Apple plans to expand into North Carolina — Here are the details
While vast portions of the global economy shut down during the pandemic, one area went into overdrive: corporate expansion and relocation planning, and economic development.
Many companies reasoned that the pandemic would fundamentally change the nature of the workplace. Many states saw a once-in-a-lifetime opportunity to attract new businesses, even as they worked to keep their existing employers afloat.
No company has been more aggressive about stepping up its expansion plans than Apple, which announced in April that it would spend $430 billion to expand its facilities in the U.S., a 20% increase over the already aggressive $350 billion expansion announced in 2019 before the pandemic.
“At this moment of recovery and rebuilding, Apple is doubling down on our commitment to U.S. innovation and manufacturing with a generational investment reaching communities across all 50 states,” said Apple CEO Tim Cook in a statement on April 26.
The crown jewel of the plan is a $1 billion engineering hub in the famed Research Triangle region outside Raleigh, North Carolina, employing 3,000 people in cutting-edge fields like machine learning, artificial intelligence, and software engineering.
It is the Cupertino, California-based company’s first corporate campus on the East Coast, and one of the first big state economic development wins since the worst of the pandemic. The effort it took for North Carolina to attract Apple is a window into how the competitive landscape among the states has changed as a result of the pandemic and social upheaval.
“Our approach has definitely been impacted and influenced by the pandemic, like everything else in our world,” said North Carolina Commerce Secretary Machelle Baker Sanders.
Sanders took office in February, so she was not involved in the negotiations with Apple, which began in 2018. But she said the deal reflects the changing priorities of companies, entrepreneurs, and employees.
“We’re seeing people, I believe, as a result of the pandemic, really look at what matters most to them; really look at where is it that you would want to be located? Where is it you would want to have your company grow and blossom? Where is it that you can go and be celebrated for the differences you bring?” she said.
A checkered history on inclusiveness
On diversity, equity and inclusion, North Carolina’s record is spotty.
The state’s so-called “bathroom bill,” the Public Facilities Privacy and Security Act known as HB2, nullified a local ordinance in Charlotte that allowed transgender people to use the bathroom of their choice. Passed in 2016, the law also struck down all other local anti-discrimination ordinances and barred municipalities from enacting laws stricter than the state’s statutes.
The law drew widespread criticism, including from business groups. The NBA pulled its 2017 All-Star Game from Charlotte, and the NCAA and Atlantic Coast Conference pulled tournaments from the state as well.
In 2017, the legislature rewrote the law, removing the bathroom provisions but keeping the ban on local ordinances. That provision expired in December.
Sources close to the negotiations with Apple confirm that diversity, equity and inclusion were a part of the talks on the North Carolina expansion, though it does not appear that the company laid out specific conditions before finalizing the deal.
“There’s no question that Apple believes strongly in equity and inclusion, and doesn’t want to see those types of bills,” said Gov. Roy Cooper in a news conference announcing the project on April 26.
Apple declined to comment on the North Carolina expansion, beyond its April statement.
Cooper, a Democrat, noted that Apple previously passed on a project on the same site in 2018, deciding instead to put it in Austin, Texas.
“People surmise that maybe it was because of diversity and inclusion issues and HB2 hangover. I don’t know for sure,” he said.
The executive director of the Research Triangle Partnership, an economic development organization that was not involved in the Apple deal but did help land a Google engineering hub in Durham with 1,000 jobs announced in March, believes the fallout from HB2 was a wakeup call in the state.
“I think we learned our lesson as a state with that legislation,” said Ryan Combs. “I think we know what’s important. It’s being a business-friendly state where everybody feels like they can get ahead. I think we’ve taken notice of that, and we’ve gone forward.”
But North Carolina remains one of only five states with no public accommodation law protecting non-disabled residents from discrimination, according to the National Conference of State Legislatures.
Apple tax incentives
Also an important part of the post-pandemic landscape are incentives.
While some states are de-emphasizing subsidies in their economic development efforts, states are nonetheless still touting incentives and cost reduction efforts in a big way. For North Carolina, fighting that battle required establishing a more robust incentive regime than it had in the past.
“I think in the past, North Carolina may have missed out on some of these (companies) because we didn’t have one,” Cooper said.
Apple will be able to collect some $845 million in tax breaks over 39 years in North Carolina if it meets its hiring commitments. It is the largest incentive package in state history, worth nearly $300,000 per job. But officials say the economic impact of the project — which they claim will be $1.5 billion — is worth it. In addition, Apple will contribute $110 million toward infrastructure improvements statewide, and $100 million for education.
But sources close to the negotiations say the clinchers for North Carolina involved the workforce — the state has seen the fourth-largest influx of educated workers according to U.S. Census Bureau data analyzed by CNBC — as well as the fact that the state has among the most higher education institutions of any state, as well as a highly-rated quality of life.
Apple and work after Covid
Sources also say that Apple has not changed its overall plans for the one-million-square-foot facility. Unlike many tech companies, Apple is not expanding its remote work options in a big way.
A potential surge of employees moving to the region from out of state is putting additional stress on the area’s housing market, which saw the median sales price rise 19.8% in May, according to Triangle MLS Multiple Listing Services.
Ashley Rummage of the Evergreen House Real Estate Co. said that almost immediately after the announcement, she began fielding calls and text messages from existing customers, and she is also already hearing from Apple employees who are preparing to move to the area even before the company has broken ground on the project.
“The housing market is hot and not showing any signs of slowing down in the Raleigh area,” she said. “And when Apple released the news that they were coming here, I think every realtor across the Triangle braced themselves for impact.”
