Major Investors & Board Luncheon Site Selection Trends...

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EDAWN Major Investors & Board Luncheon Site Selection Trends & Observations on Region’s Competitiveness

April 28, 2016

Remarks By: Dennis J. Donovan

EDAWN Major Investors & Board Luncheon Meeting

Table of Contents Page #

I. State of Site Selection/Trends 3 II. Factors/Criteria (Priority Sequence) 10

III. Databases/GIS Changing the Game 11 IV. High-Altitude Region Observations 14

• Locational Strengths 14 • Locational Weaknesses 18 • Potential Competitive Improvements 19 • What’s Different from 2012? 21

V. Speaker Biography 22


State of Site Selection/Trends 1. Insights drawn from • Recent surveys, e.g.,

o Site Selectors Guild o Area Development o Site Selection

• Business Media • WDGC Experience/Perspective

2. Robust activity • Last couple of years • Will continue foreseeable future • Across

o Industry spectrum o Throughout U.S. o Global � Not as well as U.S. � Until economic clouds evaporate

o Until economic clouds evaporate • Among most active sectors

o Chemicals o Plastics o Packaging o Metals o Food Processing o Medical Equipment o Biologics o Optics o Data Centers/Back Offices

3. Regional manufacturing • Supply chain driven • Could be several hubs by global region (e.g., Asia & Europe) • Also, Includes more regional in U.S., for some industries

o JIT o Speed to market o Flexibility o Shipping cost


• Some examples o Eaton custom manufacturing solutions centers o CG Tower � Plastics � Greater San Antonio � MX and Mid-America

o Brembo � Brake systems � Motor Vehicle market � Western MI

4. U.S. more competitive • Innovation

o U.S. consistently near the top o #6 in last Bloomberg ranking

• Technology investment o Automation o Data-driven o Labor content

• Cost compression (especially labor) • Energy costs (especially since shale gas) • Supply chain (long chains difficult to manage, risky, costly) • Lead times (especially for smaller manufacturers) • Flexibility (to quickly adjust to customer preference) • IP (an issue in developing countries) • Made in U.S.A. preferred by most customers

5. Global shoring • Less frequently just for lowering costs • More for accessing markets, but often from a modest cost location • Some reshoring

o To U.S. (e.g., GE, NCR, Frisbee, Karen Kane, Generac Power Systems) o Increasingly Mexico as an alternative, e.g.: � Casabella (cleaning products) � Flambeau (plastics) � Viasystems (industrial cabinets)

o But lion’s share still goes to U.S.


• U.S. winning more than fair share o Domestic when 10 years ago would have been offshore o Some reshoring as noted above � TaylorMade (golf balls in SC) � Whirlpool (TN) � Rev-a-Shelf (home organizing products in KY) � Gulf Coast Petrochemicals (especially TX and LA) � Big River Steel ( (eastern AR) � Celanese (Clear Lake, TX) � Dow Chemical (Iberville Parish, LA) � Willow Tex (NC) � Colgate Palmolive (UT)

o Domestic historically (reflecting a strong U.S. mfg. base) � Comprehensive Logistics (auto parts TN) � Bonita (paper bags in NC) � GE (rail cars in TX) � HMC (packaging machinery in IL) � Golden State Foods (meat processing in AL)

o FDI � Close to 20% of activity � China, getting quite active with India at precipice, e.g.:

− Yuhuang Chemical (Chinese methanol plant in Louisiana) − Shandong Tranlin (Chinese paper plant in VA) − Continental Motors (Chinese piston engines plant in Mobile, AL) − SANY (Chinese heavy equipment in Peachtree City, GA) − Bleum (Chinese software development in Milwaukee) − Welspun Corp. (Indian large-diameter pipe plant in AR) − Infosys (Indian IT center in Atlanta and other metros)

� Traditional countries still active, e.g., − Germany − Japan − South Korea − UK − Canada

6. BPO sector • Call centers, e.g.:

o Dell (Twin Falls, ID) o iQor (Columbus, OH) o Esurance (Greenville, SC)

• IT, e.g.: o GM Technology Center (Atlanta, GA) o Barclays (Dallas, TX) o IBM (Baton Rouge, LA)

• Shared services o GAP (e.g., Albuquerque) o GE (e.g., Cincinnati) o Becton & Dickinson (e.g. , San Antonio)


• Follow the sun deployment for most BPOs e.g., o HP o Google o ADP o Citigroup

• But still plenty of action in the U.S. including smaller towns for customer service/help desk (e.g., Teletech in Kalispell, MT & Asurion work-at-home in Russellville, AR)

• Middle Office redeployment a relatively new phenomenon, e.g.: o Bristol-Myers Squibb (Tampa) o Citigroup (Dallas) o Deutsche Bank (Jacksonville)

7. High-Technology • Longlist of potential locations short • Why

o Industry ecosystem o Access o Talent o Applies to R&D & Mfg.

