By Mark R. Smith, Contributing Writer
When the trend began, site certification was a simple marketing exercise by economic development organizations (EDOs). It was intended to apprise, and hopefully lure, end users and developers to a given jurisdiction by sharing information about just how great a piece of land was for a real estate project.
Then, as markets do in times of technological change, an evolution occurred: the importance of site certification grew from the early days of providing a relatively condensed dossier of actionable facts to much longer technical reports that were accompanied by hundreds (and even thousands) of pages of factoids and data.
While that sounds like too much information, the latest news is that while the Site Selector’s Guild (SSG) is working to establish the first set of national standards, there are other industry veterans who think that the days of EDOs pursuing that certified site stamp of approval are numbered.
“The first efforts to offer developers certified sites started in the late 1990s,” said Didi Caldwell, president of Greenville, S.C.-based Global Location Strategies. “At about that time, the state of New York established a program called Build Now NY, which was the first such
program in the economic development industry,” she said, noting that it was the brainchild of Gov. George Pataki’s administration to boost the attractiveness of New York through well-developed product.
“It was a matching grant program and the goal was to make more places shovel-ready for the development community,” said Caldwell. “Then Pennsylvania started the Key Sites program, which featured similar goals, but also had a training component to familiarize EDOs with how the site selection process was intended to work.”
When other jurisdictions saw the success that New York was having, particularly with the announcement of semiconductor operations, the trend took off. The firm that led the market leader in those days was helmed by Ed McCallum and Mark Sweeney, who exited Fluor Daniel (now Fluor Corp.) to found McCallum Sweeney Consulting.
“They worked with Tennessee Valley Authority and the state of South Carolina, among many other EDOs, to develop site certification programs because other states saw that best practices were getting results and wanted in,” said Caldwell. “Within the industry there was kind of a herd mentality, with lots of EDO demand and site selection firms filling the need.”
The amount of attention being paid by EDOs and site selectors to certified sites is strong and actually has “been growing in importance and popularity for years,” said Phil Schneider, president of Milwaukee-based Schneider Strategy Consulting, “to the point that most EDOs have some semblance a site readiness program. It’s quickly becoming table stakes for locations to have sites that are very well documented.”
That said, the sites are often prepared to meet the criteria of certain markets. “There are many differences and nuances concerning the sites for certain industries and businesses, and even specific markets,” said Schneider, “especially for heavier industry sites of 500 acres or more,” which are the “so-called Mega Sites.”
It seems like there are more certified sites on the market every year. “The big utilities and states have to have active, robust programs,” he said, “and ready sites are more frequently requested by site selectors because our time frames for gathering information with our clients gets shorter and shorter every year. Ten years ago it was nine months to a year; now it’s often only a couple of months.”
That makes getting the job done tougher, “but projects continue moving faster and faster, so fully-documented sites become more valuable to the process,” said Schneider. “That also means it’s a time saver for EDOs, because they too understand how fast these projects are moving and how long it can take to pull required site information together.”
That said, there are some projects, such as very heavy industrial projects, where the siting is so difficult and specific “that certified or shovel ready sites are not necessarily required by the site selector due to the stringent requirements and the difficulty in locating sites that have them,” Schneider stated. “But, there are still plenty of projects looking for your standard 40-acre sites that can accommodate 250,000-square-foot projects. And many of these have been fully documented, so the expectations of the developers is to have a good portfolio of sites” to consider.
The growing numbers of sites that have been certified turned out to be beneficial during 2020 COVID-19 shutdown, too. “Due to the pandemic, we began to conduct more due diligence virtually, which was presented by the EDOs in the same fashion to illustrate that they have sites that are ready to go,” said Schneider.
As for trends with this sector of the real estate industry, Schneider pointed to increasingly specialized sites for specific industries.
“EDOs have target industries that they know their areas can well serve,” he said. “With food processing as a target, for example, they will first ensure that they have the right labor market, transportation network, water and sewer treatment, power rates for cold storage, certain supplier and market access, and a clean environmental image.
“They will identify a site locally that fits this criteria for food processing, for instance” Schneider said, “and then fully document the readiness and attributes of the site emphasizing that it has the specific infrastructure that many food processors require. And increasingly, they will also document that the area workforce also has the skills and training needed by food processors, thereby demonstrating that the community has the land, utility and transportation infrastructure, and the workers this industry needs to succeed.”
While the various site certification programs across the U.S. have basically the same goal, their approaches often vary. Today’s market “is a hodge-podge of programs in the various states that may or may not correlate,” Caldwell said. “Some have more rigorous standards that others so even if someone says a given state is certified, there is still no consensus as to what that means.”
What it should mean, she said, “is that there has been as much due diligence conducted as possible,” including archeological, cultural environmental, wetlands, geotechnical, utilities, ownership, etc.
There may be some good news on that front in the near future, as the Site Selector’s Guild (SSG) has been discussing establishing a national standard for site readiness. “We’ve been talking about it since I was the organization’s board chair three years ago,” said Caldwell. “Gaining consensus with the nearly 60 members that make up the Guild is challenging, but I think we all agree that a national standard would be helpful.”
Helpful for sure and depending on who’s involved in a successful project, perhaps even crucial. “My opinion is that whether you achieve certification or not,” she said, “the steps you go through to achieve certification help you compete successfully for projects.”
