Arizona continues to claw its way up the list of the Pollina Corporate Top 10 Pro-Business States annual report. Tucson commercial real estate activity will benefit.

The 2012 ranking of business-friendly states showed that Arizona rose from 21st best state in which to do business in 2011 to the 17th.  Arizona raised its grade to a “B.”We at Commercial Real Estate Group of Tucson particularly like this report because it compares 32 factors that site selectors look at when considering Tucson commercial real estate for their corporations.

The report by the American Economic Development Institute and Pollina Corporate Real Estate Inc. also reflects 30 years of experience that Pollina has as a tenant representative.

Two sets of information are compared.

• Stage I covers labor, taxes and other factors that provide the environment in which businesses have to operate.
• Stage II examines incentives and economic development agency factors, efforts that help attract companies to locate in the state.

Arizona scored in the top 10 for Stage I, but not for Stage II. By improving Stage II efforts, the state can “substantially improve [its] ability to attract and retain high-quality and high-paying jobs,” according to the report.

Arizona’s Pro-Business Report Card

After at least four years with a “C” grade, Arizona improved to a “B” overall. Here’s the breakdown:

“A” Grade

• Right to work
• Unemployment insurance costs
• Business inventory tax
• Property tax
• State budget deficit

“B” Grade

• Workers compensation costs
• Individual tax index
• Comprehensive tax for mature firms
• Litigation environment
• Cost of electricity

“C” Grade

• College completion rate
• Corporate tax index
• Transportation infrastructure
• Marketing/website/response to new and existing employers

“D” Grade

• High school completion rate
• Average teachers compensation
• Unemployment rate
• Comprehensive tax for new firms
• Crime rate
• Economic development incentives

“F” Grade

• Sales and gross receipt tax rate

Arizona’s Business-Friendly Challenges

It looks to us that the state needs to figure out a way to fund important programs, including education, law enforcement and economic development. But it’s got to find money other than sales and gross receipt taxes to fund them.

It’s a balance that requires some hard political choices about how to spend the budget surplus, cut other programs and impose other taxes.

But if the right decisions are made, we can benefit with corporations strongly considering and picking Arizona commercial real estate for location, relocation or expansion. And that’s a big win for the job front.