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Trends in US Capital Investment Projects - New or Expanded Corporate Facilities

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Economic development agencies throughout the United States (and the world) compete to attract new capital investment projects each year. 

How many project deals of significant size are actually happening in the USA each year?  It's a simple question, but not so easily answered.

This updates our April 2006 analysis of investment project trends by state.  Download our April 2006 newsletter (.pdf - 4 pages with other graphs) which summarized that former market research and analysis.

The source of this data is explained below, along with other sources.

Intuitively, there are obviously many thousands of commercial real estate transactions in the USA each year - or else there wouldn't be so many CRE firms and brokers nationwide.  The vast majority of their work, however, doesn't involve selection of new business locations by clients.  It involves local services in the places where they already do business.

In 15+ years of work in this specialty, we have not yet found a very reliable source of new project data for the USA, much less the rest of the world.  The available consultant research is private or costly to obtain.

This page therefore cannot reliably answer the above question, but it is intended to share useful market insights from some of the many sources we know as an independent "concierge service" for project plans.  The key point is that thousands of development agencies are demonstrably competing for a relatively small number of "mobile" project deals.

Past research has suggested that perhaps 80% of the new job creation in any region is tied directly to the retention and expansion of existing businesses in the area, such as through growth in existing facilities or through purely local relocation (larger building) or expansion on site.

For example, new manufacturing sites are often planned to have room for at least 50% expansion in the future at the same location because it is very costly and disruptive to move such operations - even locally.

In this context, only a small share of the total projects each year are likely to be "mobile" - meaning that they have many location alternatives and are for new operations rather than on-site expansion or local moves.  Some new projects are also tied very closely to key suppliers or clients, which may limit their actual mobility beyond choices in a small region.  These may all be highly valuable deals for any community to "win".

The chart below shows the mix of capital investment projects for corporate facilities (new or expansion projects) in the USA from 1994 - 2006.  It excludes many very small projects, but includes some of them because they meet at least one of the three criteria.  For example, a project may involve a deal for 20,000 sq. ft. of space without creating 50 new jobs, and those jobs may be planned but not actually happen soon.  Similarly, even a relatively small project for perhaps 5 - 10 people can readily involve a capital investment commitment of $1 million or more.  The simple number of projects therefore doesn't differentiate between huge and very competitive "mega-projects" and those which are really quite small.  
 
It is hard to know how comprehensive and reliable the data behind the reported totals as charted above my be, because only subscribers to their research database would have access to the information about individual project announcements which add up to these totals.  Since the same methodology has been followed for many years, however, it should still be a useful indicator of changes over time in total project activity levels.

Do the math.  All the states (and thousands of cities and counties within them) may be competing for only a few thousand projects per year.  Some of these projects are very valuable to communities and are very competitive, but many are small or don't consider location alternatives.

 
Our analysis of visit patterns among our US state and regional economic development directories, as well as global directories, may also be an interesting indicator of which locations are "hot" for future project plans.

This is obviously not a very reliable indicator, since anybody can visit our open directories for any reason, but some fairly consistent patterns have emerged in recent years which seem to parallel what we have observed in project announcements and through our networks of many contacts.

Our analysis of the CEO Survey research by the Business Roundtable may also be a useful indicator of future US investment project activity.  This research focuses on the CEOs of roughly 100 large US companies.

Analysis of Directory Visits by State

Analysis of US Regional Directory Visits

Global Analysis of Regional Directory Visits

Analysis of Business Roundtable

CEO Survey 2002-2008 Results

Data Source: Site Selection magazine, April 2007 and prior years

Conway Data has maintained a "new plants database" for many years which is the source of the data used by Site Selection magazine each April for their "Governor's Cup" award to the state which reports the most projects for the preceding year.

Since they have followed a consistent process for tracking project announcements for many years, this is a potentially useful "macro" perspective on the US market for capital investment projects, but is subject to some distortions because of the way that states have reported data in the past.  Analysis of the state totals or specific projects behind the above national totals reveals some anomalies, but for lack of a better data source of this nature it is a generally useful market perspective.

