< PreviousExperts: Here’s Why the South Wins For additional perspective on our fi ndings, we turned to notable experts in the fi eld of site selection. John Boyd Jr., principal of e Boyd Company Inc., a national site consulting fi rm with offi ces in Florida and New Jersey, said he was not surprised that fi ve southern states emerged on top of the list of best business climates. “ e fi ndings of our fellow site selectors are very much in sync with our fi rm’s positive view of the business climate of these fi ve southern states,” Boyd wrote in an email. “I did a survey of our fi les, both within Boyd Co. and our BizCosts.com unit, to see where our fi rm has been most active over the past three years. e fi ve states cited in this year’s annual Site Selectors Survey accounted for roughly % of all our state-specifi c client inquiries and related location research.” Boyd said the South wins the business climate race because of things like the demographic shift to the South, investments into site readiness, workforce training programs, the availability of incentives, lower costs and lower taxes, sound tax TOP WORKFORCE CHALLENGES OF THE COMING DECADE 1. Labor Shortages 2. Aff ordable Housing 3. Upskilling 4. Child Care 5. Lack of Soft Skills 6. Global Competition T7. Labor Management Relations T7. Rising Income Inequality T9. Remote Work T9. STEM Education Source: Annual Site Selectors Survey, Site Selection Magazine, November 2024and fi scal policies, and positive labor- management relations. He added one other: “Having seasoned economic development professionals at the state and local levels and at major utility companies doing a superior job servicing consultant inquiries and promoting these states.” Jay Garner, president of Garner Economics LLC in Atlanta, said, “ e legislative branches in those states have worked tirelessly for years to be business friendly. Many rank favorably in the Tax Foundation’s annual tax competitiveness index.” When asked why he thought California was named the worst business climate, Garner said, “California has the th worst tax competitiveness ranking according to the Tax Foundation, with only New York and New Jersey worse. Chief Executive magazine, which surveys CEOs annually, has California ranked as the worst business climate in the nation — dead last.” Garner cited factors such as high taxes, burdensome regulations, high labor costs and lack of aff ordable housing as contributors to the state’s poor showing among CEOs in these surveys. On the fi nding that South Carolina has the nation’s Best Manufacturing Workforce, Boyd said that this “has much to do with its top-notch workforce training program — readySC — that works hand-in-glove with the state’s network of technical colleges, as well as its outstanding labor-management relations climate.” 40 JANUARY 2025 SITE SELECTION E-COMMERCE & LOGISTICS: Occupiers Only, Please T hink Site Selection and you think of the corporate dvecision-maker’s perspective. ink Cresa and you think pure-play tenant representation, i.e. the globe’s leading commercial real estate advisory fi rm that exclusively represents occupiers. Here, by special arrangement with Cresa Head of Research Craig Van Pelt (see Q&A, p. 42), we present excerpts of the newly released Cresa Logistics Index, which examines the top U.S. industrial markets by warehouse/ industrial inventory through the lens of being either tenant or landlord favorable. Indexed across market rent, occupancy and building metrics, the report’s top markets by overall tenant favorability are featured below, along with top tenant-favorable markets across the three metrics categories. —Ed. e purpose of the Cresa Logistics Index is to provide a snapshot of broad market conditions and to compare these to other markets. Fast-growing markets with oversupply and rising availabilities are the most tenant favorable. Several diff erent categories were evaluated and ranked from through based on whether it was considered tenant favorable or landlord favorable. Eff orts to level the components of the index were utilized to remove the overall size of a market compared to others, such as evaluating a change in a market criterion as a percentage of total current inventory. is allows for comparison of large markets such as Chicago with smaller markets like Birmingham, Alabama. ese categories were further divided into larger groups: ) Market Rent Metrics, ) Occupancy Metrics, and ) Building Metrics. Data points were collected from seven separate categories: • Market rent percentage change (quarter-over-quarter) • Market