Phil Santer, senior vice president and chief of staff for Ann Arbor SPARK led a webinar on the key factors of site selection for companies looking to expand or relocate. He covered topics like strategic planning, team assembly, project motivations, and partnerships with universities. Santer also shared success stories like KLA and Wacker, emphasizing the importance of incentives and financial support.
Site Selection Resources
- Site Selection Trigger List
- Available Commercial Properties
- Preferred Providers List
- Why Ann Arbor
- Destination Ann Arbor
- Talent Acquisition Resources
Listen to the Webinar
Webinar Transcript
Welcome everyone to Navigating Site Selection, Ann Arbor’s Strategic Advantage webinar. I’m Phil Santer, chief of staff at Ann Arbor SPARK and your host for today’s session. Let’s dive in.
We know how important site selection can be, whether that’s expanding your current operations to take on more equipment or invest in people and where you decide to spend your energy and resources. We know it’s a major decision. We’ve created this webinar to serve as a guide for the range of things to consider when doing an expansion or a location project and learn from the experiences of companies that have done that here in the Ann Arbor region.
Today’s presentation is an intentional look at the range of factors that can affect your site selection process. And I know one of the things I personally find most helpful when doing project planning is something called a ‘trigger list,’ which is a list of things that can help generate additional ideas, tasks or needs that you may have. And I hope that this presentation could serve as a trigger list for site selection projects and help identify the range of things that can make your project successful wherever you end up.
Here’s an overview of what we’ll cover, being strategic about why you’re undertaking a project, looking at things like talent, real estate incentives, and the importance of relationship building along the way.
But before we dive in, just a bit of context around our organization. Ann Arbor SPARK is a nonprofit economic development organization. We are a collaborative partnership with academic, public, and private sector partners and we have several functions. We work on new company creation. We work to support growing and existing businesses within our backyard to grow and expand in our market. We do regional marketing, so promoting the region’s assets and the opportunities that we have here. And we also work on community impact initiatives. Trying to address some of those issues that are critical for regional growth. We think we have a role to play in that. At the end of the day, our mission is to increase the economic activity in the greater Ann Arbor region.
More specific to today’s discussion, I lead something called the business development team, and we partner with companies that are looking to grow or establish themselves in the region. Looking over the past 10 years, we’ve worked on over 420 transactions. We’ve been the facilitators of [projects] that have generated more than $1.7 billion in capital investment and secured more than 11,000 new job commitments for the region.
And at the end of this presentation, I’ll discuss how we can be a partner for your company or project as well.
Let’s delve into some of the key considerations for site selection. This includes understanding the reasons behind initiating a project, strategically planning your approach, and assembling your site selection team.
Identify the ‘Why’
Some of you may have heard or know the author Simon Sinek who says that we should “start with why,” and that’s no different In this context. You need to understand the driving force behind the need for a new or expanded location. And in doing so, you can create a shared vision for your project. This can align your efforts and create cohesion within your organization. We know from experience that expansion and location decisions can be complex and nuanced, and I would recommend writing down your “why” can help keep people rowing in the same direction and honestly save time and expense at the end of the day.
What are some of the factors that could affect or cause a need for this? It could be fairly simple things. It could be trying to be closer to your customers. It could be trying to be closer to a defined set of talent where you want to access some of those specialized skills or expertise. It could mean that you’re looking to change your cost structure. Are you trying to optimize your operational costs or maybe upgrade your facilities? Are you responding to a consolidation or an acquisition process? It really could be as simple as trying to reduce commute times for key personnel.
We also know, given changes in how we work today, that the site selection process could also help align your team for hybrid work. So that means refreshing the office environment or thinking about the different amenities or ways that you want to engage and work with your team. There’s an opportunity to rethink that in the current hybrid environment and that’s one of the reasons that you could be initiating a type of project like this.
In thinking through these regions, try to be strategic in your approach. Let’s look at some of the factors around why companies have selected Ann Arbor as a strategic location for themselves.
We know from working with companies that they choose Ann Arbor for a huge variety of reasons and those could include having a growing research and development presence.
