Five Site Location Factors to Consider When Locating
Tuesday, January 22nd, 2019
When considering a location in the United States for an industrial facility, it is important to study a myriad of factors, but among the most important are the geographic considerations. It is important to remember that not every state, county or city are alike and characteristics will vary significantly. The location will greatly affect the project’s development cost and schedule, and long-term success.
In the site selection process, the company must clearly define and evaluate the project’s driving factors in order for the project to be successful. It can be helpful to have technical experts as well as financial and human resources professionals represented throughout the decision process. Below outlines just five of the many factors that are pertinent for a site location decision.
- Site and Infrastructure
The piece of land (or existing building) must meet the project’s specifications in terms of dimensions and developability to accommodate the facility’s layout while maximizing efficiencies. In order to meet layout requirements, impediments such as easements and environmental concerns like wetlands must be taken into consideration.
Not only does the land have to meet the layout requirements, but the project’s utility and transportation infrastructure needs must be met in order for the location to be suitable. Some projects are more utility intensive and will require substantial electric, natural gas, water, wastewater, or telecommunications capacities so utility availability may be key drivers. The company must also look at the utility rates since these costs will be steady throughout the life of the project.
Each project needs to assess where the raw materials will be coming from and where their customers are to find an ideal logistics location. Proximity to deep water ports for importing raw materials or exporting finished product, rail service, or proximity to airports can also be transportation drivers. Sites must have adequate access for both truck and passenger traffic, and the term “adequate” will change project to project depending on the anticipated number of vehicles.
Although there are some permits that are given at the federal level, many are going to be state or local (county or city) permits. The amount and types of permits required will vary for each project based on the project’s specific process and environmental impacts (air emissions, wetlands, etc.).
Local jurisdictions will also have restrictions such as zoning or even more location-specific industrial park covenants. These regulations will enforce items such as allowable uses, setback requirements, height restrictions, and landscaping that will impact a company’s site plan. The regulatory environment can have a major impact on the cost, and particularly the schedule, of starting a facility and continuing to operate smoothly in a location.
Unfortunately, the company can find an optimal site with all of the infrastructure they need, but unless they have skilled people to work at the facility, the site will not matter. Shortage of suitable workers due to the aging industrial workforce is a concern across the country and many communities are trying to tackle this issue head-on by implementing innovative programs to make the younger workforce aware of industrial opportunities.
Here in the Palmetto State, there are several programs up and running to help companies identify the workforce they need. ReadySC™ works closely with companies to provide the recruiting and training assistance that they need to get up and running. Apprenticeship Carolina™ helps the workforce continue to grow by guiding companies through the apprenticeship process.
In addition to recruiting and training the workforce, the company will need to evaluate the wage rates in the area to see if there will be wage pressure from existing companies or other outside influences. A prospective company must feel comfortable that they will be able to recruit the necessary workforce while also being able to retain them with wages that make financial sense for the project.
Incentives will not make a bad location good, but they can help mitigate weaknesses at potential locations. Incentives can greatly help in reducing initial costs (site preparation, utility extensions, etc.) and recurring costs (taxes, utility rates, etc.) to the company. To lessen the financial burden, some states and communities are more aggressive than others and have more resources to aid companies in return for jobs and capital investment commitments.
Financial incentives can come from local communities, states, utility providers, and other organizations. When evaluating incentives, one must look for realizable incentives since many incentives that states and communities offer may not be as helpful. For example, many states offer corporate income tax credits, but the company may not have enough tax liability to take advantage of these credits. In negotiations, one can also ask for assistance to reduce critical timelines, such as expedited permitting and commitments that infrastructure will be in place in conjunction with the company’s development schedule.
- Quality of Life
Overall quality of life of a community can affect recruitment of a suitable workforce. If planning to bring existing employees from offices abroad to the U.S. or considering a U.S. headquarters location, it may be important to look at the available cultural amenities.
K-12 schools, crime rates, recreational opportunities, and cost of living are just some of the factors that help shape the quality of life in a community. People will be more apt to work at a facility that is located in an attractive place for both themselves and their families. Companies want their facilities to prosper and will look for communities that are also thriving.
While site/infrastructure, permitting, workforce, incentives, and quality of life are not an all-encompassing list, all of these factors are going to influence the project’s initial and recurring costs and development schedule. It is imperative that they are taken into consideration throughout the siting process in order to find the optimal U.S. location for the company. The company representatives on the team typically have other day-to-day jobs so a site location consultant can help a company sift through the site decision process more efficiently. As site selection consultants, we do not make the location decision for a company, but we do help companies make defendable, informed decisions.
Sarah White has more than ten years of experience in site selection. She provides site evaluation and labor and incentives analysis on numerous major site selection location projects including manufacturing and distribution operations. You can reach Sarah at firstname.lastname@example.org.