Renewed site selection activity, cautious optimism on foreign direct investment (FDI), continued skilled labor shortages and a shakeup of the global supply chain are among key findings of a 2021 outlook survey on corporate location trends from the Site Selectors Guild.
Conducted the week of December 7, 2020, the online survey of Guild members sheds light on shifts and challenges in corporate location strategy moving into 2021. The COVID-19 impact survey of Guild members is the third of its kind, following surveys in April and June 2020.
“For the first time since March 2020, Guild members are sensing economic optimism,” said Jay Garner, Site Selectors Guild board chair and president of Garner Economics LLC. “As companies grapple with everything from finding the right talent to restructuring their supply chain, we’re seeing an acceleration of site selection activity in 2021.”
“From the changing needs of companies to new practices in the site selection process itself, so much has changed in the past year,” said Rick Weddle, president and CEO of the Site Selectors Guild. “This latest survey gives us a glimpse of some of the key trends impacting corporate location decisions based on our members’ experience across a wide variety of industries in the U.S. and internationally.”
1. Renewed Site Selection Activity In 2021
Consultants project a sharp increase in site selection activity going into 2021. Eighty percent of consultants said companies will move forward with site selection projects, an increase from 65% in June and 47% in April.
While confidence in the momentum of location decisions has taken months to rebound, the industries seeing the most activity have remained consistent.
Top Five Most Active Industries
- Biotech and Life Sciences: 67%
- Advanced Manufacturing: 48%
- Transportation and Logistics: 42%
- Food and Beverage Processing: 40%
- Software and IT: 23%
2. Cautious Optimism On Foreign Direct Investment
Expenditures by foreign direct investors to acquire, establish, or expand U.S. businesses have declined by 43% over the past three years, according to the U.S. Department of Commerce and SelectUSA. However, survey results forecast a stabilization in inbound FDI is on the horizon. Forty-three percent of consultants said inbound FDI to the U.S. will stabilize at the current levels of approximately $260 billion per year. Forty percent predict FDI will increase and therefore reverse the existing trend and 17% that say FDI will continue to decrease.
Additionally, 53% of consultants expect U.S. direct investment abroad to stabilize over the next three years while 30% say it will increase and 17% say it will decrease.
The greatest inbound market opportunities according to consultants are Asia and Pacific, with 65% of Guild members citing this market as one of the top regions, Continental Europe (62%), and North America (Canada and Mexico) (44%). According to Guild members, the greatest outbound market opportunities are Asia and Pacific (67%), North America (Canada and Mexico) (50%), and Continental Europe (40%).
3. Skilled Labor Shortages Yet New Opportunities With Remote Work
When asked how the COVID-19 crisis has influenced the availability and quality of the U.S. workforce, Guild members cited three key trends, including:
- Skilled labor shortages persist. A renewed interest in U.S. manufacturing seen during the pandemic requires more skilled workers — already a challenge before the onset of COVID-19 — which may put increased reliance on technical and community college programs to upskill current workers.
- Remote work has opened new talent pools for service companies, such as professional/technical, scientific, financial and information firms. This is benefitting smaller markets but making it difficult to assess talent availability in a market during location decisions. Given the nature of remote work, employers can look beyond their local labor shed and consider workers from other parts of the country or even globally. This offers an opportunity for talent but also forces consultants to deviate from their traditional models used to qualify and quantify an area’s labor force.
- Temporary surplus of lower skilled labor. As some service and hospitality sector jobs have disappeared during the pandemic, there is a surplus of some entry-level or lower skilled talent. As the economy continues to rebound and re-open, its anticipated that the labor market will once again begin to tighten.
4. The Supply Chain Shakeup Will Continue
Guild members identified supply chain and distribution as one of the biggest challenges for manufacturing operations during and as a result of the pandemic. When asked about anticipated global supply chain trends headed into 2021, consultants identified the following trends:
- Re-shoring/nearshoring: especially in terms of materials for industries related to health and homeland security.
- Regionalization of supply chain: increased localization of facilities to reduce the risk of disruption and minimize vulnerability.
- Management of last mile demand: partially due to the rise in e-commerce.
5. A New Hybrid Approach To The Site Selection Process
In line with global trends, site selection has embraced virtual technology to advance location decisions during the pandemic. Ninety-five percent of Guild members reported a transition to all virtual or hybrid process during the site selection process.
Virtual meetings and site tours have saved companies and economic development organizations time and money in conducting the site selection process, leaving many consultants to foresee a hybrid of in-person and virtual visits in 2021. However, consultants emphasize that virtual does not take the place of in-person visits to a location, and “boots on the ground” are still critical to the site selection process.
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