Hampton Roads Economic Development Alliance Inward Investment and Business Environment Improvement Actions

IBM -Plant Location International

Presentation to: Hampton Roads Planning District Commission May 17, 2018

1 Employment Momentum – Nonfarm Payroll Overview 8.00 Improving Expanding

7.00

Rationale – Hampton Roads Greenville, SC . Underperforming and falling further 6.00 behind peer and competitor regions. 5.00 Raleigh, NC . Virginia Sluggish job growth has hollowed out 4.00 Mo Moving Average Moving Mo the Hampton Roads labor pool. - Nashville, TN 3

Annualized % Change Charleston, SC 3.00 Baltimore, MD Jacksonville, FL . Ranks 95th in overall job growth and Hampton Roads Charlotte, NC 89th in change in prosperity among 2.00 Washington D.C. Improving short-term United States top 100 metros from 2015-2016. trend – slight growth over the 12-months 1.00 Savannah, GA . Household income is lower today Richmond, VA than it was 20 years ago. - (1.50) (0.50) 0.50 1.50 2.50 3.50 4.50 . Subpar performance will continue Contracting 12-Month Percent Change Slipping without intervention at regional scale.

Indexed Growth Comparative Labor Force Trends 112 Washington D.C. IBM-Plant Location International 111.2 . Evaluate and select best sectors for 110 Richmond 108.4 diversified growth. 108 . Analyze competitiveness of the 106 Virginia Hampton Roads region. 104.7 104 . Develop a national best practice 102 Hampton Roads Go-To-Market Strategy. 103.4 . Identify needed Competitiveness 100

Improvement Actions. 98 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018

Source: U.S. Bureau of Labor Statistics 2 Over 80,000 Jobs can realistically be Created in 10 years

The Go To Market Strategy can generate an additional 10,000 jobs. Low (direct + indirect)

The Business Environment Improvements can yield 50-102,000 new jobs. High (direct + indirect) Action Themes

Talent 27k – 59k jobs

Infrastructure & 14k – 19k jobs Logistics

Sites & 2k – 6k jobs Real Estate

Cluster & Innovation 7k – 19k jobs

Go To Market Strategy/Plan 10k jobs (above current performance)

Total Job Creation 60k – 112k jobs

Ambition* 82,5k jobs

3 * Based on 1% annual growth in employment over 10 years. In the period 2007-2017 employment was flat. Project Approach An objective assessment of Hampton Roads from the investor perspective.

1 2 3 4

Best Target Sector Competitiveness Competitiveness Go To Market Strategy Selection Analysis Improvement Actions

• Review existing • Define location drivers • Develop specific value • Identify needed literature and data and criteria for main proposition and business improvement sources sectors and sub sectors case for each sector • Sensitivity analysis • Agree on the best and • Collect comparative data • Review and assess • Assess current efforts most competitive for the Hampton Roads current marketing and sectors to be targeted region and top promotion efforts • Directional for investment competitor locations for recommendations promotion activities each target sector • Define best marketing channels • Best practice insight • Identify and validate • Conduct comparative • Stakeholder Review competitor locations and competitive location • Define target industry for comparative benchmarking analysis and company profiles • Review regional implications location analysis • Define competitiveness, • Develop best-practice • Prepare longer-term key strengths & Go To Market strategy business environment weaknesses and implementation plan improvement plans

4 4 Smarter Cities discussion Industry Sectors Selected for Competitiveness Analysis

Sector Segment Rationale Multifunctional, high value, Key segment of inward investment for the region with Shared Services serving private & public sector significant volume of global and US investment. Key area of strength for the Commonwealth and IT Software development significant source of inward investment. Strong segment for Virginia and Hampton Roads. Source Logistics Distribution Centers of significant investment for the region. Significant cluster in the region, notably for activities Food and Drink Food processing with links to imports through the port.

Advanced Transport Technologies Significant cluster in the region, notably in maritime. Opportunities for leveraging maritime skills base and Manufacturing Manufacturing competencies across transport technologies segment. Biotech R&D and Emerging opportunity within Hampton Roads. Some Life Sciences Manufacturing indigenous companies and research capabilities. Strong segment for Virginia, emerging opportunity for Data Centers Data Centers Hampton Roads with new connectivity and infrastructure.

5 Example of Competitiveness Analysis Results Shared Services Sector Hampton Roads' competitive position: Cost – Quality map and value proposition

Multifunctional shared services Hampton Roads’ value proposition . Hampton Roads is positioned in the top-right Atlanta quadrant offering a combination of high quality and Toronto competitive operating costs. Hampton Roads can 7.5 Philadelphia compete with key US competitor locations, such as San Antonio, Jacksonville and Nashville. In an Baltimore Charlotte San Antonio Dublin international context, Hampton Roads can compete with a well established location like Dublin. Nashville Hampton Roads 7.0 Research Triangle Major competitive strengths Greater Richmond Jacksonville . Established shared services cluster . Good pool of experienced skills in finance and HR

(0 (0 to 10) Roanoke/New . Strong student base

6.5 River/Lynchburg . Relatively competitive operating cost Qualitative score Qualitative Lexington . Flexible labor market (in international context)

Southside Key weaknesses Baton Rouge . High competition for skills Greater Southwest Virginia 6.0 . Relatively lower attractiveness for staff Fredericksburg New Orleans . Charleston Quality of public transport in urban areas . Lower office space availability Main competitors

5.5 115 95 75 . Key competitors are San Antonio, Nashville and Jacksonville, Richmond and Charlotte. PV of Operating Costs (index, average = 100)

6 WWW.IBM.COM/GBS/PLI Priority Areas for Business Environment Improvements The weaknesses in Hampton Roads’ competitive position can be grouped thematically by business environment area. The sensitivity analysis tested the impact on Hampton Roads’ competitive position of improvement actions in each of these areas.

