Site Selection Magazine
Adam Bruns and Patty Rasmussen
4 March 2016
The Chicago-based MacArthur Foundation, known for its “genius” fellowships, usually distributes its separate awards for creative and effective institutions to groups around the world. But in February, all 14 awards, representing over $6 million, went to the foundation’s hometown, where MacArthur each year already supports more than 300 arts and culture groups. Since 1978, MacArthur has invested nearly $1.1 billion in Chicago.
“Support for these leading organizations reflects our enduring commitment to Chicago and to its cultural life that enriches us all,” said MacArthur President Julia Stasch.
Site Selection’s Top Metros of 2015 are those enriched by facility project investment from corporations. Chicago tops the list among the largest cities in the US, followed by Houston and Dallas-Fort Worth in Texas, then Cincinnati and Columbus in Ohio. Cracking into the top 10 this year is Louisville, Ky. — one of six of the Top 10 large metro areas that encompass territory in more than one state.
Multi-state metros top our other population categories too. Omaha-Council Bluffs, Neb.-Iowa, is No. 1 among Tier 2 areas (population 200,000 to 1 million), repeating its achievement in 2013. It’s trailed by Dayton, Ohio; Tulsa, Okla.; Durham-Chapel Hill, N.C.; and Baton Rouge, La.
Sioux City, Iowa-Neb.-S.D., tops Tier 3 (less than 200,000 population), followed by Bowling Green, Ky.; Gainesville, Ga.; Janesville-Beloit, Wis.; and Altoona, Pa.
Ohio and North Carolina have the most representation among the top 10 metro areas across each population tier, with five each. See the maps below for regional metro leaders.
A handful of companies struck gold in 2015 with project investments in multiple areas among our Top 30. But one stands out for leaving one No. 1 city for another. In October, ConAgra Foods decided to move its headquarters from Omaha to Chicago. By this summer, ConAgra is set to open up shop with 700 employees in new office space at Chicago’s Merchandise Mart, where GE Transportation moved its HQ in 2012 and Braintree moved its HQ in 2014.
As reported by Site Selection’s Ron Starner last year, though 1,200 jobs will remain in the town where ConAgra was founded in 1919, the move means the elimination of 1,300 jobs in Omaha, as the company that employs 32,800 people worldwide sheds about 4.5 percent of its workforce. It also means a piece of prime headquarters property — part of a struggle in the late 1980s to keep ConAgra from moving — will now be ripe for occupancy in the top Tier-2 metro in the country.
“While we are transitioning our headquarters to Chicago, ConAgra Foods is pleased to have a significant presence in the two top-ranked metro areas,” says Christopher P. Kircher, vice president, corporate affairs and president, ConAgra Foods Foundation. “Major office locations in both these metros enhance our ability to execute against our strategic plan to build a focused, higher-margin, more contemporary and higher-performing company.”
Kircher says preparation of the new Chicago site remains on schedule. As for disposition of the campus asset in Omaha, “Right now we’re focused on defining our footprint and working through the logistics of the space requirements necessary for the 1,200 employees who will continue to be based in Omaha,” he says. “As a large employer in Omaha, we’ll continue to have a significant presence there, and we intend to continue to support the community through many of the same initiatives in which we’ve been engaged in the past,” such as community sponsorships, fighting hunger and other volunteer activities.
ConAgra President and CEO Sean Connolly said at the time of the announcement, “Locating our headquarters and our largest business segment in Chicago places us in the heart of one of the world’s business capitals and consumer packaged goods centers, enhancing our ability to attract and retain top talent with a focus on brand building and innovation.”
Jeff Malehorn, president and CEO of World Business Chicago, told Starner, “In general, it is the same story behind a lot of our wins. It comes down to the size of the talent base that we have here. Secondly, we have a very sizable food industry. And third is access to markets. That means access to domestic and global locations in terms of customers, suppliers, and for various teams to come together.”
The New Multinationals
The headquarters highlight list was long last year for Chicago: GrubHub is adding 400 jobs, while Glassdoor is establishing its own 250-employee operation. Risk management and technology firm Prescient is moving 60 HQ jobs from Greater D.C. to Chicago’s Prudential Building after choosing the city over Charlotte and Miami. And online lender Avant is investing $52 million in a headquarters relocation move, all in the city proper.
Increasingly, the multinationals that matter to cities are not behemoths, but those of the startup, entrepreneurial variety. That’s because traditional multinationals are looking to partner with small, energetic firms rather than innovate internally. Then again, sometimes it’s a quick journey from tiny to giant.
“In less than three years we have grown from a three-man startup to adding 670 jobs to the economy,” said Avant CEO Al Goldstein last summer. “We plan on hiring an additional 300 employees this year and by the end of 2015, expect to employ approximately 1,000 people.”
