Business Relocations and Expansion Decisions are Back on the Table

Gloria Salinas, Managing Director, Economic Development

After experiencing a 30-50 percent decline in business relocation and expansion projects due to the COVID-19 pandemic, Site Selector Andy Shapiro said companies are now returning to their long-term plans for relocating or expanding their business models.

At a virtual DRC Tomorrow Fund Investor Breakfast meeting on Tuesday, June 2, Andy Shapiro, Managing Director of Biggins Lacy Shapiro & Co., discussed the future of corporate and industrial manufacturing location decisions, and gave insight into the Dallas Region’s success and advantages from his firm’s lens in the San Francisco Bay Area. Shapiro, who leads location advisory, said it is now evident the pause in projects was a temporary and short-term decision by companies as they worked through realigning their staff and business models due to the pandemic.

“I’m seeing a fairly full plate and quite a bit of activity that was postponed coming back alive,” Shapiro said.

Here are three key takeaways from the discussion on the Dallas Region’s position for future of business relocations and expansions:

Managing Risk Now the Top Issue in Location Decisions

The many uncertainties created by the pandemic and the accelerated shift in work-from-home practices and industrial supply chains has made managing risk paramount in business decisions, Shapiro said.

“In many ways, uncertainty will lock a decision down [and] will prevent a client or a company from making a decision more than anything else,” Shapiro said. “There’s no greater contributor to uncertainty than risk.”

Shapiro said risk has manifested in all forms. Companies have experienced accelerated long-term trends in office and supply chain in a couple of months. There is uncertainty around how the new workplace and managing the talent for it will look long-term, and what type of impact a shortage of talent in automated and machine-learning will have on supply chain and industrial projects. He said there are also political risks with trade wars and looming requirements for U.S.-made products, as well as environmental risk and negative impacts from global warming on companies in coastal cities.

“A lot of [location decision] is about risk, all kinds of risks,” he said.

Remote Work Hubs are ‘Very Real’ and Segmenting Biopharma is the Best Way to Compete for It

Mark Zuckerberg recently announced Dallas, Atlanta, and Denver as top tech talent markets in the country and under consideration for Facebook “remote worker” hubs.

Mike Rosa, DRC Senior Vice President of Economic Development who moderated the discussion, asked Shapiro if this was a new normal for tech companies and if the Dallas Region should expect to see more remote work hubs.

“[The remote work hub trend is] very real, and of course, it’s being led by the tech industry,” Shapiro said. “And so much is not tech, professional services are going to follow, and they already are following.”

Shapiro said many employees of Bay Area companies do not actually live in the area, and they are already working remotely for companies. The distribution of remote work will continue to accelerate in the post-COVID-19 world, he said. An 8-hour day and 40-hour work week is no longer a normal.

“The physical office will take on a very different role in the professional relationship between a company and its workers,” Shapiro said. “The physical office will be a place where special teaming can take place. Where the need for face-to-face contact, which does not occur on a daily basis has a place and a home, and a resource center where meeting with others from outside the firm can take place.”

The Dallas Region has worked to attract biopharma companies for years. Rosa asked if Shapiro is seeing interest from biopharma companies in expanding to new locations or staying close to existing facilities to boost domestic production.

Shapiro said access to skilled talent, who can manufacture new drugs, is what keeps biopharma companies in coastal cities such as San Diego and Boston, but he believes they will eventually begin to consider other markets for expansion for many of the same reasons corporations consider relocation, including business friendly regulations and the low-cost environment.

“It’s really all about segmenting biopharma and seeing where you have a competitive advantage, looking closely at biopharma activities across a wide range and seeing where you have a competitive advantage then competing vigorously in those areas.”

Shapiro said segments such as research and development should be considered two different components of biopharma because development now includes clinical trials.

The Dallas Region is a Top-Tier Market and Will Continue to Draw Wins

Texas has outperformed California neighboring states Arizona and Nevada when it comes to corporate relocations and tech companies, making it a top tier market, Shapiro said.

“Texas has become a pretty powerful and impactful destination for Californians,” he said. “I do believe Texas will continue to be attractive going forward.”

Shapiro said departure states, such as California, do not invest in economic development initiatives like southern and southeastern communities that are drawing in companies from high-cost and high-regulated markets.

“We spend $14 per capita on economic development marketing in California. I believe Texas and Arizona spend 10 times that amount, if not more,” he said.

Shapiro said the Dallas Region will continue to draw business relocation and expansion wins, but so will Atlanta, Denver, and Nashville – the cities with which North Texas competes.

“The [Dallas Region] market is maturing, and costs are starting to increase, but the basic value proposition is still there,” he said. “Dallas will remain a viable and competitive destination for all matter of activity – I can’t see that changing for a long time.”

Holmes Murphy is the 2020 Tomorrow Fund Breakfast Series Sponsor and the June breakfast event was sponsored by Oncor.