Business Area Key improvement needs

Talent - Limited pool of experienced and niche skills - High competition for skilled staff due to mismatch in supply and demand - Retention of graduates, especially in key target sectors - Outmigration of workers in key demographic age groups (22-54) Cluster - Small cluster presence and limited knowledge and research base in several segments - Limited knowledge sharing and collaboration between universities, research institutes and commercial sector Infrastructure - Relatively weaker road connectivity than other regional competitors - High road transportation costs and limited presence of road haulage service providers - Few international and domestic air connections - Limited commercial redundancy for key utilities and use of renewable energy Real estate - Limited availability of suitable and shovel ready sites - Limited office, lab and flex space Cost - High transportation costs - High real estate costs, notably for industrial sites - Higher utility costs than some leading competitors

7

Economic Development Requires a Regional Approach A full range of activities must be accomplished at regional scale

Talent - ensures skills supply and alignment for the cluster, Innovation - supports innovation and supports recruitment and HR issues collaboration between companies and universities and partnership between companies Finance - ensures access to finance for new and existing companies, including seed funding, VC, loan guarantees etc. Talent Investor Development and Policy Advocacy - supports the further development and Finance Innovation growth of existing companies Infrastructure & Real and includes advocacy for Estate– the physical and digital assets and real industry towards policy makers. estate/incubator facilities Investor available to companies Infrastructure Economic Development Development & Real Estate and Capabilities Policy Advocacy Internationalization - support for indigenous companies’ Internatio- Investment internationalization efforts, nalization Promotion e.g. marketing of local Networking capabilities and international & partnerships with other Partnerships Investment Promotion - encompasses clusters/regions. investment promotion and marketing efforts

= Core HREDA responsibility Networking and Partnerships - refers to matchmaking services and networking events and activities. = HREDA supporting role 8 Transforming the HREDA Role to Enhance Business Growth

HREDA should become a more pro-active and effective investment promotion agency in line with global best practice, working in close collaboration with VEDP and local EDOs.

HREDA should support indigenously grown sectors and help promote these capabilities internationally and help foster the growth of regional clusters in Hampton Roads

Recommended Future HREDA Direction Lead targeted pro-active marketing and promotion of Hampton Roads to investors and companies (in collaboration with VEDP and local EDOs), coupled Current HREDA Focus with active business facilitation and support.

Marketing/promotion for inward investment Function as the prime point of contact for companies and coordinator for promotion activities and support with other organizations and stakeholders.

Pro-actively support the indigenous growth of Hampton Roads companies Lead generation through international promotion of capabilities

Act as facilitator for partnerships between inward investment firms and local Business facilitation companies and support regional efforts for industry-university collaboration for research, skills and cluster development. Research and analysis Play a strong policy advocacy role towards cities, region organizations and Commonwealth government authorities in support of economic development.

Organize and support after care and investor/cluster development programs. Current activities are too focused on promotion, facilitation and support HREDA should become a pro-active marketing organization acting as catalyst for growth through integrated support and effective promotion, cluster development and advocacy

9 Key business environment improvement needs

Business environment area Action themes

Talent - Sector skills consultation and coordination - Improved skills provision - Improved insight and alignment - Attract and retain talent Infrastructure and logistics - Freight logistics, infrastructure and services - Port development - Improved accessibility - Energy supply and commercial redundancy - Digital infrastructure Sites and Real Estate - Greater awareness of current real estate availability - Shovel ready sites and improved office space availability Cluster and innovation - Coordinated and aligned support for cluster development and innovation - Facilitate collaboration - Leverage strategic sites and assets - Support entrepreneurs, start-ups and SMEs

10 Preliminary Resource Priorities - $25-30M Five Year Plan Go To Market and Long-Term Business Environment Improvement Plans at $2.90 - $3.50 per capita.

Preliminary Fund Allocations

Regional Identity and Branding 7% 20% Business Growth Initiatives (Attraction, BRE, FDI & Trade) 23% Talent & Workforce

Cluster Development & Innovation

33% Infrastructure, Sites & Facilities 17%

11 Note: Percentage allocations are approximate and will be revised as implementation programming is completed. 11 WWW.IBM.COM/GBS/PLI Comparative Funding Examples

$3M Annual Program $6M Annual Program 27% Public – 73% Private $2.90 per capita funding $1.21 per capita funding $4.5 Annual Program $2.46 per capita funding

$2.8M Annual Program $4.3M Annual Program $4.6M Annual Program 56% Public – 44% Private $3.73 per capita funding $2.21 per capita funding $2.2M Annual Program $5.14 per capita in total funding 35% Public – 65% Private $3.6M or $4.00 per capita for $5.30 per capita funding marketing and business development

$2.1M Committed 2018 Revenue 67% Public – 33% Private $1.22 per capita funding

12 Implementation Timeline and Next Steps

Peninsula Business Leader Briefing Mon 5/7

HRPDC Business Alliance Alliance Board Roundtable Board of Board of Briefing CAO Briefing Briefing Directors Directors Wed 4/4 Thu 5/17 Wed 6/6 Thu 9/27 Thu 11/29 2018 2019 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Thu 3/29 Thu 4/26 Thu 5/31 Thu 8/30 Thu 10/25 Alliance Alliance Alliance Alliance Alliance Board of Executive Board of Executive Executive Directors Committee Directors Committee Committee

Thu 5/10 Reinvent HR Briefing

Present IBM Report Share Findings and Recommendations 04/01 - 09/27 Assess Implementation Needs 04/15 - 05/31 Select Funding Advisor 04/26 - 05/31

Frame Funding Strategy and Explore Capacity 06/01 - 10/31 Finalize 2019 Go To Market Strategy 08/01 - 09/30 Secure Public and Private Funding Commitments Engage Business Environment Improvement Partnerships 10/01 - 11/30 Develop Sector Specific Business Environment Improvement Strategies 11/01 - 01/15 Advance Sector Specific Business Environment Improvement Efforts Finalize 2019 HREDA Program and Business Plan 10/01 - 10/25 Approve 2018 Plan and Budget 10/25 - 11/29 Kick Off Go To Market Strategy and Plan

13 Key Findings and Conclusions

 Hampton Roads has a marketable value proposition and business case for Shared Services, IT/Software, Advanced Manufacturing, Food Processing and Distribution/Logistics and should be achieving greater economic success.

 The region’s economic development ecosystem is highly fragmented and should be more closely integrated and strategically aligned in support of a targeted Go To Market strategy and longer-term business environment improvement effort.

