After a lag in recent years, conditions in the Midwest are improving, say business leaders, who told us in this 2017 Midwest Regional Report that cities like Columbus, Boise, Indianapolis, Grand Rapids and Des Moines are showing impressive growth, while manufacturing strongholds like Wichita, Kansas, and Dayton, Ohio remain vibrant. Across the region, low costs and high quality of life also continue to be a draw for talent.
Leading the Way in Direct Foreign Investment
The city of Chicago alone is now home to 1,800-plus foreign-based companies withmore than $100 billion in direct foreign investment. In Des Plaines, German pharma manufacturer Vetter is planning a one-million-square-foot, $320 million facility. The state is now launching an “aggressive” foreign direct investment strategy to expand that growth, says Mark Peterson, president and CEO of Intersect Illinois. “What we’re focused on now is growing what we already have and tapping that chain to attract new companies.”
Despite a decline in total jobs in the sector, Peterson says there’s growth in advanced manufacturing, which is creating jobs in engineering and advanced technologies. The state’s strong university system, along with the presence of the Applied Research Institute in Champagne and the Digital Manufacturing and Design Innovation Institute (DMDII) in Chicago, are fostering innovation. “In the long run, you’ll see we will be a big part of the change in manufacturing with both new companies from overseas, as well as existing companies retooling in the state of Illinois,” Peterson says.
Boosting the Business-Friendly Environment
The Hoosier State has risen to first in the Midwest and fifth in the nation in Chief Executive’s “Best & Worst States for Business” ranking. The “secret sauce” behind that bump has been an “unprecedented collaborative effort” between state government, local government, universities and the private sector to drive a pro-business culture, says Jim Schellinger, Indiana Secretary of Commerce.
The state still boasts one of the highest concentrations of manufacturing operations in the country. Advanced manufacturing, which makes up 30 percent of state GDP and employs roughly 20 percent of the workforce, is also spurring development in IT. Schellinger says the tech sector has added nearly 15,000 jobs in the past two years, largely driven by an influx of companies escaping the high costs of the coasts.
“We have the second-lowest cost of living in America,” he says. “Everything is also now done with technology so that concentration of advanced manufacturing is drawing the IT businesses here to be next to their customers.”
The state is working to address emerging challenges related to talent scarcity. Gov. Eric J. Holcomb recently created a state-level position, Secretary of Career Connection and Talent, dedicated to collaborating with business, trade groups and government to connect workers with training and highwage positions. Schellinger predicts it will be a “game changer.”
Development in Data Centers
Iowa’s capital has one of the fastest-growing employee bases in the Midwest, reports David Maahs, executive vice president of the Greater Des Moines Partnership. One of the biggest stories in Iowa is the growth in data centers. Apple is planning a 400,000-square-foot, $1.4 billion data center in nearby Waukee. Gov. Kim Reynolds said it “puts Iowa on the world stage.”
Facebook recently started a one-million-square-foot expansion at its data center facility in Altoona, and Microsoft is completing its largest data center in the country in West Des Moines. “In total, Facebook, Microsoft and Apple have made more than $8 billion in commitments and investments in recent years,” says Maahs.
A focus on attracting talent has brought Des Moines a new downtown arena, a new science center, a new public library, sculpture park and multiple new hotels. “There’s a strong focus on making this a great place to live and our public sector and private sector working together,” he says. “It’s really set the foundation for the growth that we’re experiencing right now.”
Flexible Workforce Development
The Sunflower State is striving to meet its workforce needs by prepping workers for dedicated roles and creating “flexibility” in the workforce, says Susan NeuPoth Cadoret, acting director of the businessand community development division at the Kansas Department of Commerce.
Kansas’s Workforce AID (Aligned with Industry Demand) program helps employers close the skills gap through a public-private partnership for training and development with eight- to 12-week certification programs with on-the-job training. Welders and manufacturing maintenance techs are in especially high demand.
“We’re really working hard with businesses to identify what skill sets they’re missing and develop a shortened program,” Cadoret says. “It’s helping address those needs.”
Kansas is experiencing strong growth in the biosciences sector, especially in animal health at companies like Merck Animal Health, Bayer Animal Health, Hill’s Pet Nutrition and CEVA Animal Health. Dairy Farmers of America recently completed a 214,000-square-foot plant in Garden City. In Wichita, the aviation and aerospace sectors continue to thrive. Wichita State University’s Innovation Campus opened earlier in the year in partnership with Dassault Systèmes and Airbus, and serves as a manufacturing innovation hub. However, talent supply is an emerging challenge. “We just don’t have enough people,” Cadoret says. “Looking out over the next three years, I think we’re going to have to do something more aggressive.”
Michigan is leveraging its automotive history to grow as a global manufacturing powerhouse. Already home to 75 percent of all R&D in the automotive industry, the state’s talent and infrastructure strengths are fueling innovation in other sectors, says Jeff Mason, president and CEO of the Michigan Economic Development Corporation.
