Aaron Jodka
Colliers Capital Markets recently sat down with Monty Turner, Senior Vice President, Principal, Colliers Site Selection, Location Strategy & Incentive Negotiations, to discuss changes in client needs.
Colliers Capital Markets (CCM): How has the competitiveness of incentives changed in recent years?
Monty Turner (MT): In the current landscape of industrial development, there has been a noticeable surge in competition for incentive dollars, reflecting a heightened number of companies and projects actively vying for inducements. This escalation is primarily due to the trend of nearshoring operations alongside the strategic utilization of incentives at the federal level. The recent industrial climate has witnessed an impressive influx of ambitious investments in mega projects with capital expenditures exceeding $1 billion. This growth has seen communities and states taking a slightly different perspective on awarding projects with economic incentives.
In light of this intensifying competition, businesses need to reevaluate their approach to state and community expansion strategies. It is imperative for companies to not only consider the conventional aspects of job creation and capital investment but also to assess their unique value propositions comprehensively. By recognizing the multifaceted nature of incentive negotiations, companies can strategically navigate the complex terrain of industrial expansion and effectively secure a competitive edge in the market.
Monty Turner
“In the fierce industrial environment, recognizing the multifaceted nature of incentives is crucial for companies to secure a competitive edge.”
CCM: Which industries are driving the market today? Are they targeting specific regions?
MT: The industrial landscape is experiencing a notable upswing driven by federal incentive programs, particularly the CHIPS Act and the Inflation Reduction Act (IRA). Operations in manufacturing, specifically in industries such as solar, semiconductors, and electric vehicle supply chains, have emerged as primary beneficiaries of these initiatives, significantly amplifying their development trajectory.
Geographically, the focus has predominantly centered on the Midwest, encompassing states like Indiana, Ohio, and Michigan, the Southeastern region spanning from North Carolina to Texas, and the western states of Arizona and Utah. This concentrated regional attention has fostered robust economic activity, propelling these areas into the forefront of industrial expansion.
Moreover, the United States has become a pivotal focal point for domestic and international companies. Over the past 24 months, Colliers Site Selection clients revealed a 2:1 ratio of domestic to international foreign direct investments (FDI). Post-pandemic, we have witnessed a surge in FDI, underscoring an escalating global interest in capitalizing on the opportunities presented within the U.S. industrial landscape.
Monty Turner
“Federal incentive programs like the CHIPS Act and IRA are reshaping the landscape, propelling sectors like solar and semiconductors to new heights in regions such as the Midwest and Southeast.”
CCM: What have the CHIPS Act and the IRA done to promote business growth?
MT: The manufacturing sector has undergone a significant transformation, directly influenced by the recent surge in federal incentive programs, most notably the IRA. This initiative has generated substantial momentum within the manufacturing space, fostering a dynamic environment of growth and development.
The impact of these incentives extends beyond the business realm, benefiting consumers and amplifying their significance within the broader economic landscape. Implementing the 48C and 45X IRA tax credits is the primary impetus driving the remarkable evolution observed within the IRA framework. These incentives have led to a surge in industrial manufacturing activity, reshaping the dynamics of investment and production and solidifying the IRA’s position as one of the critical drivers of reshoring and manufacturing growth.
CCM: For employers/businesses looking to expand, how are they balancing in-place infrastructure versus incentives? Does one win out over the other?
MT: This is the question that clients ask us daily. The paramount consideration remains in identifying the optimal setting for clients’ long-term success. Inevitably, within this complex equation, various trade-offs exist that they must carefully navigate. I always say, “Incentives make a good location great; they don’t make a bad location good.”
To effectively unravel this challenge, I initiate the discussion by delving into the intricacies of clients’ operations. Doing so helps discern the pivotal project drivers significantly influencing the ideal location. It also provides a deeper understanding of the optimal balance of infrastructure versus incentives.
While incentives play a vital role, the determining factors encompass a nuanced blend of elements like infrastructure availability, operational costs, capital expenditure considerations, and potential benefits.
