Uptick in On-shoring and Shrinking Demand for Office Space Predicted by Site Selectors In Survey on Impact of COVID-19 on Corporate Location Decisions
Experts Report 45% of Corporate Projects Proceeding
April 23, 2020 – An uptick in on-shoring especially in the pharmaceutical and life science industries, a dwindling demand for office real estate as technology allows more remote work, and guarded optimism that corporate location decisions will resume in late 2020 or 2021 were among major findings of a survey on the impact of COVID-19 released today by the Site Selectors Guild, the only association of the world’s foremost professional site selection consultants.
Conducted the week of April 13, 2020 in partnership with Development Counsellors International (DCI), the online survey of Guild members aimed to inform both corporate decision makers and economic development organizations on how trends in site selection are shifting and provide insight on the likely impact of the COVID-19 crisis on corporate location strategy.
“Our hope is that this new research will help corporate clients and economic development organizations understand and plan in this economic calamity,” said Jay Garner, Site Selectors Guild board chair and president of Garner Economics LLC.
“While none of us have a crystal ball, our 50 members represent the nexus between communities and corporations,” said Rick Weddle, president and CEO of the Site Selectors Guild. “This survey gives us a sense for what site selectors are seeing from their corporate clients, and a glimpse into what we might expect coming out of this crisis.”
The top findings of this research follow:
The Shift in Global Manufacturing & Supply Chain Strategy Is a Bright Spot for North America
Guild members predict COVID-19 will accelerate the regionalization of supply chains, with 81 percent of respondents saying COVID-19 will have a major impact on global supply chain strategies.
Members pointed out that the previous focus on the lowest cost scenario, which led to growth in China and Southeast Asia, will now become more balanced as companies look to reduce risk. This could benefit North American locations as more companies look to locate production facilities close to the customers they serve and increase redundancy. Many Guild members predict an uptick in on-shoring to the United States, Canada and Mexico – especially in the pharma and life sciences industries.
The “Work from Home Experiment” Will Change the Footprint of Office Real Estate
Seventy-two percent of respondents believe the current rise in remote workers will have a major impact on how work is done in the future for both the employer and employee. From the employer perspective, Guild members predict a decrease in demand for office space and the evolution and adoption of new technologies that allow employees to work more effectively remotely.
From a talent perspective, Guild members believe impacts could range from employees expecting and wanting more work-at-home opportunities and changes in the way teams work and interact.
Consultants Report 52% of Site Selection Projects are Paused and 45% of Projects Are Moving Forward
When asked to reflect on their interactions with client companies over the past month, 52 percent of Guild members responding to the survey said that companies are pausing site selection projects, 45 percent said companies are moving forward with site selection projects and the remaining three percent indicated it was a combination but highly dependent on the industry and function. None of the Guild members surveyed said that clients were canceling projects outright at this time.
Optimism About Renewed Project Activity but Uncertainty About When It Will Occur
Guild members were optimistic about corporate location projects moving forward but had mixed reactions on when project activity would begin to return to pre-COVID-19 levels. When asked when client companies will re-start expansions or the addition of new facilities, 55 percent of respondents predicted Q4 of 2020, and 45 percent said sometime in 2021.
Life Sciences, Logistics and Advanced Manufacturing Emerge as “Hot” Industries in a Post-COVID World
When asked to select the industry sectors that will see the most location decision activity post COVID-19, 68 percent of respondents predicted that the biotech/life science sector will be the most active industry sector. Approximately 48 percent of Guild members anticipate an increase in location decisions in the transportation and logistics sector followed by the advanced manufacturing sector (39 percent). Rounding out the top five sectors most likely to see increased location activity are the software/information technology sector (19 percent) and the food and beverage sector (16 percent).
Warehousing and Production Will Be the Most Active Functions
The survey found the most active post COVID-19 functions will be warehousing and production. Decisions on the relocation or expansion of other functions such as R&D and national and regional headquarters are less likely to see as much activity.
Economic Development Organizations Should Focus on Both Business and Workforce Retention
While Guild members are confident and consistent about an uptick in location decisions in the next 12 months, they also agree economic development organizations should focus on business and talent retention. When posed the question, “What should an economic development organization’s focus during the COVID-19 crisis be?” – it was nearly unanimous that economic development organizations need to focus on existing business retention and helping their employers weather this storm. Similarly, workforce retention was also seen as a priority – including helping displaced workers find employment – closely followed by talent/workforce attraction initiatives.
Advice to EDOs: Communicate Actively With Companies and Consultants
Guild members surveyed stressed that as communities, economic developers and site selectors try to grasp what the future will hold, it is critical to maintain relationships and not “social distance” in the literal sense. Guild members reinforce that they are still busy, projects are moving forward and that communication from economic development organizations is still helpful. Specifically, Guild members are most interested in hearing from economic developers on the following:
- Updates on general market conditions, including news on companies expanding or downsizing in their service territory, as this will impact local conditions from a workforce and product perspective.
- New initiatives and resources to support major employers during COVID-19.
- Updates on incentives. How has compliance requirements changed for existing employers and will new incentives be offered?
- Information on available sites/buildings and infrastructure improvements.
- Workforce availability including re-skilling and training initiatives.
About the Site Selectors Guild
The Site Selectors Guild is the only association of the world’s foremost professional site selection consultants. Guild members provide location strategy to corporations across the globe and for every industry, sector, and function. Founded in 2010, the Site Selectors Guild is dedicated to advancing the profession of international corporate site selection by promoting integrity, objectivity and professional development. Members are peer-nominated, vetted, and must demonstrate significant professional location advisory experience. In the past three years alone, Guild members facilitated the announced creation of approximately 165,000 jobs and $90 billion in announced capital investment. Guild membership is the highest standard in the site selection industry. For more information, visit siteselectorsguild.com or follow @siteselectguild on Twitter.