The jewel in Chicago’s startup crown is business incubator 1871, the flagship project of the Chicagoland Entrepreneurial Center. Opened in May 2012 and already home to more than 350 early-stage, high-growth digital startups, the facility just finished an expansion taking it to nearly 200,000 sq. ft. at the Merchandise Mart. Featuring venture capital firms, niche accelerators and multiple university satellite offices, there’s no better model for an incubator ecosystem. And there’s no fiercer champion for it than outspoken 1871 CEO Howard Tullman, who in a January blog decried “first mover” status in favor of the real-world, concrete value he sees Chicago companies delivering. He also offered insight into why Site Selection’s Top Metros have such a strong Midwest component:
“We’re seeing similar growth and prospects in other cities throughout the Midwest,” he wrote, “as the ‘rise of the rest’ continues unabated while the fantasy stories on both coasts continue to crumble.”
In an interview, Tullman says 1871’s launch and first expansion benefited from some state assistance, but the newest expansion is completely self-funded. The startup mentality is even blasting a hole in state bureaucracy: As state legislators continue to hold a budget hostage, one ray of hope has come from an unrelated commitment by the state treasurer of several hundred million dollars to support startups.
“That’s only to the good,” Tullman says. “In Chicago last year we had over $7 billion of exits. Those are serial entrepreneurs, and those guys are the funding sources of 1871 companies. We’re not reliant on a billion-dollar venture fund. It’s a tier of successful entrepreneurs, angel investors, and early-stage venture funds, of which we have five as tenants.”
Tech hubs worldwide are modeling themselves after 1871, and in some cases drawing expansion interest from 1871 companies. Tullman says it’s fine to be a shining example, and there are reciprocity agreements with organizations in such locations as Mexico City, Paris, London, Tel Aviv, Brazil, Colombia and Turkey. But make no mistake. “My sole goal,” he says, “is to provide incentives for those startups to launch their US presence in Chicago at 1871.”
In that spirit, his team recently welcomed delegations from Turkey and Israel. The goal for globally-minded startups is very simple, he says: Capital, talent and customers.
“Go to the Valley and you discover there aren’t any customers there,” he says of Silicon Valley. “If you want to launch in the US, you don’t launch out of Starbucks or the Red Roof Inn. Come to 1871 — 20,000 people a month are here, and you have direct access to large and small customers.”
Headquarters Are Real
Some debate the value of all the headquarters coming to town, but Tullman says they’re a big part of 1871’s job creation strategy. The big companies don’t generally move their R&D operations. But they’re perfectly willing to let their corporate foundations, free of the internal corporate P&L, go invest in new ideas outside the company.
“We can point to MillerCoors, Kraft, AbbVie, McDonald’s, maybe two dozen corporations, including five to in house right now working with our startups here,” he says. “They’re doing the exact same thing they prevented from doing internally. It’s an off-balance-sheet investment that works well. Then you discover they fold it in or buy it. Amazon just bought one of our companies for $40 million. We’ve probably had five to 10 of those kinds of cases in the last year. Our goal is not unicorns, it’s $20-million to $50-million [companies] bought by a larger organization. Braintree just bought a local Chicago company. The model is consistent. The jobs stay, and the money gets recycled.”
Tullman says he’s starting to see talent five or even 15 years out of college returning to raise their own families, or just because they miss their hometown.
“Companies have moved headquarters here because of cost-of-living and lifestyle issues. In the Valley, everybody has one foot out the door looking for the next shiny object. We’re in a marketplace where the deals are better valued and the workforce is far more loyal and willing to stick around. It’s a market ripe for capital injection and growth on terms not as insane as they are on both coasts.”
The blend of Midwest values with startup values is right on time for many foreign companies looking for US landing zones, says Mark Tomkins, president and CEO of the German-American Chamber of Commerce-Midwest, whose Illinois Consortium for Advanced Technical Training (ICATT) apprenticeship program is catching fire with manufacturers in northern Illinois and, soon, more locations.
“We’re working with so many companies right now on site selection projects where, before, the Midwest was ‘Maybe I’ll look,’ and now it’s ‘Absolutely we need to consider it,’ “ says Tomkins, noting major investments by German companies in Illinois, Ohio, Indiana and other states in the region. “The other difference we’re seeing is M&A, historically the purview of big companies. For the first time, German SMEs are now doing acquisitions in the US. Many more companies are coming over and, rather than green-fielding their operation, they’re buying a platform and building on that.”
Spreading the Love
In studying the data from all the Top Metros, some patterns emerge. So do some repeat customers.
Many companies invested in projects in more than one metro, but Procter and Gamble (P&G) is in a rare category. The Cincinnati-based consumer products company was one of the very few which made at least one investment in each metropolitan tier.
P&G is investing $300 million to build a new innovation center in Mason, Ohio, part of the Tier 1-Cincinnati metro ranked fourth this year. The new innovation center is a consolidation of P&G’s beauty care business with the company’s oral and personal health care products units. Construction began in summer 2015 and will take three to four years to complete. More than 1,150 employees and 200 contractors will work at the new center.
In May 2015, P&G announced plans to close a plant in Cayey, Puerto Rico, moving production to a facility in Greensboro, N.C., ranked sixth among Tier 2 metros. The 1.1-million-sq.-ft. (102,193-sq.-ft.) Greensboro facility is capable of producing multiple product lines and, due to proximity to the company’s supply network, allows P&G to get products to consumers more quickly. And in Lima, Ohio, a sixth-ranked Tier 3 city, P&G invested $6 million to add 21,000 sq. ft. (1,951 sq. m.) to a manufacturing facility that produces liquid detergent and fabric softeners. The expansion created an additional 40 jobs.
