From Site Selection magazine, March 2008
AddThis Social Bookmark Button

Flight Plan

New investments in Florida's aerospace sector are
broadening the breadth of a key industry cluster.

Embraer facility in Fort Lauderdale
With its new $17-million, two-building expansion, Brazil-based Embraer has nearly grown all it can on the footprint its campus occupies in Fort Lauderdale.
lorida's aerospace industry is gaining lift and thrust as private industry invests in that key sector and a new state economic development plan makes it more profitable for companies to do so.
   According to Bureau of Labor Statistics figures compiled by the Aerospace Industries Association, Florida ranked seventh among all states in aerospace employment in 2006, and is knocking on Connecticut's door at No. 6. From small craft to spacecraft, the number and variety of current corporate aerospace and aviation projects in Florida is surging, backed by infrastructure improvements ranging from the new Panama City airport plan to Orlando's top ranking in 2007 for on-time flights.
   No wonder, then, that AirTran Airways announced in early January its intent to keep its headquarters in Orlando – where it's been since 1998 – and add 121 more jobs averaging $45,000 in pay to its 300-person work force. The company had considered other states as it evaluated where to locate a new hurricane-ready facility for its national systems operations, since Hurricane Charley had damaged its current control center in 2004.

   "This is great news for our state since the aviation industry and headquarters operations are critical to our plans for economic growth," said Florida Gov. Charlie Crist.
   "Orlando will remain our nerve center for our fast-growing network, as well as our headquarters city," said Robert L. Fornaro, AirTran Airways president and CEO. "We are proud to call Orlando home. Orlando is a great city with a business friendly climate, growing business and leisure passenger base and livability. It's a place skilled crew members want to come to work and raise their families."
   That's the kind of aviation base Ranger Jet Center at the Orlando/Kissimmee Gateway Airport wants to build on, as it announced in late November its shift from fixed-based operator to developer, making an investment in 86,000 sq. ft. (7,989 sq. m.) of corporate office space, 140,000 sq. ft. (13,006 sq. m.) of hangars and 700,000 sq. ft. (65,030 sq. m.) of ramp and apron.
Panama City officials hold airport groundbreaking
As the Dirt Turns

   Orlando is also ground zero for a plan that came to light in late January: a multi-college aviation-focused campus to be located at Orlando International Airport. The idea is being spearheaded by Valencia Community College, which further developed the concept when NetJets was considering Orlando and Raleigh, N.C., as possible alternate locations to its base in Columbus, Ohio. It was also part of the talks that successfully retained AirTran. According to the Orlando Sentinel, Orlando was eliminated from contention by NetJets in December, but the drive for the campus continues. Among the partner institutions would be Embry-Riddle Aeronautical University, which has campuses in Orlando and Daytona Beach.

South Florida Phenom
   Florida has the nation's third-largest footprint of aircraft maintenance, repair and overhaul (MRO) facilities, including new projects from Eclipse Aviation in Alachua County ($10 million, 49 jobs), Tradewinds Aviation in Pinellas County ($5 million, 33 jobs), Jet Aviation in West Palm Beach and Pemco World Air Services in Hillsborough County.
   The state also ranks third nationally in pure passenger numbers, with 136 million a year. More than 1,400 aviation companies reside in the state. Even the International Air Transport Association itself is getting in on the action, with a $2-million, 56-job expansion of its Latin America headquarters in Miami-Dade County, adding 10,000 sq. ft. (929 sq. m.) to its footprint in the process.
   Not far away, in Fort Lauderdale, one of those 1,400 companies is continuing to grow its campus as it grows its product line. Embraer, the Brazilian maker of both commercial jets and executive jets, is ramping up production of its Phenom 100 and Phenom 300 Very Light Jets (VLJs). Consequently, it needs training and service centers, which it has chosen to locate in Mesa, Ariz., Windsor Locks, Conn., and at its Americas headquarters and manufacturing complex in south Florida. The facility is part of a $17-million, 60-job expansion at the campus, which has grown to employ 282 and occupy more than 100,000 sq. ft. (9,290 sq. m.) since its opening in 1979.
   Gary J. Spulak, president of Embraer Aircraft Holding, Inc., Embraer's wholly owned U.S. subsidiary, and director of financial development for the company, has 25 years with the company under his belt. He also serves on the boards of Space Florida and Enterprise Florida. He says the support system for the Phenoms will consist of Embraer-owned and operated facilities in these three locations, plus an already-established center in Nashville and a network of approximately 38 authorized repair centers across the U.S. He says the three new locations were driven primarily by sales concentrations in the northeast, south and west.
   "We are under way on all three projects, and the schedule calls for the service centers to be available when the deliveries occur for the Phenom 100," he says, which begins in fall 2008.
   While each service center entails an $11-million investment, the company made a decision to invest an additional $6 million in a new spare parts center at its Fort Lauderdale complex, bringing about 82,000 more sq. ft. (7,618 sq. m.) of overall hangar and distribution center space into operation.
   Spulak says the project is organized and managed by Brazil headquarters in terms of direction, operational requirements, investment and guidelines: "They use us to task, and to put together the sourcing process. We would be the local point of contact for the development of discussions and negotiations," he explains. Embraer headquarters was a port of call during Gov. Crist's recent economic development mission to Brazil, with which the state did more than $11 billion in trade in 2006.
   Spulak says the new center will serve both the executive jet and commercial jet sectors, both of which are growing their customer base in the U.S. as regional jets continue to consume a bigger piece of the air travel business.

