Primary Employer Attraction

Full disclosure - I stole today's post from Mike Masciola. I spoke with some wonderful people from Thornton, CO last week and Mike thoughtfully put our collective ramblings into an outline. Since I am just arriving home from the work day (I really need to start posting in the AM), this might be the only way for me to make my midnight deadline. Plus the outline is pretty good. 

Primary Employer Attraction - What it takes to be competitive

Reasons primary employers move or expand into new markets

• Strategic positioning, efficiency needs due to increased competition nationally and internationally, new market opportunities, be closer to customer, consolidation/downsizing, etc.

Process used to evaluate new markets (Site Selection Process)

• Driven by the strategic needs of the company
• Location will be where company can be most successful 
• Tremendous competition - Lots of choices – process of elimination
• Short list of Metro then go to Cities

Major considerations for new location decisions

• Use ~ 400 data points
• Traditional - Proximately, labor, operating costs, logistics /transportation, etc.
• In today’s environment
• Productivity improvements – reduces workforce needs
• Space optimization – smaller foot prints
• Existing buildings
• Shovel ready sites
• Alternative financing  

What can a city can do to improve chances in the site selection process?

• Be very good at what the City can control (Good, Bad & Ugly)
• Government approvals (development, incentives, etc)
• Speed, Predictable, Flexible, Reduce risk and uncertainty
• Confidentiality
• Risks the projects (i.e. HR issues)
• Break means more work for company and consultant
• Makes community look unprofessional
• Effective ED staff - Importance of having a credible reliable single point of contact
• Regional networks/partnerships in place & coordinated
• Strong after care/retention program in place
• Long term strategic plan to protect investment
• An understanding/appreciation of business drivers not under city control
• Market fit, private sector negotiations, gaps in workforce, lack of building/site options, etc.

Actions city can take to increase opportunities of being included the site location process

• Marketing with regional organizations
• Strong relationships with site selectors
• Strong relationships with commercial brokers
• Data rich website
• Enlist existing industry in identifying prospect opportunities 
• Effective public policy examples from other communities

US Trade Deficit YTD - 48% Oil, 39% China

We discussed the relationship between U.S. manufacturing and the trade deficit in a post last week. I decided to pull up 2011 year to date statistics and look for any changes or trends. Mostly the same story other than small shifts between the country's main trading partners. Oil accounted for 48% of the trade deficit and China the next 39%. One country and one commodity account for 87% of the U.S trade deficit. The next largest deficit is with Japan at 7%, which is an economy the same size as China. 

The data comes from the International Trade Administration. 

Steve Jobs' real estate vision for Apple

Looking back through a number of Steve Job’s presentations, I’m struck by his talk to Cupertino City Council fourth short months ago. This was his last public appearance, and he was pitching a real estate development project to local elected officials. He was clearly quite ill, and according to the New York Times was told in February his time was growing shorter. The dying CEO of one of the most valuable companies in the world showed up to present site plans. And he did a great job. I’m not aware of another CEO who has made a similar presentation. Video link is below, and worth watching.

The proposed campus is an interesting and unique design, and I like it. Watching the video reminded me of two articles critical of the building and site design. John King, urban design critic for the San Fran Cisco Chronicle, was generally fair but did throw this dart,

"No space planner would fashion offices that require you to walk nearly half mile indoors to reach co-worker on the far side of the doughnut (will employees be issued Segways?)"

I wonder if any modern structure could accommodate 13,000 employees in 2.8 million square feet of office space without requiring employees to walk similar distances. Mr. King may view the extra space between tables or above our heads at an Apple retail store as wasted space. A Borg like cube would be more efficient I guess.

Christopher Hawthorne, the Los Angeles Times architecture critic, was even more critical. 

"Though Apple has touted the new campus as green, its sprawling form and dependence on the car make a different argument." 

Mr. Hawthorne goes on to link the proposed campus to "pastoral capitalism" and argues the corporate estate allows the company "to turn its back on cities and stake a claim on the suburban pastoral idyll — isolated, proprietary, verdant, and disengaged from civic space."

