As we begin a new decade, multiple trends will impact where companies expand and relocate across North America. We are focusing on four such trends, outlined below, which are driven by inter-related developments, including a shortage of highly skilled workers, exploding costs in coastal markets, economic disparities and more:

1. Talent remains the highest priority, for both companies and economic developers.  

As the competition for a limited supply of skilled labor deepens, exacerbated by immigration controls, companies are laser focused on locations where they believe they can access talent, now and in the future. Both economic development organizations (EDOs) and companies are prioritizing programs that build a talent pipeline through workforce training and skills-building among under-employed segments of the population. Corporate partnerships with talent attraction organizations like Team KC, Say Yes to Dallas, and Tulsa Remote are increasingly important.

This priority cuts across all industries and project types, including manufacturing, which will see an accelerating shift from traditional production skills to progressively more technology-intensive roles – including operating AI-driven processes.  

2. Secondary and tertiary cities are on the rise, for all the right reasons.

As the charms of magnate cities like San Francisco and New York City become increasingly unaffordable, more companies will consider locating in second and third-tier markets with urban amenities, affordable housing and other lifestyle benefits. Millennials, GenXers and others with in-demand skills, increasingly priced-out of the coastal hot spots, also are giving smaller cities a second look. Markets such as Chattanooga, Boise and Columbus are getting increased attention in news reports like Brookings "Growth Centers" and Inc. Magazine's “surge cities.” The overwhelming grip on tech talent and investment enjoyed by a few high-cost coastal cities will increasingly give way to these emerging hubs.

Manufacturing site selection also will evolve as companies looking to shorten supply chains and hedge against trade risks explore previously overlooked markets. This will create opportunities for cities to reverse population declines if they can deliver the tech skills and infrastructure required to address emerging demand.

3. Communities are emphasizing recruitment of companies that create jobs at diverse wage levels.

With renewed focus on economic equity and opportunity, EDOs are assigning a high priority to projects offering employment opportunities across the broad spectrum of income and education levels, as opposed to the former singular priority on high-wage jobs. For example, while life sciences projects have been most heavily recruited for their highly educated scientific and senior business payrolls, pharma manufacturing projects offer job opportunities for a wider range of skills.

Recent case in point: When Durham County recruited Eli Lilly’s new production center, local officials focused on job-creation numbers at “entry” levels of employment (accessible to those with community college certificates) as well as senior positions. Manufacturing employers will increasingly collaborate with local workforce development programs, internships and “second chance” programs.

4. EDOs and companies will do a better job of deploying incentives, while documenting public benefits and compliance.

This topic has become increasingly more political and sensitive, in part a practical consequence of Amazon’s highly public headquarters search, the subject of a recent Bloomberg piece titled "Amazon's HQ2 Fiasco." Google is taking a different approach with its new campus, saying “HQ2 is the opposite of what we’re trying to do.” But beyond the low theater and corporate hubris, incentives have substantive policy implications.

Incentives have a proper place for projects where: (a) tax revenues and other benefits attributable to the project outweigh the cost of the project (including any incentives), and (b) where location decisions are competitive, such that the community cannot assume it would otherwise have enjoyed those resources to use for other public purposes (schools, infrastructure) – that is, without winning the project. EDOs and companies in this competitive marketplace will rise to bear their increasing burden of explanation of these chicken-and-egg trade-offs.

Incentives will be increasingly focused on win-win propositions, backed up by solid diligence on the front end, and rigorous compliance over the life of agreements. Some projects that may have “expected” incentives in the past will not earn them in the future, while other that address these challenges will be a credit to the companies and their community partners.

In short, in the decade ahead, companies will be seeking to locate in communities adept at attracting, educating and engaging our most important asset: workers.

At BLS & Co., our goal is for our clients and communities to achieve “win/win” solutions that benefit both camps; keeping these trends in mind will help achieve that balance.

***

Jay Biggins is the Executive Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal locations and securing incentives to support new ventures.