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March 30, 2017 What Site Prospects Expect In Today’s Economy Bob Cook Sr Vice President
March 30, 2017
What Site
Prospects
Expect
In Today’s
Economy
Bob Cook
Sr Vice President
FULL SERVICE SITE LOCATION ADVISORYCUSTOMIZED SOLUTIONS ACROSS ALL INDUSTRY SECTORS
SITE SELECTION GROUP | PAGE 2
100+ projects per year
32 team members
Dallas, Austin, El Paso &
New York
SITE SELECTION GROUP | PAGE 3
1. Uncertainty (The “Trump Factor”) Healthcare Reform? Tax Reform? USA ranks #92 globally on corporate tax burden*
Regulatory Reform? USA ranks #29 globally on cost of regulation*
Trade Agreements & Related Taxes? USA ranks #33 globally on tariffs (#29 non-tariff barriers)*
2. Offshore/nearshore investment projects will slow down Border Adjustment Tax Global supply chains are complex (shift from global to regional?) the BMW “Rätsel”
3. Project timelines will lengthen as manufacturers re-assess investment strategies
4. Wage increases will accelerate5. No relief for the industrial real estate market6. “Right To Work” movement continues
SITE LOCATION TRENDSSIX FACTORS INFLUENCING PRIVATE CAPITAL INVESTMENT PLANS
* “Global Competitiveness Report-2016-2017”, World Economic Forum; ranking out of 138 countries.
SITE SELECTION GROUP | PAGE 4
Right To Work
Non Right To Work
RIGHT-TO-WORK MOVEMENT CONTINUES28 STATES NOW HAVE RIGHT-TO-WORK STATUS
Source: Wikipedia data retrieved March 2017
SITE SELECTION GROUP | PAGE 5
INDUSTRIAL REAL ESTATE MARKETLEASE RATES & ACQUISTION COSTS GOING UP, INVENTORY IS LIMITED & GETTING TIGHTER (141 markets)
$6.22$6.30
$5.76
$5.47$5.42
$5.52
$5.76
$5.93
$6.25
$6.62
89.7%
94.5%
88.0%
89.0%
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%
$5.20
$5.40
$5.60
$5.80
$6.00
$6.20
$6.40
$6.60
$6.80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Lease Rate Occupancy
94.6 % occupancy (highest since 1999)
Average rents increased 22.1% last 5 years
Construction starts & deliveries expected to be down 15 percent in 2017 (vs 2016)
Source: CoStar
SITE SELECTION GROUP | PAGE 6
WAGE INCREASES ACCELERATINGTIGHTENING LABOR MARKETS WILL CREATE UPWARD WAGE PRESSURE
98
103
108
113
118
123
128
133
138
Compensation Index
All Workers Public Administration
All Private Workers Private Mgmt
Production
All WorkersPublic
Admin.All Private Workers
Private Management Production
2010 2.0 1.9 2.1 2.1 2.4
2011 2.0 1.2 2.2 2.1 2.7
2012 1.9 2.1 1.8 2.0 1.1
2013 2.0 2.2 2.0 2.1 1.5
2014 2.2 2.4 2.3 2.3 2.3
2015 2.0 2.1 1.9 1.9 2.6
2016 2.3 2.2 2.2 1.7 2.4
Avg Last 3 2.17 2.23 2.13 1.97 2.43
Avg Last 5 2.08 2.20 2.04 2.00 1.98
Source: Bureau of Labor Statistics, March 2017
WAGE INCREASES ACCELERATINGAPPROACHING FULL EMPLOYMENT NATIONALLY– LABOR PARTICPATION RATE STILL LOW
Labor Participation RateUnemployment Rate
Source: Bureau of Labor Statistics, March 2017
4.7% (Feb ‘17)
10.0% (Oct ‘09)
4.4% (Mar ‘07)
63.0% (Feb ‘17)
66.2% (Jan ‘08)
62.4% (Sep ‘15)
• 66 metro areas at or below 4% unemployment • 67.3% in 1Q 2000 (highest on record)• 1% of US workforce = 1.6 million
FREE TRADE AGREEMENTS# COUNTRIES WITH AGREEMENTS CURRENTLY IN PLACE
44
20
15Total Market Size 684.47
Outside Borders 648.17
Unique to Canada 0.04
Total Market Size 779.82
Outside Borders 455.80
Unique to USA 80.97
Total Market Size 1,265.94
Outside Borders 1,137.31
Unique to Mexico 646.57
Population, millions
FDI Rules (2016-2017 WEF)
Canada 48Mexico 30USA 46
SITE SELECTION GROUP | PAGE 9
1. Bulk distribution
2. Food
3. Medical Devices
4. Pharma
5. Data Centers
6. Others-- automotive, semiconductor, plastics…
ACTIVE SEGMENTSSITE SLECTION GROUP POINT OF VIEW
SITE SELECTION GROUP | PAGE 10
UNITED STATES’ GROWTH SECTORSOUTPUT DATA PROVIDES INSIGHT
(USD, millions)
Total GDP
(Last 5
Years)
Share of
Total GDP
Change 2010-
2015 ($)
Change
2010-2015
(%)
All industries $148,092,838 100.0% $5,303,508 20.3%
Private goods-producing industries $40,235,525 27.2% $1,241,718 18.2%
Private services-producing industries $90,727,511 61.3% $3,881,649 24.4%
