UPPER MIDWEST REGIONAL REVIEW
More Leaders
Than Lakes
Than Lakes
Twin Cities-based United Properties, named earlier this summer as the 2004 Developer of the Year by the National Association of Industrial and Office Properties (NAIOP), reported that the first half of 2004 saw the least amount of new commercial construction in a decade, and the least new office construction since 1996.
Yet a late 2003 survey by the Minnesota Department of Employment and Economic Development (DEED), the Center for Rural Policy and Development and Minnesota Technology found that the majority of more than 160 Twin Cities manufacturing and technology companies were "very likely" or "somewhat likely" to make new investments in 2004 in employment (88 percent), capital equipment (86 percent) and/or new or expanded facilities (32 percent). Most respondents characterized the skills base and labor costs outside the Twin Cities as good or excellent. But half of them said the Twin Cities would be their most likely location for new production investment, and an overwhelming 83 percent said the Twin Cities would be their first choice for R&D expansion.
Backing up an August 2003 study by the Federal Reserve that found 74 percent of businesses citing work force quality as their top location criteria, the DEED survey found that skilled labor availability was the most important location criteria, followed by labor cost and overall tax rates. Only 18 percent called those tax rates "good" or "excellent." DEED Commissioner Matt Kramer said the state's Job Opportunity Building Zones (JOBZ) program was the tool needed to address this last challenge.
"Tax rates are an incentive -- not a deterrent -- for companies locating or expanding in a JOBZ zone," he said of the tax-free zones in March 2004. Businesses locating in them can earn exemptions from state and local taxes for up to 12 years, whereas many such zones across the U.S. typically cut off at 10 years.
The most telling finding? While nearly half of firms with operations outside the Twin Cities said they would be more likely to expand there because of JOBZ, nearly half of all respondents had never heard of JOBZ.
Nevertheless, reports DEED, in the first six months of the 10-zone program (through June 2004), 40 projects worth $52.4 million were wrapped up in 29 communities, creating 720 new jobs. In total, some 28,902 acres (11,700 hectares) make up the zones, covering nearly every territory beyond the Twin Cities metro area.
There is also a clear preference in the area for high-tech and R&D over manufacturing, as industrial companies discover when they go looking for zoned land.
"Some cities that historically welcomed industrial development now want higher-finish, higher-image commercial development, forcing industrial developers to look elsewhere," wrote Jason Meyer, vice president, United Properties Industrial Brokerage, in the company's July 2004 report. "Industrial developers are also finding themselves competing with housing developers who are moving further and further out and acquiring land once designated for industrial. And they're willing to pay twice as much for the land."
However, the report did point out that the medical device/biotech sector is expected to continue to grow. That trend is evident in the ongoing Twin Cities hubbub over an alleged site search by Medtronic, as well as a more concrete move out west. Agricultural holding group Prairie Holdings Group is turning a newly purchased 31-acre (12.5-hectare) property in Worthington into a 21,000-sq-ft. (1,951-sq.-m.), 50-employee headquarters, as well as encouraging the transformation of more surrounding acreage into a bioscience park. Located in a JOBZ zone, the property in 2005 will be home to the new Center for Information and Training of Lab Technicians being constructed by Minnesota West Community and Technical College.
The high-end high-skilled development might even extend to far northeastern Minnesota, where the University of Minnesota is proposing the construction of a $40-million physics research station north of Orr, part of a proposed $200-million program to study neutrinos.
But the real high-end momentum is in the Twin Cities. That's why the Minnesota state legislature approved $20 million in tax-increment financing for New Brighton, Medtronic's headquarters, to pave the way for the anticipated expansion. And it's why, with headquarters of 19 Fortune 500 companies, the state is second only to Connecticut in Fortune 500 HQs per capita.
Yet a late 2003 survey by the Minnesota Department of Employment and Economic Development (DEED), the Center for Rural Policy and Development and Minnesota Technology found that the majority of more than 160 Twin Cities manufacturing and technology companies were "very likely" or "somewhat likely" to make new investments in 2004 in employment (88 percent), capital equipment (86 percent) and/or new or expanded facilities (32 percent). Most respondents characterized the skills base and labor costs outside the Twin Cities as good or excellent. But half of them said the Twin Cities would be their most likely location for new production investment, and an overwhelming 83 percent said the Twin Cities would be their first choice for R&D expansion.
Backing up an August 2003 study by the Federal Reserve that found 74 percent of businesses citing work force quality as their top location criteria, the DEED survey found that skilled labor availability was the most important location criteria, followed by labor cost and overall tax rates. Only 18 percent called those tax rates "good" or "excellent." DEED Commissioner Matt Kramer said the state's Job Opportunity Building Zones (JOBZ) program was the tool needed to address this last challenge.
"Tax rates are an incentive -- not a deterrent -- for companies locating or expanding in a JOBZ zone," he said of the tax-free zones in March 2004. Businesses locating in them can earn exemptions from state and local taxes for up to 12 years, whereas many such zones across the U.S. typically cut off at 10 years.
The most telling finding? While nearly half of firms with operations outside the Twin Cities said they would be more likely to expand there because of JOBZ, nearly half of all respondents had never heard of JOBZ.
Nevertheless, reports DEED, in the first six months of the 10-zone program (through June 2004), 40 projects worth $52.4 million were wrapped up in 29 communities, creating 720 new jobs. In total, some 28,902 acres (11,700 hectares) make up the zones, covering nearly every territory beyond the Twin Cities metro area.
There is also a clear preference in the area for high-tech and R&D over manufacturing, as industrial companies discover when they go looking for zoned land.
"Some cities that historically welcomed industrial development now want higher-finish, higher-image commercial development, forcing industrial developers to look elsewhere," wrote Jason Meyer, vice president, United Properties Industrial Brokerage, in the company's July 2004 report. "Industrial developers are also finding themselves competing with housing developers who are moving further and further out and acquiring land once designated for industrial. And they're willing to pay twice as much for the land."
However, the report did point out that the medical device/biotech sector is expected to continue to grow. That trend is evident in the ongoing Twin Cities hubbub over an alleged site search by Medtronic, as well as a more concrete move out west. Agricultural holding group Prairie Holdings Group is turning a newly purchased 31-acre (12.5-hectare) property in Worthington into a 21,000-sq-ft. (1,951-sq.-m.), 50-employee headquarters, as well as encouraging the transformation of more surrounding acreage into a bioscience park. Located in a JOBZ zone, the property in 2005 will be home to the new Center for Information and Training of Lab Technicians being constructed by Minnesota West Community and Technical College.
The high-end high-skilled development might even extend to far northeastern Minnesota, where the University of Minnesota is proposing the construction of a $40-million physics research station north of Orr, part of a proposed $200-million program to study neutrinos.
But the real high-end momentum is in the Twin Cities. That's why the Minnesota state legislature approved $20 million in tax-increment financing for New Brighton, Medtronic's headquarters, to pave the way for the anticipated expansion. And it's why, with headquarters of 19 Fortune 500 companies, the state is second only to Connecticut in Fortune 500 HQs per capita.
