by Deane C. Foote
Marketing The Right Site Can Attract Distribution Centers To A Community
When deciding to build a distribution center, companies expect to reach key markets efficiently and hire an appropriate workforce in a community that will embrace their operations. They also want to maximize profitability and reduce operating costs. Economic development agencies can leverage their resources to provide sites with the right features, including efficient infrastructure, proximity to clients and suppliers, and appropriate community and site characteristics that support the companies’ goals and objectives.
Companies Gravitate To Sites Within Easy Reach Of Delivery Points
Considering that the primary expense associated with the logistics of a site is transportation (such as fuel prices, driver costs and truck maintenance), communities should promote sites with highly accessible transportation routes, said Craig Morgan, group manager of the Real Estate Services Group at Carter & Burgess.
“If you’re a community located on the intersection of two interstates, that’s going to be much more desirable than if you’re a community 20 miles off the interstate,” he said. “Communities need good transportation routes to major markets to support a distribution center effectively.”
Companies choose sites that optimize the distribution network, which includes existing and planned distribution centers and points of delivery. In a business where on-time delivery is crucial, proximity to clients and suppliers through alternate transportation routes such as highways, rail or air can save time and money.
Match Community Assets To Company Needs
Determining which industries to pursue can be made clear by conducting a community assessment, which outlines features attractive to particular industries. The best fit for a community is a growing industry that matches the community’s transportation routes and available workforce, said Deane Foote, senior project manager of the Real Estate & Economic Development Group at Carter & Burgess. He recommends that a community ask two key questions: “What companies would enhance existing industries? What kinds of suppliers and customers are in place?”
One economic development group, the Northwest Commission in Northwest Pennsylvania, is using a cost-comparison study performed by Carter & Burgess to target foreign and domestic companies. The report spells out the advantages of certain industries doing business in the region when taking into account labor and real estate costs, tax rates and incentives.
The results, just completed in July, were sent to 15 international representatives who market the Commonwealth of Pennsylvania to companies in Canada, Europe and Asia. Already, the data has generated inquiries, said Jack Allston, executive director of the Northwest Commission.
“You can see the advantages of being located here rather than elsewhere,” he said.
Since a reliable and skilled labor force is the foremost community characteristic companies seek, the majority of communities need to complete a prevailing-wage rates and benefits survey. “All communities need a strong database on their labor force to include wages, benefits and availability as well as a quality analysis, which was completed for us by Carter & Burgess,” Allston noted.
“Performing a cost-comparison study is the easiest way for us to assess a community and help our clients decide what they should expect to pay for their labor,” Morgan said.
Often, incentives such as tax abatements and infrastructure grants are tied to companies meeting or exceeding community wage averages.
Working out other incentives in advance can help attract new industry, too. Because time is of the essence for building a distribution center, Morgan calls fast-track permitting “a remarkable tool.” The procedure allows companies to deal with one person who delivers permit approval requests to all jurisdictions, from the planning and building departments to the fire chief. “It’s a great asset for communities to have in place,” he said.
Perception Can Make Or Break A Project
Morgan has found that educating communities about the impact a large operation might have is an important step to reversing resistance to such a change. He likes to have community leaders speak to officials in communities where the target company has successfully located other operations.
“What we like to see is a community that is pro-business, that wants us there,” he said. Quelling misperceptions and rumor and demonstrating alternatives in advance can help.
The most common concern raised by citizens when building a new distribution center is the likelihood of increased traffic and truck noise in the area. That’s a change which can be mitigated by locating off an interstate and away from residential areas.
Another perception is that distribution centers create low-wage and low-benefit jobs. In many instances this is not the case. It’s the job of the economic development organization to help the community understand the positive impact of proposed operations. “It’s an education process that may take some time,” Foote said.
Market Sites Ripe For Construction
“Some communities have planned industrial parks with water, sewer and power in place. If not, companies expect communities to show they can provide these services to a site in a short period of time,” Foote said. Increasingly, companies are also requiring sites to have fiber optics to receive and transfer data. “With all the new technologies available, inventory systems are set up so that as soon as an item is bought from a store, it’s automatically ordered from a distribution center,” Morgan said.
Communities can tap into federal Community Development Block and Economic Development Administration grants to fund infrastructure for facilities that will create a certain number of jobs.
Some companies will give special consideration to certified sites, which have been designated by the state as already having completed the entitlement process, with major environmental studies completed and mitigated if required. When there is a virtual tie between sites, other incentives, including tax abatements and free or discounted land, can lure a company.
“Marketing efforts will help direct a company to certain sites, particularly if they’re starting a Web search,” Foote said.
With communities increasingly aware of the growing distribution industry, competition for these operations will only grow more fierce. A community that understands the site- selection criteria that companies require to meet bottom line goals will distinguish its real estate gems from the rest.
Deane C. Foote is a Senior Project Manager in the Real Estate & Economic Development Group of Carter & Burgess, Inc. (www.c-b.com). He can be contacted at FooteDC@c-b.com or at 602.650.4982.