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PALM BEACH COUNTY: EQUAL PARTS LIFE AND SCIENCE

Check out a blogging entry from a site location expert, Catalina Valencia, who participated in the BDB’s 2018 Site Consultant Familiarization Tour.

Mention Palm Beach, Florida to me and thoughts of beautiful beaches, spring breaks, vacations, and tourists come rushing to my mind. When my husband and I met in 2005, I was living in Florida and he worked as an engineer in St. Louis, Missouri. Although he loved the Sunshine State, when we decided to marry we chose to make our home in St. Louis because job opportunities in Florida for engineers were scarce. More than 10 years later, I found that business has changed quite dramatically in Palm Beach County, especially in regard to engineering.

While attending a recent familiarization (FAM) tour of Palm Beach County organized by the Business Development Board of Palm Beach County (BDB), my perception of the region was broadened due to an eyewitness account of rampant development occurring among traditional Floridian industries like tourism as well as many other, not-so-traditional ones. Frankly, I was astonished by the progress that has been made there since I moved away in 2007.

Yes, Palm Beach County still means beaches, sun, and tourism, but its economy has enriched and expanded into several other areas that are helping to broaden its appeal. From aviation, aerospace, and engineering to life sciences, information technology, and financial services, Palm Beach County has become a hub for highly-skilled industry segments. However, more work is needed if County leaders intend to fulfill their desire to attract manufacturers. As a site selection professional who specializes in manufacturing, here is my account of the advantages and drawbacks Palm Beach County has for capital-, labor- and resource-intensive industry.

The Advantages
Five main factors were apparent during my visit that I credit with helping spur growth in the region:
•    Leadership & Focus
•    Cross-sector Collaboration & Workforce Development
•    Creativity, Capital Availability, and Entrepreneurship
•    Connectivity & Labor Shed
•    Quality of Life

Leadership & Focus: Under the leadership of the BDB, the region is developing a holistic and synergistic approach to economic development. The BDB, in collaboration with many other community stakeholders, has coordinated and focused its work around key industry clusters. These industry clusters are organized around task forces that blend market knowledge and expertise from local businesses, government, academic, and economic development resources to create a forum to “voice concerns, identify challenges and explore opportunities.”

Life sciences is an extraordinary example of how efforts like these have helped incentivize the development of a new industry cluster in the region. The first seed was planted in 2008 with the arrival of Scripps Florida – a division of the non-profit Scripps Research Institute headquartered in La Jolla, California. The translational research of Scripps around cancer biology, chemistry, immunology, aging, neuroscience and more – has been a prodigious force in attracting other life sciences businesses and institutions to the area, giving place to what is known today as the North Palm Beach Life Science Corridor. Other efforts have helped stimulate further development of life sciences in the County, most notably the collaboration between industry and academia, which I’ll explain in a bit.

Seeking collaboration with Scripps, the Max Planck Florida Institute for Neuroscience opened its doors in Palm Beach County in 2012. Headquartered in Munich, Germany, the renowned Institute has produced 18 Nobel Laureates since its inception in 1948. The Institute is focused on “understanding the structure, function, and development of neural circuits.”During our tour, we had the opportunity to see the ultra-high-resolution fluorescence microscope that earned Max Planck researcher Stefan Hell the Nobel Prize in Chemistry in 2014. The microscope offers “new insights into what happens on the molecular scale of life,”presenting significant “potential for research on disease or the development of drugs.”

Together, Scripps Florida and the Max Planck Florida Institute for Neuroscience, have helped catapult Palm Beach County’s position as a flourishing life sciences hub in the United States.

Aviation/aerospace/engineering is another industry cluster making big leaps toward advancing Palm Beach County’s reputation as a home to sophisticated industrial specialization. Building on legacy industries such as Pratt & Whitney UTC and Lockheed Martin, the likes of Belcan Corporation and Aerojet Rocketdyne are strengthening the County’s position as a viable alternative to other traditionally-focused aerospace pockets of the country.

