McGowan moderated a panel at the WERC 2106 conference in Providence, RI. The recording of the event is linked here.
The following article appeared in the WERCSheet July/August 2016 edition
“You can have a great location, a wonderful property, and be in a very nice community, but if you can’t attract, retain and sustain a quality workforce no matter how good your processes are, you’re really in trouble”. – Mark Beattie
Site Selection Insights
Expert observations, tips crystallize process parameters.
There is a significant flaw in many, if not most, site selection initiatives that could and often does a negative impact on the project’s outcome, members of the site selection panel observed. The panel, comprised of individuals with extensive experience in the diverse phases of the site selection process was moderated by Kevin B. McGowan, president, McGowan Corporate Real Estate Advisors; and included Tim Feemster, Foremost Quality Logistics; Richard E. Hollander, executive vice president, Society of Industrial and Office Realtors (SIOR); Mario Camardella, manager, business attraction, Virginia Economic Development Partnership; and Mark Beattie, principal, Hickey & Assiciates, LLC.
And the “flaw” that was referenced is the lack of sufficient resources being dedicated to the site selection initiative. Specifically, Beattie observed, “The first big mistake in site selection projects that at the outset the companies or clients don’t have a full complement of internal and external team on board. “There are a number if disciplines within the company – operations, engineering, manufacturing, finance, tax, public relations and government affairs, among others, who need to be on-board from day one. The external team, primarily the consultants and other appropriate interests (real estate) should be included as they tend to drive the early dialog.
The early dialog is critical, he points out, as the discussion is primarily about the strategic intent of the project and offers some early views about how it will be accomplished. “With the parties involved, everyone gets to understand the strategic impact, and they all hear the same questions and answers early on,” he explained.
“The key from the typical site selection perspective in today’s world is to start with understanding what are the goals and objectives of the organization and how does it fit into the overall strategy of the client, to make sure that we as site selectors are bringing in the right value,” Feemster shared. “Every aspect of the site selection process under consideration will take time, and the key is to kick it off right at the beginning, making sure that you have a cross-functional team that’s going to carry the elements forward to effect the correct decision.”
Top criteria to consider
Having experience in a variety of different types of the site selection projects for different types of usage, Beattie noted that the criteria are very similar. “It’s really more of a matter of prioritization relative to what you’re trying to do and what you’re trying to establish,” he said.
The top criteria he observes today is the need for a skilled workforce. “You can have a great location, a wonderful property, and be in a very nice community, but if you can’t attract, retain and sustain a quality workforce no matter how good your processes are, you’re really in trouble,” he argues. Market growth and proximity to the customer, infrastructure (supply chain and industry cluster), taxes, regulatory risk are all factors, along with quality of life, utility, energy and public incentives.
“These are typically the “big dogs” that are in play, but clients tend to move them around to some degree and apply in a macro/micro basis various percentage amounts of how they are weighted against each other,” Beattie explains. As an example, he mentioned that labor represents about 35 percent to 40 percent when making a decision as to a site location.
Meanwhile, Feemster noted that when discussing a “strict DC operation in a supply chain world, CSCMP numbers say over 60 percent of the cost is transportation. Therefore, you have to get your transportation right before you figure the geo and right after that it becomes labor availability, cost of labor, infrastructure, intermodal, and criteria like that.”
Brokers and business development sources
McGowan noted that there’s a large volume of criteria that must be gathered and managed and suggested brokers as a resource to assist in the site selection initiative. Hollander, of SIOR, discussed the role of SIOR-certified brokers, who have extensive experience in industrial and office real estate. “Not only do we find space for our clients, that’s a small part of our role,” he explained. “The brokers in our network assist the client in evaluating the options and negotiating the transaction, as well.”
In many cases, he said, they also ensure that the client’s real estate strategies are in line with their business strategies. Additionally, they recommend certain specialists (i.e., experts in incentives) to assist the client to attain the optimum solution.
Mario Camardella, of the Virginia Economic Development Partnership said that their goal is to be a source of information, to help make the site selection process somewhat smoother and move it a bit faster. For example, they maintain a database of available buildings and land for consideration and review. They also are available to introduce the company to the correct sources and service providers in the local community and at the state level they can serve as a bridge to various departments, such as taxes, labor and environment.
“We work with our clients and the various state, local and regional business development agencies to develop partnerships and build relationships with them,” according to Beattie. If it is a short-term project, like location an available building or filling a specific need it’s one sort of relationship. However, if it is a major, long-term project (build-to-suit) that suggests a totally different partnership.
“This type of partnership drives a different discussion, primarily about what type of support can be derived,” he explained. “The economic development people can really educate our end client along with our clients to prioritize what they really need, because they’re not going to get everything, but what they do absolutely need that will make a real difference for their operation at start-up and ongoing”
Beattie shared, “You’re going to need the economic development group in the community while you’re there for something, so it’s important to build a partnership that you can sustain and have respect and ensure that you become part of the community so they can do their part to support your business and help you grow”.
And Feemster acknowledged, “Even though many industrial projects don’t qualify for a lot of incentives, it is important to get to know your local, regional and state economic development folks because it is important to understand the services they can provide and the partnership you will need during your tenure.”