Relationship Disclosure

We have no affiliation with Site Selection magazine, which is published by Conway Data.  Global Direct Investment Solutions performs US advertising sales work for fDi magazine, by the Financial Times group, but fDi has no involvement at all in the above market analysis work.

We also have no affiliation with the other suggested sources of historical market data, analysis, or future projections.

Our reference to these sources is not an endorsement of their work by us, nor vice versa.  This information is just shared to make it easier for the people we reach to find such information, and share our own perspective on this market on the basis of many sources of information, including our own direct contact with 1000+ investors during 15+ years.

Other Sources: Project Announcements and Trend Analysis

Plant Location International (IBM-PLI), for which Bruce Donnelly worked in the past (Biographic profile) when it was the global site selection consulting practice of PricewaterhouseCoopers, maintains a database of major project announcements worldwide (GILD - Global Investment Location Database).

The data itself is not openly published or for sale, but is gathered from many sources and then used as the basis for their own market analysis reports to support their PR and marketing of their consulting services, as in the case of their presentations at IEDC and BIO.

Recent Investment Trend Analysis

Sept 18, 2007 - IBM Plant Location International released new research during a presentation sponsored by fDi magazine at the IEDC conference in Phoenix about 20% growth in new jobs created worldwide by foreign direct investment projects during 2006.

Press release   IEDC presentation information including IBM-PLI speaker bios, website links, and a .pdf copy of their presentation.

Similar research for the life sciences sector has been presented at BIO.

OCO Consulting ( www.ococonsulting.com ) is a small European consulting firm which tracks project announcements as a subscription service, primarily for reference by investment promotion agencies (IPAs) to guide their targeting strategies for business attraction work.  This also promotes their research services to help identify potential investors for clients, and supports the promotion of their other consulting services for IPAs and economic development. September 17, 2007 - The Business Roundtable has released the results of their quarterly CEO Survey of roughly 100 of their 160 member firms.  This reflects the CEO expectations for sales, capital investment, and employment levels at their firms over the next six months, as well as US GDP planning assumptions.

Our graphs show the CEO Survey trends since 2002.

Oxford Intelligence is another European research service which tracks project announcements for various clients, including publishers and others who help them to promote their research services to IPAs. September 17, 2007 - Oxford Intelligence was also a speaker at the IEDC presentation sponsored by fDi magazine.  IEDC presentation information - where their presentation can be downloaded (.pdf)
Industrial Information Resources ( www.Industrialinfo.com ), based in Houston, specializes in research about the capital investment project plans of various process industries as a subscription service to potential suppliers (engineering and construction services, process machinery, etc.).  Their prior focus on US projects has now become more global. June 5, 2007 - The JP Morgan Global PMI Report on Manufacturing and Services reported global expansion at a faster rate.  J.P. Morgan Chase & Co. produces this global market research with NTC Economics, ISM, and IFPSM.
LoopNet ( www.LoopNet.com ) is a leading provider of commercial real estate listings online whose services are used by many of the top CRE networks.  Their services to such firms now include reference data about past deals.  The CRE firms often publish local market reports which can now be found easily through our new Search: Global CRE tool.

Although their data includes thousands of property transactions which may not be very relevant to investment promotion efforts by economic development agencies, such as changes of ownership or lease renewals and local office moves, or transactions in the hospitality, retail, or healthcare sectors, it is potentially a very useful source of CRE data.

The Milken Institute ( www.milkeninstitute.org ) publishes some market research related to economic development trends, but generally not at the level of individual project tracking.  Their focus is more typically at the level of development strategy, rather than competition for projects.

The World Economic Forum ( www.weforum.org ) also attracts some interesting research reports related to economic development issues worldwide, but generally focuses at the policy and strategy level rather than detailed market analysis about business investment project flows.

 

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