28 Dec Chung: Real estate is key factor
The CEO of the Economic Development Partnership of N.C. (EDPNC) emphasized the importance of available real estate, especially buildings ready to be occupied, during the Wilkes Economic Development Corp. (EDC) annual meeting Thursday night.
“Too often the stumbling block for our local partners (like the Wilkes EDC) is product in the form of real estate that can accommodate the types of industries looking right now,” added Christopher Chung, speaking at Wilkes Community College’s John A. Walker Community Center.
“Product is something you don’t want to be without as you go out there trying to recruit companies,” he said.
The EDPNC is a public-private organization—like the Wilkes EDC—that recruits new businesses and assists existing companies in the state while working under contract with the N.C. Department of Commerce.
“At some point, we always have to depend on our local partners (like the Wilkes EDC) to carry the ball the rest of the way,” said Chung.
Wilkes Chamber of Commerce President Linda Cheek noted that constructing a speculative shell building is risky and asked Chung what size is best.
Chung said the EDPNC’s goals for 2019 include doing a better job gathering data to provide that information. He agreed about the risk and said it takes “patient capital” to construct a spec shell building.
“You’ve got to be willing to still see that thing empty a year from now, maybe even two or three years from now, but recognize that you’re not going to get any further if you don’t have anything to offer companies.”
Chung added, “It’s a risk that every community has to weigh, but we’re not here to say you should or shouldn’t.”
The EDPNC hears from an average of about 200 companies considering North Carolina for a manufacturing plant each year and about 75 percent of them “need an existing building right off the bat” with certain square footage and ceiling height, he said.
Less than 40 percent of counties in the state have the buildings companies want, Chung said.
“They always seem to be in a hurry by the time they contact us…. The challenge always is that if ya’ll don’t (have it), they’re moving on to the next community or some other community that does have it.”
Chung said communities need to discuss the status of their property inventories.
“If we don’t have that basic piece of real estate a company insists it needs, it’s going to make it real hard to get them to come here” regardless of anything else. “It’s a challenge we’re seeing all over North Carolina…. especially with the economy doing so well.”
Having available buildings is also a good way to help keep a company in the community when it needs to expand, he added.
Workforce, other factors
After learning what a company needs, including worker skill base, highway access and possibly rail, utility capacity (electricity, water and sewer etc.), real estate and whatever else, the EDPNC contacts its local counterparts like the Wilkes EDC in the area of the state being considered.
Chung said workforce is the number one challenge right now and isn’t an easy problem to solve. He said the tight labor market, reflected by low unemployment rates, is a good problem to have but presents challenges.
Chung said great community colleges, universities, the military and people moving to North Carolina help provide a bigger talent pool, “but plenty of industries are still finding it way too hard to fill jobs as soon as they create them.”
He said that if North Carolina has a site that competes well with real estate, workforce and other factors and is one of the three or four finalists, the last hurdle usually is state and local financial incentives.
He said some states like South Carolina, Tennessee and Mississippi historically are able to offer bigger incentives than North Carolina. “We don’t have to be the biggest offer on the table, but we can’t be so far out of the ball park that it’s easy for the company to decide to go somewhere else.
“So, on the front end, real estate gets you cut and on the back end it’s incentives.”
Chung also urged people in the audience to be ambassadors for Wilkes County. He said George Smith told him his initial consideration of establishing the Copper Barrel distillery in North Wilkesboro resulted from North Wilkesboro Mayor Robert Johnson promoting the town when they happened to meet in Charlotte.
Chung said that in addition to new business recruiting and addressing needs of existing employers (which can include helping them expand), the EDPNC also provides export assistance, small business startup counseling and tourism promotion. He said tourism advertising is focused on places like Nashville, Pittsburg, Atlanta, Washington, D.C., and Columbus, Ohio.
To illustrate the competitiveness of new business recruiting, Chung said the EDPNC is having a dynamite year if it is successful with about 20 percent of its recruiting efforts.
Impact of tariffs
When asked about recent tariffs, Chung said the biggest impact so far is that a record number of foreign companies have expressed interest in building manufacturing facilities in North Carolina due to uncertainty about U.S. tariffs on foreign products or a belief that they will be imposed.
He said about one out of every three companies that express interest in moving to North Carolina lately is from another country. The EDPNC currently has 12 such projects from China, 11 from Germany, nine from Japan and six apiece from Korea and India.
“If you are a foreign company there is no doubt that you want to sell to the United States if you have the opportunity… but what if the U.S. government makes it harder to sell into the U.S. from outside by putting up trade barriers and assessing tariffs” on imported goods.
“One potential strategy to hedge your bet is to put your manufacturing or some type of valued added process here so that it’s actually made in the United States and not subjected to tariffs.”
Chung said the flip side is that U.S. companies are hurt when foreign countries put tariffs on exported U.S. goods in retaliation—and this is occurring.
He said profit margins for U.S. companies are also squeezed when they have to pay more for imported components or raw materials due to tariffs.
“I suspect that over time, we’ll learn about some things that aren’t helping us like they are on the business recruitment side.” He referenced the impact of tariffs on N.C. companies exporting lumber and logs to other countries.
If EDC builds it, will they come?