Land and building costs are the primary factors for businesses evaluating locations for new facilities

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By Michael Trotter, founder, Bearing Resources Inc. 

There are numerous factors a business considers when choosing a location for a new operation. Previously, I listed several of those factors; if you didn’t read the previous article, the list was:

  1. Workforce skills — Does the area have sufficient labor to support the company’s operation?
  2. State and local taxes — Are the taxes competitive to other locations?
  3. Transportation infrastructure — Can incoming raw materials, as well as finished product and employees, travel to and from the location unencumbered?
  4. Utility infrastructure — Are the water, sewer, electric, natural gas, and communications utilities in the immediate area adequate for supporting the new operation?
  5. Land or building costs and supply — Is the site or building reasonably priced?
  6. Permitting and regulatory structure — Are the local and state permitting and regulatory environments conducive to operating a business? Is it a friendly environment, or are they “anti-business?”

In this article, I’ll elaborate on No. 5, “land or building costs and supply.” It’s important to note that the list may be considered to be in the order of importance, but it can also be construed as a simple list of the criteria all economic-development projects consider.

Although the list may be in an order of importance, my personal philosophy is that land or building cost and supply is actually the most significant factor. It’s my belief that, in order for a county to be seriously considered for an economic-development project, it’s paramount for it to first have a site or building that meets a project’s requirements. If a county doesn’t have a site or building available for a prospect to even consider, the other factors, which are usually critical, don’t matter. They can’t be a part of the decision process. There’s a saying within the economic-development industry that says nobody buys a car from a dealership without any cars on the lot. In other words, when you’re in the market for a new car, you wouldn’t ever think of visiting a dealership that doesn’t have any vehicles anyway.

This part of our state has experienced tremendous growth, resulting in wonderful job opportunities for the people who live here. This substantial growth has, however, reduced the number of sites that are available for future projects. Many economic developers across South Carolina, as well as across the entire United States, will say having a good supply of available sites and buildings is one of their largest challenges.

To help address the problem of the lack of buildings, many communities across this country build “speculative” — or spec — buildings that may be considered by a prospect. The implementation of a spec-buildings program is a much longer subject and can’t also be adequately covered in this article, but suffice it to say, their implementation can be a very important and legitimate technique for communities to use.

To better convey the problem I’ve described, assume a plastics company is shopping around for a new location. They’re a specific type of plastics manufacturer that must be serviced by a railroad. Railroad companies throughout the United State aren’t expanding their systems in significant ways by constructing new rail lines in a wholesale fashion.  Therefore, the number of sites the company could choose from is already inherently limited. Also, assume the company is only interested in properties that are 100 acres in size.

Now, imagine you’re the economic developer in the county where you live. You do indeed have a couple of sites at your disposal that are on the railroad. However, one is 25 acres and the other is 50 acres. Contemplate for a moment: What chances do you think your county has of being considered for the project? None. There’s not even a site that will meet the requirements. If there’s not a site that’s available, will your areas workforce skills come into play? How about your state and local taxes? What about the transportation infrastructure? What about the utilities? How about the permitting and regulatory process?

Any company considering a new location will consider all of the factors mentioned in the list. In reality, the company’s actual list of criteria will be even much more extensive than the list mentioned here. The ones in this article are simply some of the more critical ones that are common to every project.

After considering the perspective I’ve described in this article, perhaps you may also believe that “land or building cost and supply” is a key prerequisite if a county wants to attract a new company to their area.

Michael Trotter is the founder of Bearing Resources Inc. Prior to founding Bearing, Trotter enjoyed a 22-year career at Duke Energy, which included a managerial role within Duke Energy’s Economic Development organization, where he was responsible for economic development efforts in North Carolina’s Charlotte area, the Triad, and the Research Triangle. 

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