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Lexington’s Target Industries

Boasting a robust economy, the Bluegrass is a diversified growth engine for economic success. There are several key industries that are particularly significant to Lexington’s economy and are strategic targets for economic development.

Advanced Manufacturing

Advanced manufacturing uses innovation and technology to improve the manufacturing process, typically through computer technology, advanced robotics, clean technology, automation, innovation, precision control, customization, and waste reduction. The Bluegrass Region has a strong advanced manufacturing sector, particularly in the automotive industry, biotechnology products, and renewable energy machinery. The region’s strong transportation network allows for the easy import of component supplies and the export and distribution of finished products. To support this sector, Lexington strives to help advanced manufacturing  companies expand research and development activities and enhance product lines, and there are many educational programs in place to continue building a workforce to fuel the manufacturing industry for years to come.

Animal Sciences

Animal sciences involves the production and management of livestock and domestic animals. Animal scientists use biological, physical, and social sciences to understand and study animals’ physiology, behavior, welfare, nutrition, genetics, and diseases. The equine industry is an important part of animal sciences, particularly in Lexington. Horses are a major part of Lexington’s economy and are at the heart of our local culture, with an estimated 150 horse farms in Lexington and 450 in the region. Lexington and the Bluegrass Region have a strong infrastructure to support the horse industry, including horse farms, race tracks, the Kentucky Horse Parks, museums, equestrian events, equine medical facilities, and research and development at the University of Kentucky.

Bluegrass Economic Advancement Movement/Foreign Direct Investment 

The Bluegrass Economic Advancement Movement (BEAM) is a regional initiative in the 22-county region anchored by Lexington and Louisville. Recognizing the importance of foreign direct investment (FDI) for innovation, research, exports production, and high-wage jobs, the BEAM Trade and Investment Plan was developed in collaboration with the Brookings Global Cities program to examine FDI in the BEAM Region and proposes the way forward for metropolitan cultivation of FDI that helps build a resilient and growing regional economy. Lexington and the Bluegrass Region have a strong presence of foreign direct investment that makes important contributions to our economy. The Bluegrass Region is home to 21% of all foreign-owned facilities in Kentucky and 23% of the workforce – that’s 99 facilities with ownership from 18 different countries providing full-time employment to over 23,900 people (as of April 2017). In fact, Lexington recently ranked 7th Best City for Attracting Foreign Investment by fDi Intelligence.

Business and Professional Services

Lexington is a regional hub for business and professional services, which help companies operate by providing services and support such as legal, architectural, engineering, consulting, and real estate services, as well as back-office support operations, accounting and payroll services, and processing facilities. Companies engaged in providing professional services tend to concentrate in metropolitan areas near their clients, while back-office and support services companies prefer lower-cost locations. Lexington is idea for both, with 100 headquarters operations and one of the lowest cost-of-business locations in the country. In fact, Lexington was named #8 City with the Lowest Startup Costs by Smart Assets in 2016 and #16 Best Place for Business and Careers by Forbes in 2015.

Clean Technology 

Clean tech uses technologies, processes, or services to minimize the environmental impact of production, energy consumption, and power generation. Renewable energy and energy efficiency are core to clean tech. Clean tech is an emerging industry in Lexington and there are many regional assets to help propel the industry forward. Of particular importance are the growing number of biotechnology firms in the area and the high concentration of life sciences research being conducted at the University of Kentucky. Many partners work alongside UK’s research and development of clean and renewable energy sources. The Center for Applied Creative Research (CAER) is a multidisciplinary energy technology research center to improve the environment, featuring multiple specialized research facilities.

Life Sciences 

In the Bluegrass Region and Kentucky, Lexington is a hub for the life sciences industry. Lexington has leveraged top ranked research programs at the University of Kentucky, a culture of innovation and commercialization, a superior business climate, and an expansive network of medical centers to provide an environment where any market niche of the life sciences industry can grow.  The life sciences industry has two components: direct patient care and biotechnology. Direct patient care includes hospitals, nursing facilities, and medical centers, and is a prominent market in Lexington with a strong base of health care facilities, employers, resources, and several major medical centers. Biotechnology includes animal and plant science research and designing and manufacturing medical/veterinary products. Biotechnology is one of the fastest growing industries in the country, and over 50 biotech companies have chosen to locate in Lexington.