• Examples o Novozymes � R&D � Research Triangle

o Baxter � Global Innovation Center � Boston

o 3M � R&D/mfg. � Austin

o Facebook � Engineering/sales � New York City

o XCOR � Aerospace mfg. � FL Space Coast

8. However, within R&D • A mini-trend: smaller, geographically-dispersed, driven by:

o Talent attraction o Local knowledge o Still prefer tech hubs even if smaller

• Among companies following this model o Boeing o HP o Red Hat o GlaxoSmithKline o Colgate Palmolive o Microsoft


9. Corporate HQs • Overall a small proportion of corporate location activity • But several major moves over recent years • Typically HQ relocation undertaken for strategic reasons (e.g., customer access) as opposed to

cost savings (exception being companies with HQs in NYC or coastal CA) • One trend that has emerged is HQ right-sizing

o Predominantly in industrial companies o But even Fortune 500 services corporations downsizing HQ o Frequently when a HQ relocates it could involve � C-suite and maybe 1 or 2 rungs below � Often would be less than 250 people

o Examples of HQ C-suite relocations (often less than 100 employees) � Hilti � Golden Living � Gardner Denver � Dover � Aon � Boeing, even (at 300)

• Preponderance of HQ relocations (especially Fortune 1000) gravitate to Tier One metros o Global air service o Extensive domestic air service o Extensive talent pool o Recent examples: Mercedes to Atlanta and Toyota (No. Am. HQ) to Dallas

• Some HQs will, however, be attracted to Tier Two metros o Those where Americas dominates in revenue o Where only a handful of executives need to travel overseas o When cost still a concern (midsize HQ including C-suite, middle office, back office) o Example: Gardner Denver to Milwaukee (C-suite)

10. Emergence of redeploying middle office operations • Often consolidation • Sometimes relocation • Cost & talent driven • Tier Two metros can shine • Illustrative functions

o Treasury o Settlements o Asset management o Fraud/compliance o Risk o Technology o Could be shared services as well

• Verizon in Tulsa a good example


11. Distribution • More sub-regional DCs • Close to market • Some on fringe of optimal freight nexus to save on labor and other costs (Target, Wal-Mart,

Family Dollar among companies embracing this model) 12. Decision time compression, the norm in Site Selection • Speed (time to market) • Without sacrificing quality • For the site selection decision-maker, places premium on:

o Databases o Tools o Models

• Affects EDCs o RFI � Response time � Completeness � Efficiency

o Fast/efficient field visits o Websites � Designed for all decision makers � Not just site consultants � We represent less than 40% of the market

• Importantly, one major ramification is greater demand for modern, available buildings o For light mfg./back offices o Over 60% set as a pre-condition an available building o At the very least, ready to go sites � All utilities � Fast track construction � Rapid permitting

o Accelerated construction/permitting � No longer a competitive edge � Rather a given � Absence often a deal breaker

13. Among challenges facing companies seeking to add capacity in the U.S. • Labor shortages

o Across skillsets o Crafts/technical most severe

• Aging infrastructure • Available buildings


14. Obvious implications for Economic Development • Education investment • Workforce preparedness • Talent attraction • Ready to go sites • Shell buildings • Transportation infrastructure • Utility capacity/redundancy

15. Regional economic development essential • Why: Customer driven • What

o Business attraction o At least coordinate business retention entrepreneurship workforce


Factors/Criteria (Priority Sequence)

Common Criticals Human Resources Market Proximity Transportation Electric Power Available Building Ready-To-Go Sites Electric Power Telecom Incentives Overall Costs

Headquarters BPO R & DGlobal Air Service Competitive Labor Demand Talent PoolDomestic Air Service Labor Supply/Depth Geographic DiversityQuality of Life (Nat'l Recruiting) Labor Quality/Stability Mfg. & HQ AccessHQ Presence Labor Cost Industry EcosystemHigher Education Future Labor Market Viability Technical UniversitiesAvailable Office Space Available Building Quality of LifeArea Image/Reputation Onsite Parking Area Image/ReputationReasonable Taxation Redundant Power/Teleco Air ServiceFavorable Business Climate Time Zone TelecommunicationsMeaningful Incentives Air Service Available Office/Lab Space