Window on the Americas
   According to the AeA's analysis of high-tech employment in the state, Miami-Fort Lauderdale is the state's largest tech hub, helping the state to its status as the second-fastest growing "cyberstate" and fourth overall. Asked about the Crist administration's focus on work-force development, Spulak says he knows how important it is to the state.
   "As we continue to expand, it will be that much more important," he says. "We welcome very much that initiative, and we're very satisfied it's a priority of the administration. For the MRO business specifically, it will be that much more important."
   Asked about the status of the company's military aircraft facility in Jacksonville's Cecil Commerce Center – announced in 2004 but put on hold in the wake of the U.S. Army's cancellation of its ACS program – Spulak says the Army is "in the process of evaluating a schedule to go forward with the new acquisition program for ACS" and that the Cecil location is "the location of choice for our defense-related business in North America."
   Spulak says the fact that the company has invested nearly $325 million speaks volumes about south Florida. Fort Lauderdale, he says,
Gary J. Spulak
Gary J. Spulak, president of Embraer Aircraft Holding, Inc.
"offers a lot in terms of skilled labor, and a very nice and appropriate business climate." He also cites a very good working relationship with the airport.
   But there are some things that can't be negotiated. Asked if there is more room to expand, he says, "There is not more land in a contiguous way. We'll cross that bridge when we come to it."
   The Embraer campus is just one small part of a regional assemblage of multinationals. A new economic impact study from Miami-Dade County's The Beacon Council and WorldCity Business estimates that 728 of the region's 1,200 multinational firms collectively manage more than $200 billion in revenue. Among other findings:
   • Two hundred and thirty-two of the companies studied have global headquarters based in south Florida, managing some $93 billion in revenues; regional headquarters manage $80 billion;
   • At $203 billion, the revenue managed by South Florida multinationals is nearly the size of the GDPs of Argentina ($248 billion) and Venezuela ($227 billion) and larger than that of Colombia ($172 billion) and Chile ($161 billion).
   • "While companies from Europe and the United States have long seen Miami as the gateway to the Americas, the data show that a large number of multinational companies originated elsewhere. The study found 27 companies from Canada, 116 from Latin America and the Caribbean and 76 from Asia. Europe [led by the U.K. and Spain] accounts for 305 companies while the United States for 659."
   "A decade ago, only 30 percent of our projects were from outside the United States," said Frank Nero, president of the Beacon Council, at a January press conference. "Today about 50 percent of our projects are international. We've evolved into an international business platform for all of the Americas and even regions outside the Americas. A recent example is Martinair that has its Americas Headquarters in Miami-Dade County."
   In 2007, Martinair announced a $2-million headquarters expansion.

Pay the Piper?
   The flight path for Vero Beach-based Piper Aircraft's very public site selection process for an expanded headquarters and a manufacturing plant for its new PiperJet still doesn't have an end point. But as many parties run low on patience, all indications are that a decision is near on the 1,000-job project.
   The battle is pitched between Vero Beach, Albuquerque, N.M.; and Oklahoma City, which were chosen from a pool of some 60 cities that made offers after the PiperJet was announced in 2006. While a company executive hinted a decision was imminent in December, company spokesman Mark Miller referred a January query to a statement issued in spring 2007 by Steve Johnston, director of human resources:
   "We view today's [May 9, 2007] unanimous vote by the Vero Beach City Council and the Indian River County Commissioners to develop a package of financial incentives to improve the business climate for Piper Aircraft and our expansion plans as a sign that there is a legitimate local effort underway to partner with Piper," he said, pledging full data comparisons over the coming weeks with its site selection consultant. "Our facilities in Vero Beach have served us well for the last 50 years," he said. "As we enter our next generation of production and prepare to launch the PiperJet, we owe it to our employees, customers and shareholders to make certain that we have the optimal location and state-of-the-art facilities to ensure our competitiveness within the General Aviation industry."
   The community's incentive package reportedly includes $12 million in breaks and funds from local sources and $20 million from the state.
   "Conducting a thorough and accurate comparison of these communities and their available real estate, job markets, economic cost factors and business incentives is a complex and lengthy process," continued Johnston last spring. "Piper is committed to making the best possible site decision, and consequently will take the necessary time to make a thorough decision."