 HREDA should continue to focus on core responsibilities while also taking a more proactive and expanded approach to function as a catalyst for growth. With adequate resources and support, performance can be increased by more than 50% annually resulting in an additional 1,000 jobs per year or 10,000 jobs over ten years.

 Improvements in the region’s business environment (talent and skills, infrastructure, sites and facilities development, cluster development and innovation) can generate an additional 50 – 102,000 new jobs over ten years.

 Together, implementing the Go To Market Strategy and the Business Environment Improvements should realistically yield over 80,000 new jobs in ten years.

14 14 Smarter Cities discussion Appendix: IBM-PLI Conclusions and Recommendations: Selected Slides . Competitiveness analysis results by sector Slides 16-22 . Sector Prioritization for investment promotion activities Slide 23 . Key Go To Market roles and actions for HREDA Slide 24 . Suggested roles and responsibilities: Regional economic development capabilities and actions Slide 25 . Priority areas for business environment improvement Slide 29 . Sensitivity analysis Slides 30-31 . Recommendations to support sector development Slides 32-35 . Talent Action Plan Slide 36 . Infrastructure and Logistics Action Plan Slide 37 . Sites and Real Estate Action Plan Slide 38 . Cluster and Innovation Action Plan Slide 39 Hampton Roads Market Conditions: Selected Slides . Military Employment in Hampton Roads Slides 40-41 . Real Private Industry Regional Gross Domestic Product (GDP) Slides 42 . Payroll Employment and Quarterly Job Growth Slides 43-46 . Employment Momentum, Indexed Job Growth, Peak to Trough to Peak Employment Slide 47-50 . Migration by Metro Areas Slide 51 . Population Growth and Composition Slides 52-55 . Comparative Trends – Civilian Labor Force Slides 56-57 . Brookings Institute Metro Monitor Dashboard Selected Rankings 2011-2016 and 2015-2016 Slide 58

15

Competitiveness Analysis Results Shared services Hampton Roads' competitive position: Cost – Quality map and value proposition

Multifunctional shared services Hampton Roads’s value proposition . Hampton Roads is positioned in the top-right Atlanta quadrant offering a combination of high quality and Toronto 7.5 competitive operating costs. In an international Philadelphia context, Hampton Roads can compete with a well Baltimore Charlotte San Antonio established location like Dublin. Dublin Major competitive strengths Nashville Hampton Roads 7.0 Research Triangle . Established shared services cluster Greater Richmond Jacksonville . Good pool of experienced skills in finance and HR . Strong student base (0 (0 to 10) Roanoke/New . Relatively competitive operating cost 6.5 River/Lynchburg

Qualitative score Qualitative Lexington . Flexible labor market (in international context)

Southside Key weaknesses Baton Rouge . High competition for skills Greater Southwest Virginia 6.0 . Relatively lower attractiveness for staff Fredericksburg New Orleans Charleston . Quality of public transport in urban areas . Lower office space availability Main competitors 5.5 115 95 75 . Key competitors are San Antonio, Nashville and PV of Operating Costs Jacksonville. (index, average = 100)

1616 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Software development Hampton Roads' competitive position: Cost – Quality map

Software development Hampton Roads’s value proposition

San Jose (Silicon . Hampton Roads has a good value proposition for Valley) software and IT services, notably when the emphasis 8.0 Boston Northern Virginia is on availability of relevant students rather than a New York London Philadelphia large experienced talent pool. Atlanta 7.5 Baltimore Toronto Major competitive strengths . Established IT cluster 7.0 Research Triangle Singapore . Opportunity to tap into experienced military Greater Richmond ) personnel pool

10 Hampton Roads . Strong student base to 6.5 Jacksonville Dublin

0 Roanoke/New ( . Relatively competitive operating cost River/Lynchburg Greater Charlottesville Greater Fredericksburg .

Qualitative score Qualitative Strong data and IP protection (in international Nashville Shenandoah Valley 6.0 Southwest Virginia context) New Orleans Greensboro Southside Charleston Key weaknesses 5.5 . Limited research performance . Relatively smaller pool of experienced skills . High competition for skills 5.0 . Relatively lower attractiveness for staff San Jose . Lower office space availability

4.5 170 150 130 110 90 70 50 Main competitors

PV of Operating cost . Key competitors are Greater Richmond, Atlanta and (index, average = 100) Philadelphia.

1717 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Distribution center Hampton Roads' competitive position: Cost – Quality map

Hampton Roads’s value proposition

Distribution center . Hampton Roads has a good quality value proposition for distribution centers. The port is a major asset, and 7. 7 the region’s proposition is stronger for activities that Chicago are more directly dependent on the port presence. Atlanta Major competitive strengths 7. 2 New York Philadelphia Columbus . Good market access Greater Richmond Baltimore . Houston Established logistics cluster 6. 7 Hampton Roads Roanoke/New . Reasonably good pool of experienced personnel Charlotte River/Lynchburg Northern Virginia . Strong student base Jacksonville Nashville Shenandoah Valley . Good opportunity for development of cross sector Southside 6. 2 ) Savannah linkages – i.e. software / IT (logtech)

10 Greater . Reasonably good port access and multimodal

to Fredericksburg 0 ( Lexington connectivity Miami 5. 7 . Reasonable access to relevant real estate Qualitative score Qualitative Charleston Key weaknesses . 5. 2 High competition for skills Shreveport . Relatively high labor, transportation and real estate cost

4. 7 125 115 105 95 85 75 Main competitors . Key competitors are diverse and include Baltimore, PV of Operating cost (index, average = 100) Richmond, Philadelphia, Columbus and Atlanta.

1818 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Food processing Hampton Roads' competitive position: Cost – Quality map

Food processing 7. 3 Hampton Roads’s value proposition

New York . Hampton Roads has a high quality value proposition Houston for food processing relying on raw materials handled Toronto 6. 8 through the Port of Virginia, notably in US context.

