Episode 34 – Site Location in the Post COVID-19 Era
Rick Weddle: Welcome to Site Selection Matters, where we take a closer look at the art and science of site selection decision making. I’m your host, Rick Weddle, President and CEO of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners and corporate decision makers to provide you with deep insight into the next and best practices in our profession. In this episode, we have as our guest, Tom Stringer, managing director and service leader for site selection and incentives with BDO. Today, Tom will talk with us about the site location industry in the post-COVID 19 era. Join me as we welcome Tom Stringer to Site Selection Matters. Tom, before we get into how the pandemic has really changed your business, take a minute if you will, to give our listeners an overview of your portfolio or book of business and the site selection and location advisory world. Tell us a little bit about what you do.
Tom Stringer: Hey, Rick, and thanks for the time today, certainly appreciate it. Yep, our practice here at BDO really is multidisciplinary in the site collection and incentives world we work with various companies on things like corporate headquarters, where we represent companies like Northrop Grumman and other well known brands with their corporate headquarters site searches to major manufacturing facilities. We had the honor again of working with Northrop years ago for the long range strike bomber. Recently, another client of ours that’s attracted a lot of attention has been Nikola motors, we help them with their headquarters and their manufacturing facility in New Jersey, we just recently went public the other day, we also spent a lot of time working with major professional sports leagues helping them plan some of their major events. So, we have a lot of fun, we’re in a lot of different areas, and we certainly enjoy the work very much.
Rick: So, real quickly, just to kind of dig in on that just a bit major manufacturers, major headquarters, and sports leagues, that seems to take you across the full gamut of location work.
Tom: It does. One of the benefits of this profession, I think, is that you have to be multi-disciplined in order to really succeed through the ups and downs of economies and the swings and business cycles. And I’ll be honest, we’re at the point in our careers, our team here that we get to kind of choose our projects and choose the clients that we work with rather than having to chase a lot of business. And those clients have been with us for in some cases now decades, which is a lot of fun. And the economic impact of things like a major manufacturing facility, or a corporate headquarters, or a large event can be pretty tremendous for a community. Certainly you’ve seen that in film and TV Motion Picture production, where we have a rather large client that we help choose some of the site works for their production. And the economic impact from those events can be as large on a shorter term basis than it can be for permanent facility. So, we enjoy what economic development can do, we’re really happy to be a part of it. And it does keep it interesting when none of your clients are the same.
Rick: Sounds both interesting and fun. And then along came the future and the COVID-19 pandemic. Tell me how has that affected and also not just the pandemic, but also business and government’s response to that, how has that impacted the companies, the industries, the segments that you’re working with?
Tom: Sure, I will tell you, generally, I think for the first maybe month or so the body was in a state of shock. The whole economy was in a state of shock regarding the potential health concerns and the long-term ramifications. I think, to be very fair to both government and the business, I think that we’ve done an excellent job in transitioning what we could from the business community and the corporate world to working at home. The stray child or dog wandering into a board meeting or a client meeting is now really accepted in corporate and governmental America. I’ve done numerous public hearings via Zoom and Microsoft Teams, and you’ve seen various family members walk into those meetings. And it’s been pretty humorous because everyone’s been in the same boat. But I would say from an economic standpoint, I think the world has woken up to, hey, we don’t need as much real estate maybe as we used to have. This experiment, well, slightly bumpy in some areas has really worked. So, I think that’s gonna have a really long-term impact. I think where we are now here several months into this, I think the strategic discussions are starting to take hold for, hey, we’re coming out of this to some extent to what is the workplace look like? What is our real estate portfolio look like? What locations have handled this well? If there are flare ups, and there appear to be some hotspots that pop up again, in some states and other cities and countries. How does the response to that look? Is their attack back to a lockdown environment, odds are probably not because of the devastation that that’s caused from an economic standpoint. But how do you corral the virus in a more pragmatic way and keep business going, keep business operating? So, it’s been an interesting couple of months. And I think we’re in for…if we think the last two or three months have been interesting, I think the next two or three years are gonna be profoundly interesting.
Rick: I bet so. Can you tell me my assumption is, and I think it’s true, but I’d like to hear your thoughts on it are companies finding out…you mentioned, you said, maybe I don’t need that much real estate, are companies finding out as they’ve had to trim things down that they really just don’t need as much capacity, real estate people, etc., etc., etc., as they had thought they did?
Tom: I mean, a couple of good questions when times are good a lot of factors get tend to add on both in government and business just in general. And then when times get lean, you try to make do with a lot less. Well, the one thing that we’re starting to see in this work from home experiment, while unique, different, challenging, has not affected productivity negatively. In fact, there’s probably some arguments to be made that productivity is going up, no commuting, people closer to home, working on flexible schedule, the understanding that that’s now acceptable in the economy because it’s something that used to be a luxury. Now, it’s an absolute necessity. Factor that in with well, if people like this meaning our workforce likes this, we don’t need to incur the costs of $100 per square foot for 300,000 square feet in Manhattan, we can go to 50,000 square feet, we can let folks work from home, we can return that money to either employee benefits, employee salaries, or the shareholder that becomes a real different value proposition. And that is something that we see companies really taking hold of. Will it affect those big cities? In some ways, yes. Is this gonna mean the death of the big city? I think, if the great London fire and the bubonic plague haven’t done it. I certainly think COVID-19 is gonna do that. I think the big cities are gonna be fine. I think what it does, is it allows suburban and rural areas to attract high net worth high skill types of positions to their communities because if you’re working for companies that’s located in Silicon Valley, or lower Manhattan, but you only need to be there once a month, you can really work anywhere. And that from an economic development perspective, I think spreads the wealth in ways that maybe we haven’t seen before.
