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Introduction to the data analysis and graphs below
Our April 2006
newsletter (4 pages with graphs) summarizes this market research and
analysis. Our analysis
of the volume of major capital investment projects in the United States is
obviously not the same as an analysis of their financial value, job
creation, or social and economic impact. A 50 job
call center project has a very different capital investment value and
community impact than a 2000 job automotive assembly plant which may attract
many related suppliers to the area.
The analysis below shows variances in the number of
projects relative to population over a seven year period, including the end
of the 1990's boom and the recent years of recovery.
There are no national standards for the reporting of
investment projects, so reliable and comparable information is difficult to
find. States and cities may report projects in different ways.
Some report virtually anything that happens in the area, while others may
just report the projects which they directly supported in some way.
Since multiple organizations are often involved (state,
regional, county, city, utilities, service providers, etc.), there may be
duplication in their reported statistics. Some projects are also
reported repeatedly - such as when they are first announced, and at each
stage of their subsequent development, even if that was within the reported
scope of the original project. Optimistic announcements are also not
adjusted down later to the reality of actual results.
Good data remains very hard to find, so any trend analysis
faces many limitations. It is, however, useful to consider where
projects have been going over time, and recent trends. An even more
difficult aspect of the analysis is to check state "results" against all the
effort and resources that states, cities, counties, and others invest to
attract and retain more business projects, plus the challenge of reliably
estimating the actual job creation and economic impact of such projects. |
Scope,
purpose, and assumptions of this analysis Our focus is
on "major" projects, loosely defined as creating an estimated 50 or
more jobs according to the announcement at the time of investment,
which may not in fact turn out to be the same as the eventual job creation
impact in the community by that company. Such job creation estimates
typically reflect expectations for the first 2 - 3 years of the project.
There are many smaller projects, and they all add up, but we
focus on the larger ones, and in particular on new cross-border projects
(investment from one location to some other one) involving a business location
decision. That can include investment from one county or city to
another nearby, rather than just across state or national borders, but is
generally beyond local site selection (finding a new building in the same
area) even though major local expansion projects may also face
competitive location choices. State project statistics may make no
such distinctions between local and competitive "mobile" investments.
Our analysis differs from others in this market because
our focus is on performance in terms of cost-effective marketing work to
attract as well as retain and expand corporate projects. Some states,
for example, spend lots of money on marketing activities each year but have relatively poor results
to show for it. Our separate analysis of
economic development lead generation costs may also be of interest
in that regard.
We therefore tie our analysis to
population levels rather than to political boundaries on the basic
assumption that similar numbers of people should expect a similar market
share of US capital investment project activity unless they are doing
something better or worse to attract more or fewer projects than other
states around the country or the competing states within their region.
A similar population in a very different location may not have the same
project potential, but this analysis should be more useful for comparison
within a general region, and to get a sense of differences in the volume of
projects over time between regions. |
| The analysis
presented below is based upon published data which is reported by Site
Selection magazine (Conway Data) each March in their popular "Governor's
Cup" ranking of states and cities by the total number of new, expansion, and
"other" projects announced in the preceding year.
Such data is not entirely reliable, as explained above,
particularly because states may differ in their reporting of projects to the
publisher, or may change their reporting practices over time, as in the case
of new leadership. It is, however, a sufficiently consistent source of
basic information about project announcements to provide a national picture
of market trends over time, even if there may be flaws in some of the data
or limitations for reliable analysis of any one state or year.
Our methodology and
interpretation for this graphical analysis
is explained further below. |
One of the
challenges presented by the Site Selection statistics is that they do not
openly publish the supporting data (which projects were used in their
tallies, and how they were categorized), or the job creation and capital
investment value information to estimate the economic impact. Thus, a
50 job project counts as one project, just like a 2500 job project.
Their rank-order lists for award purposes are also obviously
skewed in favor of large states and cities with the economic size to attract
lots of projects every year, regardless of whether that really equates to a
high economic impact relative to their population. In other words, a
smaller state may be doing much better at attracting projects, but still not
attract as many as a much larger state. Knowing that they cannot
possibly reach the top of such a ranking, some states may also not be
motivated to spend limited time and resources providing better information
to the publisher. |
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Distribution of new manufacturing, manufacturing
expansion, and other types of project announcements
New manufacturing
projects are usually around 17% of the total projects reported per year in
the Site Selection data.
Manufacturing
expansion projects are around 28% of the total, so new manufacturing plus
expansion projects are 45%.
The remaining 55%
is "other" projects, as explained below.
Total projects
have declined from roughly 12,000 per year in 1998-2002 to a little
more than 6,000 per year from 2003-2005.
From 1988 to 1994
the total projects reported were generally in the 4000 - 5000 range.
The top large
states in that period generally reported 250 - 300 projects per year, as
contrasted to 600 - 1200+ in the boom years.
In recent years,
the top large states have generally reported 250 - 500 projects with a
couple of exceptions.