Reasonable Taxation Reasonably Attractive IncentivesMeaningful Incentives

Manufacturing DistributionCustomer Access Market AccessSupplier Proximity Freight CostsTransportation Costs Transportation InfrastructureSemi-Skilled Labor Supply Transportation ServicesQualified Entry-Level Labor Supply Labor Supply (Incl. Forklift)Labor Quality Seasonal Labor PoolLabor Cost Big Box AvailabilityNonunion Large Scale SitesElectric Power NonunionDisaster Risk Electric PowerAvailable Building Moderate TaxationReady-To-Go Site Meaningful IncentivesFast-Track Construction/PermittingModerate TaxationMeaningful Incentives


Databases/GIS Changing the Game

1. On site selection projects, companies going further in process before outreach to EDOs 2. Makes best of class ED websites: • Critical for EDOs • Very important for 60% of market • Nice to have for site selection consultants

3. IEDC Data Standards the gold plate for EDO websites 4. Illustrative databases • ESRI • ArcGIS Online • Tetrad • Nielsen • Easy Demographics • AGS • WAVTEQ

5. Illustrative GIS • ArcGIS Suite

o ArcGIS Pro (just released) o ArcGIS Online o Extension software (e.g., StreetMap Premium) o Custom web/mobile apps can be created

• Map Info • Global Mapper • Grass GIS

o Open source o Free

• GIS Cloud • Caliper • Capterra

6. Then there’s Google • Google Earth (can screen sites across geographies)

o Site plans o Distance and area measurements (e.g., square-footage of warehouse cluster) o Integration of GIS layers, 3D renderings, and other overlays with aerial images o High resolution aerial imagery

• Google Maps o Analyze traffic patterns and drive times o StreetView to investigate street-level environment and determine building tenants

• Google Docs o Use for research and work collaboration, as well as simple file-sharing o Ideal platform for RFI completion, especially if inter-office contributions required


7. Real estate portals • Costar • CCIM (access to Costar) • LoopNet • Showcase • Fast Facility • Sites Across America

8. GIS-powered EDO websites • GIS Planning • Location One • Catylist’s SiteFinder

9. Mobile-friendly websites • Essential • Not all EDOs there yet

10. Social media in site selection • Still limited for business attraction • Best outlets

o You Tube � Expert knowledge � Virtual tours

o LinkedIn � Major announcements � Discussion groups

o Slideshare (presentations) o Facebook, Twitter not sufficiently targeted but can be effective for communicating with

stakeholders/local companies 11. New site reconnaissance tool • UAVs or Drones • Virtual site/building tours • Increasingly utilized by EDOs (e.g., Ft. Payne)

12. ED Professionals more consultative • Only 35%-40% of companies utilize a site selection professional • Balance rely on associated professionals (e.g., architects) or in-house (in smaller companies

often CEO) • Many will be data paralyzed or confused by time they reach out to EDO • EDO may have to objectively help prospect synthesize/frame • Perhaps EDO would be asked to provide input via project collaboration tools such as

o Google Docs o DropBox o Trello o Base Camp o Redbooth o Slack


13. Site consultant outreach • Most important info

o Major employers o New/expanding employers o Downsizing employers o Legislative/policy changes o Other major considerations, e.g.: � Certified site � Available building � Transportation upgrades � New education/training programs

• Interface o E-newsletter (quarterly) o News Flash o Once a year office visit o Luncheons/dinners o Site Selectors Guild � Conferences

− National − Regional

� Advisory forums o CoreNet and IAMC


High-Altitude Region Observations Locational Strengths

1. Geographic orientation • Strategic positioning in western U.S. market • Next day delivery to

o Northern CA o Portion of Southern CA

2. Transportation resources • Ample motor carrier (65+) • Two Class 1 RRs • I-80 • Soon to be completed USA Parkway • Small package service • Air cargo service • Pretty good air service with nonstops to several gateways, e.g.,

o LA o SF o Chicago o Dallas o Denver o Seattle o Twin Cities

• Competitive freight costs 3. Availability of large scale, fully serviced • Industrial sites • Business park

4. Fast track • Construction • Permitting

5. Ample water supply 6. Utility infrastructure • Electric power

o Reliable o Moderate cost

• Natural gas • Excess treatment capacity

o Water o Sewer


7. Favorable demographics • Population

o Over 450,000 o Strong growth � 5.2% next five years (U.S.3.2%) � Importantly, includes positive net migration

o Relatively young as reflected in proportion of prime working age (21-34) � Reno/Sparks: 19.6% � U.S. Average 18.9% � Fairly diverse population