State Crosses Off Tasks on Business Climate 'To Do' List
   Five straight times, most recently for FY 2008, Florida has placed fifth in the Tax Foundation's annual State Business Tax Climate Index. That's a sign of solidity and some degree of certainty for corporate facility planners, even with the state's sometimes onerous development review process for large industrial projects – "That is something Florida should probably look at to try and streamline," says Ed McCallum, principal of site consulting firm McCallum Sweeney.
   But the state is doing what it can in plenty of areas in the meantime. In January, Gov. Charlie Crist unveiled an "innovation economy" economic development plan built around six planks: sustainable growth,
Lt. Gov. Jeff Kottkamp
Lt. Gov. Jeff Kottkamp
lowering the cost of doing business, multimodal infrastructure, R&D, cultivation of entrepreneurial systems such as incubators and venture capital, and improved education and work-force training.
   The plan got a big booster shot in late January, when Florida voters approved property tax reform. Among its measures are two components that help parts of the business community: First, an equipment purchase personal property tax exemption of up to $25,000 will affect 1 million of the state's 1.2 million businesses. Second, the reform institutes a 10-percent cap on how much a property tax can rise for non-homesteaded properties, including commercial properties that are now seeing high-percentage increases.
   In a January interview, Lt. Gov. Jeff Kottkamp, who hails from the booming Cape Coral area in southwest Florida, offered some insights into Gov. Crist's economic development agenda. Asked about the upcoming legislative session that gets under way in March, he said one priority is making sure specific quick-closing funds are set aside, "so when something comes up like Scripps did, we can take quick action."
   Kottkamp says his personal role in economic development and corporate prospect attraction is at least a weekly occurrence. He cites his recent trade mission to Germany, which involved bringing 40 Florida companies to Medica, the world's largest medical device convention. It also involved a visit to the Max Planck Research Institute, which just announced it would be locating an operation near Scripps, helped in part by $90 million from the state.
   "Our economy is transforming before our eyes," he says. "The days of being a tourist state are long behind us. The career opportunities are unlike anything that's ever existed in this state."
   The Scripps cluster may soon have a neighbor, as the University of Miami announced in late January its intent to develop a large new biotech research center and life science park that would encompass 1.4 million sq. ft. (130,060 sq. m.).

Gray and Tan
   Asked if the state uses its elderly population as a recruiting tool now that people are working productively to a later age, he says it's a dynamic mix that really gets the job done:
   "Every single day, between 500 and 1,000 people move here, mostly in their 30s, he says. "We're not really the gray state we used to be. But we do have an amazing talent pool of people 65 and over. I remember an anthropology class in college – on the first day when we introduced ourselves, one of the students had a doctorate in anthropology from Harvard, and was a friend of the author of the textbook. You run across people all the time who have been CEOs of FORTUNE 500 companies."
   As chairman of the board of Space Florida, Kottkamp is especially jazzed by the advent of private enterprise in the space business that the state has been a leader in for 50 years. Thus the project may involve Elon Musk writing the check for a private launch facility or NASA's shift to the Constellation program.
   "The direct and indirect space business in Florida is remarkable. We're hoping to do more of these projects in Florida, so we don't have to build rockets elsewhere and transport them here. That's extremely expensive for NASA, and not all that efficient."
   Even after reforms and relief enacted in 2007 that created a state-backed reinsurer, insurance relief is slow in coming. Asked what else the administration is doing to address it, Kottkamp said the problem is the resistance from national insurance companies, "who frankly have not kept their word. Now they are having their feet held to the fire. We think these companies that took advantage of below market reinsurance should pass on their savings. We're going to keep fighting on that."
   Kottkamp says the enduring drought has not had a noticeable effect on economic development. But the push for clean tech and other environmentally aware development is a central tenet of the Crist administration. Asked what kinds of incentives the state might offer for such development, Kottkamp says, "There are grants for renewable energy right now," and cites a measure proposed last year that would reward solar panel investment with a significant property tax exemption. "We understand fully the link between the environment and the economy," he said. "We're considering a whole host of things to provide grants and incentives in the environmental arena."
   That arena could include nuclear power, he says.
   "There is a lot of cost, and we realize that, but we hope to bring that capital to the state," he says. "There is no one way to solve it all, but that will certainly be one way of expanding our energy capacity in Florida in the future."

Site Selection

Top of Page | Letter to Editor | Site Selection Online | SiteNet

Site Selection Online – The magazine of Corporate Real Estate Strategy and Area Economic Development.
©2008 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.