In search of your Secret Garden

By Paul Willies

Special to FDI Alliance International


University Corporate Center

Things are looking good in the good ol’ USA – if you parse away the politics. Inflation is down, unemployment is reaching levels not seen in 17 years, job growth is up – the value of your home has surpassed the all-time high of 2008!
But how do you market your area to someone sitting in a corporate office in Frankfurt, London, or Paris?

Right now, the United States has a black eye politically, and talk of sanctions against foreign countries is not a good back drop for encouraging new inward investment. But nevertheless, the savvy investor knows that political winds change – and opportunity lies in the Secret Garden.

Secret Garden

Most Europeans equate the United States to the kitch of the tourist parks of Orlando, or the bustle of New York, Chicago and Los Angeles … but have no appreciation for the thousands of miles of country in between. When you live in a country or city where the language can change within a two-hour drive, where your dream of a family holiday is only a few hundred miles down the road – yet seems a distant thought – the idea that it might take 44 hours (2,983.6 miles) non-stop to get from Boston to Los Angeles by road is a bit daunting.

The game is to present your Secret Garden; that one place in the middle of nowhere that offers a nirvana of opportunity with the least risk. If you build it, will they come?

Capital costs associated with constructing the infrastructure and buildings of tomorrow vary widely by location and remain hard to predict – the cost to construct in London or New York exceeds $3,200 per M2 (10.76 Sq ft.). Fluctuating currencies and commodity prices, and unexpected political developments, have added to a complex and dynamic mix over the past 12 months. These factors add further dimensions of risk to investment decision making, increasing the challenges associated with securing certainty of outcome. Commercial industrial manufacturing has been experiencing a renaissance in the US, partly as a result of low energy costs and the increasing costs of imports from Asia, driven in part by higher wages. This is clearly a trend that will accelerate with renewed political support. Investors are able to consider manufacturing across sectors in the US due to further innovations in technology and sophisticated management systems in recent years.
There will be continuing investment in manufacturing if the pace of “reshoring” accelerates.

Employment

Ramping up your new manufacturing plant. The availability of filling positions is critical in the process of developing a new production or distribution center. High unemployment actually offers a large pool of potential workers – albeit in need of training. Offering training programs to potential investors can take the edge off the concern of filling positions. Technology and distant training can attract hungry applicants to the Secret Garden.

Quality of life

Where the cost of one-bedroom apartment in New York hovers around $2,000 a month – as much as $5,000 in London – the idea that a similar apartment would cost less than $1,000 – or an entire house $2,000 - is appealing to those slaving away to pay the rent, let alone the opportunity of actually owning your own castle!
And for recreation?

The lure of the wilderness – tranquility, peacefulness - can be powerful against the bustle of city life, although the perks of a Starbucks (no pun intended) has its place. The cultural aspects of the community need to be played as hard as the financial gain.

Transportation

University Corporate Center

If you live in London or New York there is a high probability you don’t own a car – you might not even have a driver’s license – you have no need. Bus, train and taxi services are less expensive options than parking a car in Manhattan or Paris. However, living in the suburbs or rural districts of a distant county – a car is vital to your wellbeing – access to a nearby airport holds appeal. In attracting employees to far-flung corners of the state, offering incentives for transportation could make or break filling a position.

Distribution

OK so you have built the best mousetrap money can buy – now you need to get it to market. Availability of cost-effective distribution by truck, rail, sea or air becomes a factor in the decision process.

Facilitating economic growth and prosperity through efficient movement of goods is at the center of any comprehensive transportation plan. Assessing the most efficient means of freight movement requires careful consideration. Concerns for open and competitive markets for the shipment of goods are weighed against concerns such as congestion mitigation and road safety. Each mode provides certain benefits when compared to the other, however those benefits typically entail a trade-off for some other cost. Advocates for the movement of goods by road point to speed and flexibility factors. Advocates for the movement of goods by rail point to safety and energy efficiency factors - the interrelated elements of air and water movement of goods should not be ignored.

Counting your blessings

Taxation issues can take a bite out of the bottom line. The cost of concurrency fees, building permits, and re-zoning issues can bring a well-thought-out plan to its knees. Many communities offer incentive packages that can take the sting from the risk of placing your investment in their district. And for most, the taxation levels are lower in far-flung communities than larger built-up ones – so taking the county road to the far ends of the earth may pay dividends in the long-term.


Paul Willies is a regular contributor to FDI Alliance, a commercial real estate appraiser based in Tampa, Florida, and the owner of Appraisal Development International, Inc (www.appraisaldevelopment.com) and can be reached at paul@appraisaldevelopment.com