The FDI community is in a tough spot. Covid-19 has instigated lockdowns around the world and the knock-on economic fallout could lead to many foreign investment projects getting mothballed. 

A new survey by US-based trade association Site Selectors Guild (SSG) and place marketing firm Development Counsellors International highlights the scale of the challenge facing the industry.  

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More than half of the site selector respondents – who help firms find optimal investment locations – said they were delaying projects, according to the survey conducted last week.

Despite the crisis, 45% of survey respondents said their projects were still proceeding, while the remaining 3% said it was a mixed picture. 

There were also varied predictions as to when expansions and new facility activities might restart – 55% of SSG members predicted the fourth quarter of 2020, while 45% anticipated they would resume “some time” in 2021.

Here is a summary of the survey’s top five impacts on corporate location decisions, including suggestions for investment promotion agencies (IPAs) and economic development offices (EDOs).

1. ‘Hot’ sectors post-pandemic

Life sciences, logistics and advanced manufacturing will be the hottest sectors once the crisis subsides, the research suggests. Sixty eight percent of SSG members predicted the biotechnology and life sciences sector will be the most active, while 48% anticipated a rise in location decisions in the transportation and logistics sector. These sectors were followed by advanced manufacturing (39%), software & IT services (19%) and food & beverages (16%). 

2. Supply chain shifts will benefit North America

Eighty one percent of SSG’s members expect Covid-19 will have a sizable impact on global supply chain strategies. Many site selectors surveyed predicted a rise in on-shoring to the US, Canada and Mexico, particularly in the pharmaceuticals and life sciences sectors. 

In medical supplies and defence-related products there will be a “significant push to mandate those materials in the US, so it will be a required type of on-shoring,” predicted Jay Garner, SSG board chair and president of Garner Economics.

SSG members said that the previous focus on lower costs, which led to growth in China and Southeast Asia, will become “more balanced” as groups seek to mitigate future risks. The report added  that companies will carry more safety stock and extend their supplier networks.

“I think you’ll see a lot of companies thinking about their strategic footprints in way more than just a low cost approach,” said Rick Weddle, SSG’s President and CEO. 

3. Reduced demand for office real estate

Seventy two percent of respondents said they expected the recent surge in remote working to have a significant impact on the nature of future work for both employers and employees. SSG members said they expected a decrease in demand for office space as new technologies are adopted to enable remote work.

4. Warehousing and production will be most active functions

Sixty nine percent of site selectors expected both warehousing and production to be the most operative business activities after the crisis. Decisions to expand or relocate back office or support operations, research and development, technical support and headquarters were predicted to be less prominent.

5. Shifting priorities for IPAs and EDOs

Surveyed site selectors also recommend investment promotion agencies (IPAs) and economic development offices (EDOs) focused on business and talent retention in response to the crisis. 

Guild members also listed what they hope to hear from IPAs and EDOs in the future, such as updates on market conditions, novel approaches and resources to support major employers and information concerning changes in compliance regulations.