Cross-sector Collaboration & Workforce Development: The committed and synergistic participation of diverse organizations across the region shined brightly throughout the FAM tour. Many were active participants of the tour, serving either as speakers, hosts to facilities visits, or tour guides. Although their perceptions are notably biased, it is hard to believe that the progress seen in the region could be accomplished without a somewhat well-coordinated effort among economic development agencies, academia, government, and local business working toward common goals.

Representatives for the School District of Palm Beach County, Florida Atlantic University, Palm Beach Atlantic University, and Palm Beach State College discussed the work being done to ensure that academia is feeding the labor force pipeline with the skills to sustain the growth around the region’s target industry clusters. A strong collaboration between academia and industry has given shape to academic programs that respond to the needs of the target industries. Industries are lending themselves as “training ground” for students via internship programs. One company – United Franchise Group – has gone so far as to commit significant resources toward creating the Titus Franchising Center at Palm Beach Atlantic University aimed at teaching those who wish to operate their own businesses through franchising. Florida Atlantic University has created a Life Science initiative based on the collaboration with the Max Planck Florida Institute and Scripps. These examples, are among many that illustrate the strong collaboration between local industry and education sectors.

Creativity, Capital Availability, and Entrepreneurship: The BDB has taken it upon itself a commitment to pursue creative ways to attract target businesses to the area. Behind the Gates is one such initiative. Targeting business executives who have a second home in Palm Beach County while their businesses are in another state, this initiative aims at enticing them to relocate their businesses to Palm Beach County.  This effort helped spawn the Flagler Financial District, a Wall Street-like marketplace filled with hedge funds and private equity firms feeding the growth of a dynamic environment for start-ups and entrepreneurship.
Behind the Gates has also spurred repatriation of Palm Beach County natives that left years ago and are now returning to establish new business there. Daniel Cane, CEO and Co-Founder of Modernizing Medicine, is an excellent example. A graduate of Cornell and entrepreneur by nature, Daniel co-founded Blackboard Inc. while still obtaining his undergraduate in applied economics. In 2010, Daniel co-founded Modernizing Medicine, a company that today employs over 600 people. The company developed an electronic health records system called EMA™, that is “modernizing medicine” by making the management of medical administrative tasks and records more efficient, intelligent, and seamless.

Connectivity and Labor Shed: Palm Beach County enjoys the benefits of an expanded labor market due to its proximity to the Miami and Fort Lauderdale regions, which together constitute the Miami Metropolitan Area. Workers commute daily between the large three-county stretch, offering industries a labor shed of nearly 3 million workers (Source: JobsEQ®. Data as of 2017Q4). As you might imagine, commuting has its struggles. To facilitate, All Aboard Florida, a wholly owned subsidiary of Florida East Coast Industries (FECI), is building the Brightline, a diesel/electric, higher-speed rail system that promises to connect Miami to Orlando. Today, service is available between Fort Lauderdale and West Palm Beach, but once full connectivity is attained, the labor shed in the area will enlarge even more, offering expanded opportunities for businesses –especially those in highly-skilled segments – and for workers who will be able to commute with far greater ease.

Quality of Life: There is no denying that Palm Beach County has an outstanding reputation when it comes to quality of life. A diverse offering of outdoor recreation and sports; arts and culture; and shopping and dining amenities, have made of Palm Beach County a top destination for tourists and retirees throughout the United States and the world. Several developers have expressed interest in creating new master planned communities there that combine living, eating, shopping, and entertainment around centralized neighborhoods that emulate large urban areas with the ease and reach of suburban ones. The high quality of life makes Palm Beach County an easy proposition for any industry needing to recruit out-of-state employees.

