Corporate site location is the process by which companies decide how to expand, consolidate or close locations. Understanding corporate site location trends are an important tool for companies, communities and policymakers to recognize in the hopes of encouraging the creation of high-wage jobs and capital investment. Unfortunately, 2023 starts with an economic slowdown driven by the rebirth of inflation created by massive government spending matched by a supply chain challenge that created a lack of consumer products—lots of money and fewer products drives up the cost of goods and services. You don’t need to be Adam Smith to figure out that 2023 is going to be a challenging economic year with increasing interest rates driven by the Federal Reserve Bank slowing down investment but hopefully reducing inflation. For the past several years, the Montrose Group has developed an annual top 10 list of corporate site location trends. The 2023 version of this list is different than years past driven by the global economic slowdown.
- Focus on Economic Development Incentive Compliance. Economic slowdowns translate into complications with existing economic development incentive agreements. 2023 will be a year when companies and communities need to focus on compliance issues with existing agreements. As an example, any company with an economic development agreement focused on an office or white-collar job project is likely struggling to determine how Work From Home (WFH) impacts its economic development agreements.
- Searching for a Skilled Workforce. Ever since company HR folks started doing the retirement math with their Baby Boomer heavy employee based, workforce development has been a major corporate site location focus as regions with a pool of skilled workers in a company’s industry have a big advantage. Mix in a little COVID 19 and the United States has a massive workforce development crisis as anyone that can retire has and the nation’s pool of availably workers is simply not bouncing back to pre-COVID 19 levels. 2023 will remain a year when developing a pool of skilled workers matters more than ever.
- Housing is the New Workforce. Joining the workforce challenge is a growing crisis with a lack of housing in many regions of the country. Financing for traditional housing construction has been tougher to come by since the financial services crisis of 2008-09 and local governments responding to Not in My Back Yard neighbors have been slow to develop new housing products. 2023 will be a year when companies study the availability of housing that fits the price point of their workforce.
- Logistics Development Slowdown. What comes up must go down… the growth in the speculative industrial logistics and fulfillment center market over the past several years has been meteoric but that growth will dramatically slow in 2023. Increases in interest rates and a market that has completed its logistics network to deal with the growth in E-Commerce will see this industrial market slow down in 2023.
- Tax Codes Get Back to Basics. Local and state governments facing potential economic challenges that could slow revenue collections for the first time in over a decade are likely to search for the best tax policy that can retain and attract the industry that is their focus. 2023 will be a year when state policymakers not just focus on economic development incentives but search for a tax policy that is designed to retain and recruit companies in targeted industries.
- Renewable Energy Growth. The planned explosion of Electric Vehicles planned by the global auto industry and the focus of global manufacturing firms on using renewable energy to operate their facilities will drive investment in renewable energy projects across the United States. 2023 will likely be a year when communities, companies and developers search for creative ways to foster renewable energy projects even as rural communities actively oppose this critical economic development investment.
- Megaproject II. 2022 was a year driven by corporate site location megaprojects whose investment was in the billions for large scale industrial projects often driven by the drive to build computer software chips production back to the United States and to develop a new generation of Electric Vehicles domestically as well. 2023 will be a year when these megaprojects begin to be implemented and will provide substantial supply chain opportunities for surrounding communities focused on recruiting these new companies tied to the announced megaprojects.
- Rise of the Midwest. While the South and Southwest regions of the United States will continue their long-term population growth, growing pains in these regions create an opportunity for the Industrial Midwest to rise once again. Rising labor rates, housing, real estate and construction costs matched with infrastructure struggling to keep up with large population growth in the South and Southwest create an opening for the Industrial Midwest to capture additional manufacturing, life sciences and other growing industries in 2023.
- Office Reboot. 2022 was a bad year for the office market and 2023 does not promise better opportunities. WFH is the new normal for larger advanced services and tech companies, and, until that trend moves workers back into offices, it is unlikely many companies will be in search of large office space tied to corporate site location projects. 2023 creates an opportunity for communities, developers and companies to reboot office space into new uses such as housing to fill market needs.
- Opportunity Europe. The war in the Ukraine and the battle with Russia over access to its energy supply for Europe creates an opportunity for European companies to search elsewhere for new investments. U.S. markets for European manufacturing companies have always been attractive as it is generally less expensive to produce a product in most of the U.S. as compared to Europe. Stable U.S. markets with reliable and affordable energy prices may be well positioned with many European companies search for a new corporate site location in 2023.
2023 will be a challenging year for corporate site location projects but opportunities exist for success in the New Year!!! If you need assistance with any corporate site location matters, please contact Dave Robinson at [email protected].