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From Site Selection magazine, September 2012

Here We Go

Infill often fills the bill for companies ready to get growing.

Rolls-Royce opened its Crosspointe plant in 2009 in Prince George County.
Photo courtesy of Rolls-Royce

Rolls-Royce, whose Crosspointe plant’s rotatives floor is shown here, is in the final planning stages for an expansion that will house an advanced blade machining facility.
Rolls-Royce, whose Crosspointe plant’s rotatives floor is shown here, is in the final planning stages for an expansion that will house an advanced blade machining facility.
Photos courtesy of Rolls-Royce

n post-recession America, speed to project completion, in addition to cost and operational efficiencies, is what's driving many a location decision, a trend playing out throughout the Mid-Atlantic region.

Firms in search of more space are eyeing existing buildings that can be retrofitted quickly, easily and cost-effectively. If they can't find a facility to suit their needs, they want shovel-ready sites that don't require a lengthy permitting process.

"When firms are ready to grow, they are ready to go," says veteran location consultant Dennis Donovan, a principal of Wadley-Donovan-Gutshaw Consulting. "They don't want to be slowed down by lengthy construction timelines or bureaucratic hurdles like permitting delays," he says.

The Mid-Atlantic is seeing an uptick in location-related activity, much of it with existing buildings rather than greenfield development, Donovan says. "The whole region is doing well, and continues to be among the most desirable locations in the country. States have made solid investments in infrastructure and education. They have pro-business climates and competitive incentives."

In fact, from an overall job creation perspective, several metros in the region are outperforming the nation as a whole, including the D.C. metro area, Richmond and Baltimore (see chart).

Aerospace is one of several growth industries that like the Mid-Atlantic, according to Donovan. "There's access to ports, rail and roadways. They aren't far from suppliers or customers, particularly companies that have U.S. military customers," he says.

One such firm that has found a comfortable home in the region is Rolls-Royce. The company's North American regional headquarters is in Reston, Va. In 2009, it opened an aircraft engine components manufacturing plant on a 1,000-acre (405-hectare) site called Crosspointe, just outside of Richmond in Prince George County.

Already the company's largest North American facility, Crosspointe is preparing for more growth. "We are in the final stages of planning a 90,000-sq.-ft. [8,361-sq.-m.] expansion on this site, to house an advanced blade machining facility," says a Rolls-Royce spokesperson. "The same factors that led us to Virginia in the first place remain in play today. We have access to a deepwater port, and there are good rail and highway connections. We have great relationships with the state and local governments. And we have access to top research talent to solve critical manufacturing challenges."

Labor Market Recover ListOther states in the region are benefiting from the aerospace boom as well, with firms such as Philadelphia-based MAG, Inc. citing the availability of existing structures as a factor in their location decisions. MAG selected Maryland's Hagerstown Regional Airport for its new helicopter and fixed wing maintenance, repair and overhaul facility because it could use an existing 17,000-sq.-ft. (1,579-sq.-m.) hangar to house operations, company officials said in a press release.

In Delaware, Hawker Beechcraft plans to open a 60,000-sq.-ft. (sq.-m.) northeast regional service center at New Castle County Airport. And in Bridgeport, W.Va., Aurora Flight Sciences recently underwent a $1 million upgrade to increase production capacity of its precision composite metal components for advanced aerospace vehicles.

Retailers Deepen Mid-Atlantic Distribution Networks

With economic indicators suggesting that consumers, after several years of restraint, are opening up their wallets a little wider to buy goods, retailers are scrambling to keep up, especially as the popularity of online shopping continues to grow.

"Retailers are trying to shorten the time between online customer orders and delivery fulfillment," Donovan says. "To do this, you need more distribution centers located in closer proximity to your customers."

Online behemoth is doing exactly that. In a July conference call to discuss second quarter earnings, Amazon CFO Tom Szkutak noted that proximity to customers was part of company strategy. "We are trying to get closer to customers with our wide multi-node fulfillment network. We are opening a lot of fulfillment centers and adding a lot of fulfillment capacity," he said during the call. In the past year, Amazon announced 18 new fulfillment centers, he noted.

The Mid-Atlantic is a prime focus for this strategy, based on recent activity. The company has invested $225 million in three new facilities in the region: two in Virginia and one in Delaware, adding to its existing inventory of warehouses in the region. Amazon also opened facilities in Kentucky, Tennessee and South Carolina during this same time frame.

While some industry insiders speculate that the fulfillment center spree is aimed at expanding Amazon's same-day delivery service, currently offered on selected goods in the East Coast's major metros of D.C., Baltimore, Philadelphia, New York and Boston, among other big city markets, company officials say this isn't so. "We don't see a way to do same-day on a broad scale, economically," Szkutak said on the call.

Other retailers are expanding their distribution networks in the region as well. In July, Macy's opened the doors of its $150-million, 1.3-million-sq.-ft. (120,770-sq.-m.) distribution center in Martinsburg, W.Va, to support online orders from East Coast customers of Macy's and Bloomingdale's. And in July, Ace Hardware opened its Import Redistribution Center at the new 900-acre (364-hectare) CenterPoint Intermodal Center in Suffolk, Va. The center will handle international goods arriving at the Port of Virginia and redistribute them to eight Ace Hardware Retail Support Centers in Texas and the eastern U.S.

Energy Rules

With demand up for energy of all kinds, energy companies are in growth and acquisition mode, tapping into regional resources to make their expansions happen.

In Delaware, PBF Energy Holdings announced a massive $1-billion dollar investment to build a green hydrogen plant at its Delaware City Refinery, which will reduce sulfur dioxide emissions and enable the production of clean transportation fuels.

And in West Virginia, a new industry cluster is evolving around drilling for and transporting the massive natural gas deposits buried deep inside the Marcellus and Utica shales. "The Marcellus Shale is going to be a major economic driver in West Virginia, as it is starting to be in Pennsylvania and Ohio," Donovan notes.

Firms are jockeying for position as technological advances make drilling for these resources more feasible.

In February, Crestwood Holdings acquired Antero Resources' Marcellus Shale holdings in Harrison and Dodridge counties, a $375-million purchase that includes 33 miles (53 km.) of low-pressure gathering pipelines currently collecting 210 million cubic feet per day from 59 horizontal wells.

Dominion Resources is part of the West Virginia shale action as well. The company — a major energy player in the Mid-Atlantic — is building a $500-million natural gas processing plant in Natrium and a pipeline to transport gas to the plant from West Virginia and Pennsylvania shale wells.

Dominion has also beefed up its energy production capacity in the region, as power demand continues to grow. In July, Dominion opened a $1.85-billion, 585-megawatt hybrid energy center in Virginia's Wise County, and broke ground on a 1,329-megawatt gas-fired power station in Warren County, Va. Dominion also plans to file regulatory applications later this year for another gas-fired generating facility, a 3-on-1 combined cycle plant with a 1,300 megawatt capacity, in Brunswick County, Va.

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