I love dense urban environments, but I understand the benefits of both urban and suburban locations for corporate headquarters and people’s homes. The new Apple campus seems as accessible to mass transit as the Infinite Loop campus, and I'm not convinced a company could create a car-independent campus in Cupertino, CA or any similar suburban location. Apple is reducing the previous concrete footprint, increasing green space, and creating a more sustainable facility all around. 

Manufacturing and Trade

As we discussed yesterday, China’s manufacturing output is expanding rapidly, much faster than the Chinese economy or Chinese consumer spending. A large percentage of the goods are manufactured for export, with the U.S. being country’s largest export market.  China provides aggressive incentives, a fixed, artificially low currency, and an appealing cost structure for export focused manufacturing firms. And it’s working, the U.S. trade deficit with China rose from $83 billion in 2000 to $273 billion in 2010. China now accounts for 43% of the country’s trade deficit and has replaced petroleum (with a trade deficit of $270 billion in 2010) as the largest factor in the U.S. trade deficit. This growing trade deficit is certainly a contributing factor in U.S. manufacturing’s reduced growth.

Of additional concern is the destination of the U.S. strong export markets, which are heavily skewed to NAFTA and Europe. Growth is projected to decline in Europe and be quite modest in Canada and Mexico. US exports continue to increase to high growth developing markets, but leveling the playing field is important to replace the growth developed nations once provided.

 

Even with these strong headwinds, manufacturing GDP continues to grow in the United States, although quite modestly. The Real GDP of Manufacturing (GDP adjusted for inflation) expanded at a compound annual growth rate of 1.1% in the U.S. from 2000 to 2010, to $1.55 trillion. In the last decade the sector expanded by $157 billion.

The numbers mask bright spots, and the figures will surprise some. California, long derided as too expensive for manufacturers, not only retained the top spot for manufacturing but the sector grew strongly. California increased the state’s share of U.S. manufacturing GDP substantially. California, Texas, and Oregon accounted for 89% of growth in U.S. manufacturing from 2000 to 2010.

Less positively, manufacturing is recovering from the recession at a much slower pace than the overall economy. While total GDP recovered to 2007 levels by last year, manufacturing remains 8% below 2007. We’ll dig into some of the interesting state and metro numbers in coming days. 

Manufacturing Output by Country

Our site selection work includes a decent number of manufacturing projects, it’s not our biggest line of business but one that we particularly enjoy working on. Manufacturing provides one of the largest economic impacts per dollar invested, and precisely because of this, nearly every city, state, and nation aggressively targets the industry. We’ll spend some time on this blog discussing manufacturing in the U.S. Our primary data source is real gross domestic product data set from the Bureau of Economic Analysis. Other data providers should take note; the BEA produces an enormous amount of relevant, interesting, and accessible information.

We’ll begin with a look at manufacturing output by country. This data set comes from the United Nations and is only current through 2009, but still quite interesting. The United States remains the world’s largest manufacturer, with 2009 output of $2.33 trillion, but growth is modest. By contrast, China’s manufacturing output is growing rapidly, reaching $2.05 trillion in 2009. A decade ago U.S. manufacturing was 4 times larger than China’s, and by 2011 China seems certain to be larger. The U.S. share of global manufacturing stands at 18%, down from 29% in 1970. 

The actual data is available here.

2011 SXSW Economic Impact Report

Austin, TX (August 23rd, 2011) – Greyhill Advisors is proud to present the comprehensive economic impact of the 2011 South by Southwest Music, Film and Interactive Conferences and Festivals (SXSW) to the City of Austin. This analysis represents the fifth consecutive study to fully assess the unique nature of SXSW and its beneficial economic impact to the city. To read and download the full study, please visit www.sxsw.com, use the direct download links below, or contact the representatives listed in the Press Release. 

Press Release

http://greyhill.com/reports/SXSW_Press_Release.pdf

Economic Impact Report

http://greyhill.com/report/SXSW_Economic_Impact.pdf