As the office markets in Westchester and Fairfield counties begin to show some much needed improvement, economic development in both regions are in a state of flux.
Westchester is being marketed as a center for biotech and information technology by county, regional economic development and business groups. Meanwhile, business attraction and retention efforts being waged by New York state are in transition as newly elected Gov. Andrew Cuomo looks to establish Regional Economic Development Councils across the state, including one for the Hudson Valley region.
In Connecticut, Gov. Dannel P. Malloy”™s First Five program that would offer multimillion-dollar grants and tax credits to the first five businesses that bring a minimum of 200 new full-time jobs to the Nutmeg State is awaiting approval from the General Assembly.
Both Westchester and Fairfield counties have experienced mixed results so far in 2011 with some notable lease deals and some significant corporate space givebacks. Guggenheim Capital Markets L.L.C. of New York City signed a long-term lease and is expected to begin operations this July in its new 31,142-square-foot offices at 4 Manhattanville Road in Purchase.
However, it appears that Bayer Healthcare”™s Diabetes Care Division in Tarrytown will likely be affected by a major consolidation program. Bayer officials joined New Jersey Gov. Chris Christie on April 4 to announce that the company had selected an as yet unspecified site as the home of its consolidated East Coast business operations. Rosemarie Yancosek, head of U.S. Communications for Bayer Healthcare Pharmaceuticals, while stopping short of saying the company will eventually shutter its Tarrytown locations on Benedict Avenue and White Plains Road, said that the company will be consolidating existing offices in Tarrytown, Morristown, N.J., Montville, N.J. and Wayne, N.J., to one location near the three current New Jersey locations. A decision on a new office site is expected in the next few months. The first moves are projected in late 2011 with the consolidation program completed by the end of 2013. The company employs 2,500 workers in New York and New Jersey.
Tax breaks in play
In Fairfield County, after convincing Starwood Hotels & Resorts Worldwide to move its corporate headquarters from White Plains to Stamford thanks to a generous incentive package worth nearly $90 million in late 2009, Connecticut lost in its bid to lure Pepsi Beverages across the border earlier this year. Pepsi announced in March it was staying and expanding in Somers, N.Y., due to a combination of state and local incentives.
According to CB Richard Ellis, the most significant lease in Fairfield County in the first quarter of this year was Beiersdorf Inc., which secured 46,125 square feet of space at 45 Danbury Road in Wilton. However, leasing activity was down almost 43 percent in the first three months of this year. In addition, the market which now boasts an office availability rate of 20.4 percent, according to CB Richard Ellis, saw a number of corporate downsizing programs from McMahon Securities, Allianz, Paloma Partners and the largest totaling nearly 34,000 square feet at 1 American Lane in Greenwich by CitationShares.
Laurence Gottlieb, director of economic development for Westchester County, said that the depressed real estate market has prompted corporations to rethink possible relocation plans and instead look to negotiate better lease deals with their current landlords.
He cited the examples of Pepsi, Heineken USA and Dannon, which all decided to remain in Westchester and expand their operations rather than relocate.
He added that the high price tag involved with a corporate relocation is now further exacerbated by the rising cost of gasoline, which has the potential to adversely impact a corporation”™s workforce if it decided to shift operations elsewhere.
New York reinvents
Westchester County business leaders in the region are awaiting the details of the planned 10 Regional Economic Development Councils that are being established by Lt. Gov. Robert Duffy. The state plans to provide more than $130 million for competitively determined economic development projects put forward by the regional councils.
He said that while some may be impatient over the lack of details concerning the councils, Gottlieb said, “We respectfully should give the governor the breathing room he needs to establish these councils, get them going and have people put together good projects that should be funded.”
Gottlieb added that the regional NY BioHud Valley initiative puts the Hudson Valley region a year ahead of competing regions in the state for funding.
Al Samuels, president and CEO of the Rockland Business Association, while a strong supporter of Cuomo”™s budget and reform initiatives, is concerned that the regional councils may add another layer of bureaucracy when a region is looking for assistance in terms of a business relocation, expansion or retention project.
“I see the potential for a cumbersome process,” he said. “I also see a situation where time becomes a bigger issue than it is now. ”¦ We are (possibly) creating a process that I think will take a considerable amount of time.”
He said that right now there are many unanswered questions as to how these regional councils would operate.
In terms of Westchester”™s competitiveness, Gottlieb said that the recently enacted state budget that closed a $10-billion deficit with no new taxes, could be seen as a precursor to further state operational reforms. On the other hand, Connecticut continues to wrestle with its budget. Malloy and Democratic lawmakers recently agreed on a $40.2-billion two-year spending plan that includes well in excess of $1 billion in various tax increases.
“What you are hearing from people in the marketplace is that the ”˜Connecticut Advantage”™ is quickly drying up and that there is a projection that gap will further close faster come whatever budget deal is reached in Connecticut,” he said. Whether the final budget agreement includes higher fees, or taxes, Gottlieb said those higher costs “in a way solves the issue of Connecticut being a far, far cheaper place to do business regionally than here in Westchester County.”
Gottlieb said that he has never been a believer of marketing a region based on lowest price point. “What you end up with is corporations that are only interested in short-term deals rather than long-term investments and growth,” he said. “Our campaign ”“ the New York”™s Intellectual Capital Campaign ”“ is really about reaching out to firms that are interested in an endless pipeline of quality workers.”
He said that while others areas of the country experienced an “economic Armageddon,” Westchester County”™ downturn was not nearly as severe and has seen its unemployment rate fall to 6.7 percent in March.
First Five program
The First Five program is targeted to companies that will create 200 jobs within the first 24 months from the date an application is approved by the state or a business that would invest not less than $25 million and create no fewer than 200 jobs within five years from when its application is approved.
First Five includes provisions that would allow direct financing for the program of up to $40 million per year; tax credits under the state”™s Urban Industrial Site program not to exceed a total of $750 million; and $20 million under a separate job creation tax credit program. In addition to the First Five program, the state is planning to spend $15 million to market the state as a tourist and business location.
Ronald Angelo, deputy commissioner of the Connecticut Department of Economic Development, said the amount of incentives under First Five that a company or a project might receive “are at the governor”™s discretion.”
In addition, the state will be working on a “fast track” priority for certain projects where a company could receive direct financing as well as tax credits.
Angelo said there has been tremendous interest from both in-state and out-of-state companies in the First Five program. Angelo said that the governor”™s bill has come out of committee and he expects the measure to be approved before the session comes to a close in early June.
He said that while Connecticut is facing difficult budgetary times, “Frankly there has been a new energy that we have seen in the business community.” He said Malloy has been meeting with business leaders throughout the state and “is taking a very active, hands-on approach to economic development.”
