Sunday, February 06, 2011

Industrial Sites Needed Now for the Manufacturing Jobs of Tomorrow

Imagine for a moment that the Pittsburgh Region gets some good news early this year – several manufacturing firms are seriously considering building new assembly plants in southwestern Pennsylvania, each of which would employ hundreds of workers with high wages and good benefits. But a few months later it turns out that the celebration was premature – the companies can’t find an industrial site here that will accommodate their plants, and they are forced to take their jobs elsewhere.

Think it couldn’t happen?

Think again. A decade ago, the Pittsburgh Regional Alliance reported that Southwestern Pennsylvania had lost over 4,000 jobs and over $800 million in investment by a dozen manufacturing firms and other business prospects in a two-year period due to a lack of suitable industrial sites.

Why would industrial sites be in such short supply?

The reason is our topography. The same rolling hills and rivers that make Pittsburgh one of the most scenic regions in the country also make it one of the most difficult and expensive in which to develop land, particularly the kind of large flat sites that manufacturing firms and distribution facilities need. Nearly 70% of the land in Southwestern Pennsylvania has a slope greater than 8%, whereas in Columbus, only 200 miles to the west, less than 20% of the land is that steep. Turning land with steep slopes into industrial sites can cost twice as much or more than using land that is flat to begin with.

Because of that, it’s not surprising that virtually all of the limited supply of flat land we have has already been used for something. Even when a site becomes available for reuse, existing facilities have to be demolished, any environmental contamination has to be cleaned up, and the infrastructure has to be modernized, again making it far more expensive than a flat, unused piece of property in another region. And many of the flat sites we have are along the rivers, which we increasingly want to use for recreational amenities.

This is not a new problem for Pittsburgh. Over a half century ago, the Regional Industrial Development Corporation (RIDC) was formed because of a realization that the region didn’t have enough modern industrial sites to support new business growth. Today, two of the three largest industrial parks in the region are here thanks to the efforts of RIDC starting in the 1960s and 1970s.

In fact, planning and development of industrial sites and buildings has to begin years in advance of when they are needed. Many businesses can’t afford to wait for a site or building to be created, so they’ll favor the region with available space that enables their plant to get up and running the fastest.

By the mid-1990s, when manufacturing jobs were growing in the Pittsburgh region, it became increasingly difficult for firms to find suitable, ready-to-go space here. A study done at the time by a national site selection firm found there were only four sites and three buildings in the entire 10-county region that had the potential to be competitive for a major manufacturing facility. Moreover, there were no sites at all that could accommodate very large projects, and no high-quality sites near Pittsburgh International Airport.

The region mobilized to address this growing crisis. The Southwestern Pennsylvania Growth Alliance assembled the first-ever regional priority list of industrial site projects, elected officials and business executives from all 10 counties presented it to Governor Ridge, and over the course of the next 4 years he provided nearly $40 million in grants for industrial site projects in all 10 counties. The counties provided matching funds, and RIDC and county economic development agencies did the hard work of building the necessary infrastructure to create ready-to-use industrial sites and buildings.

How important was this effort? Most of the new and expanded manufacturing and technology plants the region celebrates today are located on industrial sites developed over the past decade using funding provided by the state. For example, Medrad’s medical device manufacturing plant, Flabeg’s solar manufacturing plant, U.S. Steel’s R&D facility, and many Marcellus Shale businesses are located on industrial sites for which planning started over a decade ago.

The good news is that those industrial sites have been filling up with job-creating businesses. The bad news is that as a result, the space available for new firms and expansions is dwindling. Industrial market research from Grubb & Ellis shows that less than 6% of the Class A space in the Pittsburgh region was vacant at the end of 2010. That puts us at a competitive disadvantage with regions like Cleveland, which has three times as much available industrial and R&D/flex space as Pittsburgh.

No municipality or county can address this on its own. Investing in new industrial sites must be a regional effort because the jobs at industrial sites will be filled by the residents of many different municipalities and counties. Moreover, state grant assistance is critical, not only because of the high cost of site preparation and infrastructure, but because the majority of the tax revenues paid by the businesses and employees on the sites will go to the state, not local government.

Although there has been considerable criticism of the large number of Redevelopment Assistance Capital Program grants made by Governor Rendell as he was leaving office, more than one-third of the grants he awarded in Southwestern Pennsylvania were for much-needed industrial site development.

Our region needs more of these kinds of investments if we’re going to grow. RIDC and our county economic development agencies need to continue to plan new industrial site and building projects, and Governor Corbett should continue to provide the state support needed to make them a reality.

(A version of this post appeared as the Regional Insights column in the Sunday, February 6, 2011 Pittsburgh Post-Gazette.)


Blogger BigmacInPittsburgh said...

Thanks this information helps me to better understand the who,what's and whys of this region.
So what good are recreation facilities on the river if the people who are going to use them have no income?
Maybe we need to think first things first,I can always drive to other areas for fun.

4:04 PM  
Anonymous Anonymous said...

Kittanning Area, has ton of space, especially the Ford City Riverfront, 100s of cleared acres.

1:23 PM  

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