Companies benefit from the proximity to some of the leading research institutions and collaborative opportunities that we have here with institutions like the University of Michigan and the activities that they generate from that institution, as an example. Ann Arbor also has a unique and vibrant community. I think we hit above our weight class in many ways, including in this instance. We have a rich cultural scene, we have great recreational opportunities, and overall, a really high quality of life. I think I saw a ranking that came out just this week that Ann Arbor was ranked as one of the most peaceful locations in the Midwest. So we have a lot of those things sort of in our back pocket. I think companies find being a part of such a dynamic place place-focused environment enhances employee satisfaction and their retention.
I mentioned access to universities: companies can tap into a pool of talented graduates and cutting-edge research. We’ll talk a little bit more about establishing those partnerships later and I think a lot of folks want to be part of Ann Arbor as an emerging technology hub in the Midwest. There’s a benefit to being a part of that dynamism and that momentum that we’re trying to build here as a community.
Your Site Selection Team
Let’s look at some of the people that you want to have on your site selection team — and this list is probably bigger than you may initially assume. They could include the internal team of key members within your organization that’s going to play a crucial role in the process. They could be across a variety of departments like operations, finance, HR, the executive leadership team. You’re going to want to ensure that you have representation from departments that are both directly impacted by the site selection decision and even those that may not have an immediate impact on the site location decision.
You’ll also need to think about your external partners, so that could include a broker or a tenant rep. These are professionals who work in real estate for many organizations. They have an existing relationship with a brokerage firm and it’s important to know who that is ahead of time. We’ve seen organizations or projects that have undertaken work and they have to restart that process only later to realize that they need to work through their broker that they have an existing relationship with.
It also could include architects and engineers. You may want to engage a site selection consultant. These are professionals that work specifically on site selection projects to help companies go through that process. You may need to work with a developer or a general contractor if it involves construction and leverage their project management and other expertise. And you want to work through your economic development partners, like us, where we can help you collaborate and make sure that you’re thinking about the right ways to engage with other parts of the community and enhance incentive work as well.
One aspect of thinking about your site selection team is also thinking through your communication plan. You’ll want to have a plan before, during, and after the site selection project. You want to think through who are the stakeholders, who needs to be informed about the project, what the process is, what the progress is, and also what are those milestones.
You want to know what are the communication channels that you’ll need to update those folks on and how often do you want to provide them with updates to ensure transparency and alignment throughout the process. And you want to think about what are the concentric circles of communication that you’ll want to have related to this project as you continue forward. What might start as a small seed of an idea with a few folks around this project ultimately is something that you’re going to want to probably share with as many people as will listen to it.
You want to figure out what is that process of going from that seed of an idea within maybe an executive’s head all the way to trying to share this news when you’re trying to go through the talent acquisition process.
When you’ve finally opened up, I want to give you an example of a company that went through an intentional site selection process and had success by doing so.
Case Study: KLA
KLA is a process controls management company in the semiconductor industry and their work has only become more important as semiconductors continue to drive our global economy. And in 2018, they began a process to identify, really, a second headquarters operation away from Milpitas, California and they looked at places across North America, including in the southern US, Canada, and in the Midwest.
Obviously there were a huge range of factors. After all, they were siting a second headquarters location with technical staff, back office, supply chain personnel, and more, very cross-functional and diverse. But they knew that university relationships were critical, especially with places like the University of Michigan. They wanted to be quick to market but also have a showcase location for their team, and they wanted to know about the talent dynamics of the markets that they were considering, and understand what it would take to scale an office of the size that they were contemplating.
Ultimately, we were fortunate to land KLA in our backyard with what became a multimillion-dollar second headquarters and around 600 people who work in a variety of functions there today. The site selection process that they went through allowed them to deepen their relationships with the universities and, in fact, their property was once owned by the University of Michigan.
And as a community, we were able to find temporary locations for their team as they built out their new location. And I think SPARK’s ability to put the company’s HR teams in front of other companies’ HR teams was critical in understanding the dynamics of the talent acquisition process In Ann Arbor.
They also partnered with the state of Michigan and Ann Arbor Township on some key location incentives that supported their growth. And I think the success of this project is a testament to the intentional process that they developed over the course of a couple years.
