By Tim Sleeper, CRE Acquisition Specialist
Amazon received nearly $600M in state and county incentives when it decided to move HQ2 to Virginia. Bezos' required conditions for the project had 3 main criteria:
1. Proximity to a metropolitan area with at least 1 million people
2. A stable tech minded business community
3. A resident community open to new commercial real estate development.
That seems pretty vague for the biggest company on the planet that specializes in pin-point accuracy and execution in it's operations, don't you think? Of course, the reasons for their generic requests are tied to the generation of demand in the market place. Every state in the union has a city that took a look at HQ2. Perhaps unsurprisingly, Bezos eventually chose NYC and then Virginia, which happen to be short distances from a couple of his existing homes.
Successful site selection takes a team effort and consistent communication. Obviously, if the state of Virginia knew that Amazon would fall close to a Bezos residence, they could have saved the people of the Old Dominion from the impressive tax burden that Amazon won. The Amazon team executed perfectly. Site selection requires a delicate transition between confidentiality and transparency. A unified front of communication and timed releases of information are needed to ensure the highest incentive awards at the city, county and state vs state levels.
Here are 4 considerations that have proven effective for our partners and clients during the site selection process:
1. Create a single point of communication for your site selection team
During the incentive bidding process that occurs over several months, the representatives of economic development organizations will try to dig up as much information about your project as possible. For example, if they discover that you are under contract to purchase a property in their state, then they drastically reduce the amount of tax based performance incentives they offer. Loose lips sink ships and several points of communication on your team will cost you. The need for a unified front in communication cannot be overstated.
You don't have a team? We can help with that!
2. Plan ahead
Snails are slow, attorneys are slower and Eco Devo groups appear to be dead on occasion. Legislative funding for business incentives can be unpredictable and eco devo groups try to stretch their allotted pocket books as far as possible. They realize that slowing down their granting process often plays to their advantage. When you are on the hunt for commercial property in a robust market, you often need to move fast. This dichotomy of actionable interests creates difficult scenarios in every site selection venture. Understanding the big picture is important at every step along the way. Many companies require a new facility to be built from the ground up as part of the process. Starting early is the only way to allow for appropriate negotiations and bidding to occur with eco devo groups, sellers, landlords, architects, engineers, contractors, etc., etc.
We recommend a minimum of 18 months for the best results! Don't have a plan? We can help with that!
3. Narrow the field, but don't tell anybody
It is nearly impossible and certainly not time effective to underwrite every opportunity that the team encounters. It's best to choose an overarching factor (such as proximity to Jeff Bezos' home) that narrows the field down to a manageable territory. We often recommend that negotiations occur with 2 or 3 possible suitors in order to understand the true value obtained at the eventual site winner. You don't want the losing locations to know that they aren't viable as information they provide will help you negotiate with the preferred locations. Here's a list of important factors to research at the top sites:
- Population Demographics
- Education of Population / University Access
- Unemployment Rates
- Competitor Analysis
- Local Economic Drivers
- Military Presence
- Local Notable Expansions / Closures
- Local Wages
- Infrastructure Condition and Availability
- Cost of Utilities
- Cost of Logistics
- Access to Customer Base
- Local Tax Rates
- Commercial Property Analysis
Don't have access to this information? We can help with that!
4. Seek transparent and comprehensive information regarding commercial property
The acquisition costs of the real estate are often the biggest expense you'll encounter during your expansion or relocation. Economic development groups will favor the involvement of brokerages or development organizations with whom they have sponsorships. It's important to understand who is partnered with whom throughout negotiations. The onset of digital information has created a title wave of information overabundance. It's difficult to isolate the real data at times. At Logical Move, we never list property or sponsor eco devo groups. As tenant and buyer representatives, we are never incentivized to misrepresent data or circumstances. We are truly working in our clients best interest from start to finish.
Don't have someone you can trust in the field? We can help with that!
Site Selection = Focused Communication
Months of planning, negotiating and consistent communication are needed to retain the highest incentives. Let our experience work for you.
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