It may be easy to cut taxes, but new and expanding companies looking for Arizona and Tucson commercial real estate want a lot more.
There’s a report out of the Economic Development Corporation of Utah that we hope gets into the hands of the Arizona Commerce Authority.
We at Commercial Real Estate Group of Tucson think the report shows that much work needs to be done to get site selectors to consider Arizona and Tucson commercial real estate.
The 50×50 report demonstrates a new EDCUtah tool that helps site selectors see how states stack up to specific needs for relocating, expanding or opening businesses.
It takes a look at 50 metrics that 138 site selectors said were the most important to them. The 2016 report weighs four categories to come up with a composite score.
Arizona scored in 24th place, a typical spot in most state rankings that we take a look at. We also weren’t surprised that Arizona ranked high, sixth, in Arizona taxes that affect businesses with commercial property.
Arizona’s rankings for economic factors (28th), labor costs (30th) and operational costs (30th) were lower than usual, but not drastically so.
Most of Arizona’s rankings in the region were low, too. Among 12 western continental states, Arizona is ninth overall, while 10th in economic factors, eighth in labor costs and seventh in operational costs. Taxes again was the bright spot at second.
What’s Most Important to Site Selectors
We are most concerned about how low rankings in individual categories drag down the state’s overall position. That’s because economic factors and labor costs are weighed more heavily than the one area where Arizona does well.
Economic factors such as labor, cost of living and education carry the most weight, 50%, of the four categories.
Labor costs—annual median wages and industry wages—are weighed at 25% of the overall score. Operational costs such as real estate, utilities and health insurance contributions are weighted at 12.5%, the same as the weight for taxes.
That tells us that in this report, site selectors for Arizona commercial property, including Tucson commercial real estate, consider economic factors more important than taxes. And Arizona has far to go to improve education, job growth and wage growth.
Why These Metrics Matter
The report does a good job explaining why these metrics are important.
Economic factors. Success indicates a climate of steady economic growth. An educated workforce and low unemployment rate provide the workers that companies need to expand.
Labor costs. There’s a balance that must be struck: low labor costs to companies vs. higher incomes to attract talent.
Operational costs. Less costly is better for companies.
Taxes. Here’s another place where companies can reduce costs. This category does not include tax incentives that states give to companies to attract them to locate within their boundaries. It also doesn’t include local tax incentives such as those available for Tucson commercial real estate transactions.
We think state leaders must do better on economic factors and labor costs. It’s hard work, but the pay-off will be more serious consideration from corporations that need office and industrial commercial property for their own success.
Commercial Real Estate Group of Tucson has its own methods and tools to help you compare the benefits that states can provide for your business relocation, expansion or launch. Contact CREG Tucson for a free consultation.