Rick: Yeah. I would bet so. I would bet so. Let’s go back to your manufacturing footprint, you said, you really ticked off a number of big firms that you work with, but one thing that’s been on a lot of people’s mind because of the news coverage lately is the issue of reshoring or supply chain realignment and bringing back or bringing new operations to the US that were once upon a time maybe scattered to more cost less locations. What’s your thinking on this reshoring movement? And what does it mean to our cities and our states in the US?
Tom: I think that is gonna be the biggest economic question of the next half decade. Anytime you have Republicans and Democrats agreeing on something, odds are that there’s gonna be some activity on it. I think there is a reshoring concept is very real. I think that a few issues pop to mind, national security first and foremost, I think if COVID has done anything, it’s explained that long-term dependence on one location and stretched out supply chains is really not effective. And we had warning signs of this over the past decade, whether it was Hurricane Katrina, all the Gulf Coast Hurricane, Hurricane Sandy, some of the wildfires where we had supply shortages, but we rationalized them that while it was a one off event, it was a once in 100 year flood, it was a once in 100 year hurricane. Well, COVID has brought that chicken home to roost, so to speak that no, it’s not. We’ve had these series of events just in time inventory it with this far flung, internationally dependent supply chain hasn’t worked for critical items, the great toilet paper crisis, medical supplies, pharmaceutical, breadlines in New York City. So, I think that repatriation issue, once we start to kind of unpack it a little bit it becomes a national security issue becomes a medical issue. It’s gonna be a cost that I think is embedded in contracts and pricing. And the reason for that, I think is because your average consumer now understands it. They understand that what Harvard, Wharton, and Kellogg were teaching for the last 20 years doesn’t work in the real world.
They wanna be able to go into the store and get their prescriptions, to get bread, to get meat, to get toilet paper so that realignment on the part of the consumer getting that what’s been sold to them really doesn’t work is gonna allow the business community and states and municipalities to say listen, okay, it may cost a little more, but you get this added security of having it. So, I think it’s a very real issue. I think it’s gonna be consumer-driven, which is the best way for any market, I think it will be an advertising benefit for those companies that do go ahead and start to explain this to the consumer that we’re solving…we’re delivering your product, and we’re solving this potential problem. And the incremental costs will be justified. So, I think, from a city and an economic development standpoint, I think they have to get out in front of this issue as much as they can’t wait for the federal government to do anything despite, we’ve seen some claims that from the White House and from members of Congress that, hey, we would like to help you repatriate and we’ll find a way to incentivize that activity, that would be great. And maybe that comes, maybe it doesn’t come. But if states and municipalities really focus on picking industries that they’re good at, whether its distribution, logistics, types of manufacturing, pharmaceutical in particular, medical device that’s another one, those are very good targets. And they’re specific enough areas that certain communities can make the argument to when those types of projects back,
Rick: Yeah. And then there’s opportunities to bring that home because as you made the point very well done, it doesn’t matter how cheap your product is, if you can’t get it on the shelf, so a customer can actually take it home and purchase it or whatever. So, supply chain and supply delivery is gonna be very key. Let’s switch gears a bit if we can, we’ve been talking a lot about kind of top-level or macro-level issues. I’d like to know more how the pandemic has or is impacting you specifically, how has it changed or impacted your daily work? How much are you doing online? Or virtually? Are you traveling? Or maybe when you start traveling again, when will that be? Take a minute if you will share with us a day in the life of site selector Tom Stringer?
Tom: Sure. I mean, this might sound a little insane, but I live about 16 miles east of New York City. And I commute to the office in New York as much as I can, which was typically about two hours each way, each day, in addition to traveling probably 50% to 75% of the given workweek. So, two or three days out of town, the other two or three days in New York City added up for a long day, quite frankly, working from home is just something I never thought was viable for me. But it’s turned out to be anything but it’s been exceptional. I mean, we’re actually have been working longer hours really assisting clients with recovery incentives the various stimulus programs and helping them get aligned with some of the strategic games that they’re looking at as they come out. So, while we’ve replaced the commuting hours with billable hours, it’s still been the same amount of time, I’m wearing some very cozy clothes, more so than [inaudible 00:12:45] or sportcoat anymore. But as a business that requires you to get in the field and to really kick tires meet people, evaluate people, as much as evaluating sites, that’s been the biggest challenge, we’ve had to do a lot more desktop due diligence, a lot more drone footage, we’ve contracted with a lot of providers to go out and view sites and then cut our own views of buildings that’s been the biggest challenge really getting out in the field.
