How do companies choose where to locate?

Published 9:20 am Thursday, May 7, 2015

Guest Column by Ryan Nolander

Recently, you may have read about Amazon’s plans to build a distribution center in Shakopee. This got me thinking that inevitably the question will be asked, “Why wasn’t Albert Lea considered for their new location?”

Ryan Nolander

Ryan Nolander

In this case, as with others, it is because they are locating where they logistically need to be. Obviously, the large market they are planning on serving is the Twin Cities metro area, so being in Shakopee they will be positioned to accelerate their deliveries into the region and their cost of development will be cheaper there than in downtown MSP.

Email newsletter signup

Another project that I hear about from time to time is the Walmart warehouse in Mankato. This project didn’t contact Albert Lea because they needed a large workforce, and in Mankato they have a college population available to supply a continuous flow of workers.

In the news recently was the McKesson Corporation project in Clear Lake, Iowa. Albert Lea was one of the final sites for this project, but they ultimately decided to locate in Clear Lake. In retrospect, when I met with the site selection committee and showed them potential building sites in Albert Lea, I believe they already knew where they wanted to locate. It looks like Albert Lea, and ultimately Austin, were used as leverage to gain the best possible deal from Clear Lake and Iowa, which is where they wanted to locate the entire time.

So how does the process work? The process for most of these sizeable leads goes through what is called a “double-blind” lead. The company has a project and a general idea of what they are looking for in a location. They then contact a site selector to start the search based on the specs they have created, the site selector contacts the Minnesota Department of Employment and Economic Development, and DEED contacts the communities that the company is interested in. The projects will have names from the site selector like Project Lightning, Project Magnolia, Project Windmill, etc., which means that neither DEED nor the community know who the inquiring company is.

The site selector’s role in the process is to scout out locations with specific parameters given to them by their clients.

Items they are interested in can include relative proximity to a company’s major business market, water and sewer rates and availability, airports, interstate routes to their customers, nearby suppliers, workforce and/or training availability, incentives and the list goes on. However, even if a community offers the best deal on land, incentives, workforce, etc., this doesn’t mean the company will locate there if ultimately the long-term operational costs don’t make sense.  An example of this would be a community may be offering the best upfront “package” but if the company is going to spend more in fuel costs, time and overall operational cost because their market is farther away they will probably discount the “package” to make the decision that makes the most sense for the long-term operation of the facility.

Typically, when a lead like this comes to ALEDA a marketing proposal is put together tailored for that business with the specs they are looking for.  We depend on our partners — the city of Albert Lea, Freeborn County, Freeborn-Mower Cooperative Services, Minnesota Energy Resources, DEED and others — for detailed information needed to reply to this request. Many times there is a short timeframe before the proposal is due and we usually need to suspend everything else to make the deadline.

The hard truth about “chasing smokestacks” is that it is a low probability game. According to a recent University of Minnesota Extension article, based on the same data from the United States Department of Labor Statistics, existing businesses added almost six times as many jobs as new startups or new businesses locating in Minnesota. While we eagerly respond each year to several leads like I described above, in reality more projects come to fruition through helping local companies expand.

Until next month, remember that we are all in this together.


Ryan Nolander is the executive director of the Albert Lea Economic Development Agency.