#157 – Inside Our Industry – Investment Boom Turns Up The Heat For Economic Development Teams
Posted on | Inside Our Industry
Private manufacturing construction has hit a record milestone. Shovel-ready land and build-out ready buildings play crucial roles in landing new projects.
Investment Boom Turns Up The Heat For Economic Development Teams
Geert De Lombaerde | IndustryWeek.com | June 22, 2023
Having prepared real estate has become the biggest driver of big-dollar site selection decisions; ‘Speed is the new incentive.’
The hockey-stick chart is stunning: The value of private manufacturing construction put in place in the United States reached nearly $15.3 billion in April, more than double the figure of a year earlier and pushing year-to-date gains to 84%. Another point of comparison: Until May of 2022, the record month for thus metric had been September 2015—when “just” $7.6 billion of projects were put in place.
“Firms [are] strongly expanding their capacity to meet their long-term objectives,” National Association of Manufacturers Chief Economist Chad Moutray wrote on LinkedIn June 1. “This should bode well for future growth in manufacturing in the U.S. moving forward.”
Today, the work to tee up that growth has economic development teams and site selectors around the country scrambling. Between the upheaval of the COVID pandemic, recent geopolitical events and tensions and the passage of various landmark pieces of stimulus legislation, the spigots have opened on billions of dollars of spending and billions more in incentives. That has created something of a land rush—often anchored around megaprojects such as Intel Corp.’s $20 billion, 1,000-acre campus in Ohio or Ford Motor Co.’s Blue Oval campus in West Tennessee–that has turned up the wick on the engines of economic development.
“Speed is the new incentive,” said Chambers, who is part of the Indiana Economic Development Corp. team that this month got to announce that General Motors Corp. and Samsung SDI will invest more than $3 billion in a battery manufacturing plant near South Bend—just a few months after the two companies announced the launch of their joint venture. “We’ve got to work to meet that opportunity.”
A quick semantic note here: We haven’t yet used the (buzz)words “reshoring” or “nearshoring” to describe the wave of investments underway. Those words may apply in some cases but experts said they’re often a misnomer; companies are rarely expressly relocating production from sites they now see as too far down their supply chain or simply too risky. Instead, Caldwell said, the main strategic rationale behind new investments is to capitalize on new growth opportunities—building the next project rather than “fixing” a previous one—while along the way lowering the risks inherent in a continental or global business venture.
The core tenets of big ECD investment decisions haven’t changed: Location is still the No. 1 key, with access to water, rail, electricity and workers feeding into the equation. But with grants and subsidies often available to fuel today’s new opportunities, companies are moving more quickly than before the pandemic to find workable spots. And they’re not afraid to be more exacting or use that urgency as a bit of leverage over locales vying for their investments.
So which states stand to win more than their fair share? Caldwell said the Southeast has the advantages of more available land, cheaper electricity and fewer, if any, organized-labor hurdles to clear. Chambers and his peers in the Midwest, she added, can rely in part on being more business-friendly than parts of the Northeast. And when it comes to logistics, states in the Sunbelt and Midwest also have an edge.
Gigerich, meanwhile, said several parts of the Mountain West region are taking advantage of being close to the West Coast and its access to global markets without being as “challenging” on the regulatory and taxation fronts as, say, California. Similarly, he added that Southwestern states—Texas and Arizona foremost among them—have been able to recruit successfully for projects that in the past often went to areas closer to the West Coast.
The Midwest, Gigerich noted, can also sell itself on having a long history of being able to transition from one generation of manufacturing to another. In this fast-moving environment, a track record of that sort of innovation and an educated workforce able to keep up can be an ace in the hole.