Information-communications-technology-producing industries $8,510,599 5.7% $332,662 22.2%
Utilities $1,992,691 1.3% -$21,626 -5.1%
Manufacturing $29,253,880 19.8% $837,033 16.8%
Durable goods $14,036,512 9.5% $607,014 25.7%
Motor vehicles, bodies and trailers, and parts $2,825,565 $255,376 60.4%
Machinery $1,964,642 $73,783 23.3%
Computer and electronic products $1,902,149 $18,306 5.0%
Fabricated metal products $1,801,432 $79,995 27.1%
Other transportation equipment $1,528,841 $91,840 37.0%
Primary metals $1,300,018 -$6,343 -2.7%
Nondurable goods $15,217,366 10.3% $230,018 8.8%
Food and beverage and tobacco products $4,602,723 $141,126 17.5%
Chemical products $4,048,352 $113,975 15.9%
Petroleum and coal products $3,719,409 -$102,897 -17.1%
Plastics and rubber products $1,093,433 $40,438 21.8%
Transportation and warehousing $5,046,919 3.4% $230,085 27.2%
Finance, insurance, real estate, rental, and leasing $25,384,568 17.1% $1,074,567 23.8%
Government $17,129,800 11.6% $180,140 5.4%
Health care and social assistance $10,059,132 6.8% $427,247 24.0%
Professional, scientific, and technical services $9,093,215 6.1% $353,662 22.0%
Information $7,134,639 4.8% $293,816 23.4%
Source: Bureau of Economic Analysis, data retrieved March 2017
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
70.28
38.63
66.69
125.84
54.09
Average FDI per Project (USD Millions)
2011-2015
FOREIGN DIRECT INVESTMENT– GREENFIELD PROJECTSTOP TEN DESTINATION NATIONS (47.3% of GLOBAL FDI)
SITE SELECTION GROUP | PAGE 11Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics); data retrieved March 2017
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000 410,295
338,149
130,792
93,804
Total FDI (USD Millions)
2011-2015
Global
Avg
48.77
Average Annual Projects 2011-2015 US 1,752 World 15,563
Growth in FDI Value (Last 5 vs Previous 5) US 18.7% World -19.1%
GREENFIELD PROJECTS—FDI SOURCE COUNTRIESTOP TEN SOURCES OF FDI (61.4% of GLOBAL FDI)
SITE SELECTION GROUP | PAGE 12Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics); data retrieved March 2017
total 2011-2015% of global
totalWorld 3,798,820 --Europe 1,424,097 37.5%Asia 1,006,065 26.5%North America 779,201 20.5%
United States 637,612 16.8%Japan 297,270 7.8%Germany 279,919 7.4%United Kingdom 227,943 6.0%China 220,575 5.8%France 196,806 5.2%South Korea 129,286 3.4%Spain 117,957 3.1%Canada 115,565 3.0%Hong Kong 108,553 2.9%
Top 7 Sources for the US – 69%United Kingdom
SwitzerlandLuxembourg JapanNetherlandsCanadaGermany
65.9% of FDI comes from Europe
SITE SELECTION GROUP | PAGE 13
CATEGORY
CATEGORY
WEIGHTING DESCRIPTION
LABOR AVAILABILITY 30.0%- Age and Income Demographics, Educational Attainment, Skills and other factors
LABOR COST 20.0%Recommended Wages and Benefits; Household Income Unemployment Insurance, Workers Compensation Costs and other factors
OPERATING COSTS 20.0% Utility Rates, Tax Rates and other factors
OPERATING CONDITIONS 10.0%Union Presence, Infrastructure, Climate Variables, Laws/Regulations, Economic Incentives and other factors
REAL ESTATE COSTS &
CONDITIONS5.0% Quality and Cost of Real Estate Options
TRANSPORTATION &
LOGISTICS15.0% Distance to DC, Customers, Suppliers, and other factors
HOLISTIC APPROACH TO SITE SELECTIONSAMPLE WEIGHTINGS, EACH PROJECT IS UNIQUE AND WEIGHTINGS WILL VARY
OPERATING COSTSCOMPARISON OF NORTH AMERICAN COUNTRIES
SITE SELECTION GROUP | PAGE 15Source: fDi Benchmark
All IndustriesAverage Costs Canada Mexico United States
Electricity(Per kWh in USD)
.0583 .1417 .0554
Production Salary(in USD)
38,195.95 7,786.77 40,176.17
Total Tax Rate(% Profit)
21.1 51.7 43.9
Exchange Rate 1.32 CAD 19.22 MXN 1.00 USD
IMPORTANT SITE SELECTION FACTORS28 SITE SELECTION FACTORS– COMBINED RANKING OF “VERY IMPOTRTANT” OR “IMPORTANT”
PAGE 16