Software and Information Technology

Lexington has a unique business mix of software and information technology industry leaders, world-class small businesses, and social networking and interactive media startups. With such diverse businesses in the industry, Lexington is an ideal location for software and IT businesses. Software leaders include IBM branch offices, Funai Electric Company, Conduent, and Software Quality Systems (SQS). Lexington’s local startups are making a name for themselves in the world of social networking and game development, such as Frogdice Inc., an independent game developer of online role playing games and virtual worlds, and Gun Media, another Lexington-based gaming company whose goal is to build fresh and exciting interactive experiences for a wide range of platforms and gamers.

Visitor Industries 

Visitor industries includes the sale of goods and the accommodation, entertainment, and recreational opportunities available for tourists, visitors, and residents, including businesses such as retail trade, travel arrangements, convention and trade shows, performing arts, spectator sports, museums, and food services. Lexington is a great place for business and leisure. Lexington is at the heart of the horse industry, the start of the Bourbon Trail, and the home of the University of Kentucky. Visitors are drawn to Lexington for events and conferences at the Lexington Convention Center, which contains Rupp Arena and the Lexington Opera House. In addition, Lexington has attracted visitors through both national and international events such as the Creative Cities Summit, the Alltech World Equestrian Games, and the 2015 Breeders’ Cup World Championship. To help strengthen and grow Lexington’s visitor industries, Commerce Lexington Inc. and VisitLEX’s teams have embarked upon a more formal partnership to develop strategies to recruit associations and business meetings to the area. Our teams meet quarterly to discuss various topics including infrastructure, marketing strategies, client feedback, incentives, and other items, as well as review our strategic plan.

 

Lexington’s Bourbon Industry

For more than 200 years, Kentucky’s legendary distilleries have crafted the world’s finest bourbons and Lexington is at the heart of the Bourbon Trail. In fact, whiskies are Kentucky’s 9th largest export at $295 million in 2016. To understand the economic significance of the bourbon industry, the Urban Studies Institute at the University of Louisville recently released a report titled “The Economic and Fiscal Impacts of the Distilling Industry in Kentucky” for the Kentucky Distillers’ Association.

The report estimates that about one third of the nation’s bourbon industry employment, payroll, and production workers are located in Kentucky. There are around 4,300 direct jobs in the bourbon industry at distillery production sites and corporate offices, and another 15,000 to 17,500 jobs supported by the bourbon industry with nearly $800 million in payroll.

Employment and average annual wages have increased nearly every year since 2001. In fact, the average annual wage has nearly doubled, rising from $53,000 in 2001 to over $95,000 in 2015 (most recent year for which data is available).

There are more than 50 distilleries in Kentucky, a threefold increase since the Urban Institute’s 2009 study on the bourbon industry. This is largely due to the increasing presence of craft distilleries. In fact, the Craft Spirits Data Project estimates that there are 35 craft distilleries in Kentucky (as of August 2016). Last year, distilling production and consumption contributed $190 million in tax revenue to Kentucky state and local governments.

Lexington is at the heart of Kentucky’s bourbon industry. There are 11 distilleries located in the Bluegrass Region, including Alltech’s Lexington Brewing and Distilling Company in Lexington, Buffalo Trace and Castle & Key in Frankfort, and Woodford Reserve in Versailles, with the James E. Pepper brand of the Georgetown Trading Co. opening soon in the Distillery District near downtown Lexington.

The Kentucky Distillers’ Association conducted a survey of its members and found that capital projects from 2010 to 2015 totaled $485 million and anticipated capital projects for 2016 to 2021 are around $620 million. These investments provide tax revenue for state and local jurisdictions and indicate a strong future for the bourbon industry in Kentucky.

To support the growing bourbon industry, the University of Kentucky has begun offering courses in Distillation, Wine, and Brewing Studies within the College of Agriculture, Food, and Environment. These courses will help provide a local workforce, continued research, and innovation to help the uniquely Kentucky bourbon industry thrive. Furthermore, there are more than 70 wineries in Kentucky and the number of craft breweries and cideries are increasing every year.

Economic Contributions of Toyota

Last month, Toyota Motor Manufacturing Kentucky, Inc. (TMMK) announced a $1.33 billion investment in its Georgetown operations to increase manufacturing flexibility and decrease model changeover times. The investment will improve equipment and add new technology in multiple manufacturing areas to prepare TMMK for the Toyota New Global Architecture (TNGA), a global vehicle platform for multiple configurations and powertrains. TNGA is a new way of designing, engineering, and manufacturing vehicles that will create a flexible production environment allowing quick response to demand while preserving Toyota’s values of exceptional quality and safety. Furthermore, TMMK will be the first vehicle assembly facility in North America to adopt TNGA.

