How businesses make location decisions is changing

A recent review of survey responses in the US over the last 30 years shows how some decision criteria has changed while others remain consistently important. Digital disruption, technological change, geo-political shifts, globalisation, etc. have all changed the way that business decision makers consider different locations for future investments and jobs. We break down the key trends and findings for your below.

Note: % of respondents that identified the factor as ‘important’ or ‘very important’.

Source: Lucid Economics; Area Development (2016)

Key Trend #1: Skilled Labour Rules!

Unsurprisingly, the availability of skilled labour has become the most important location decision factor for businesses. At the same time, labour costs are still important (and always has been), however, from 2010 to 2015, the importance of labour cost has fallen below the importance of skilled labour. These trends are in line with technological advances and the value that employers must get out of employees. While cost is still important, finding the right talent is more important, which is also why there has been an increase in the importance of training programs. And not all training programs are created equal; the programs that can help deliver the skilled labour required are of interest here, particularly if the programs can offer specific skills suited to a company’s specific requirements.

Key Trend #2: Trucks Beat the Internet

Highway accessibility has always featured as a top site selection factor for businesses. However, its importance relative to skilled labour availability has waned in 2015. Interestingly, at the same time the availability of advanced ICT services has waned significantly from 2005 (when it was #3 behind highway accessibility and labour costs) to #23 in 2015. Apparently moving product is more important than moving information, or probably more factual is that businesses have become so accustomed to having high speed internet access that it has become a given (and hence not an important decision factor relative to others).

Key Trend #3: Quality of Life Matters!

One of the really interesting trends over the last ten years of survey results is the considerable increase in the importance of quality of life. As a site selection factor, it has risen from #20 in importance in 2005 to #3 in 2015!!! This trend should not be that surprising given the importance of skilled labour. Most of these individuals are very qualified, very talented and in high demand by employers. They have the luxury of choosing where they want to live often over having to take a job in a place that have to live. Important to keep an eye on your community’s quality of life and attractiveness for skilled employees!

Now, this survey does tend to favour a US environment, given its source, but keep in mind that 25% of decision makers surveyed said they will open a foreign facility within the next five years. Asia-Pacific will be the top destination of these and some of them might even look to Australia!

If you want to find out more about how your community can become more attractive for investment, please get in touch at info@lucideconomics.com.au or 1-800-940-990.

If you would like to see the entire site selection factors from 1986 to 2015, please just send us an email at info@lucidecnomics.com.au.