• All of the above augers well for future labor supply 8. Impressive labor market resources • Sufficient critical mass (almost 240,000) • Rough estimate underemployment

o Blue collar 24,000 o White collar 43,000 o Total 79,000 (nearly 1/3 workforce)

• Unemployment rate: 6.2% • Sizeable skills base in most categories, e.g.,

o Production/logistics (23,000) o Engineering (3,500) o Information technology (5,500) o Life Sciences (2,700) o Health-related (16,500)

• Annual college grads to augment supply o Two year (1,400) o Four year (2,700)

9. Several established and growing industry ecosystems, beyond gaming/tourism, • Aerospace, especially unmanned aerial systems (UAS) • Metalworking • Nutritionals • Packaging • Information technology • Data centers • Energy storage • Regional and middle market HQs • Logistics (still a linchpin)

10. Higher educational resources, e.g., • UNR (including schools of medicine, pharmacy, and engineering) • Sierra Nevada College • Truckee Meadows Community College • Western Nevada College


11. Improving public education, including Signature Academies 12. A vibrant, dynamic downtown • Live/work/play • Entrepreneurial hotbed • Well on the way to 24x7 • Nearly all successful regional business attraction efforts feature an exciting downtown • Important for recruiting not only businesses but younger talent (especially in this case from the

Bay Area and Central Velley) 13. Desert Research Institute including the Dandini Research Park (helps solidify a case for attracting

high-tech businesses) 14. One of most favorable tax climates in the U.S., e.g., • No income tax • No inventory tax • No franchise tax • Reasonable property and sales taxes

15. Meaningful incentives for capital investment/job creation • Sales tax reduction • Personal property tax abatement • Modified business (payroll) tax abatement • Catalyst Deal Closing Fund

16. Attractive quality-of-life • Both for experienced talent and recent college graduates • Outdoor recreation/scenery big draw • For a mid-size metro extensive amenities, culture, entertainment • World class medical care • Higher education • Public and private education • Clean air • Easy commutes • While increasing, still a good value (e.g., cost-of-living index about 105)

17. Second to none economic development service • EDAWN • Governor’s Office of Economic Development

18. A pragmatic yet aggressive five year strategic plan (EDAWN) • Metric driven • Workforce coordination

o Added as a primary/role o Critical to future success of region


19. Spate of companies moving to area • Testimony to EDAWN and all stakeholders stewardship • Reflects a compelling set of locational attributes for Reno/Sparks • Acknowledges the stark contrast between CA and NV • Includes one of biggest wins in history of U.S. site selection

o Tesla o Congrats to all

20. Greater Reno’s brand & reputation changing with positive implications


Locational Weaknesses 1. Emerging labor supply challenges, across skillsets • Especially for skilled crafts and semi-skilled positions required in manufacturing and logistics • Construction trades feeling the pinch as well • Shortages also appearing in other fields such as

o Information technology o Engineer o Health career professionals/techs

2. While about at U.S. average, still over 13% of adults without a high school degree 3. Reno/Sparks often lumped in with entire state which statistically does not perform as well on

educational attainment

Category Reno/Sparks Nevada U.S. Less than 12 years 13.3% 15.1% 13.6 12-15 years 58.6 62.4 57.1 College degree Bachelors only 18.2 15.0 18.3 All 28.2 22.5 29.4

4. Despite laudable efforts, getting enough high school students STEM qualified and interested in

post-secondary STEM fields remains a challenge 5. Housing costs are markedly increasing and could dampen efforts to both recruit businesses and

people 6. While the region’s image is changing, the perception of a smaller gaming/tourism area still

persists 7. Air service to the East Coast is lacking which does somewhat hamper business recruitment 8. Limited access four-lane highway linkage to Las Vegas remains elusive (where is I-11?) 9. The qualifying wage for key incentives seems fairly high ($43,500) considering that a third of

households earn less than $35,000 per annum (both in Reno/Sparks and the state) 10. There is a paucity of larger, modern office space available which reduces the region’s appeal for

back and middle office operations 11. Unemployment insurance cost is relatively steep • Base wage $28,200 • New employer rate 2.95% ($832/employee) • Average rate all employers 2.62% ($739/employee)

12. A couple of business climate rankings place Nevada in lower third of states • Forbes & CNBC • Difficult to comprehend logic • But could raise a question mark for some corporate prospects