Toyota Motor Manufacturing Kentucky, Inc. (TMMK) in Georgetown, KY, is Toyota’s largest manufacturing plant in the world, producing 550,000 vehicles and 600,000 engines annually at its 1,300-acre campus featuring over 8.1 million square feet of work space. TMMK produces four cylinder and V-6 engines, Camry, Avalon, Camry Hybrid, Avalon Hybrid, and the first U.S.-assembled Lexus.

In fact, Toyota produced more than 2 million vehicles in North America in 2016, and nearly one-fourth were made in Georgetown. Looking back even further, Toyota has produced more than 30 million vehicles since 1986 in North America, and one-third were made in Georgetown.

Additionally, there are over 100 parts and commodities suppliers for Toyota located in Kentucky, and a total of more than 350 suppliers in the U.S.

The Kentucky Cabinet for Economic Development estimates that there are over 9,500 people employed by Toyota across the state (as of May 8, 2017), excluding Erlanger. Toyota plans to close its operations at the Erlanger Engineering Laboratory Building, which it will then donate to Boone County Schools for a STEAM-focused education center, the Ignite Institute – an innovative, tuition-free school for students grades 9-12 with a focus on biomedical sciences, advanced manufacturing, pre-engineering, logistics/IT/coding, and building trades, with the opportunity to earn an associate’s degree.

Toyota’s involvement in the Bluegrass Region goes beyond employment and dollars invested in infrastructure. Several years ago, Toyota created the Advanced Manufacturing Technician (AMT) Program in collaboration with the Bluegrass Community & Technical College to craft a homegrown workforce with soft skills as well as technical knowledge. Today, the program has grown into a new,  $24 million, 78,000 square foot Advanced Manufacturing Center in Georgetown, KY, with over 60 students enrolled in the most recent semester. Through an apprenticeship-based curriculum, the AMT program combines learning with hands-on experience in an immersive environment. Students learn the knowledge and skills required to be advanced manufacturing technicians and apply those concepts while working part-time for actual manufacturers in the region, such as Toyota.

According to a study by the Center for Automotive Research, Toyota has operations in 19 states around the country and that 70 percent of Toyota vehicles sold in the United States were also built in the United States. Toyota employs over 135,900 people in manufacturing, supporting operations, and dealerships, with another 108,400 intermediate jobs that supply Toyota and 225,800 induced jobs created by the spending of these direct and indirect employees. This brings Toyota’s total American employment impact to 470,000 jobs.

Want to learn more about advanced manufacturing in Lexington and the Bluegrass Region? Click here!

 

Foreign Direct Investment in the Bluegrass Region

Following our recent ranking as #7 Top Small American City of the Future 2017/18 for FDI Strategy by fDi Intelligence (read more here) let’s look at the presence of foreign direct investment in the Bluegrass Region.

According to the Cabinet for Economic Development, there are over 480 foreign-owned facilities in Kentucky employing nearly 106,000 Kentuckians. The eight counties of the Bluegrass Region are home to 21% of the FDI facilities in Kentucky and 23% of the employees – that’s 99 facilities with ownership from 18 different countries providing full time employment to over 23,900 people (as of April 4, 2017).

In Lexington, there are 34 facilities with ownership from 14 countries, employing nearly 6,600 people full time. China is the largest FDI employer with 2,128 jobs (or 33% of Lexington’s FDI employment), followed by Japan with 1,210 jobs (or 18%).

In the Bluegrass Region, Japan is the largest FDI employer, with nearly 16,000 employees, or 67% of the FDI workforce and 60% of the foreign-owned facilities. Not surprisingly, 60% of the Japanese FDI workforce is in Scott County, followed by 14% in Madison County.

Germany is the second largest employer, with nearly 2,500 employees (10% of the FDI workforce), 95% of which work in Fayette, Franklin, and Woodford County.

Half of the foreign-owned facilities are located in Fayette (34%) and Scott County (18%). Around 41% of the FDI workforce is in Scott County alone, with 27% in Fayette County, 11% in Madison County, 8% in Franklin County, and the rest spread throughout Bourbon, Clark, Jessamine, and Woodford County.

The majority of foreign-owned facilities employ less than 100 people (54%) and a just over one third employ less than 50 people (38%) and around one third employ between 100 and 500 people (37%). However, several Japanese-owned facilities are major employers in our region, including around 8,200 employees at three Toyota facilities in Scott County and 1,449 employees at two Hitachi facilities in Madison County.

Check back next week for highlights from the Center for Automotive Research’s report on the economic impact of Toyota in Kentucky. 

Want to learn more about foreign direct investment in the Bluegrass Region? Check out the Bluegrass Economic Advancement Movement (BEAM) Global Trade and Investment Plan.