Understanding Site Selection and Preparing for the Call
Chris Steele of Investment Consulting Associates traveled to Saratoga County on August 11 to speak about the site selection process and how it applies to our region. Below is Chris’ blog recap of those remarks.
Economic development is the art of helping communities attract new investment, supporting existing business, and helping people to start new enterprises. It’s about innovation, it’s about economic self-sufficiency, and it’s about building a stable base. Any effective economic development strategy – whether for attraction, business retention, or for supporting entrepreneurship – must base itself in an understanding of what drives the private sector. Once communities understand what makes a business expand or choose a new location, they can also better understand their own strengths and become more proactive players in driving investment.
What is Site Selection?
The term “site selection” seems to suggest the process for looking for a building or a piece of land, but the reality is a little different. Site selection instead is an expression of a business purpose: it is how a company finds that place on the map where they can find the workforce, infrastructure, logistics, partners, and community that allow them to achieve their business goals.
Just as a homebuyer looks for a community that can offer good schools, culture, and all the other things that make for a great quality of life before looking for that specific house, companies look for the right community before they look for the right real estate deal.
The site selection process is an expression of this philosophy, starting with an examination of business goals and drivers. Once the drivers are known the company or their consultant can identify communities that meet key thresholds (such as size, access, or key infrastructure) and then evaluate this short list through scenario testing models. Those communities that survive after the desktop modeling exercises are then subject to further evaluation, field interviews with similar companies, discussions with local officials, and finally with real estate and incentive negotiations.
How Has Site Selection Changed
The process of narrowing the list of options in a stepwise fashion has remained much the same over time. However, the process now takes much less time than it used to, and communities are contacted much later in the process than was once the case. The internet and online databases provide companies and their consultants access to much of the data needed for models, meaning that communities no longer receive lengthy requests for information (RFI’s) that indicate that a project is in the works. Instead, a community will often receive a last-minute call from a consultant congratulating the community on making it through the process to this point, briefly explaining the project, and then assigning the beleaguered economic development professional or town administrator a series of questions and requests (introductions to companies, meetings with officials, initial incentive offers) that must be fulfilled in short order.
Making this more complicated, companies have also been very cautious and conservative in making new capital investments since the end of the Great Recession. The end result is that projects often take quite a while to get started or green lighted, but move very quickly once they are approved.
The end result of these changes is that site selection projects that might have taken six months to complete ten or fifteen years ago can be done in less than six weeks now.
What Can Communities Do to Remain Competitive?
By understanding how companies make location and investment decisions, communities can better prepare for those last-minute calls, and can even influence the kinds of projects for which the calls come. Success better understanding the competitive landscape, knowing one’s advantages, and then preparing to make the most of an opportunity when one comes.
First, Know Thyself – Communities are the most successful when they can effectively understand their own strengths and identify (and market to) the kinds of companies who are seeking out those advantages. The same tools used in site selection modeling can be used in reverse to help companies, developers, and public agencies reuse abandoned, vacant, and underutilized properties. Labor, market access, infrastructure, climate, cost, utilities, regulatory, and other data not only provide the clues to determine who might be a prospective new user for a site or facility, but also give insight into the packaging and marketing that can be used to make that site more attractive and competitive.
Industry and use-specific profiles coupled with weighting schemes can add substance to marketing plans to demonstrate the location’s and community’s strengths relative to competitive alternatives, as well as incorporated into incentive plans later.
Identify Areas for Growth – While real estate is secondary to the site selection process, there is no getting around the fact that any new investment or company will need a place to call home when the decision is finally made. Communities that can point to an appropriate place – new or existing – that can accommodate this growth have a distinct advantage over those who do not.
Be Predictable – Companies and investors expect and appreciate a certain degree of regulation. After all, regulation protects a community’s quality of life, its local infrastructure, and the ability to do business there! However, they do want to be able to understand any regulations, clearly understand their obligations, and know when they will receive a clear response to their proposals and inquiries. Arbitrariness and uncertainty help no one.
Be Prepared – Finally, be prepared when the call comes in. Economic development professionals should do their best to know where to find answers to questions, have the relationships in place to request meetings, and prepare key decision makers so that they can be ready to go when companies contact their communities.
By taking the simple steps described above, communities can both be prepared for opportunities as they arise and also be more proactive participants in drawing in the kinds of investment they want.
Interested in learning more about Saratoga County’s economic development preparedness? Click here to contact the Saratoga County Prosperity Partnership.