Potential Competitive Improvements 1. Workforce the most critical priority 2. Continue the outstanding initiatives already in place such as: • Public education improvement

o High school graduation rate o ACT scores o STEM emphasis but not at expense of creative arts

• Collaborative programs such as the accelerated career pathways (e.g., Washoe County, Western NV College, Truckee Meadows Community College, UNR)

3. Set as a goal that all adults are basic skills prepared and attain 12 years education • Collaborative effort • Look at Washington State’s I-Basic Model

4. Redouble efforts to encourage more enrollment in selected fields for Associate Degrees and industry approved Certifications • All out PR campaign to promote socio/economic value of technical careers • Special fund to offset tuition costs (e.g., Tulsa, KS, TN, VA) • Actively support/expand Nevada Dream It/Do It

o Certifications o Marketing o Competency Models � By the National Model Clearinghouse � Sponsored by US Department of Labor, Employment & Training Administration � The workforce arm (Mfg. Skills Institute) of Virginia Manufacturers Association a leader

5. By all means encourage more STEM related four year college enrollment but not at expense of associate degrees and certifications (needed by most companies especially manufacturing and logistics)

6. Explore Work Keys Certification at the county level • Brings together job families • Response to needs of all businesses • Would noticeably enhance business retention and attraction

7. Continue striving for more nonstop air service to Eastern US cities (Jet Blue to JFK a good start) 8. Perhaps through a competition, provide financial support for construction of office space (large

floor plate) 9. Explore ways to provide dual electric power service (from two substations) to selected industrial

sites 10. Continue to create a downtown that will serve as a national model for midsize metros 11. No matter what it takes, ensure enough affordable housing • Single family, including starter • Rental

12. Keep on supporting the creation of I-11


13. Develop a multi-media campaign, including a dedicated website (a corollary to Reno.com) to attract working age people to Reno/Sparks.

14. Consider adding public relations (all media including digital) to accelerate the transformation of the region’s brand

15. Provide franchise tax exemptions for electric power consumed in • Manufacturing • Data Centers

16. Reduce unemployment insurance cost by a third 17. Increase the Catalyst Deal Closing Fund to $50 million 18. Create local deal funds (e.g., Lexington, KY implemented a $1 million reserve) 19. Explore creating a Manufacturing Innovation Hub • Part of the National Network for Manufacturing Innovation • State would then contribute matching funds • Perhaps target UAS or Energy Storage

20. As part of the Governor’s Office of Science, Innovation, and Technology consider a matching grant program for nonprofit university led research collaboratives commercializing new

technologies 21. Continue focusing on target industries as defined in the strategic plan • They fit well with the region’s locational attributes • Recent successes validate the selection of these targets


What’s Different from 2012? 1. Revamped economic development vision/program • Beginning stage 5 years ago • Success has been stunning (over 100 wins)

2. The focus on Workforce reflects a national reality 3. Downtown is vastly different and very exciting 4. The movement of people and businesses from CA has picked up steam 5. The diversification of the region’s economy is most impressive 6. The Tesla win put Reno/Sparks on the radar screen for a far greater proportion of corporate site

selection projects 7. The pace of entrepreneurship/economic gardening exceeds expectations (the cool factor) 8. The emergence of Reno/Sparks assuming a national leadership role in UAS is amazing 9. Data centers have made massive and contribute to an ongoing image turnaround 10. The rapid rise in housing costs and the affordability issue have been surprising


Speaker Biography Dennis J. Donovan

Partner Wadley Donovan Gutshaw Consulting

Dennis is a partner with Wadley Donovan Gutshaw Consulting, a corporate location advisory firm based in Bridgewater, New Jersey. For 39 years, Dennis has been working with major corporations in resolving locational challenges for office and industrial operations. Among his clientele are Amylin, Amerigroup, Barclays, BOC Group/Linde, Canon Information Technology, Covance, Dover, Gardner Denver, Marriott, Nortel, Pitney Bowes, T. Rowe Price, and Verizon. Dennis has played an active role in CoreNet Global, the corporate real estate industry’s premier trade association. He designed and teaches CoreNet’s site selection course. Dennis was also involved with producing CoreNet’s 2020 research output which peered into the future of corporate real estate. Dennis’ task force concentrated on Role of Place/Global Location Strategy. He is also a frequent panelist at CoreNet workshops, including the highly acclaimed “Around the World in 90 Minutes” series. Dennis is a founding member of the Site Selectors Guild. He is also a frequent speaker and author on corporate location trends. Dennis holds a bachelor’s and master’s degree in economic geography from the University of Nebraska at Omaha and the University of Rhode Island.

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