This mix of
projects varies between states, but has generally been very consistent
nationally in the last seven years, 1999-2005.
Not all "new" or
expansion projects are mobile, facing competitive cross-border investment
choices among sites in several states.
States typically
compete for investment projects which are mobile within their region, rather
than against other regions.
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Long-term performance trends analysis : Rank
order against national average for projects per million population
Variances in the
number of project announcements relative to population from 1999-2005.
Compare to 2003-2005 analysis below.
Large positive
percentages reflect above average numbers of projects per million population
relative to the national average.
Negative
percentages reflect lower than the average numbers of project announcements
for the state population level.
From 1999 - 2005,
the national average was 34 projects announced per million population.
See methodology notes below.
This seven year
period covers both the "boom" at the end of the 1990's economic cycle and
the recession and initial recovery years.
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Recent performance trends analysis : Rank order
against national average for projects per million population
Variances in the
number of project announcements relative to population from 2003-2005.
Compare to 1999-2005 analysis above.
This shows how
relative national performance by states has changed during the economic
recovery over the last three years.
Once again, the
number of project announcements does not equate to comparable economic
impact, job creation, payrolls, etc.
From 2003 - 2005,
the national average was only 22 projects announced per million
population. See methodology notes
below.
That compares to a
national 7 year average of 34 projects per million from 1999 - 2005,
and 41 per million in the 1999 - 2001 "boom".
Total projects
have remained roughly half the "boom" levels from 2003-2005, but some states
have still done better than others
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"Boom years" performance trends analysis : Rank
order against national average for projects per million population
Variances in the
number of project announcements relative to population from 1999-2001.
Compare to 1999-2005 analysis above as a 7 year
period, or to the 3 latest years from 2003-2005
This shows
relative national performance by states during the last three years of the
1990's capital investment boom.
The national
average was 41 projects per million population from 1999-2001,
compared to only 22 from 2003-2005.
Capital investment
project activity tends to decline quickly in a recession, and then
significantly lag an economic recovery.
Increased global
competition for investment projects may also have been a factor in recent
years.
Comparison or
recent years to the
last "boom" years of "irrational exuberance" may be less relevant
than comparison to the early 1990's.
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Methodology behind our analysis
The above graphics just show where projects have reportedly
been going, without differentiating the types of projects (new
manufacturing, expansions, or other types of projects). They do not
reflect the economic impact (estimated job creation, capital investment, tax
flows, payroll value, etc.).
Separate charts illustrate the 2001
state population data used for the above
analysis.
The variances for each state are measured against the
average number of projects announced per million population for the country
during the indicated years. This baseline changes, such as from 41
projects per million from 1999-2001 to only 22 projects per million from
2003-2005, with a seven year average (including 2002) of 34 projects per
million.
To illustrate, the baseline performance for a state with a
2 million population would have been 82, 44, and 68 projects respectively,
so that a stable performance of 70 projects in all three periods would have
been 12 below average during the boom years, 2 below average over the last 7
years, and 26 above average in the last three years since the national
market has declined roughly 50%. This example
reflects changes in national market share even though the number of projects
won remains the same, which shows why simple year-to-year comparisons may
not be as meaningful. Similarly, a state with a 4 million population
would be measured against a national average benchmark of `64, 88, and 136
respectively (2x above). That illustrates why simple
year-to-year comparisons in this long-term market can be misleading. |
"Other"
projects and questions about inconsistent or dubious data
The "other" projects which Site Selection now includes in
their published data can be "offices, headquarters, distribution centers,
research and development facilities, speculative offices, speculative
industrial buildings, mixed-use facilities and hotels".
The inclusion of speculative construction activity may
result in double-counting of projects as such space is sold or leased, and
this may affect the data in some states more than others - whether because
of actual differences in their markets or because some states don't report
all of these as projects in their statistics.
Another data reliability question relates to some of the
data in small states which may not track and report projects as thoroughly,
given limited resources or the perception that they have no chance of being
ranked highly because of their relatively small number of projects by
comparison to much larger states. The level of reporting may also be
affected by leadership changes.
As shown in the above analysis, however, small states can
rank higher than might be expected because they may win more major projects
relative to their population size. This methodology basically levels
the playing field relative to population levels, but still does not take
other factors into consideration. As an obvious example, there may be
far more potential to develop new manufacturing or distribution projects in
Wyoming than in Washington DC - despite similar population size - because of
available space to develop. There are also many selection factors
which go into business site selection than just the population or economic
size of an area, so some states consistently rank poorly despite their size,
as the above graphics illustrate. |
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Our interpretation of the above graphics
In a rising market, such as from the recent 6,000 projects
per year pace to the 12,000 pace of the 1990's peak, favorable year to year
performance comparisons may become much easier to achieve, but it is quite
possible that more of those extra 6,000 projects are mobile and therefore
offer the marketing potential is for states to compete for more than
their usual share of regional projects as the total market size grows again.