rent percentage change (-year) • Total vacancy rate (current) • Availability rate (current) • Sublease square footage as a percentage of inventory (current) • Net delivered square footage as a percentage of inventory (-year) • Under construction as a percentage of inventory (current). Among the criteria for the index: Industrial logistics space (warehouse/ distribution), buildings over , sq. ft., Class A & B, non-owner occupied. e top markets in terms of total square feeet were included in the index. e data was collected from CoStar and Cresa data points. The Charts Markets with high levels of new construction and high vacancies and availabilities are considered the most tenant favorable. e Austin and Inland Empire markets, despite several years of strong growth, are waiting for demand to catch up to supply, triggering landlords to be motivated to make concessions to close deals. Without further ado, here are the top markets by tenant favorability: E-COMMERCE & LOGISTICS Rank Market MSA State Inventory (Q2 2024) SF 1 Austin TX 101,546,928 2 Inland Empire CA 651,890,213 3 Reno NV 88,233,414 4 Boise ID 42,019,863 5 Salt Lake City UT 128,828,441 6 Charleston SC 72,841,752 7 Las Vegas NV 137,040,362 8 Phoenix AZ 344,443,717 9 San Antonio TX 117,830,005 10 Houston TX 638,823,933 11 Spartanburg SC 73,869,952 12 Indianapolis IN 304,968,041 13 Savannah GA 114,103,336 14 Laredo TX 43,806,093 15 Denver CO 198,140,965 16 Nashville TN 194,799,897 17 El Paso TX 61,448,534 18 Vallejo-Fairfi eld CA 38,458,690 19 Worcester MA 64,822,241 20 Bakersfi eld CA 47,255,500 SITE SELECTION JANUARY 2025 41 Despite its growth, Austin, Texas, is ranked the most tenant-favorable market out of 100 U.S. markets in the latest Cresa Logistics Index. Photo by RoschetzkyIstockPhoto: Getty Images Source: Cresa Logistics Index TOP 10 MARKETS BY RENT METRICS Several southern California markets were ranked tenant favorable due to falling rents. The Inland Empire experienced double- digit yearly rent increases in both 2021 and 2022. After years of sharp increases and a robust construction pipeline, rents have retreated, dropping more than 10% year over year, providing a window for tenants. Other fast-growing industrial markets like Houston and Austin rank tenant favorable. Here are the top 10 across three different metrics categories: TOP 10 MARKETS BY BUILDING METRICS The markets noted as tenant favorable due to building metrics included high amounts of new construction as part of the historic levels of new supply under construction and delivered in the past several years. Austin and Phoenix both had over 10% of their total inventory delivered in the past year. 60 80 90 100 100 99 95.5 94 92 92 90 87 86 85.5 40 50 60 70 65.3 65 65 64 63.3 63 63 61.3 59.3 57.7 Los Angeles, CA Inland Empire, CA Orange County, CA Houston, CA Ventura, CA San Francisco, CA Boise, ID Modesto, CA Austin, TX Bakersfield, CA Austin, TX Phoenix, AZ Savannah, GA Las Vegas, NV Laredo, TX Boise, ID Charleston, SC Spartanburg, SC El Paso, TX Norfolk, VA Most net deliveries & under construction as a % of inventory TOP 10 MARKETS BY OCCUPANCY METRICS Markets with oversupply have led to increased availabilities and spiking sublease square footage. These markets include several fast-growing markets, including Spartanburg, South Carolina, which recorded a 25.3% availability rate last quarter, ranking the highest in terms of occupancy metrics. 60 80 90 100 100 97.3 90.7 90 90 87.3 87 87 86.3 84.3 Spartanburg, SC Charleston, SC Reno, NV Savannah, GA Indianapolis, IN Phoenix, AZ Hagerstown, MD Inland Empire, CA Austin, TX Salt Lake City, UT Highest total vacancy, availability & sublease sq. ft. as % of inventory Lowest rent growth ranking (Q-o-Q & 1-Year percentage changes)42 JANUARY 2025 SITE SELECTION THREE QUESTIONS FOR CRAIG VAN PELT Cresa’s Head of Research responded to three questions from Site Selection about the Cresa Logistics Index findings. A number of markets Site Selection has recently identified as attractors of corporate end-user project investment are also in the Cresa Logistics Index Top 10 Most Tenant Favorable, with your No. 1 Austin ranked last spring as our No. 1 Top Metro by Projects Per Capita. It seems counter-intuitive that such a hot market would be the most tenant favorable. How do you explain the dynamics in such dynamic areas as Austin, Phoenix and others? Craig Van Pelt: Yes, it is counter-intuitive, but these markets are somewhat a victim of their own success, and the window of tenant favorable circumstances may likely be short-lived. The