What Matters Most for Business Locations and Expansions?

About the Author

Jonathan Morgan

Jonathan Morgan is a School of Government faculty member.

Jonathan Morgan is a School of Government faculty member.

Public officials and economic developers want to know what is required for their communities to be attractive and competitive locations for new private investment.  A good starting point is to understand which factors businesses consider to be most important when making decisions about where to locate new and expanding facilities.  One source for this information is Area Development Magazine, which conducts a corporate survey every year in order to gauge the importance of the many variables considered in the process of choosing a site for a business facility.  Area Development uses its survey responses to rank site selection factors based on their relative importance.

Area Development released the results of its 25th Annual Corporate Survey in early 2011.  The survey was conducted in late 2010 and included 158 business executives, of which two-thirds represented manufacturing firms.  Among responding firms, 29 percent indicated having less than 100 employees, 33 percent have 100-499 employees, 9 percent have 500-999 employees, and 30 percent have 1,000 or more employees.  Survey respondents were asked to rate 26 site selection factors on a four-point scale ranging from “very important” to “important” to “minor consideration” to “of no importance”.  The final rankings of site selection factors represent a combination of the “very important” and “important” responses.

Click here to see the 2010 ratings and rankings of site selection factors and how they compare to 2009.  Here are the highlights.  Highway accessibility and labor costs top the list in 2010 as they did in 2009 and have done over the 25 years of the survey.  Three factors related to taxes—tax exemptions, incentives, and the corporate tax rate—are among the top 10 most important variables.  Incentives moved up three spots from eighth in 2009 to claim the fifth spot in 2010.  Occupancy and construction costs continue to be a very important consideration for manufacturing facility location decisions as well as energy availability and costs, and shipping costs.  Two other factors are also likely to be critical in business location decisions, and communities will need to address them: availability of skilled labor and availability of buildings.

How do these site selection rankings compare with your experience trying locate businesses to your community?  To what extent might these ratings apply to non-manufacturing industries?  Are you surprised by the results of the separate ranking of quality-of-life factors?

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