One should not read too much into the numbers, but the
rank order distribution of performance during the 1999 - 2001 boom years,
the 2003 - 2005 economic recovery years, and over 7 years (3 before and 3
after 2002 as a transition year between the boom and recession) shows some
interesting changes in the relative position of various states in recent
years.
There are also some surprises, such as small states which
do very well relative to their population, while some prominent large states
such as Florida, Georgia, Arizona and Colorado rank far lower than
might have been anticipated. |
Questions
about the reliability of California projects data
Some of the changes in the original published data behind our
analysis seem odd.
For example, the California data seems skewed in recent
years. That may reflect the fact that the former governor eliminated
the state economic development office, shifting the burden of such work to
the local level. That transition may have affected the reliable
reporting of project announcements.
The disparity between roughly 1500 projects per year
reported in California before 2002 to only 10% of that level after 2002,
which would be incredibly low relative to the high state population and
contrary to anecdotal evidence about the California market, suggests that
the published data used for analysis may not accurately reflect recent
California project levels. |
| As the
economic recovery continues, we would expect the level of project activity
to increase from the recent average of 22 projects per million population to
the longer term average of around 34 projects. It may not return soon
to the "boom" levels of 41 projects per million, but the point is that
investment project activity could grow dramatically over the next few years
without exceeding the longer-term averages, as it did earlier in the 1990's
in the last economic recovery cycle. Many things
have changed in the last decade to alter historical trends, such as the
rapid growth of US investment into fast-growing international markets which
were not regarded as attractive as recently as a few years ago.
Foreign investment into the US may also increase. |
As indicated
above, total US project activity per year has varied between around 6,000
and 12,000 per year from the recent recession and recovery period to the
prior "boom" peak. A recovery to more "average" long-term levels would
therefore be around 9,000 projects. More than half
of this is the "other" projects, as explained above. Many projects
will not be "mobile", such as expansions or those tied closely to key
supplier or customer locations. The historic trend of roughly 17% of
the total as new manufacturing projects suggests that there may be only
around 1500 such projects per year nationwide, plus office projects and
distribution centers. |
| Related
analysis : website visits and regional interests
A quick review of our graph of
daily website visits or monthly visits
shows a major increase in activity early in 2006 by comparison to 2004 and
2005. Visits are up 150% from 2004 levels.
Our analysis of regional
interests among 2006 and 2005 visitors shows that our visitors continue
to have interests spread all over the world, and throughout the United
States. Our analysis of
economic development lead generation costs may also be of interest. |
Economic
development marketing implications The above
analysis suggests that there may soon be hundreds more manufacturing
projects per year (new plus more expansions and office and distribution
projects) for which states will compete in 2006 and beyond as the economy
expands again, even if not to "boom" levels. That should greatly
exceed the 1100 new US manufacturing projects as in the last few years.
That is why we are ramping up our 2006-2010
business plan to develop a unique global structure of
regional offices
for corporate relationship development work and independent, well-qualified
referrals to relevant professional services and economic development
contacts. |
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Other information resources about project
announcements The following sources may be
helpful for analysis of the distribution of capital investment projects in
the United States, or recent investment trends and news such as major
project announcements.
Many economic development organizations at the national,
state, regional, and local level maintain timely information about
investment activity in their areas, but this information is often
inconsistent or scattered through a confusing series of press releases which
may describe the same project at different stages of development. Some
organizations track and report virtually anything that happens in their
areas, while others focus on reporting projects which they actually
assisted.
Our regional and state economic development directories
can help to find such resources quickly for most regions of the United
States and worldwide.
We also maintain a directory which selectively highlights
some of the professional service providers and publishers who
track
investment project announcements. Some of these only provide such
information on a paid subscription basis, or do not share the data behind
their market analysis.
We openly share information about many
major project announcements by location,
and by industry sector, as explained at right. |
For
assistance with project plans or community marketing work
Please contact us if we
may be of assistance with capital investment project planning in the USA or
other countries, such as through well-qualified referrals to relevant
professional service providers and economic development organizations, or
assistance with preliminary planning and research needs. Our
Opt-In page can also be used for private
feedback to guide our research work.
As we work with communities to share knowledge of their
business investment climate and recent developments, we update our selective
directories of project announcements as
listed below.
These are not intended to be comprehensive lists of major
project announcements for all locations and industries. In a typical
year, there are several thousand new manufacturing projects or expansions in
the USA and worldwide, plus thousands of other types of projects such as
offices, distribution centers, R&D operations, etc. There are also
many projects in sectors which are not the primary focus of our work, such
as retail, hospitality (hotels, restaurants, entertainment), hospitals,
government facilities, social infrastructure projects, speculative real
estate development investments and property ownership changes, etc.
We just highlight some major project announcements because
this may help future investors to discover places of potential interest
through information about past projects relevant to their own interests. |
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