Defense contractor Williams International is expected to invest up to $300 million in new facilities in Pontiac over the next five years. Packaging manufacturer Dart Container also announced a $40 million investment in an innovation center in Lansing. LG Electronics announced a 300,000-square-foot plant in Hazel Park, and Switch recently opened a large advanced data center campus in Grand Rapids. “We have the innovative spirit, the engineering and the IT talent. We know how to design, develop and making things in Michigan,” Mason says. “And we have the assets that will keep us a leader in this space.”
Michigan is also growing as a distribution hub. Amazon is currently constructing two fulfillment centers, including a one-million-square foot facility in Livonia. However, with the unemployment rate at 3.7 percent, Mason says there’s a growing “battle” for workers in skilled trades.
Healthcare and Manufacturing Growth
In 2013, the Mayo Clinic announced it will spend more than $3 billion over the next 20 years to transform its operations in Rochester. “There will be a lot of economic growth around Rochester over the next five years, and it’s fueling [development] around the region,” says Kevin McKinnon, deputy commissioner of economic development at the Minnesota Department of Employment and Economic Development.
Minnesota is also seeing growth in other sectors. Electronics distribution company Digi-Key recently announced a $250 million investment in a one-million-square-foot distribution center in Thief River Falls. Last year, Kraft-Heinz announced an additional $100 million investment in its New Ulm facility.
Medical device manufacturer Biomerics plans a 52,000-square-foot facility in Brooklyn Park, while Faribault Foods, a food manufacturer owned by Mexico’s La Costeña, is constructing a $100 million plant in Faribault.
While the state’s unemployment rate is below the national average, it is still challenged with finding more jobs for some citizens. “We’ve been putting a lot of time and effort into skills, training and working with populations that might have barriers to employment,” McKinnon says.
A Growing Global Hub of Agtech
The Show-Me State continues to grow as a global leader in agtech, which contributes $33 billion in GDP to the state economy and provides over 378,000 jobs. St. Louis, global headquarters of Monsanto, is seeing new innovation in farming practices and soil management at companies like TerraManus Technologies and Shatto Milk. Israeli company NRGene also chose St. Louis as its U.S. headquarters in 2016.
The state’s central location has also attracted new investments in logistics and distribution. Amazon recently announced a 448,000-square-foot distribution center in Hazelwood. In July, Dollar Tree broke ground on a $110 million, 1.2-million square-foot distribution facility in Warrensburg.
Norwegian aerospace and defense company Nammo AS also plans to locate its Capstone Precision Group U.S. logistics center in Pettis County. And American Outdoor Brands Corporation will soon break ground on a new $55 million, 500,000-square-foot national distribution center in Boone County.
However, Missouri still ranks behind some other states in the region in terms of GDP and job growth. New growth initiatives by Gov. Eric Greitens include a reduction in red tape, better workforce training and more support for entrepreneurship.
The new Skilled Workforce Missouri program, currently being used by 3M and Leggett and Platt, is designed to give businesses access to skilled labor with better training programs and recruitment tools. “Now, you can contact the Department of Economic Development. They will be a one-stop shop to help businesses find skilled workers, and Missourians get the skills they need to find jobs,” Greitens said.
Cultivating People and Relationships
Nebraska Gov. Pete Ricketts says the state’s high-quality workforce remains its single greatest competitive advantage. “Whenever I’m talking to companies about why they want to expand or move to Nebraska, the conversation always starts with the workforce,” Ricketts says.
The governor has taken a hands-on approach to economic development by traveling on trade missions and working on relationships with CEOs. He has also taken his private sector experience as COO of Ameritrade to convert state government into a more “customer-focused” organization. “Everything that occurs around economic development boils down to relationships…I call companies directly,” Ricketts says.
While the state logged a negative growth rate in the first part of the year due to declines in the agricultural industry, sectors such as manufacturing and tech are showing robust growth. The development of data centers is also gaining momentum. Facebook recently announced it will construct a $307 million, 450,000-square-foot data center south of Papillion. In the past couple of years, Yahoo has also expanded its data center presence in the state, and Travelers opened a $200 million data center in 2015. Ricketts says it’s being fueled by some of the lowest utility rates in the nation.
One challenge Nebraska faces is that its low unemployment rate is leaving some companies with a dearth of workers. The new Nebraska Developing Youth Talent Initiative is aiming to create collaboration between businesses and public schools. High school students can now be exposed to the skilled trades at an earlier age, and they can even earn credit at local community colleges before graduation. “By the time they are a senior, they’ll have already had the opportunity to explore different career fields and be ready to develop a skill,” he says.
From the Rust Belt to the Knowledge Belt
Manufacturing remains a key driver in Ohio’s GDP. However, the Buckeye State has moved from the Rust Belt into the “Knowledge Belt” with diversification into biohealth, tech and new innovative industries, says John Minor, president and chief investment officer for JobsOhio.