demand has spurred historic levels of construction, particularly spec construction. A slowdown in demand due to elevated inflation and general economic headwinds has resulted in oversupply. This has caused rents to slow down and, in some cases, retreat as vacancies rise. With recently completed construction awaiting tenants, landlords are more willing to negotiate terms. One question your index prompts is how fast certain growing markets’ boundaries and definitions are changing. Which locations among the index’s most tenant favorable markets stand out to you in this regard? Van Pelt: The fastest-growing markets are coupled with quickly expanding populations that can provide the labor to maintain growth. Markets like Phoenix, Las Vegas and Austin can easily expand because there are not natural boundaries to slow growth. This has made the barriers to entry low because there is the ability to find available land. However, the rising cost of construction and higher interest rates have pushed rates higher, which may slow growth in the mid-term. It seems that some markets identified as the most landlord favorable can still be relative bargains for tenants looking to diversify or grow their logistics footprints. Which stand out to you? Van Pelt: That’s a good point because, while there has not been the same type of construction levels within landlord favorable markets, stability has not caused the same type of rent escalations that have been seen in other markets. It should also be noted that many of the tenant favorable markets are considered smaller or mid-sized. In particular, the most landlord favorable market in the index — Hickory, North Carolina — has seen moderate increases in asking rates, but is still well-below the national average. Hickory is also well- located from a distribution standpoint and is shifting away from traditional manufacturing like textiles to an important factor in modern internet infrastructure as a key maker of fiber- optic cable. The result will likely be an increase in demand for logistics centers. Other more traditional markets that served as important manufacturers in the steel and automotive industry — like Toledo, Cleveland, and other similar markets — have low vacancy rates but competitive asking rates. With reshoring trends gaining steam and government incentives sparking investment in manufacturing, these traditional markets are well-positioned for growth. The lower asking rates in these markets are relative bargains compared to other markets. Craig Van Pelt, Head of Research, Cresa44 JANUARY 2025 SITE SELECTION T he improving economic environment is playing a key role in shaping the offi ce market’s outlook. As economic growth strengthens and business sentiment improves, companies are increasingly confi dent about their long-term prospects. is confi dence is translating into higher demand for offi ce space, particularly in core markets like London, Paris, and Madrid. In the fi rst three quarters of , . million square meters (more than . million sq. ft.) of offi ce space was leased across Europe, marking a % increase over the same period in . More than half of Europe’s markets — including key cities like London, Brussels, Madrid, and Barcelona — saw growth in leasing volumes. One of the key trends in the offi ce leasing market is the fl ight to quality. Companies are increasingly seeking Grade A offi ce space — modern, well- located buildings off ering top-tier amenities and energy effi ciency. In fact, Grade A leases now account for over % of leasing activity in major cities, up from just over % in . is shift highlights how businesses are prioritizing high-quality offi ce environments to support employee well- being, attract top talent and help achieve corporate ESG commitments. OPTIMISM & OPPORTUNITY In Europe’s Offi ce Sector Sustainability and carbon reduction are increasingly vital in the offi ce sector, driven by the EU’s Energy Performance of Buildings Directive (EPBD), which sets higher energy effi ciency standards as part of the push toward net-zero emissions.” Sustainability and carbon ent by SUKHDEEP DHILLON, HEAD OF EMEA FORECASTING, CUSHMAN & WAKEFIELD editor@siteselection.com WESTERN EUROPE London, whose Canary Wharf district is pictured here, is among the core European markets seeing higher offi ce demand and increased leasing volume. CREDIT: 2018 photo © visitlondon.com/Jon Reid SITE SELECTION JANUARY 2025 45 Balancing Quality and Costs However, tenants are also becoming more cost- conscious, balancing the desire for premium office space with the