By Michael Trotter
A term that is often utilized within the economic development community really isn’t the best description of what is actually occurring: site selection.
You may read or hear about a company that is considering this part of the state for a new business operation. The report you may hear is, ABC Company is “selecting” a site. The economic development community is also guilty of propagating the term that isn’t the most accurate, as there are even entire businesses whose reason to exist in the first place is to assist a company with deciding on a new location. The individuals that work for such a company are called site-selection consultants.
Though “select” is the term that is frequently used in the economic development vernacular, a better description of what is really happening is “elimination.” For example, once a company determines it needs to establish a new operation, it issues what is called a request for proposal (simply asking for prospective sites to be submitted to the company).
This solicitation is referred to as a RFP, which is also a frequently used term by many other industries. As a result of the RFP being issued, the company may receive hundreds of responses. However, the job at hand is to select only one. Therefore, the company, maybe with the assistance of a site-selection consultant, begins to narrow down their choices, so it is actually looking for a reason to “eliminate” several sites.
The sites are narrowed down to three or so via this “elimination” process. It’s important to note that at this point in the process each of the remaining sites will work for the company. It is now that the term “select” may be more appropriate.
When a company decides to establish a new operation, there are numerous reasons why an area may be eliminated. Each year, Site Selection magazine, a magazine dedicated to the economic development industry, implements a poll and asks why a site may be eliminated. In the most recent survey, they asked corporate real estate executives why a site may be eliminated.
Based on their feedback, the following were top factors for deciding on a location:
- Workforce skills – Does the area have sufficient labor to support the company’s operation?
- State and local taxes – Are the taxes competitive with other locations being considered?
- Transportation infrastructure – Can incoming raw materials as well as finished product and employees travel to and from the location unencumbered?
- Utility infrastructure – Are water, sewer, electric, natural gas, and communications utilities in the immediate area adequate for supporting the company’s new operation?
- Land or building costs and supply – Is the cost of the site or building a reasonable price?
- Permitting and regulatory structure – Is the local and state permitting and regulatory environment conducive to operating a business? Is it a friendly environment, or are they “anti-business”?
When the magazine also asked site-selection consultants the same questions they had asked of corporate real estate executives, their list was very similar, but they also added incentives to the list. For example, the availability of incentives at the state and local level is also an important factor for deciding on a location. Incentives can be very important early in a site investigation. Another way of saying it is, does the state and local municipalities even offer economic development incentives?
Yet another important factor is the state’s economic development strategy. For example, does the state have a central economic development organization, and are they good to work with?
The next time you hear or read about a company that is considering this area for a new business operation, it’s important to realize the process described above takes quite a while, perhaps even a couple of years. It’s not a quick process.
Michael Trotter is the founder of Bearing Resources Inc. Prior to founding Bearing, Michael 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.