Greater Richmond Hampton Roads Major competitive strengths New Orleans . Reasonably good access to raw materials Miami 6. 3 . Established cluster base Shenandoah Valley . Good pool of experienced staff

) Savannah . Strong student base

10 Southside .

to Reasonably good port access and multimodal Greater 5. 8 0 ( Charlottesville Roanoke/New connectivity River/Lynchburg . Reasonable access to relevant real estate Qualitative score Qualitative Southwest Virginia Key weaknesses 5. 3 . High competition for skills . Relatively high labor and real estate cost Charleston

4. 8 Main competitors 30 50 70 90 110 130 150 . Key competitors are Greater Richmond, Houston, NPV of Project cash flows Miami and New Orleans. (index, average = 100)

1919 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Transport technologies Hampton Roads' competitive position: Cost – Quality map

Hampton Roads’s value proposition

Transport technologies . Hampton Roads has a high quality value proposition for transport technologies, notably for maritime Philadelphia activities. 7. 2 Chicago Atlanta Major competitive strengths Toronto San Antonio . Established transport technologies cluster Hampton Roads Shanghai Baltimore 6. 7 . Good research base . Reasonably good pool of experienced personnel, Northern Virginia Charlotte Roanoke/New most notably in shipbuilding Charleston River/Lynchburg . Nashville Opportunity to tap into experienced military 6. 2 Huntsville Savannah personnel pool ) Greater Richmond . Strong student base 10

to . Good opportunity for development of cross sector

0 Shenandoah Valley ( Greater Lexington 5. 7 linkages – i.e. software / IT (cyber, serious gaming) Charlottesville Southwest Virginia

Qualitative score Qualitative Southside Key weaknesses . High competition for skills 5. 2 . Strong focus of experienced skills on shipbuilding with Queretaro high employment dependency on federal defense spending 4. 7 . 35 55 75 95 115 135 155 Relatively high labor and real estate cost Main competitors NPV of Project cash flows (index, average = 100) . Key competitors are Atlanta, San Antonio, Toronto

2020 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Biotech R&D and production Hampton Roads' competitive position: Cost – Quality map

Biotech R&D and production Hampton Roads’s value proposition

08 . Hampton Roads has a weak proposition for Life Sciences. New York Philadelphia 08 Major competitive strengths Boston Chicago . Good IP protection (in international context) San Jose (Silicon Valley) 07 . Good student base London Research Triangle Singapore Key weaknesses Toronto Dublin Northern Virginia 07 Miami . Small cluster presence . Limited research base Baltimore (0 (0 to 10) . Small pool of experienced skills 06 . Qualitative score Qualitative High competition for skills Greater Richmond Roanoke/New River/Lynchburg Main competitors 06 Hampton Roads Greenville . The region faces strong competition from leading US locations such as Philadelphia, Chicago and Research

05 Triangle, as well as other Virginia locations, such as 80 85 90 95 100 105 110 115 120 125 130 Greater Richmond. NPV of Project cash flows (index, average = 100)

2121 WWW.IBM.COM/GBS/PLI Competitiveness Analysis Results Data Center Hampton Roads' competitive position: Cost – Quality map

Hampton Roads’s value proposition Data center * . Hampton Roads has a good proposition for data

New York centers combining an attractive cost profile with 7,9 good quality. However competition is fierce. Major competitive strengths Chicago Toronto . High infrastructure quality, especially geared towards Boston 7,4 Northern Virginia international interconnectivity . Competitive operating costs . Good market access Baltimore Research Triangle . Large student pool Hampton Roads 6,9 Charlotte Columbus Key weaknesses (0 to(0 10) San Antonio Greater Richmond

Qualitative score . Small cluster presence Nashville Jacksonville . Limited research base 6,4 Southside . Small pool of experienced skills . High competition for skills Savannah . Relatively higher natural disaster risk . Somewhat lower energy sustainability potential 5,9 160 150 140 130 120 110 100 90 80 70 60 Main competitors NPV of Operating costs (index, average = 100) . The region faces strong competition from a broad set of NA locations such as New York, Toronto, Northern * Newark / Northern New Jersey Virginia and Chicago as well as Research Triangle, Charlotte and Columbus.

2222 WWW.IBM.COM/GBS/PLI Sector prioritisation for investment promotion activities

Cluster / Segment Investment Job value Contest- Hampton Hampton Hampton Hampton Overall Industry volume ability ** Roads’ Roads’ cost Roads’ Roads’ cost priority qualitative offer qualitative offer offer offer (Within (Within Virginia) Virginia)

Shared multifunctional, high value, serving High - High- High Medium Medium High Medium High Services private & public sector Medium Medium High- High- High- IT Software development High High High Medium Medium Medium Medium Medium

High- Medium - Medium - Logistics Distribution Centers High Medium Medium High Medium Medium Low Low

Food and Medium - Food processing High Medium Medium High Medium High Medium Drink Low Advanced Medium - High - Manufacturi Transport Technologies Manufacturing High High High High High Medium Low Medium ng Life Sciences Biotech R&D and Manufacturing Medium High High Low Medium Low Medium Low Medium- Medium Data Centers Data Centers High Medium Medium Medium Medium Medium Low – Low*

•In short term this is an emerging opportunity. As proposition develops, data centers could be given higher priority. •** competitive risk Low High Priority of sector for HREDA investment promotion

23 Key Go To Market roles and actions for HREDA

Roles Key actions

Investment Promotion • Lead pro-active investment promotion for the region in key sectors (through sector teams/experts) • Coordinate and align investment promotion activities of different actors in region • Coordinate with VEDP • Be prime point of contact for potential investors Networking & Partnerships • Build and maintain database of companies, organizations and stakeholders active in priority sectors • Matchmaking services, networking events and activities • Facilitate partnerships between companies and education sector (e.g. universities) • Work with Opportunity Inc to develop and implement sector-talent strategies and actions. • Establish partnerships with key local service providers • Seek partnership with international initiatives linked to priority sectors Investor / Cluster • Set up and coordinate sector industry partnerships Development and Policy • Work closely with local EDOs on after care support Advocacy • Act as policy advocate for priority sectors at local, regional and Commonwealth level • Organize round-tables and forums for inward investors and local companies • Facilitate training services Internationalization • Support the international promotion of regionally based companies • Conduct market research and identify opportunities for Hampton Roads companies abroad • Provide marketing support for Hampton Roads SMEs seeking opportunities abroad • Coordinate efforts with VEDP