need to manage rent expenses. Prime office rents are expected to rise by an average of 4.4% in 2024, slightly down from 5.7% in 2023. While rent growth is slowing, demand for prime office space remains strong, particularly in key cities where availability is limited. As businesses recover and expand, the demand for high-quality office space is expected to continue to grow, though tenants will likely seek ways to mitigate costs where possible. Strong demand for prime office space is expected to support rent growth in the short term. However, new office completions, expected to peak at 5 million square meters (53.8 million sq. ft.) in 2024, will likely contribute to rising vacancy rates across all grades. While vacancies will increase due to the influx of new developments, most of the space being completed is in prime locations, where demand remains high. As a result, vacancy rates will likely remain lower in sought-after areas, while older, less efficient buildings may see higher vacancies. Sustainability and carbon reduction are increasingly vital in the office sector, driven by the EU’s Energy Performance of Buildings Directive (EPBD), which sets higher energy efficiency standards as part of the push toward net-zero emissions. Property owners, especially those facing lease events soon, must prepare for these changes, as they could impact asset values, leasing terms and tenant demand. Additionally, climate risks like rising temperatures and extreme weather are influencing the future of office real estate. Property owners must evaluate how these factors affect portfolio resilience and long-term value. With growing emphasis on environmental responsibility, energy- efficient and climate-resilient buildings will be in higher demand. As tenant preferences evolve, the market is seeing a shift toward higher-quality, flexible office spaces. Landlords are responding by repositioning and refurbishing older buildings to make them more attractive to tenants. This trend is particularly noticeable in major cities like London and Paris, where older office buildings are being renovated to meet modern demand. In some cases, older buildings in peripheral areas may face declining demand. As tenants seek newer, more efficient office space in prime locations, older buildings may become obsolete. This could lead to a rise in repurposing older office stock for alternative uses, such as residential or mixed-use developments. Repurposing will become an increasingly viable solution in locations where traditional office space is in low demand, especially in non-central areas. Repositioning older office buildings and investing in sustainability will be key to maintaining competitiveness in the evolving market. The trend of upgrading and enhancing older properties is expected to continue, as landlords seek to align with changing tenant needs and environmental requirements. As investors and tenants navigate these evolving trends, proactive strategies focused on sustainability, climate resilience and high-quality assets will be essential for long-term success. The office market is poised for steady recovery, with significant opportunities for those prepared to adapt to the changing landscape. Economist Sukhdeep Dhillon, based in the United Kingdom, heads the Cushman & Wakefield EMEA forecasting team, which provides real estate forecasts and analysis for 119 prime markets spanning 22 countries. Office Occupier Conditions Tenant Favorable Neutral Landlord Favorable Cushman & Wakefield Q3 2024 Ediburgh The Hague Amsterdam Luxemburg Paris (La Defense) Brussels Frankfurt Rotterdam Dublin Manchester Birmingham London (WE) London (City & East) Paris (CBD) Madrid Marseille Lyon Geneva Milan Munich Vienna Bratislava Prague Berlin Hamburg Copenhagen Oslo Helsinki Warsaw Stockholm Budapest Bucharest Sofia Istanbul Dubai Abu Dhabi Rome Barcelona LisbonINVESTMENT PROFILE: PORTUGAL Global Companies Find Portugal Offers a ‘Central Place In the World’ for Business Services I f you were a North American company leader and could pick a European business services location that’s literally the closest to home, did you know Portugal would be your first landing spot across the Atlantic? Even though it’s closest to North America in miles, Portugal is also a direct bridge to the 500 million people across European markets, not to mention the 260 million people in Portuguese- speaking markets in Mozambique, Angola and Brazil. Moreover, the low-risk country’s number of subsea telecommunications cables (14 and counting) ensures its leading role as a digital