At a recent NAIOP Chicago event, the topic wasn’t real estate; it was labor. February saw the highest monthly level of job creation since mid-2016 and unemployment sits at just 4.1 percent as skilled talent becomes increasingly difficult to recruit and retain.
“Job growth continues rapidly even with talent shortages and employment occurring faster than the labor force can expand,” said JLL Managing Director Keith Stauber, moderator. “These trends also mirror consumer confidence, which has been at its highest levels since 2000.”
Greater competition for labor has pushed occupiers to look at long-term workforce productivity and sustainability (including metrics like net migration and population growth) rather than short term affordability.
The NAIOP panel of experts featured JLL International Director Meredith O’Connor, Co-Chairman of JLL’s Headquarters Practice Group and a Business and Economic Incentives lead. Her top 10 takeaways:
- High-profile headquarters searches by large corporate users have created an unprecedented level of transparency around site selection, incentives and labor criteria.
- By sharing the name of your client with governments and economic development groups, you can tell a story that resonates, resulting in maximized labor, real estate and incentives prospects. (Gone are the days of incomprehensible project code names.)
- Labor drives everything. First find available labor (cost is often secondary), then layer on real estate options. Only then should you add incentives to the mix as a way to strengthen and close the deal.
- The playbooks governments have created for corporate users scouting locations are a good exercise. If they tell a memorable, special story, they can be reused when, not if, future pursuits hit the market.
- Toyota and Mazda’s recent hunt for their $1.6 billion auto plant wasn’t an easy search. But going public opened up more opportunities. In fact, the team toured more than 20 states in two months!
- You would think 2,000 acres is easy to find, but once the JLL team layered on dozens of variables, most notably related to labor, hundreds of locations narrowed to 20 very quickly.
- What drove Toyota and Mazda’s decision: logistics, labor, location. And location includes a culture fit. They wanted to feel welcome and do business in an environment that reflected their values.
- Visiting so many states, it became clear that incentives have moved beyond the traditional toolbox. Occupiers and governments are getting creative, looking for customized offerings like an expedited permitting process or unique community sponsorships.
- But incentives will never make a bad location good, or an ill-equipped site ready for action. Mega sites with consolidated ownership, turnkey infrastructure and a critical mass of labor nearby will be best positioned to capture the next big users.
- Increased public scrutiny around incentives is to be expected, because the volume is there and states aren’t taking their feet off the gas. But incentives are a fiduciary responsibility of corporations, and “if not but for” them, these major economic coups wouldn’t exist.