King White: Incentives are key to competing for new business

14-Jan-2013

There’s been a shift in mentality in the C-suite over recent years: Everyone wants incentives. It’s part of a changing economy, said King White, founder and president of Dallas-based Site Selection Group LLC, which helps companies with relocation and economic incentives. White founded Site Selection Group in 2006, after working in a similar capacity for a decade at Trammell Crow Co. before it was acquired by CBRE. Site Selection Group operates throughout the world helping companies. Since its founding, Site Selection has grown roughly 20 percent annually. The company has 17 employees. When White, 40, began working at Trammell Crow, economic incentives weren’t always part of the real estate decision and the C-suite was rarely involved in that decision. Now, CEOs want to know what city, county, state and federal incentives are available for a relocation or expansion. “Companies are more strategic now than they have ever been,” White said.

WHY ARE INCENTIVES AN iMPORTANT PART OF REAL ESTATE DECISIONS? It’s part of the changing economy. The world is becoming flat and people are making smarter location decisions, as a result. The decisions are filtering into the C-suite and boardroom more frequently than they had been in the past. That has become a standard part of the whole process.

WHEN DID THIS SHIFT HAPPEN? Over the last 10 years, and even more so over the past five years. Today, there’s a strong opinion at the C-level part of the organization that they want to make sure they are getting all the economic incentives — city, county, state and federal — that are offered. Everyone wants to make sure they are getting the same shot as everyone else. Along with economic incentives, it makes sure companies are making better labor decisions.

YOU WERE RECENTLY CITED IN A NEW YORK TIMES ARTICLE that WAS CRITICAL OF THE Texas’ ECONOMIC INCENTIVE PROGRAMS — WHAT WERE YOUR THOUGHTS ON THE ARTICLE? If you look at the size of the Texas economy, it makes sense they are giving out more economic incentives than other parts of the nation. Everyone is playing the game. Texas is just playing far more organized and strategic. People are just jealous that we have a system that works. We have a great combination of state and local incentives to offer companies and it’s a good business model overall. These packages are not loosely done, it’s a contract and a win-win for the community and the company if it’s a successful project.

SO WHY THE CRITICISM? I can’t really put my finger on it. We see benefits of the deal, if it’s structured correctly. That’s why you have experts, such as consultants and economic developers that understand the risk and reward of the incentives. They are protected contracts, but you don’t hear that part of the story.

WILL NORTH TEXAS SEE ANY RELOCATIONS THIS YEAR? We evaluate the labor market frequently for projects and it’s definitely tightening up. The information technology talent is difficult to find and there’s pressure on the wage markets. The wage markets have been holding flat the past three or four years, but we think there will be some wage inflation happening in the next 12 to 24 months. We’re seeing wages tick up a good 5 percent a year rather than the usual 2 percent or 3 percent. Over the next two years, expect a 10 percent increase in wages in the Dallas area. There could be local labor shortages if we grow at a pace that we can’t keep up with. That can be fixed by paying the right wages, but someone will be the loser in that equation. There’s a lot of competition for talent. We work about 120 national projects a year and Dallas makes the short list on about 25 percent of those projects.

WHAT TRENDS ARE YOU SEEING? We are getting cash incentives for companies that move to Dallas for a 40-person office, which we’ve never gotten in the past. Communities are lowering their threshold and competing for business. They don’t give out massive incentives, but they are giving out money for smaller projects. For a small user, that’s important money. It also creates some dynamics in regional economic development.

WHAT DYNAMICs? They are all playing the game — Plano, Frisco, Allen, McKinney. And now Richardson has gotten more aggressive with State Farm. I think it’s an opportunity for them to compete on a national landscape. Outside of Texas, there’s minimal support, or lack of support, on the local or state level. That’s a big positive, making people think they are wanted.

ARE THESE COMMUNITIES TRACKING THEIR AGREEMENTS? About half of the communities on a city level hand out incentives and have no way of making sure the company is complying with the package. We have a cloud-based management system that builds budgeting and reporting that can be used by cities and companies alike. We are working to roll out that technology.

Source: Dallas Business Journal  www.bizjournals.com/dallas