Site Selection Under Pressure: How to Expand Without Leaving Value on the Table

For many industries, interest in U.S. expansion is hitting new highs. A confluence of factors, including tariffs, the artificial intelligence (AI) boom, geopolitical uncertainty, and growing energy needs, is driving expansion and onshoring into the U.S. 

The average effective tariff rate for consumers is 16.9% — the highest since 1935 — motivating businesses in critical industries like life sciences and manufacturing to consider onshoring or expanding their U.S. footprints. Beyond cost considerations, companies want to secure their supply chains from future geopolitical disruption and reduce reliance on foreign sources for critical raw materials and products. Meanwhile, the proliferation of AI is fueling massive growth of data centers, which have substantial power needs. 

Emphasizing the scale of the shift, BDO’s 2025 Tax Strategist Survey revealed that 56% of tax leaders say they are very likely to significantly increase investments in U.S. production over the next 12 months in response to potential tax policy changes. 

Businesses in many sectors are feeling the pressure to build quickly. But to secure a site that meets their long-term business goals, they must be aware of the various issues affecting site selection to allow for the additional time necessary to negotiate and secure valuable incentives. 

Tax Leaders Report Interest in Expansion

According to BDO’s 2025 Tax Strategist Survey of 300 senior tax leaders: 

Workforce Availability and Competition

Skilled workforce availability is one of the most significant variables influencing site selection. Specialized manufacturing sectors, such as energy equipment and services, often experience intense competition for electrical engineers. That is particularly true in the Southeast portion of the country, where the sectors are growing rapidly. 

The life sciences industry faces a persistent need for highly educated biologists, chemists, engineers, and lab technicians. But those labor pools are often concentrated in specific areas, making it difficult for companies to move outside the metro areas of Boston; San Francisco; Raleigh-Durham; New York; and Washington, D.C. Because of its abundance of top-tier universities, Massachusetts has long been a hub for life sciences and therefore offers one of the most comprehensive incentive programs for the life science industry. 

While the data center sector is growing quickly, the number of workers required to operate one is significantly fewer than that needed for life sciences and energy equipment and services industries. 

Navigating Labor Challenges

When selecting a site, labor availability should be one of the highest priorities for companies. For industries that rely on large amounts of high-skilled workers, such as energy equipment and services, manufacturing, and life sciences, increasing compensation and offering benefits (covering relocation expenses, for example) could help them stand out as competitive employers. That strategy is particularly critical for securing in-demand senior-level talent.

To form a strong pipeline of talent, businesses should invest in relationships with universities and trade schools. Not only does a partnership with educational institutions provide access to early-career talent, it also provides the opportunity for businesses to co-develop training or curricula to give students the skills needed to succeed on the job. Once organizations have built a strong bench of entry-level talent, they can increase the tenure of talented individuals by offering internal training and growth opportunities. Greater retention may improve an employer’s brand, further improving its competitiveness.  

Demand and Regulatory Hurdles to Site Selection

As an industry grows, businesses tend to cluster in one area, which is a natural outgrowth of the availability of resources, labor, and infrastructure. But as more businesses develop a presence in a specific region, resource demand might outpace supply. A labor shortage could emerge; roads might become more congested and show heavy wear-and-tear; and ports could become backlogged as a result of greater shipping activity. Utility companies might not be able to keep up with energy demand, particularly in areas with rapid data center growth. Further, local communities might be resistant to high levels of construction, citing concerns regarding municipal resource use or general economic change. Regulatory barriers and approvals such as permitting and environmental impact studies can add another layer of complexity to the site selection process and extend timelines. 

The likelihood of resource competition, combined with regulatory requirements associated with the permitting and construction process, means there are a limited number of “shovel-ready” sites, or places where construction can begin shortly after purchase. Instead, companies often need to allocate significant time and investment to prepare the site and secure critical infrastructure. 

