and your location needs to be attractive for every stage of life.

Highway Accessibility
Going hand-in-hand with proximity to major markets, proximity to major roadways falls at number two. The further away a location is from the highway, additional freight cost and shipping time is added—increasing the overall cost of logistics. It is forecasted that trucking and freight costs will increase in the coming years.

Availability of Skilled Labor
“It pretty much goes without saying that any operation—new or expanding—will need an adequate supply of workers who have whatever skills are required to do the job well.” Steve Stackhouse-Kaelble, Area Development writer.

 Not surprisingly, the availability of skilled labor ranked as the number one most important site selection factor. With the uptick in the economy, technology advancements and an aging workforce, it is critical to attract and retain the right talent. Workforce development, the ability to train or retain existing labor, should be a focal point of local economic development agencies.

If your business needs support with selecting a new site, please let us know. As part of our site selection process, we can help your company identify and evaluate your specific location requirements.

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