Data Drives Decisions
Now, let’s turn to the data that you’ll need to make an informed decision. Obviously, costs are key to start with. As you’re going through this process of looking at what data you need to know and making the decision, you’ll need to think through both what we’re calling obvious and non-obvious expenses. So you’ll need to think through lease or purchase rates, taxes, utilities, operational expenses.
We should also think about those factors that may be non-obvious at the start of a project. That could include things like parking expenses for your employees or whether the location that you choose is a city that has an income tax that could affect talent decisions later in the process.
Try to think through the range of costs for the project itself and future expenses that could affect what this project is going to look like. Also think through and try and identify what your confidence level is in estimating costs accurately to account for potential fluctuations in costs due to factors like time to market.
For example, in recent years we’ve seen supply chain issues increase costs and make projects run slower. So consider the lead time for the critical materials, the cost of capital, environmental concerns, fees, all of that. For example, we’ve seen a project that’s recently underway in our market where one of the first things that they ordered before the start of construction for their new building is going to be the last thing that is placed inside of that project just given the current lead time for that particular item that they had ordered.
In certain cases when doing a new build, for example, we’ve also seen that the land entitlement process can cause issues. Knowing that you’re okay to proceed to do a project through a planning commission or another process is critical. We know that costs are more dynamic than ever, and we’ve seen the projects that have started with an acceptable budget when they’re being contemplated that have actually adjusted the cost of those projects by the time the organization went through its decision-making, that by the time the board said, “Yes, let’s proceed with this investment,” the cost of the project had changed dramatically to the point where that project was no longer viable.
Think through costs, time, think more than ever, you really need to give yourself a little bit of flexibility in identifying those costs and understanding that those things might fluctuate over time.
Real estate, of course, might be one of the costs that you’re considering for a site selection project. So let’s look at that briefly. A way to start is utilizing online platforms like CoStar or LoopNet or others to help identify what those potential locations could be. We also have a link on our website to access comprehensive commercial listings in our region. But we recommend talking with brokers or tenant reps. You should leverage their expertise and relationships with property owners to explore locations including properties that may be off-market. Commercial real estate, at the end of the day, is a relationship business and tapping into those networks is valuable when reviewing real estate.
You also need to recognize that leasing prices, for example, vary across different markets and different product types. You need to know how those prices are listed. In some markets, lease rates are presented monthly and in other markets they’re presented in yearly figures.
Try and educate yourself about real estate jargon such as triple net, price per square foot, or other fees that can help you navigate a lease agreement effectively. This affects obviously the cost of leases, but some leases don’t include taxes, insurance, or other fees, which obviously can affect the pricing or expected pricing of your project. You can use market reports to gain a deeper understanding of a local market and the dynamics. You can use this information to help you make a more informed decision, or in potential cases, help negotiate more favorable terms for your lease, and really think through and write down what are the specific needs that you have for your project. What is the amount of square footage that you have? Do you have need for a loading dock or a garage door? What about parking spaces? Is there a zoning requirement for your work? Do you have a required ceiling height that you need to have? You should write all those things down and try and identify them in a way that can indicate these are my must-haves, these are my wants, and these are my desires but are not necessarily critical.
I think it’s worth noting at this point, too, that it’s rare in the current market of commercial buildings that the exact building is out there that is going to fit your particular needs. There’s probably going to have to be some compromise, especially if you’re looking for an existing building to be able to take on. So just note that the market responds to the needs that people have. However, when you’re dealing with commercial real estate, that market is a little bit smaller than, say for example, if you might have been house hunting and you think, oh, that’s the exact kind of house that I would want, and that market or that product exists, it’s a little bit different sometimes in commercial real estate. Knowing that you should also be willing to look at real estate products that could work for you that are outside of the norm.
We’ve seen an increase in coworking spaces, for example, that can be flexible options for companies. Some real estate providers in our market offer plug-and-play options or are even willing to take company equity as a way to cover rent. Real estate is generally a part of these projects. So spend time thinking through your must-haves, your wants, and your needs. Write those down, and get them outside of your head.
