Site Selectors Guild Activity Outlook
The latest survey of the Site Selectors Guild views on site selection activity and trends is attached and I have a few comments. While I generally agree with the greater optimism, I’m more cautious and think that there are uncertainty and nuances to consider.
Guild members are much more optimistic today than in April last year, at the depth of the Covid-19 recessions and uncertainty, that companies will move forward with site selection projects. The pace and coverage of Covid-19 vaccinations is an obvious concern. Second, some projects, such as facilities with long planning and construction timelines and notably those tied to e-commerce such as data centers, e-commerce fulfillment centers, delivery equipment and others seem to have hardly paused. I spoke yesterday to representatives from California’s Central Valley who said that e-commerce fulfillment has been strong throughout in their area driven by access to LA and the Bay Area combined with available land and lower costs.
There is a difference between site selection activity and starting construction. Companies may resume their site searches, but at some time they have to weigh their views of future economic activity and demand for their products and decide whether to start construction or not. Increased activity is not the same as increased investment. We’ll see, but my feeling is that the second half of the year or early 2021is more promising for increase divestment.
I think that stabilization of FDI into the U.S. is more likely than growth. Greater predictability of trade and tariff policy and reliance on rules-based procedures will help confidence. But FDI into the U.S. also depends on pandemic control progress and economic stability in historical investment sources from the EU and other developed countries.
There will the continued pressure for reshoring and crating redundancy particularly in health care related industries where bottlenecks and delays were heightened during the pandemic response. However, supply chains are complicated, and many recent articles have pointed out that supply chains for products as diverse as bicycles and computers are concentrated in east and southeast Asia and this will constrain reshoring in the near term and likely longer. As the Economist noted recently: “Is a wave of supply-chain reshoring around the corner? Experience and evidence suggests they are stickier than you think.”