Corporate Decision-Makers 2016 2011Highway accessibility 94.4% 93.8%Availability of skilled labor 89.8% 88.4%Labor costs 89.6% 88.4%Occupancy or construction costs 86.0% 85.9%State and local incentives 84.0% 85.9%Corporate tax rate 82.3% 86.0%Tax exemptions 79.7% 83.6%Energy availability & cost 78.5% 84.8%Proximity to major markets 78.1% 83.0%Quality of Life 76.4% 62.3%Available buildings 75.5% 76.3%Available land 75.3% 73.9%Expedited / "fast track" permitting 71.7% 72.4%Low union profile 70.8% 81.0%Environmental regulations 70.8% 76.4%Right-to-work state 70.1% 77.5%Inbound/outbound shipping costs 69.1% 79.2%Training programs/technical colleges 66.7% 50.6%Availability of long term financing 66.7% 70.0%Proximity to suppliers 66.0% 67.8%Raw material availability 53.7% 52.8%Accessibility to major airport 52.4% 55.7%Availability of unskilled labor 51.9% 58.9%Water availability 46.3% naAvailability of advanced ICT services 40.9% 76.6%Proximity to innovation/commercialization/ R&D 39.2% naRailroad service 33.7% 33.6%Waterway or oceanport accessibility 18.1% 24.5%
Location Consultants 2016 2011Availability of skilled labor 100.0% 93.6%Highway accessibility 98.7% 98.3%Labor costs 95.8% 96.3%Tax exemptions 95.8% 86.9%State and local incentives 95.8% 88.3%Available land 95.8% 92.7%Proximity to major markets 95.8% 93.8%Energy availability & cost 93.0% 88.4%Proximity to suppliers 93.0% 83.9%Training programs/technical colleges 91.7% 64.2%Available buildings 88.9% 79.1%Accessibility to major airport 88.8% 80.3%Expedited / "fast track" permitting 87.3% 86.4%Occupancy or construction costs 86.0% 87.1%Inbound/outbound shipping costs 84.6% 76.5%Low union profile 82.0% 82.7%Environmental regulations 80.3% 79.0%Corporate tax rate 78.9% 86.0%Right-to-work state 76.4% 75.0%Water availability 72.2% naAvailability of advanced ICT services 69.5% 81.2%Availability of unskilled labor 69.0% 51.4%Raw material availability 64.8% 61.2%Quality of Life 63.3% 66.0%Proximity to innovation/commercialization/ R&D 62.0% naRailroad service 45.1% 38.2%Availability of long term financing 40.8% 63.0%Waterway or oceanport accessibility 29.6% 26.1%
Source:
Area Development Magazine
Top 10 Factors
Countries With at Least 70,000 Annual Graduates in Engineering, Manufacturing and Construction
Rank Country
Population
(000) Enrollment Graduates
Enrollment per
1,000
Population
Graduates Per
1,000
Population
1 Russian Federation 142,098 -- 454,436 -- 3.20
2 United States 325,128 1,521,313 237,826 4.7 0.73
3 Iran 79,476 1,599,329 233,695 20.1 2.94
4 Japan 126,818 586,112 168,214 4.6 1.33
5 Korea 49,750 895,939 147,858 18.0 2.97
6 Indonesia 255,709 1,003,371 140,169 3.9 0.55
7 Ukraine 44,646 541,922 130,391 12.1 2.92
8 Mexico 125,236 822,038 113,944 6.6 0.91
9 France 64,983 307,495 104,746 4.7 1.61
10 Vietnam 93,387 534,609 100,390 5.7 1.07
11 Germany 82,562 537,586 93,329 6.5 1.13
12 Turkey 76,691 465,197 74,762 6.1 0.97
13 Brazil 203,657 891,593 74,539 4.4 0.37
14 United Kingdom 63,844 210,353 71,302 3.3 1.12Source: World Economic Forum, Human Capital Report 2015
(data not available for Canada, China and India)
ENGINEERING TALENTCOMPARISON OF NORTH AMERICAN COUNTRIES
SITE SELECTION GROUP | PAGE 18
1. Provide reliable, cost-effective electricity 2. Technical data and expertise during site selection
- capacity (crucial for energy-intensive projects; system-wide differences) - reliability (system & sub-station level)- redundancy (how is it achieved?)- generation mix (“green” becoming more important for company branding)
3. Strategic funding - marketing & advertising
- recruitment & retention of eco dev talent- real estate site development
4. Project-level funding5. Project management / product knowledge
ELECTRIC UTILITY – A VALUED PARTNERUTILITIES PROVIDE SIGNIFCANT VALUE IN ECONOMIC DEVELOPMENT & THE SITE SLECTION PROCESS
CASE STUDIES
SITE SELECTION GROUP | PAGE 19
Project Type: Manufacturing Facility
Industry: Automotive
Selected Location: Dunlap, TN
# of Employees: 300 employees
Facility Size: 150,000 square feet
Project Type: Manufacturing (“SpeedFactory”)
Industry: Athletic footwear
Selected Location: Atlanta metro area
# of Employees: 160 employees
Facility Size: 75,000 square feet
THANK
YOU!Bob Cook
Senior Vice PresidentLatin America
El Paso, Texas(915) 549-4288