24 Execution Management Strategy and Actions Regional Economic Capabilities Development Suggested Investment attraction Local Local Local Local HREDA HREDA HREDA VEDP VEDP EDOs EDOs

Hampton Hampton Hampton Hampton Partnerships networking Local Local Local Local Chamber Chamber HREDA HREDA HREDA VEDP and Roles and Responsibilities: Responsibilities: Roles and EDOs EDOs Roads Roads

Hampton Hampton development Local Local Local Local Local Local Chamber Investor HREDA HREDA HREDA EDOs EDOs EDOs Roads

Hampton Hampton Hampton Hampton Internationa Chamber Reinvent HREDA HREDA HREDA lization VEDP VEDP VEDP Roads Roads

-

Hampton Hampton Hampton Hampton Hampton Hampton Universities Local Local Innovation = Research Chamber Reinvent Reinvent HREDA VEDP owner EDOs Roads Roads Roads

&

Opportunity Opportunity

K Development Development Local Local - Universities Community Council for for Council Council for for Council Workforce 12 Workforce Peninsula Peninsula colleges HREDA Talent education EDOs = contributor

Inc. Inc.

Port of Virginia of Port Port of Virginia of Port Port of Virginia of Port Infrastructure real estate & Local Local Local Local HRPDC HRPDC HREDA HRPDC VEDP

EDOs EDOs

Hampton Hampton Hampton Hampton Hampton Hampton Hampton Hampton Local Local Local Local Local Financing Chamber Reinvent Reinvent Reinvent VEDP EDOs EDOs EDOs Roads Roads Roads Roads

Delivering inward investment HREDA Role and Responsibilities

Corporate location decision process Action Responsibility Pro-active marketing activities putting 1. Define Project Assumptions and Hampton Roads consistently on Regional and Long-list of Location Options companies’ long list, working in Commonwealth collaboration with VEDP level

2. Analyze Long-list of Candidate Locations Identify Shortlist Coordination of marketing activities and investor development service, Regional level contact point 3. Evaluate Short-listed Locations Select Preferred Location

4. Site Search & Negotiations

Preparation of marketing activities Counties and and performing integrated investor local EDOs development services such as product 5. Implementation delivery and negotiation

26 Marketing strategy Suggested targets, Key Performance Indicators (KPIs) and resource allocation for pro-active sectors

Multi- Food Distribution Transport functional Software/IT Data Centers Processing Centers Technologies SSC Investment projects 2007- 21 20 16 71 27 1 2016* High - High - Level of ambition High Medium Medium Medium - Low Medium Medium Annual Targets 2018/19/20 4 / 600 4 / 200 2 / 200 8 / 400 4 / 500 1 / 50** (projects/total jobs) Fall back target 3 2 1 5 3 1 (projects) % of target 10% 10% 5% 20% 10% 2-3% projects

% of target jobs 20% 6-7% 6-7% 13% 16-17% 1-2%

% of resources 20% 10% 5% 10% 15% 5%

* Source: IBM-PLI Global Location Trends database, incl. both foreign and domestic investment projects ** Indicated targets for data centers should be effective as of the second year (2019) since pro-active marketing for this sector is a new recommended priority and will require some time to become effective

27 Note: all reference to years is to calendar years Marketing strategy Suggested targets, Key Performance Indicators (KPIs) and resource allocation for re-active and market driven sectors

Biotech R&D and Other (including market Production driven sectors)

Investment projects 2007-2016* 1 143

Level of ambition Low x

Annual Targets 2017/18/19 0 / 10 15-20/1000 (projects/total jobs) Fall back target 0 10 (projects)

% of target projects 0% 40%

% of target jobs 0% 30-35%

% of resources 0% 35%

* Source: IBM-PLI Global Location Trends database, incl. both foreign and domestic investment projects

Note: all reference to years is to calendar years 28 Priority areas for business environment improvement

The weaknesses in Hampton Roads’ competitive position can be grouped thematically by business environment area. The objective of the sensitivity analysis is to test the impact on Hampton Roads’ competitive position of improvement actions in each of these areas.

Business Key improvement needs environment area Talent - Limited pool of experienced and niche skills - High competition for skilled staff due to mismatch in supply and demand

Cluster - Small cluster presence and limited existing knowledge and research base in several segments - Limited knowledge sharing between universities, research institutes and commercial sector

Infrastructure - Relatively weaker road connectivity than other regional competitors - High road transportation costs and limited presence of road haulage service providers - Few international and domestic air connections - Limited commercial redundancy and use of renewable energy Real estate - Limited availability of suitable and shovel ready sites

Cost - High transportation costs - High real estate costs, notably for industrial sites - Higher utility costs than some leading competitors

29 Sensitivity analysis Shared services example

Baseline Skills

Multifunctional shared services Multifunctional shared services

Atlanta Atlanta Toronto Toronto 7.5 7.5 Philadelphia Philadelphia Hampton Roads Baltimore Charlotte Baltimore San Antonio Charlotte San Antonio Dublin Dublin

Nashville Hampton Roads 7.0 7.0 Research Triangle Research Triangle Nashville Greater Richmond ) Greater Richmond

Jacksonville 10 Jacksonville to 0 (0 (0 to 10) Roanoke/New ( Roanoke/New

6.5 River/Lynchburg 6.5 River/Lynchburg Qualitative score Qualitative Qualitative score Qualitative Lexington Lexington

Southside Southside Baton Rouge Baton Rouge Southwest Virginia Greater Southwest Virginia 6.0 Greater 6.0 Fredericksburg New Orleans Fredericksburg New Orleans Charleston Charleston

5.5 5.5 115 95 75 115 95 75

PV of Operating Costs PV of Operating Costs (index, average = 100) (index, average = 100)

30 Sensitivity analysis Overview of outcomes

Software Shared Food Transport Distribution Biotech Data center development services processing technologies center

Skills improvement Talent High High Low to moderate High High Low to moderate Moderate

Cluster development Cluster Moderate to high - Low to moderate - Moderate - Low

Innovation R&D Moderate - Low to moderate - Moderate - Low

Infrastructure Quality and connectivity - Moderate to high - High - High Moderate

