What Does Commercial Real Estate Have to do with Economic Development?
In two words: A lot.
Economic development can be defined as efforts that seek to improve the economic well-being and quality of life for a community by creating and/or retaining jobs and supporting or growing incomes and the tax base.
Jobs, jobs, jobs — that’s what economic development is about. The topic hits home. During the recession, many of our neighbors, friends, and relatives went without employment. It’s well known well-paid, happily employed head of households are key to the health of the family unit.
The reality is when a business owner in a neighboring state starts thinking about relocating, he may get online to start researching incentives a particular state may have to offer, but usually one of the first things he/she does is get online or call a real estate broker to determine the costs of leasing or buying space, and how those real estate costs compare to his current location. Here’s a perfect example:
We have a 20,000-square-foot industrial building listed for sale or lease in Carson City. While this product type is hard to find, as we’ve discussed previously, and we’ve had quite a bit of interest, the most serious prospect we have to date are people from a furniture company out of Los Angeles. They have a common story: Not only have they been sick of being taxed to death by California, they were pleasantly surprised once they started digging into our operating costs for real estate. This particular building is listed for sale just under $800,000. This same building in Los Angeles would sell for more than $4 million. They are currently leasing but their lease term is due to expire, so it’s a perfect time to move. While the move would be costly, it would offer a massive cost savings in their real estate expenses and taxes, provide an opportunity to buy vs. lease, and offer a substantial cost savings in labor. Salaries for comparable labor are about half here for the skill set they seek, but are still good paying jobs in this area, and the move would offer the owners and any relocating employees an amazing improvement in their quality of life.
We work closely with the Northern Nevada Development Authority to help attract new companies here, and we have been for about seven years now. Prior to that, like many of you, we wondered about the mystery of economic development and what impact these organizations truly have on increasing jobs in a given community. We decided the only way to find out was to get directly involved.
What we have determined is job creation doesn’t happen in a silo. Many factors must be in alignment to attract a business here. While real estate is certainly important, and as commercial real estate professionals, we would argue it’s the most important, there are many other components companies take into account before relocating: available labor force, available tax incentives, and education (how to educate new employees and what education exists to train work force in the specific field). While a company may initially reach out to us as a result of its interest in real estate, we eventually need to address these other concerns, or we won’t get these companies over the finish line and relocated to our state. To provide knowledgeable answers about these other requirements, we rely on NNDA, and sometimes GOED, the Governor’s Office of Economic Development, at the state level.
I need these agencies to address the available tax incentives available. I need them to put us in touch with the right people to secure labor and discuss current wages, because we’re not HR experts. Often, I need assistance working with NDEP if the relocating company produces emissions or deals with hazardous materials. NNDA helps arrange meetings with the Governor or his staff for large companies, which provides a feeling of support and connectivity California just can’t offer. We also count on accountants to do apples-to-apples comparisons for these inquiring firms. We rely on attorneys, lenders, contractors, developers, and the county planning departments to also work as a team to answer all questions.
This cooperative approach produces results. In Carson City, since 2012, this NNDA team approach has assisted eight companies in opening here, creating 87 new jobs, with an economic impact of $73.7 million.
Here’s the even bigger picture: Since 2010, NNDA has assisted so many companies to relocate or expand to Carson, Lyon, Douglas, Washoe, Storey and Pershing counties that over 3,200 direct and indirect jobs have been created by assisting 67 companies to relocate and expand to the region, with an economic impact of $1,41 billion (that’s billion ... with a “b”).
Those are great numbers, which we are proud to have been a part of. We don’t quibble over to what degree, or who made the first contact ... in the end, does it really matter? The end goal is to create new jobs in the region, and working collaboratively, we are doing that.
Brad Bonkowski and Andie Wilson are Broker/Owners of NAI Alliance Carson City, a commercial real estate brokerage. They may be reached at 775-721-2980.