Talent
Another big part of these projects are around talent and availability. So if you’re already in the area, we recommend mapping where your current employees reside and the roles that they fulfill. Color-code the locations of those employees based on their function or other factors. And this is really helpful, visually setting out what your existing talent reach looks like. For example, it’s usually good to know where your ownership or members of your executive team live. That is a really important factor as you’re looking at location decisions. Recognize also that with hybrid work models, your talent reach may extend further than ever before, which is going to open opportunities perhaps in other markets. But starting with your own employee’s data can help add a geographic element to your talent availability going forward.
You should also utilize data from external sources to refine your understanding of talent availability and your positioning within the market. Let’s look at a couple of those data sources now.
You could gather data on the pricing of various positions within the markets that you might be looking at. We use platforms like PayScale to provide comprehensive market insights into the amount and cost of particular roles. You should look at the market rates for key positions to gauge the salary competitiveness of this. And if you’re entering a market, consider the price that you’re willing to pay to acquire the talent and know that likely that might mean paying above the 50th percentile in the existing market unless you’re going to provide other benefits or inducements to have that kind of talent join your organization. You should also review job posting data trends over time and that can help reflect the difficulty of finding talent in the given market. So for example, postings that are there for longer indicate there’s a tougher recruiting market for that particular type of role. PayScale and Lightcast are two data providers that we use to provide this information.
Going back to a map perspective, we use tools like Lightcast to create maps of certain positions within a market. So for example, this [shown in webinar recording] is a density map of engineering jobs. You can align these maps with your real estate options and provide a powerful way to explore a new location. And even depending on the roles, you can validate this data and identify candidate leads on LinkedIn or through other avenues. So try and take as much data and geographic information as you can and overlay that with your project considerations.
You should also look at considerations that are beyond just things that you might be thinking around where the talent may live. You should think about housing availability, you should think about transportation options. You should think about access to childcare and other elements that are going to impact your team’s sustainable utilization of a new or expanded location.
Examining housing expenses can reveal areas where your team members are likely to reside in the future and these things matter relative to where they might be coming from. So for example, we worked with a large company that was moving two operations to the Ann Arbor area. One area was a lower cost of living area than the Ann Arbor market. The other area was a higher cost of living market than what Ann Arbor was. The locations and discussions that we had with each group of individuals, depending on where they were coming from, were vastly different because their expectations of current realities were very different. And again, recognize that in the hybrid work world, your access to talent is larger than ever before and you should lean into that when you’re considering your location decisions.
You should also think through, does the location offer access to an airport that provides the flights that you need as a business? I think in our region we’re lucky to have DTW as a recognized airport in our backyard that has direct flights to amazing locations around the country and the world, and we’re really fortunate to have that in our backyard.
You should also think about the proximity to other businesses. Talent tells us they don’t want to be beached and locating near competitors is sometimes a strategic advantage to be able to ensure that you can do talent acquisition in the appropriate way, as odd as that may seem. Also, think through roadway infrastructure, access to rail if that is an important part of your business. And think through things like public transportation routes. Are there reliable public transportation options in the area that could impact employee commuting patterns and accessibility for your clients or customers? And at the end of the day, know where your key stakeholders are, where your partners, customers, employees, suppliers, where are those things are at, relative to an expanded or new location.
Also think through unique ways to enter or expand in new markets and leverage things like coworking spaces. We have a comprehensive map of coworking spaces in the Ann Arbor area on our website that will be included in the list of resources from this presentation.
Case Study: Wacker
Let’s look at a company that used a somewhat unique approach to be able to test the market and enter Ann Arbor in a unique way. So that company would be Wacker, a multinational corporation. They’re headquartered in Germany with its North American headquarters located in Adrian, Michigan. They also have manufacturing facilities in Tennessee and numerous locations worldwide.
Wacker has a really significant presence and initially, they entered the market by leasing a small shared lab space at a place called MI-HQ, which is a coworking lab on the west side of Ann Arbor. Over time, they expanded their presence by developing a new R&D building in Pittsfield Township, which houses a variety of functions including offices and lab space. But they tested the market with a lower investment option and allowed Wacker to gain insights and understand the local market dynamics and create relationships with the community before making a larger investment into the community and to be able to test the market and figure out, is there something here that we should be leaning into? Consider your options when you’re going through this overall process.