Real estate Cost & availability Low Low Low Moderate Low to moderate Moderate Moderate

Access to raw materials Volume - - - High - - -

Transport - - - - - Moderate - Cost Utilities - - - Low - - Low to moderate

Job creation grant Low Low Low Moderate Low Low to moderate Low Incentives State corporate tax Low Low Moderate to high Moderate to high Moderate to high Low Low

Attractiveness Living environment - Moderate to high Low to moderate - - - -

31 Sector development approaches vary by sector

Sector development approach Sectors/segments

Inward investment driving growth together with local companies Software - Pro-active inward investment Shared Service Centers - Support local companies Food processing - Address improvement needs Distribution centers

Emerging opportunity for leveraging inward investment Data centers - Opportunity linked to new infrastructure improvements (cables) - Investment attraction required - Limited investment volume

Leverage existing anchor companies, attract strategic investment projects Transport technologies and extend sector -Support local companies and attract inward investment to meet supply chain needs of anchor companies - Leverage competences to extend into other segments of cluster Cluster based development Biotech -Grow local cluster and eco-system -Support local start-ups and SMEs - Limited short-term opportunities for inward investment

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Time

Action plan A. Talent

The action plan for talent sets out to create the right conditions for greater alignment between skills demand and supply and collaboration between relevant stakeholders. In addition, actions relate to concrete programs or initiatives that will enhance the skills provision.

Theme Actions

Collaboration and consultation • Sector-skills consultation and coordination with relevant business community representatives, education providers and policy makers. Identify skills needs, ascertain changes in skills requirements and facilitate skills alignment and program development. • Talent collaboration platform that takes stock of and continuously monitors all relevant talent actors and the education and training programs on offer. Skills provision • Transfer program and up-skilling for military personnel to target potential candidates in a timely manner and work with relevant skills providers for appropriate support and up-skilling • P-TECH to advance technical skills for young people who do not necessarily follow the university/college route.

Improved insight and alignment • Talent analytics to suppport education outcomes and better align skills supply and demand

Attract and retain • Attract and retain program to ensure skilled people stay. Make people aware of opportunities that exist and target Hampton Roads ‘diaspora’.

36 Action plan B. Infrastructure and logistics The action plan for infrastructure addresses immediate pain points that are affecting the operations of companies in Hampton Roads, as well as more strategic issues that will need to be addressed in the medium to longer term. Theme Actions

Freight logistics infrastructure, • Logistics services strategy to encourage greater collaboration and management of logistics services and costs requirements between actors and reduced freight costs • Attract logistcs services providers to create greater critical mass and scale • Freight Equalisation Program to subsidise transportation costs

Port development • Digital port and logistics platform to share information and facilitate collaboration • Living lab for port an logistics tech to encourage innovation, entrepreneurship and inward investment • Explore synergies with Greater Richmond to leverage joint capabilities and assets Improved accessibility • Invest in road infrastructure to improve access to key road networks • Norfolk airport expansion to enhance air access for freight and passengers • Improve intermodal connectivity and create better linkages between different modes of transport in order to improve transport offer

Energy supply • Greater commercial redundancy in utilities to ensure large energy consumers (e.g. data centers) have choice • Invest in renewable energy to provide green options for energy consumers (e.g. green data centers) and encourage growth of renewable energy sector Digital infrastructure • Invest in digital infrastructure to ensure future needs of data centers, manufacturing and services operations are met.

37 Action plan C. Sites and real estate

The action plan for sites and real estate is designed to ensure the availability of sufficient high quality and competitively priced shovel ready sites and office facilities.

Theme Actions

Awareness of current real estate • Improve real estate market transparency and highlight investment opportunities for availability developers

Shovel ready sites and office • Work with developers and planners to improve real estate offer in region, notably for SMEs facilities • Leverage VEDP site development fund and use this as a vehicle to create shovel ready sites • Improve zoning and development process to accelerate development • Connect current sites to required utilities and infrastructure

38 Action plan D. Cluster and innovation

The action plan for cluster development is designed to foster the growth of cluster networks and collaboration between relevant actors. The emphasis is on generating coordinated support for companies from different actors and relevant stakeholders, support the innovation and entrepreneurship activities and help companies based in Hampton Roads to grow. These efforts should also help attract entrepreneurs and start-ups to Hampton Roads. Theme Actions

Coordinated and aligned • Cluster coordination within industry sector partnerships including all relevant actors support • Innovation coordination within industry sector partnerships to explore collaborative research and innovation opportunities

Facilitate collaboration • Support cross-industry synergies to allow sectors to move up the value chain • Improved knowledge transfer between universities, research organizations and companies • Data exchange platform to leverage data for value creation Leverage strategic sites and • Port cluster development to develop logistics and manufacturing industries. Leverage assets anchor companies and identify supply chain linkages and gaps.

Support entrepreneurs, start- • Support local champions and SMEs through a dedicated enablement structure and ups and SMEs programs to facilitate collaboration, growth and internationalization • Scale accelerator and incubation programs with mentorship programs, business plan development etc. • Hackathons to encourage innovation • Crowdfunding list to encourage local funding of start-ups and SMEs

39 Military Employment in Hampton Roads

Employment Originally thought to be flattening, 2016 military employment estimates in Hampton Roads witnessed the largest decrease since 2013. 115,000 113,369

110,000 Recession

105,000

100,000

95,000

90,000 -1,779 from 2015 to 2016

85,000

2003 to 2016 - Hampton Roads has lost 29,280 (26%) of its uniformed military personnel 84,089 80,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

40 Source: U.S. Bureau of Economic Analysis Military Employment in Hampton Roads

Recession

3,000

2,000 1,833

1,174 1,000

86 109 -

(1,000) (751)

(1,333) (2,000) (1,886) (1,913) (1,779) (2,080)

(3,000) (3,192) (3,147) (3,598) 2016 represents the (4,000) (3,740) Largest Reduction Since 2013 (5,000)

(6,000) (6,056)

(7,000) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

41 Source: U.S. Bureau of Economic Analysis Real Private Industry GDP

Millions

$65,000 Growth in the total value of goods and services (GDP) produced within a metro area serves as a critical indicator of economic well-being. Raleigh

$63,000 Current estimates show metro areas with smaller population counts are outpacing the production of private industry goods and services compared to Hampton Roads. $61,000 Richmond

$59,000 Hampton Roads

$57,000

$55,000

Private industry in Hampton Roads $53,000 experienced a -1.8% contraction 2015 to 2016. $51,000 MSA Population Raleigh: 1.3 million $49,000 Richmond: 1.3 million Hampton Roads: 1.7 million $47,000 2008 2009 2010 2011 2012 2013 2014 2015 2016

42 Source: U.S. Bureau of Economic Analysis Total Payroll Employment – HR, VA, US

12-month % Change 2017 Regional Employment Growth: .18% 4.0 Regional Growth January 1, 2017 to January 1, 2018

3.0 Recession

2.0

1.0

0.0

-1.0 Largely mirroring the volatility of the Commonwealth, Hampton Roads has been experiencing an extended period of growth -2.0 below the national average.

