The Truth About Site Selection November 8, 2003 Bruce Maus, Corporate Real Estate Inc. Linda Lund, CRESA Partners * Site Selection 1. Why do Businesses Invest in New Facilities? 2. How Do Companies Make Location Decisions? 3. Site Selection Process * … in this world nothing is certain but death and taxes. Benjamin Franklin 1789 * and Change! Bruce Maus 2002 * Causes of Change • The world continues to shrink due to the speed and availability of information • Shift in the value of proprietary technology to process technology – Lester Thurow • Increasing consumer demands for products and services to be Free, Perfect, and Now (Robert Rodin) How has “change” made an * impact on location decisions? Rapid change creates uncertainty. Therefore, companies demand flexibility in facility solutions: – Shorter leases with options – Generic and flexible design – Exit strategy How has “change” made an * impact on location decisions? Compressed schedules – The start date moves but not the completion date – Demands for simple solutions to complex problems Pent-up demand – Wait too long to make decisions – the flood gates open * “I don’t know what my company will look like in five years” Recent quote from the CEO of a $2 billion company What drives the need for a new location? • Market opportunities • Labor market constraints • Corporate change (merger/acquisition) • Need to be close to customers • Other company specific factors • Cost containment How do companies make location decisions? Faster than Ever! Corporate Senior Mgmt Strategic Plan Oper’l & RE Business Units Strategic Plan +Corp.-Wide Facilities Business Units Strategic Plan +Facilities-Wide Project-Specific: Implementation: Real Estate + Projects Facilities Who makes the decision? • Human Resources • Finance • Operations • Consultants * Corporate Location Trends • Activity was down – before September 11 • Most active industries: – Pharmaceuticals – Biotechnology – Food Processing – Telecommunications – Electronics – Plastics – Customer Contact Centers – Financial Service Centers * Corporate Location Trends • Seek reductions in all costs related to operations • Economic slowdown – Sept. 11 Impact? • Retention of key employees • Some employers unwilling to be employer of choice (big fish; little pond) • Want it when they need it Corporate Location Trends * • Smaller communities and rural areas becoming increasingly popular – Better work ethic – Lower costs – Available land – Telecommunications - increased quality – Internet - can go anywhere Geography • Selecting a Region/Country • Selecting Communities • Selecting Best Sites Incentives • TIF/Tax abatement • Utilities • Government loans/grants • Block grants • Training dollars • Do they matter? Site Selection “Hey, we’ll be lucky if we ever sell this place!.... Well, it’s like everyone says.... location, location, location.” The Far Side by Gary Larson Site Selection Criteria • Key Issues: Location, Location, Location OR If you buy real estate, buy it with the thought in mind you may have to sell it tomorrow. * Site Selection Criteria • Key Issues: – Customers, suppliers, workforce • NOT location, location, location!!! – Transportation – Site/Building issues • Topography, scale, shape, condition, visibility, etc – Zoning/Use restrictions – Utility service * Site Selection Criteria • Key Issues (Continued): – Total Operational Cost – Labor • Supply • Quality • Cost • Transferee appeal • Training • Union • State regulations • Access to public transportation * Site Selection Criteria • Environmental Issues – Air emissions standards – Water quality, quantity, emission standards – Existing contaminants – Cultural issues – Endangered species – Development constraints • Protected wetlands, etc * Site Selection Criteria • Subjective Criteria – Business climate – Quality of life – Proximity to other operations and senior management * Sample RFP • Build 50,000 sf building • 50 jobs • 5 acres of land with services - cost • Available buildings • Wage data for 5 job descriptions • Community profile • Aerial photo • Site plan with utilities • Incentives available Corporation’s Top Ten List 10. Local Leadership attitude toward project 9. Customer perception of area – IMAGE 8. Incentives 7. Access – Various transportation modes 6. Adequacy of infrastructure –water, sewer, telecom, power, gas, etc. Corporation’s Top Ten List 5. Speed to Market 4. Labor Quality and Quantity 3. Taxation Cost 2. Transportation Cost 1. Labor Cost * Case Study: Land O’ Lakes Animal Food Processing Plant • Site location criteria • Variable & fixed costs • Subjective criteria • Results - Black River Falls, WI: – Affordable electric energy rate – Buildable site with low construction costs – On Interstate 94 Case Study: Arctic Cat • Site selection criteria • Driving factor - logistics • Results: Bucyrus, OH: – 200,000sf distribution center – Improved customer response time – Proximity to suppliers & customers – Speed to implementation How Can You Influence The Location Decision? • Thorough knowledge of the community • Choices of ready to go sites • Community database that is current • Utility capacity to serve industry needs • Documented labor market statistics and resources • High quality appearance (CBD) • Affordable and available housing How Can You Influence The Location Decision? • Website that is easy to find and use • Prompt response to requests for information • Capacity to quickly arrange prospect visits • Ability to deal with confidentiality requirements The New Paradigms for * Economic Development • Don’t teach your clients the business of economic development • Give your clients and consultants exactly what they ask for • Understand forces driving business decisions today Questions??? The Truth About Site Selection November 8, 2003 Bruce Maus, Corporate Real Estate Inc. Linda Lund, CRESA Partners THANK YOU!!!