Building Strong Relationships
Finally, let’s look at site selection from a relationship support and incentive perspective. So establishing strong relationships with, for example, universities can be a key driver for companies that we work with. Building partnerships requires an understanding of each party’s needs and objectives and finding opportunities for collaboration. Universities can offer powerful resources as a recruitment base, but they also have expertise beyond just sort of student engagement. If you’re going to engage with universities, think through what are the ways that you can have mutual benefit from part of that relationship asking, what is the university or college known for? How do they measure their own success? What does a successful business partnership look like for them? Asking those questions and understanding those responses are really key to setting up a long-term productive partnership. But these things can be valuable in a variety of different ways and we encourage folks to look into and have those relationships established with a variety of institutions around the region.
We also know that tax incentives and financial support can play a significant role in changing the cost structure of a project. However, these incentives should not be the sole driver of decision-making, but should instead serve as a tool to help close and deal. You need to focus on the business fundamentals. Incentives shouldn’t drive the decision.
Now that caveat aside, incentives typically fall into several categories. There are things like job creation incentives, there are capital investment incentives, financing incentives, location-based incentives, things like brownfield or grants that may be available to encourage investment in an economically less or economically more distressed area. Also, training programs, honestly — this could be a webinar topic in and of itself, and our team at SPARK can assist in identifying and pursuing the relevant incentives to ensure that businesses maximize their benefit and strategically utilize them to their overall value.
Just to close the loop on a couple of examples that we’ve looked at in this presentation, KLA and Wacker, which have utilized relationships and support to make their projects successful. KLA would not be in the site that they are currently in without going through this process. Their ultimate location for their headquarters wasn’t identified until later in the process and was technically off-market when they began. KLA is also a great example. They had Zingerman’s Deli, a local institution, rename one of their sandwiches as an example of their commitment to the area, and was I think also a really nice way to market that they were here and investing in the community. Wacker supports cultural icons like the University Musical Society and both organizations have partnered with the State of Michigan to gain incentive support for their investments. So learn from other companies that have been through the expansion or location process and gather those best practices as a way to help you enter the market.
Unique Factors
What factors can help seal the deal? Look at some of the things that are unique to the individual communities that you might be considering. An example would be Ann Arbor’s commitment to carbon neutrality, which has one of the most aggressive plans to become carbon neutral by 2030, is a huge part of the sustainability effort and there’s now a driving culture around that particular piece. That’s a unique way to be able to leverage a unique characteristic of a particular market.
Think about what amenities you want to offer your team. Can you use your location to provide those amenities either within the building that they are going to be located within a particular area of town? Understand and think through and honestly meet your neighbors that are going to be in the vicinity to determine whether or not there actually could be something worth value from a business perspective.
And think about the message that you want to provide to your market with your location decision. So from an automotive or Southeast Michigan perspective, not to be a little bit too particular on that. If you’re an automotive supplier and you end up in Dearborn or you end up in Warren, you’re telling the market one particular thing based on that location decision. So think through what you want to tell the market with a location decision.
Final Thoughts
To start wrapping up, what can SPARK do for you? We consider ourselves a member of your team as you’re working through these decisions. We can facilitate introductions to other companies or leverage our extensive network of external, what we call project advocates. That could include the Michigan Economic Development Corporation. It could include utilities, universities, the Detroit Regional Partnership, Michigan Works!, municipalities, chambers, and a whole range of folks that are going to encourage and I think will be champions for your project. We can facilitate all of that work. We could also do incentive reviews and help you pursue the ones that make the most sense.
As a reminder, we’ll be sending a recording of this presentation and a list of resources following today’s discussion. This is going to include a downloadable site selection trigger list, ways to review commercial property, coworking spaces, our preferred provider, and talent acquisition resources. So, more to come.
And finally, let’s get in touch. We have an incredible group of professionals that work at SPARK and we would be happy to chat with you about your site selection project.
Thank you for your time.