Growth in the beginning of 2017 showed signs of an improving United States -3.0 labor market. However, decelerated growth in Q3 and Q4 Virginia eliminated previous advances. -4.0 Hampton Roads Growth March 1, 2017 to March 1, 2018 was 0.0% -5.0

-6.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

43 Source: U.S. Bureau of Labor Statistics Total Nonfarm Payroll Jobs Thousands Peak Employment: July 2007 790 Employment = 781,600

Recession

1,200 Jobs shy of pre-recession peak 780

770 Closing the Gap After over a decade, jobs within Hampton Roads should return to peak over the summer of 2018

760

750 Nonfarm civilian employment figures are considered the best estimate of labor market activity by the National

Bureau of Economic Research HRPDC 740

Hampton Roads

730 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

44 Source: U.S. Bureau of Labor Statistics - Data shown through March 2018 Road to Recovery – Comparative Job Growth Since Peak

Percent Above/Below Peak Employment

7.00 Monthly Job Growth from Pre-Recession Peak. 7.11 Hampton Roads, Virginia & United States

As of March 2018, Hampton Roads remains -.15% below it’s pre-recession peak 5.24

Post revision estimates show that in the summer of 2017 the region of Hampton Roads nearly maintained levels of peak employment. If similar patterns of growth continue, the region should return to 2.00 peak in Q2 2018.

-0.15

-3.00

United States Virginia Hampton Roads

-8.00 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101 105 109 113 117 121 125 129

Source: U.S. Bureau of Labor Statistics - Data shown through March 2018 45 Quarterly Job Growth

Indexed Growth

135.0

Nashville, 131.9 130.0 Data shown through Q1 2018, Seasonally Adjusted

125.0 Charlotte, 125.4 Raleigh, 124.9

120.0 Jacksonville, 120.1

115.0 Richmond, 112.9

110.0 Baltimore, 110.7 Virginia, 108.9

105.0 Hampton Roads, 104.9

100.0

95.0 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017

46 Source: U.S. Bureau of Labor Statistics Employment Momentum – Nonfarm Payroll 8.00 Improving Expanding

7.00 Greenville, SC

6.00

5.00 Raleigh, NC Virginia 4.00 Nashville, TN Month Moving Month Moving Average - Charleston, SC 3 Baltimore, MD Annualized Annualized Percent Change Jacksonville, FL 3.00

Hampton Roads Washington D.C. Charlotte, NC Improving short-term trends 2.00 with minimal growth over the 12-month period United States 1.00 Savannah, GA

Richmond, VA - (1.50) (0.50) 0.50 1.50 2.50 3.50 4.50 Contracting 12-Month Percent Change Slipping

47 Source: U.S. Bureau of Labor Statistics, March 2018 seasonally adjusted Indexed Job Growth Since the Recession

Indexed Growth 125 Locality, Cumulative Growth, CAGR Indexed Job Growth by Alliance Represented Communities [SERIES NAME], [VALUE], 2.32% 120 2009 = 100

Hampton Roads 115 Indexed Growth since 2009: 103.56 CAGR: .39% 110

[SERIES NAME], [VALUE], .75% 105 [SERIES NAME], [VALUE], .53% [SERIES NAME], [VALUE], .25% [SERIES NAME], [VALUE], .19% 100 [SERIES NAME], [VALUE], .11% [SERIES NAME], [VALUE], -.08% [SERIES NAME], [VALUE], -.48% 95 [SERIES NAME], [VALUE], .-.52% [SERIES NAME], [VALUE], -.96% 90

85

80 2009 2010 2011 2012 2013 2014 2015 2016 2017

48 Source: Economic Modeling Specialists International Q1 2018, Estimates derived from QCEW Employment across all 2-digit NAICS industries Extended Recovery from Job Loss

Size of Market Recession Average Duration to Recover Jobs Lost: 5 years

Baltimore : 4 years to recover 72,400 (5.48%)

Orlando : 7 years to recover 103,700 ( 9.54% )

Charlotte: 6 years to recover 91,900 (8.89%)

San Antonio: 3 years to recover 21,800 (2.53%)

Nashville: 4 years to recover 53,000 (6.61%)

Hampton Roads: 11 years to fully recover 47,800 jobs (6.12%)

Jacksonville: 7 years to recover 58,000 (9.15%) Forecasted Return Q2 2018 Richmond: 6 years to recover 38,700 (6.20%)

Raleigh: 4 years to recover 32,300 (6.14%)

Charleston: 4 years to recover 21,300 (6.99%)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

49 Peak Employment = Employment Low Passed Peak Employment Peak to Trough Employment by Represented Communities

Size of Market YTD 2018 Virginia Beach: Jobs Lost – 15,652 (8.8%)

Norfolk: Jobs Lost - 11,972 (8.2%)

Chesapeake: Jobs Lost - 5,466 (5.5%)

Newport News: Jobs Lost – 3,293 (3.3%)

1999 2037 Hampton: Jobs Lost – 7,223 (11.7%)

Portsmouth: Jobs Lost – 823 (1.9%)

Suffolk: Jobs Lost – 788 (3.1%)

Isle of Wight: Jobs Lost – 2,903 (23.1%)

Franklin/Southampton: Jobs Lost – 883 (10.3%)