connectivity gateway. No wonder Portugal saw the category of “other business services” grow more in 2022-2023 (16.8%) than any other export sector but travel. From 2015 to 2023, the category grew by 98%, while telecommunications, computer and information services grew by an astounding 247%. All of which contributed to the country’s 40% leap in inward FDI to rank No. 7 for FDI in Europe in EY’s European Investment Monitor 2024 report, with 221 FDI projects tracked in 2023 and two services categories representing 57% of those projects. Why is Portugal the friend-shoring choice for so many growing companies? It’s a question best answered by two leaders in their respective fields. by ADAM BRUNS adam.bruns@siteselection.com 46 JANUARY 2025 SITE SELECTION Space technology firm Beyond Gravity has found Portugal’s talent base exerts a powerful pull. Photo courtesy of Beyond Gravity SITE SELECTION JANUARY 2025 47 Beyond Gravity After a number of posts around the world, Mário Vidal recently returned to Portugal to serve as managing director of Beyond Gravity Portugal, part of Switzerland’s largest aerospace company with 14 locations in seven countries, including two new facilities in Decatur, Alabama, and Linköping, Sweden. Among his responsibilities is overseeing the establishment and ramp-up of the company’s Innovation & Digital Hub in Lisbon, where he earned an economics degree from the Universidade Nova de Lisboa. Describe where around the world you have worked in the past several years, and what Portugal feels like now compared to when you previously were in the country. Mário Vidal: Over the past several years, my career has taken me to various international markets — including Spain, the UK and the last 10 years in Switzerland, where Beyond Gravity is headquartered — in global hubs in industrial engineering and aerospace. Each location brought unique opportunities to lead transformation projects, develop strategies and manage cross-functional teams. Returning to Portugal after 20 years now to lead Beyond Gravity’s Innovation & Digital Hub in Lisbon has been both exciting and rewarding. The country I’ve come back to feels more vibrant and dynamic than ever, with a thriving technology ecosystem, a remarkable pool of engineering and digital talent, and an entrepreneurial spirit that is fueling innovation. As a Portuguese [native], it’s inspiring to see how much the local market has evolved, and I’m thrilled to contribute to this momentum as we expand Beyond Gravity’s presence here. As you experience the everyday environment for doing business in Lisbon, describe how various facets of that environment compare to other places you have worked in recent years. Mário Vidal: Lisbon offers a unique environment for doing business, combining a dynamic technology ecosystem with access to a highly skilled yet affordable talent pool. Compared to other locations we’ve worked in, Lisbon stands out for its vibrant startup scene and the wealth of young professionals eager to innovate. [Mapping Portugal’s Startup Landscape 2024 report, released in November 2024, found the number of startups in Portugal grew by 16% over the past year, bringing the total to 4,719.] The city was selected as the European Capital of Innovation 2023 for many reasons. Its strong technical university landscape ensures a steady pipeline of talent, while its infrastructure and connectivity provide a solid foundation for growth. Also, a stable geopolitical environment creates stability and a platform for foreign investment. These elements create an optimal environment for fostering innovation and collaboration, making Lisbon a clear choice for Beyond Gravity’s expansion. In March 2023, Beyond Gravity announced the establishment of a new Innovation & Digital Hub in Lisbon, Portugal, which was officially opened in November 2023. Since then, we have realized various milestones and grown rapidly in Portugal. Beyond Gravity Portugal’s new permanent facilities were inaugurated in early October 2024. Located in the center of Lisbon (Entrecampos), the Innovation & Digital Hub currently houses more than 100 employees. The team is expected to reach 200 people by 2025, thus becoming the largest space engineering and innovation company operating in Portugal and significantly enhancing Beyond Gravity’s operational capacity. Walk us through the company’s site selection process for the hub in Lisbon. Mário Vidal: Our site selection process for the Lisbon hub was a collaborative effort by a cross-functional Mário Vidal, Managing Director, Beyond Gravity PortugalNext >