There are a host of issues that could arise later if proper due diligence is not conducted prior to a company making its location decision. “It could be that the soil conditions aren’t what they were thought to be,” said Caldwell, “or there’s an endangered species in the area or the utilities can’t be made available within the proper time frame.
“What the entire exercise is really about,” she said, “is mitigating as much as possible risk to the schedule, the costs, and the ability to operate now and into the future as intended.”
In the end, that comes down to the needs of the end-user.
“With or without an established certification program, doing your due diligence leads to success,” said Caldwell. “However, having an established program can provide structure to local community’s due diligence efforts, achieve third-party validation and also may include a level of funding from the state, a public utility, the rail company or another entity.”
At press time, the SSG was moving toward creating a proof of concept by the end of this year so it can present it to the board and potentially obtain final approval by the start of 2022.
“One thing we’ve talked about is that most certification programs are either/or,” Caldwell said. “A site either achieves certification or it does not. One format under consideration by the Guild is setting up a national standard with tiers that work toward a point system, like we’ve seen for many years with Leadership in Energy and Environmental Design (or LEED) buildings with their Platinum, Gold and Silver standards. That way, sites can receive a designation based on wherever it is in the site readiness journey.”
That also means that some sites “that are really unique and may never qualify in some certification programs” can at receive recognition for the due diligence activities that have been undertaken, she said.
Speaking of sites that are not certified, Caldwell said one topic that was commonly discussed at [the recent] International Economic Development Council conference in Nashville concerned how many sites are getting snapped up before there’s been time to complete certification, as well as how sites that were certified years ago and have sat on the market are suddenly seeing success.
Good examples of the latter are Ford Motor Company’s site where it will build new battery and electric vehicle facilities at the Glendale Megasite in Hardin County, Kentucky, and Memphis Regional Megasite in Haywood County, Tennessee. “There has been so much investment activity recently for large industrial sites,” she said, “that good sites in a reasonably active market are being snapped up, whether they have gone through proper due diligence or not.”
As a result, Caldwell’s concerns have to do with the grander vision.
“I don’t want communities to get complacent and feel like they don’t need to go through the due diligence process. That’s not the way to think,” she said. “On the contrary, they should be accelerating the process to identify, validate and market good sites to take advantage of this wave of industrial activity.”
Jeannette Goldsmith is vice president of Strategic Development Group, a site selection and incentive negotiation firm also of Greenville, South Carolina. She too recalls the earlier days of site certification, though she wonders if that part of the development industry has run its course.
“Essentially, site certification programs started 20 years ago as a way for jurisdictions to market sites and make them stand out in the development industry,” said Goldsmith. They were well received, but “as time went on, they became much more technical meaning that the jurisdictions had to do much more homework and due diligence before presenting sites to end users or developers.”
As that happened certified sites evolved from a marketing bonus to something much more technical after some developers had made deals earlier on and didn’t end up getting what they thought they had paid for – and thus wanted more information and numbers to crunch.
“Initially, site certification didn’t cost much to complete and it was almost an afterthought in the grand scheme of EDO budgets,” said Goldsmith. “It was about 10 years ago that the game started changing, because the process evolved from a marketing play to an attempt to completely de-risk a site, which resulted in a greater demand for information.”
For example, she recalled early instances of getting all of the criteria or required information that was shared with the development community on one page; in recent years, five pages of criteria has become the norm. Based on today’s certification requirements, certification packages can run up to thousands of pages for a single site.”
That’s also meant gathering the information for a site certification is much more challenging. “They can be tough for one person to compile when they’re relying on [entities for data] such as planning and zoning, other governmental offices, environmental consultants, utility companies, attorneys, etc.,” Goldsmith said. “That’s how this part of the industry has changed.”
Still Worth It?
Ironically, as the time and money that is spent on site certification is to satisfy the ever-increasing demand for technical information, site consultants came to understand how pivotal this information was for corporations making location decisions. “It also led to a cost increase, because depending on the location, demand and size of the lot, certification can cost between $25,000 and $200,000 per site,” Goldsmith said.
While technology and analytics have not changed this already information heavy-discipline simply because it’s technical by nature, they’re still so technical, “that there isn’t room for qualitative judgement,” she said.
“We’ve reached a place where most every company requires sites that are shovel ready; and while site consultants still require all of the due diligence to be completed, having a certified site has lost it marketing relevance,” said Goldsmith. “It’s expected, so it’s no longer a bonus.”
So moving forward, she expects the industry to move away from certified sites. “I think this trend has peaked and they have outlived their usefulness,” she said. They’re too cumbersome and too costly for jurisdictions to complete the requirements. At the end of the day, you have a certified site, but not necessarily a good site.
“The information a community has to collect takes a lot of time and a lot of money to produce,” said Goldsmith, “and, unfortunately, I have seen too many communities waste a lot of time and a lot of money on sites that are never going to be attractive to an end user.”
Still, she lauded what the SSG is trying to do. “It’s an effort to finally level the playing field” she said, “and to standardize the many different certification programs across the country.”
About the Author: Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
Concurrently, he’s written at length about the film and video industry for a variety of publications, and about his other loves, including music, sports and leisure.
Global Location Strategies
Didi Caldwell, president
864-281-6691/918-3816 cell and firstname.lastname@example.org
Phil Schneider, president
630-841-2953 cell and email@example.com
Strategic Development Group Greenville, SC
Jeannette Goldsmith, vice president
864-982-0061 cell and firstname.lastname@example.org