Poquoson: Jobs Lost - 574 (26.2%)

= Peak Employment = Employment Low = Returned to Peak = Forecasted Return 50 Source: U.S. Bureau of Labor Statistics, Economic Modeling Specialists International Q1 2018, Estimates derived from QCEW Employment Migration by Metro Areas – 1 to 3 Million

Total Change 50,000 Hampton Roads Trails Similar Sized Metros in Migration In-Flow Net Migration includes both Domestic and International 40,000

30,000

20,000

Hampton Roads 10,000 (5,244) in Net Migration 2016-2017

-

(10,000) Austin Tucson Buffalo Denver Raleigh Orlando Portland Hartford Nashville Louisville Charlotte Memphis Las Vegas Cleveland Baltimore Cincinnati Columbus Rochester Richmond Pittsburgh Milwaukee Providence Kansas City Sacramento Santa Maria Santa Indianapolis Birmingham New Orleans Salt Lake City Grand Rapids San Francisco San Oklahoma City Oklahoma Jacksonville, FL Jacksonville, San Luis Obispo Hampton Roads

51 Population Growth - Hampton Roads

Components of the Regional Population Change

Population Growth = (Births – Deaths) + (Net Migration) Net Migration = International & Domestic both include uniformed military movements

Hampton Roads July 2016 - July 2017

Natural Increase in Population Growth Net Migration Births: 22,246 International: 3,505

Deaths: 14,484 Domestic: -8,749

Natural Increase Total: 7,762 Net Migration Total: -5,244

Total Population Change July 2016-July 2017: 2,480 or .14% Population Growth Source: U.S. Census Bureau, Analysis of the Virginia Beach-Norfolk-Newport News, VA-NC MSA

52 Alliance Represented Communities Population Growth: 2016 to 2017 Represented Community Growth Chesapeake 1.17% 2016 to 2017

Suffolk 1.06% Organic Growth Actual Growth Measured by Births-Deaths After Migration

Poquoson 0.89% .505% -.0102% 7,619 residents -154 residents Isle of Wight 0.63% 2016 to 2017 Population Growth by City/County Measured as a Percent Change from the Previous Year Virginia Beach -0.21%

Norfolk -0.34%

Portsmouth -0.45%

Hampton -0.49%

Newport News -0.55%

Franklin -0.63%

Southampton -1.49%

53 Source: U.S. Census Bureau, 2017 Annual Estimates of Resident Population & Estimates of the Components of Resident Population Change Indexed Growth Cumulative Population Growth since 2000 Locality, Cumulative Growth, CAGR

140 [SERIES NAME], [VALUE], 1.91% Indexed Population Growth by Alliance Represented Communities 2000 = 100

Total of Represented Communities 130 Indexed Growth since 2000: 106.23 CAGR: .34%

[SERIES NAME], [VALUE], 1.13% 120 [SERIES NAME], [VALUE], 1.02%

110 [SERIES NAME], [VALUE], .30% [SERIES NAME], [VALUE], .23% [SERIES NAME], [VALUE], .23%

100 [SERIES NAME], [VALUE], .08% [SERIES NAME], [VALUE], -.03%

[SERIES NAME], [VALUE], -.34% [SERIES NAME], [VALUE], -.47% 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

54 Population Composition and Change by Age Cohort Population Composition Population Change 2013 to 2017 2013 2017 100% 40,000 12.65% 14.17% 90% 30,165 11.81% 80% 12.61%

70% 20,000 17,326 13,332 26.06% 60% 24.55%

50% 0 15.10% 40% 15.61%

30% (13,026) (20,000) 20% (18,626) 34.38% 33.05% 10%

0% (40,000) Under 25 25 to 34 35 to 54 55 to 64 65+ Under 25 25 to 34 35 to 54 55 to 64 65+ 55 Comparative Trends– Civilian Labor Force

Indexed Comparative Trends – Commonwealth of Virginia Growth Though growth within Hampton Roads has been anemic, other metro areas within 112 the Commonwealth experienced Q4 declines in their civilian labor force estimates. Washington D.C. 111.2 Nevertheless, Hampton Roads lags significantly - Showing only 3.4% growth in 110 civilian labor force since Q2 2009.

Richmond 108.4 108

106 Virginia 104.7 104 Hampton Roads 103.4 102

100

98 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 56 Source: U.S. Bureau of Labor Statistics Comparative Trends– Civilian Labor Force

Indexed Growth Comparative Trends – Domestic Markets

130 While short-term trends reflect an improving labor market, the region of Hampton Roads continues its extended period of below trend growth when compared to other domestic markets. 125 Raleigh, 124.8 As it stands, competitive markets continue to outperform the Hampton Roads Charlotte, 121.9 region by attracting and growing their civilian labor force base to notable Nashville, 121.3 120 degrees since the end of the recession. Orlando, 120.5 Charleston, 119.0

115 Jacksonville, 113.7

110 Richmond, 108.4 Greenville, 107.5 Baltimore, 106.0 105 Virginia, 104.7 Hampton Roads, 103.4

100 Detroit, 99.3

95

90 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018

57 Source: U.S. Bureau of Labor Statistics METRO MONITOR 2018 DASHBOARD Virginia Beach-Norfolk-Newport News, VA -NC

Rankings out of the 100 largest metropolitan areas Selected Rankings 1st to 20th 21st to 40th 41st to 60th 61st to 80th 81st to 100th

Growth in the Virginia Beach metropolitan area, 2015–16

GROSS METROPOLITAN JOBS PRODUCT (GMP) JOBS AT YOUNG FIRMS 95th 88th 95th 90th OVERALL +0.6% -0.2% -1.1%

Prosperity change in the Virginia Beach metropolitan area, 2015–16

PRODUCTIVITY STANDARD OF LIVING AVERAGE ANNUAL WAGE 89th 86th 93rd 61st OVERALL -0.8% -0.4% +0.6%

Inclusion change in the Virginia Beach metropolitan area, 2011–16

MEDIAN WAGE RELATIVE POVERTY EMPLOYMENT RATE 93rd 79th 88th 81st OVERALL +0.0% +1.6% +2.9%

Read more: https://www.brookings.edu/research/metro-monitor-2018/