One such area is in Fintech. Financial services is now the second-largest private sector in Ohio and the sixth-largest such sector in the U.S. by GDP. A number of companies in the state, including KeyBank, Progressive and Kroger, joined forces in April to form a Fintech business accelerator. Fintech71—named after I-71, which connects Cincinnati, Columbus and Cleveland—will focus on growing entrepreneurial activity and attracting more Fintech companies to the state.
Facebook announced in August that it will build a $750 million data center facility outside of Columbus in New Albany. Amazon Web Services recently opened three data centers in the state in Hilliard, New Albany and Dublin, for a $1.1 billion total investment. And Cincinnati Mayor John Cranley told CNC in mid-September that the city would be ‘very aggressive on tax incentives’ in trying to land Amazon’s HQ2 project. “There is a growth and momentum that is happening here,” says Minor. “I would say we’ve become quite diversified our industry bases.”
#28 NORTH DAKOTA
Tech Flying High in the Roughrider State
While it’s one of the most sparsely-populated states, North Dakota has one of the fastest-growing economies in the nation. A study by ExpertMarket indicated the state has the best economic outlook for 2017 based on unemployment rates, GDP per capita, startup design and number of new entrepreneurs. The state, which derives a large portion of its GDP through natural resources, is also a growing hotbed for tech and entrepreneurship, reports John Schneider, economic development and finance division director at the North Dakota Department of Commerce.
A business-friendly regulatory climate, low taxes and strong incentives are fueling growth. Microsoft and Amazon have operations in the state, and Midco has invested more than $200 million in the Fargo region since 2014. [Our] technology-based business sector is growing and diversifying,” Schneider says. “Keeping pace with rapid changes in the technology arena and integrating those advances benefits all North Dakotans.”
North Dakota has also become a hub for unmanned aircraft systems (UAS) and has invested $16 million for infrastructure projects to establish the UAS training academy at the Grand Sky UAS Business and Technology Park in Grand Forks. Northrop Grunman plans to expand its UAS operations in the state with a new hangar and research facility in Grand Forks. Other smaller UAS companies, such as SkySkopes, are setting up shop in the region. “Within its borders, we already have all the components needed to support UAS education, training, research and commercialization,” Schneider says.
#21 SOUTH DAKOTA
A Government to Support Businesses
South Dakota has a “philosophical drive” to ensure that government is there to support businesses and citizens, says Scott Stern, commissioner of the Governor’s Office of Economic Development. South Dakota’s business tax burden is ranked No. 2 by the Tax Foundation, thanks to no corporate income tax, personal income tax, personal
property tax or business inventory tax. There are also generous incentives. “We find ways to help companies succeed and look at it with a long-term view,” Stern says.
Gage Brothers Concrete recently broke ground on a $40 million plant in Sioux Falls, and Wind Chill recently started construction on a 205,000-square-foot refrigerated foods warehouse and distribution center. Stern also says the state’s agricultural background and science industries have merged to make bioscience one of the fastest-growing sectors.
Biotech ag firm SAB Biotherapeutics recently announced an expansion with the construction of an eight-acre “pharm” to harvest plasma from cattle to be used in the production of human biopharmaceuticals. “There have been a lot of opportunities and activity in genetic research, advancing food performance and seed performance sectors,” Stern says.
One challenge the state continues to face is workforce recruitment and retention. While South Dakota has been outpacing the nation in population growth for the past few years, there’s also a growing need for talent. “It’s important for us to get the messaging out, change some of the perceptions of South Dakota and let people know that we have not just opportunities for jobs but for careers,” Stern says.
Attracting Big Investments
Wisconsin has been rising through the ranks of economic development with strong momentum. Tricia Braun, deputy secretary and COO of the Wisconsin Economic Development Corporation, says the state has been enhancing its business climate with tax reform and business-friendly incentives. “We’ve figured out what we needed to do to compete for companies and protect investments that were already here,” she says. “We’ve leveled the playing field and made it [easier] to invest.”
The efforts are paying off. German Gummy Bear manufacturer Haribo recently announced construction of its first North American plant in Pleasant Prairie. Taiwanese electronics manufacturer Foxconn announced in July that it would construct a $10 billion plant in southeast Wisconsin. The project, expected to be operational by 2020 and to create up to 13,000 jobs, was fueled by a package of incentives worth up to $3 billion for capital costs, workforce development and tax exemptions. “There are already some global operations centered in the state and other companies see that as a benefit, with opportunities for collaboration and business relationships,” Braun says.
Growing Wisconsin’s talent pool is a big priority, he adds. “Inspire,” a new statewide platform aimed at connecting employers to students and supported by all of the state’s nine regional economic development organizations, is helping bridge the gap with more regional collaboration.