Automaker General Motors spread the investment love among three cities: two located in Tier 1 — Arlington, Texas, and Warren, Mich., ranked No. 2 and No. 6, respectively — and one in Tier 3, Bowling Green, Ky., ranked No. 2. GM made a $1.4-billion investment to enhance its Arlington Assembly Plant where the company manufactures Chevrolet and GMC brand SUVs. The plant will be reconfigured with a new paint and body shop and other assembly area upgrades. Construction began in 2015 and is expected to last until 2018.
GM is also investing $1 billion at the company’s Warren Technical Center and plans to 2,600 jobs over the next four years. The 326-acre (132-hectare) Tech Center, which is registered as a National Historic Landmark and is listed on the National Register of Historic Places, houses most of GM’s engineering, advanced technology and safety research. The expansion project includes new design studios and renovation of the current R&D offices.
Finally, GM is investing $483 million at the Bowling Green Assembly plant, manufacturing home of the iconic Chevrolet Corvette. In May 2015 the company announced $439 million for a new paint shop and other facility upgrades, then in December, GM announced an additional $44 million to expand the popular Performance Build Center where, for a cool $5,000, customers can participate in and oversee the assembly of their car’s 650-horsepower supercharged LT4 engine.
An 80-year history and a robust workforce were two factors that led Kay Chemical, an Ecolab company, to expand in the Greensboro-High Point, N.C. metropolitan region. The company broke ground on an $11-million building expansion at the Kay’s headquarters in Greensboro in June 2015 to accommodate growth in its rapidly growing quick service restaurants (QSR) and retail food businesses. The expansion is expected to be complete by the end of 2016 and will create an additional 45 new jobs over the next three years.
Projected growth and consolidating functions were among the reasons for Ecolab’s decision to invest in the Tier 3 metropolitan region of Janesville-Beloit, Wis. The company relocated logistics operations for parts distribution from facilities in Elk Grove Village, Ill., and South Beloit into a single, 244,000-sq.-ft. (22,668-sq.-m.) equipment distribution facility in Beloit, just six miles from the South Beloit facility. The company began transitioning inventory to the new facility in mid-October 2015 and shipping customer orders by November. Ecolab is on track to complete the final phase of the project in May. Five new full-time jobs were added at the new location.
Data giant Google was another multi-tier investor, investing $300 million to expand its data center in Lithia Springs, west of metro Atlanta, ranked No. 8 in Tier 1. The expansion will add more than 300,000 sq. ft. (27,871 sq. m.) to the existing 500,000-sq.-ft. (46,455-sq.-m.) structure. Google Fiber is also coming to cities in the metro Atlanta region. The company has begun construction in order to lay thousands of miles of fiber-optic cable in select areas of the metro. The company also invested $1 billion into the company’s thriving data center facility on the south side of Council Bluffs, Iowa, part of the top-ranked Tier 2 Omaha metro. Three additional stories were added to the existing building.
Tasty Triumphs for Sioux City
It was a big year for food production companies in Sioux City, Iowa, the top-ranked Tier 3 metropolitan region, with investments made by longtime corporate residents including Wells Enterprises and a joint venture between Seaboard Foods and Triumph Foods that promises to create 1,100 jobs in Sioux City.
Wells Enterprises is the maker of Blue Bunny Ice Cream and other frozen treats. The company has been located in LeMars for more than 80 years, and operates two ice cream production plants. In February 2015, the company announced plans to build a 12,000-sq.-ft. (1,114-sq.-m.) addition to one of its plants. The $19.3-million project also includes installation of a new multiproduct production line and additional hardening equipment. Wells is also introducing a new see-through, quart-sized container that is recyclable and BPA free. The expansion is expected to be completed by August 2016.
The brand relaunch and increased business fueled the Wells expansion says Lesley Bartholomew, director of corporate and employee communications for Wells. But other factors keep the company in the Sioux City region. “Wells remains in Le Mars and the Siouxland area due to an excellent work force, quality of life and business climate,” Bartholomew says. “We have been part of the Le Mars community for over 100 years and have great working relationships with City and County Administrators, local schools and the community. In Le Mars, life truly is sweet.”
A 250-acre (101-hectare), shovel-ready industrial site, existing transportation infrastructure and proximity to raw materials were some of the reasons Seaboard Foods, headquartered in Guymon, Okla., and Triumph Foods, headquartered in St. Joseph, Mo., opted to locate their joint-venture pork processing facility in Sioux City. “When we started inquiring about expanding our business, we recognized the strong commitment and willingness to welcome Triumph Foods and Seaboard Foods to the city,” said Mark Campbell, CEO of Triumph Foods. “Local leaders have built a business environment poised to bring growth to the region.”
The $264-million investment includes building a new 600,000-sq.-ft. (55,742-sq.-m.) pork processing facility capable of processing 3 million hogs annually. The Seaboard Triumph plant is expected to be completed and open for business by summer 2017.