InRoads Research: The Importance of Site-Readiness
Major job-creating investments are won because of an available pipeline of ready sites. In the face of the current economic climate and future aspirations, being site-ready is paramount to winning the attention of companies who would invest in Hampton Roads. Site readiness allows the region to keep up with the “speed of business” and outpace project competition. Let’s walk through what it means to be site-ready, why it is important, and the potential solutions to site-readiness obstacles.
Site-Readiness Means “Shovel-Ready”
The definition of a “shovel-ready” site is as varied as the companies who seek them. The basic idea is that the site has been determined to be suitable for development and all infrastructure and permits are in place, so the site is ready-to-go when a company comes calling. This allows the company to begin operations as soon as possible.
“A SHOVEL-READY mega-site is an area of land developed with roads, utilities, etc. for the future construction of a cluster of businesses, typically built in rural communities and including improvements to local infrastructure.”
– Bryan K. Stephens, President of Hampton Roads Chamber
Site readiness means more certainty. It is fundamental that companies look after the interest of its stake-holders. In this regard, minimal surprises help to maximize investment in the process of locating a facility. Fewer unknowns make it easier to control the budget from the company’s perspective. Additionally, fewer unknowns allow the state/region to better prepare to offer development assistance and incentives, as the state/region is reluctant to do so with a stronger presence of uncertainty.
Site-readiness means faster delivery times. Companies are deadline driven, and the window of client decision-making timeframes is getting smaller. To minimize costs, clients want to deliver a facility as soon as possible. Simply put, time is money. The time resource is not always available to wait through the process of developing a potential site after a company has expressed interest, leaving the project vulnerable to competition.
Site-readiness means having a competitive edge. Site selection is competitive, so site-readiness provides more of a competitive advantage. Having “shovel-ready” sites or even the availability of quality sites that can be “shovel-ready” within 12-18 months gives companies more incentive to invest in our region over another. Companies understandably prefer shovel-ready sites to locate to, so a site being designated “shovel-ready” becomes an attractive selling point and competitive advantage or at minimum makes you competitive.
Site readiness means no regrets. While waiting to invest may minimize up-front state/regional risk and expenditures in the interim, how much more is the opportunity costs of not being prepared? Ben Safran, the Engagement Manager in McKinsey & Company’s Washington DC office, warned not to end up where, “you’re half stuck in this position where you wish you would have done something two years before, because you would have had this opportunity.” According to the Virginia Economic Development Partnership (VEDP), “absences of developable sites cost Virginia at least 47 projects and $6.5 billion in capital investment in the last 5 years.” Per VEDP, with at least 9 large projects included, this translates to an average opportunity cost of 1,800 jobs and $1.2 billion per lost project.
Obstacles and Solutions to Site-Readiness
The scarcity of shovel-ready sites in Hampton Roads, and all of Virginia, is due to several factors. Leading factors include challenges coordinating between responsible authorities and lack of dedicated funding sources for developing sites to higher levels of readiness.
Some active solution to move towards development ready sites include taking local and state legislative actions, coordinating stakeholder willingness to transact, and securing infrastructure investments. VEDP suggests that Virginia can generate upwards of 48,000 jobs over 10 years through 3 initiatives: a dedicated site improvement fund, a building development fund, and more flexible zoning.
A positive step of progression has been the Virginia Business Ready Sites Program (VBRSP), a discretionary program established to help Virginia localities develop and market existing industrial or commercial sites to prospective businesses, instituted in two phases. Phase I grants were for assessing industrial or commercial sites and determining their Site Characterization Tier Level (see tier classification chart below). Phase II grants are to assist in moving a site’s Characterization Tier Level up to the next Tier level.
In November of 2016, Governor McAuliffe announced the grantees of Phase I in which 24 Virginia localities collectively were approved for $96,405 in grants. Of which, 15% or $14,325 was awarded to a mix of several Hampton Roads localities, including: Isle of Wight County, Shirley T. Holland Intermodal Park - Phase III ($2,025); and York County/James City County, Pottery Property, ($2,500), and PAC Property ($2,200). In July of 2017, the governor announced Phase II grantees, of which no Hampton Roads locality was a recipient of a portion of the $1.188 million awarded. Albeit, the CenterPoint Intermodal Center in Suffolk is the first recognized site in the process with Tier 4 and Tier 5 certifications, meaning all critical infrastructure components are in place.
It is a conundrum when state and regional stakeholders prefer to invest in sites if and when, it is known a company will locate there but, companies prefer “shovel-ready” sites before they will come. This truly creates a “chicken and the egg” scenario, but consider that while we are waiting to make breakfast, our region is getting hungrier and hungrier. Hampton Roads’ situation mandates action, if not for the time-factor involved in elevating a site’s readiness alone. There currently is a lot of room for improvement. The clear comparative advantage is in preparation.