We have been able to do some travel over the last three weeks, which has been very interesting. One of the great strategic advantages that the United States has, was superior air travel between even second and third tier markets, basically is the interstate system for corporate businesses air travel. And that shutdown is a bigger problem. I think that most people in the economy realize, taking almost 10 hours to get to Sky Harbor airport in Arizona, and then 10 hours to get back really changes the dynamic of what can be accomplished during the course of a week. So, it’s been, quite frankly, from a personal experience, neat. It’s been fun to be around the family a lot more my wife, she gets the Congressional Medal of Honor for teaching to different middle school grades here in New York. While we’ve gone through this while she still works. But I’d say looking forward, I think that the experiment has worked from a delivery standpoint, from a site selectors standpoint, it’s definitely been limiting in the ability to press forward on projects, and we have a lot of projects that are still ready to roll ahead. But the ability to get out in the field and again measure buildings, measure sites, but measure the people you’d be partnering with has definitely been affected by this. And that’s something that I’m very much looking forward to getting past and getting out in the real world again.
Rick: We adjust as we have to to be successful, but like you say there’s still some shoe leather in this business that needs to be worn. When you get into the fieldwork you just have to…you kind of you got to measure twice, cut once, you got to make sure it really is what it looks like on paper. But let’s turn one more corner if we could. Tom, if you had a crystal ball today and could see ahead, the year ahead, maybe the next year and a half ahead, what would you see? Walk our listeners through your outlook for the next 18 months or so,
Tom: I think if we have a therapeutic that changes things pretty dramatically and pretty quickly, so we’re gonna put that on the shelf, though, for a little while, let’s assume that that doesn’t happen, I think you’re gonna see as with any traditional presidential election year, you’re gonna see a pretty stark slowdown in business activities in the course of the summer, and through the fall until the election is coming up. And that’s pretty traditional. But I think it’ll be a little bit more pronounced this year, especially as you see flare ups occur throughout the COVID crisis, you’re seeing certain states, certain cities have increases, it certainly affected the market and makes the market a little bit jittery. When you factor in a presidential election, and one that’s gonna be probably unique with the conventions and how things might shake out that’s gonna throw a few curveballs and curveballs in business and uncertainty mean, just uncertainty and slow downs. So, I think you’re probably gonna see a pretty tepid economy throughout the course of the fall, regardless of who’s elected. And as you get into 2021, I think that the turn of the counter will psychologically make a lot of folks feel better. But we are also seeing capital investment activity will start to turn a little bit, which has been good. Like I said, we’ve been out in the field, and we’re moving forward on some pretty sizable investment projects. But for that to get to the rest of the economy and for the rest of the economy just start to really catch up to where it was, you’re still looking for 6 to 10 months really past that. One thing that I would…two things that I would know, in the crystal ball. I mean, no one has ever shut mainstream America down before. I mean, we’ve had isolated incidents and pockets here and there.
Hurricanes, fires, things like that, civil unrest, but no one has shut it down on purpose for this type of period of time. The lasting damage that that’s gonna do is, well, we’re pretty darn resilient people and Americans take a punch better than anybody and get back up. This is gonna be significant because Main Street is hurting pretty significantly. And I think a lot of economic development efforts really in the year to two years ahead are gonna have to be focused on helping Main Street, helping those small businesses get revived. I think all of us economic development professional, site selectors, folks in the corporate world are gonna have to really focus in on that because they really are a catalyst for the rest of us in so many ways. So, I see a focus on Main Street as being extremely important. And as we get into 2021, and the capital investment starts to catch up, at some point, we’re gonna see a probably a major shift again, regardless of who wins the administration and probably federal tax policy because at some point, you have to pay the piper. And the sooner you address paying the piper, the better because a lot of money has been spent, a lot of money has been pushed around that drives asset prices up pretty significantly, you’re seeing that kind of in the rerun up and stock market, you’re seeing that in residential real estate prices kind of akin to what happened after 9/11. So, I think that you’re gonna see a pretty significant shift in federal tax policy kind of an almost post World War Two environment where taxes inevitably at the corporate and individual levels are gonna have to rise. I don’t think there’s any question about that, Republicans and Democrats are gonna have to be on the same page with that against from a certainty standpoint. So, I see probably a return to a pretty solid new normal in late 2021.
Rick: Well, that’s great, Tom, you’ve really given us a lot to think about, a deep dive in site location work and a peer into your crystal ball there for a minute, what a great conversation. But that’s really all the time we have today. So, let me say thanks to Tom Stringer with BDO for talking with us today on this episode of Site Selection Matters. Thanks for listening to this episode of Site Selection Matters. And a special thanks to Tom Stringer with BDO for helping us get inside and better understand how the COVID-19 pandemic has impacted professional site location and advisory services. One informative discussion we’ve had and one that leaves us with a lot to think about going forward. Again, I’m Rick Weddle, president of the Site Selectors Guild. This podcast episode represents my views and the views of my guests. And they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. We hope you’ll subscribe to the Site Selection Matters podcast on Apple podcast, on Stitcher, on Spotify, or wherever you get your podcast. We look forward to bringing you some great discussions in the year ahead. And until next time, good day.