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Back in March, as COVID-19 began to grip the globe and economies slowed and then stopped, Christopher Chung, CEO of the Economic Development Partnership of North Carolina, said deals the agency had been working on for months started dropping off the table.
“When something comes along as disruptive as a pandemic, it really throws into question the near-term economic outlook,” Chung said. “It throws into question whether consumer demand stays solid.”
Expansion plans, relocations and other investments that were once in play statewide were now in question. Economic development professionals started to hold their breath and plan for the worst.
As we continue to endure the pandemic and executives get used to the “new normal,” economic development professionals are seeing a renewed interest in North Carolina.
Chung’s organization is a private-public partnership nonprofit company that’s contracted by the N.C. Department of Commerce to conduct economic development work, in an effort to bring new jobs and an increased tax base to the state.
He said June, July and August saw 10%-20% more new prospects compared with the same period last year.
Some that postponed their projects have started their search again.
Economic development professionals around the state said they, too, are starting to see renewed interest despite the continuing pandemic.
Shifting away from the headquarters
Some companies around the country are abandoning their headquarters in favor of satellite offices in a metro region or distributed in talent sectors throughout the country.
For instance, social media company Pinterest paid nearly $90 million to cancel its 490,000-square-foot San Francisco office lease last month in a yet-to-be-built high-rise near its existing headquarters.
“We have seen companies say they will reduce reliance on in-person offices. Will they stick to that? I don’t think even they know,” Chung said. “But who is to say that won’t change?”
In another example, REI, the outdoor gear co-op, will never occupy its new 380,000-square-foot Seattle-area headquarters, favoring a “less centralized approach” that offers “flexibility for more employees to work outside of the Puget Sound region.” Social media giant Facebook just inked a deal to buy the property for nearly $368 million, according to the Seattle Times.
Workers whose jobs don’t have to be conducted in person all the time are reconsidering their living arrangements. Five North Carolina cities appeared on a top 25 list for “newly remote workers.” The list by FinanceBuzz examined the cost of living, availability of high-speed internet, parks per capita and other metrics.
Winston-Salem’s No. 15 ranking on that list buoyed local officials. The city’s unemployment rate has also bounced back from 13.1% in May to a more recent 8.2%.
“Our economy has been fairly resilient,” said Laura Lee, senior vice president of Greater Winston-Salem Inc.
The new economic development organization came from a merger of the Winston-Salem Chamber of Commerce and Winston-Salem Business Inc.
Lee said the area has seen continued interest from large-scale manufacturing firms as well as food and beverage companies.
Continued travel restrictions and quarantine requirements are stymying some business travel.
Site visits, talking to existing employers about the business climate, angling for state incentives and talking to county and city officials about permits are best done in person, Chung said.
“All of those things companies want to do those in person because there’s a lot riding on it, and it’s not one of those things companies easily decide to replace with a virtual conversation,” Chung said.
He said in late May and early June, the EDPNC was speaking with a manufacturer based in New York City.
“They wanted to schedule some time to look at potential real estate,” Chung said. “If they sent folks from New York to North Carolina, theoretically once those folks turned around and went back home, they would’ve had to self-quarantine upon return to New York.”
One Europe-based company was ready to open a bank account for a project in Cumberland County, but executives could not fly here because of travel restrictions, said Robert Van Geons, president and CEO of the Fayetteville-Cumberland Economic Development Corp.
“Their interest remains high, and we are hopeful that as soon as travel issues pass to push those forward,” he said.
Absent in-person visits, Van Geons said staff at his EDC are using drone videos to showcase sites.
“In most cases, it is followed up with in-person visits,” Van Geons said, though he added that he’d heard of companies buying warehouses after a video call without visiting the site.
“The reality is you have to adjust. Contracts still end, and customers have demands, and you have to adjust accordingly.”
A good example of working around pandemic restrictions is the August announcement of an expansion of a Dansons distribution and customer service facility. The Canada-based company produces barbecue pellet grills. Van Geons said the EDC started working the project in May — about the time when businesses were starting to open back up in the state.
“In their case … they had to charter a plane to get here,” he said.
When the pandemic hit, many companies that had considered North Carolina put the brakes on their efforts, Chung said. And the number of new deals coming through the door in March, April and May dropped by 30%.
“Before they can spend $10 million or $100 million or $1 billion on a new location — no one is going to make that decision virtually,” Chung said. “That has to be done in person.”
There was a marked change in June, July and August, he said. New deals were up between 10% and 20% — still a far cry from the aggressive goal the EDPNC had set, but not as bad as Chung had feared in March when the governor issued the first state of emergency and stay-at-home order.
“The nice thing is any company that has come into the door since since March already has COVID-19 baked into its assumptions,” Chung said.