The Drawbacks
Despite all the wonders witnessed during the FAM tour, Palm Beach County does have some drawbacks for manufacturers. Most notably:
•    Cost of Living
•    Cost of Doing Business
•    Diversity, and
•    Manufacturing Workforce Availability

Cost of Living: The cost of living index in Palm Beach County is 121.7, versus 101.6 for the State of Florida, and the base 100 for the overall US. The $52,999 average annual salary in the County has a purchasing power equivalent to $43,551. (Source: JobsEQ®. Data as of 2017Q4. Cost of Living per C2ER, data as of 2017q4, imputed by Chmura where necessary.) The median house value in the County is $222,700, far higher than Florida’s $166,800 and the U.S. average of $184,700. (Source: JobsEQ®. American Community Survey 2012-2016.) Wealth and exuberance is predominant in Palm Beach County, an intimidating consideration for employers looking to expand or relocate manufacturing operations.

Cost of doing business: Taxes, wages, and utilities are key operational costs for manufacturers. A quick look at Palm Beach County indicators suggest it may be a costlier proposition than other manufacturing centers of the country. A 2015 study conducted by the Tax Foundation in collaboration with KPMG ranked Florida 31 out of the 50 US states based on the effective tax rates for capital-intensive manufacturing projects (11.3% – 19.6%). It ranked 21st for labor-intensive manufacturing projects (7.8% – 11.2%). Average annual manufacturing wages in the County are approximately $69,000 versus $59,000 for the state, and $67,000 for the U.S. (Source: JobsEQ®. Data as of 2017.)

Utility rates in Florida are also high, which can be a major deterrent to manufacturers. In December 2017, the average industrial electricity rate was $0.078/kWh in Florida compared to $0.0663/kWh in the US. (Source: U.S. Energy Information Administration, EIA.) Likewise, the average industrial natural gas rate was $5.94/MCF in Florida versus $4.25/MCF for the US.

Diversity: For a County made up of close to 21% Hispanics and 18% African Americans, diversity was noticeably absent during the FAM tour. (Source: JobsEQ®. American Community Survey 2012-2016.)

Manufacturing workforce availability: The manufacturing workforce is over 21,000 in the County and represents just 3% of the available workforce. (Source: JobsEQ®. Data as of 2017.) Despite recent gains Palm Beach County has made in the percentage of those employed in manufacturing, the percentage is projected to decrease slightly over the next five-years.

Although much information was shared during the FAM regarding efforts around workforce development for highly-skilled professions in life sciences, aerospace, and engineering, little was mentioned in regard to developing blue collar professions. This does not mean that the County is not making any efforts in the area, but unless local officials communicate what’s being done it could be overlooked when a search is underway.

My verdict:
Palm Beach County has many things pointing in its favor when it comes to attracting capital-, labor- and resource-intensive business, but to provide exceptional location advisory services, I cannot allow myself to be blinded by the paradisiac setting and intentional positive bias that make up FAM tours. To bring objectivity to my perceptions, I looked into the numbers. Nominal GDP in Palm Beach County grew 5.5% annually on average between 2012 and 2016, versus 3.7% for the nation. Employment increased 2.5% over the year ending 2017Q4. The unemployment rate went from 5.1% in January 2017 to 4.1% one year later. Average annual wages per worker increased 3.2% in the region during the preceding four quarters, and over the next five years, employment in Palm Beach County is projected to expand by over 37,000 jobs. (Source: JobsEQ.)

Overall, I believe Palm Beach County’s efforts have been impressive and that others could learn from their success. However, if the County wishes to be a viable alternative for the manufacturing sector, the BDB and other local actors have much work to do to address challenges surrounding cost of living, cost of doing business, diversity, and manufacturing workforce availability. Evaluating the competitive position of the County versus potential competing regions is a good starting point to establish benchmarks around specific manufacturing segments that make the most sense for Palm Beach County.

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Regardless of the challenges, it is evident that Palm Beach County has come a long way since I left the area at the end of 2007. The region’s concentration on tourism and services, although still dominant, has shifted to more diversified industry segments. I applaud the local leadership, and especially the BDB, for driving economic development growth and generating creative and collaborative solutions to retain, expand, and attract business to the region.

 

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