Addressing Resource Constraints and Regulatory Scrutiny

To succeed in an environment with limited resources, businesses need to negotiate with utility providers, local governments, and communities. Once a company has identified a viable site, it will need to engage with local leaders and the broader community. Maintaining positive community relations during construction helps avoid project delays that could result from local pushback and can lay the foundation for a productive relationship. 

Data centers have faced heightened community pressure because of their energy use, which can drive up energy prices for existing residents and businesses. Working with local governments and utilities to manage energy prices and potentially fund infrastructure upgrades can help avoid contentious community relations.

A key part of positive community relations is good corporate citizenship, which is a business’s commitment to having a positive impact on its community. Companies should present their plan for corporate citizenship to the state or municipality’s economic development agency to show how they will be a valuable addition to the community. A corporate citizenship plan should address how the company’s expansion contributes to the local economy through well-paying jobs and investment in infrastructure. It can also include charitable commitments, investments in small businesses, or partnerships with schools and universities for training and apprenticeship programs. Corporate citizenship can be the factor that results in an economic agency offering one business an incentive package over another. 

Pressure to Build Quickly and How to Navigate It

Businesses frequently face pressure from C-suite executives and investors to build new sites as quickly as possible, and pressure can be even more intense in high-demand industries. But rushing the site selection and construction process can cause delays and going over budget if projects run into regulatory and compliance issues or lose access to key resources.

Looking to compress timelines wherever possible, businesses might seek sites in states with business-friendly regulatory environments. Fewer and less complex regulations typically allow for quicker construction. However, companies also need to balance the benefits of favorable regulatory systems with their needs for labor, energy, and other resources, not to mention the potential tax implications.

Successful site development requires a business to become familiar with laws and regulations affecting potential targets. Zoning approvals, building approvals, environmental impact reviews, land use entitlements, and community reviews can all differ depending on location. In some areas, getting on the agenda at local government and community board meetings requires 90 days’ advance notice. Anticipating such timelines can help avoid delays. 

Securing State and Local Incentives

Once a business has identified a short list of sites that meet key resource needs and have assessed the time to build at each — taking into account any regulatory considerations and necessary infrastructure work — it can begin identifying, negotiating, and securing incentives. Common incentive types include:   

• Job Creation: Job creation incentives are among the more lucrative incentives available. Many jurisdictions offer a rebate covering all or a portion of future payroll/withheld taxes for new jobs created to support an expansion project. The incentive is generally in place for 10 years. Also, most states have negotiated incentives to reward job creation, with Southeastern states among the most aggressive when trying to attract expansion projects.  
• Capital Investment: Capital investment incentives provide tax credits and deductions for constructing new facilities, acquiring new production equipment, or upgrading existing facilities. They are designed to boost local economic development. Abatements are typically provided for income taxes, as well as real and personal property taxes.         
  In addition to state and local capital investment incentives, the One Big Beautiful Bill Act reintroduced 100% bonus depreciation for property and creates a new category of 100% expensing for qualified production property. 
• Utilities: Projects to upgrade utility infrastructure, implement energy-efficient systems, and enhance water conservation not only help businesses meet their energy needs but can also unlock incentive opportunities. Several jurisdictions offer utility tax credits, energy efficiency grants, renewable energy tax incentives, and utility rate reductions. 
• Custom Incentives: Many states and localities offer custom incentives that can be negotiated case by case. Such incentives are typically reserved for significant projects and are much more flexible than predefined programs. Options can include grants and rebates for job creation, capital and infrastructure investments, and training and education. States also maintain competitive funds to close deals when a developer is choosing between one or more states.

Once they have secured incentives, companies must meet compliance and reporting requirements to realize their awards. That can include tracking how many jobs were created, details about capital investments, training plans, and more. If a company cannot verify that it has met specific incentive requirements, it might be required to repay the full amount under a clawback provision in the agreement. To avoid that, businesses should regularly evaluate and update compliance processes for tracking and reporting employment, development, and investment commitments. Given the vast amount of data required, businesses will need a data management strategy that consolidates information into a unified platform and allows connected systems access. That process enables the automatic extraction and reporting of information.