IBM space: clean as a whistle and a tough sell

The IBM facility in East Fishkill, known as the Hudson Valley Research Park, is a beehive of semiconductor activity, with 46 buildings, including an advanced 300mm chip fabrication plant; approximately 6,000 employees distributed among 20 different divisions; serviced by 2,000 vendors and contractors; and five tenants.

Near the center of the complex, however, is a vacant space: what”™s known as Building 334, which consists of 100,000 square feet of clean-room manufacturing space and 75,000 square feet of offices and amenities. The building, which was used by IBM to produce the thin films used to package microchips, has been empty for a decade. Recently, IBM has stepped up its efforts to find a tenant and partnered with the Hudson Valley Economic Development Corp. to market the space.

Despite all the advantages of being on the IBM campus, the space isn”™t an easy sell, according to Philip D”™Orazio, site strategy space planner for the research park. “We”™ve not been successful,” he said. Ideally, IBM would like to locate a tenant such as Philips Semiconductor, which took over another plant on the site a few years ago (the facility has since been purchased by investor group NXP). But the dynamic nature of the semiconductor industry makes this more difficult, as needs have changed.

A big issue is that as a 200mm chip fabrication plant, the building is too small for the current needs of semiconductor manufacturers, which are making chips from larger wafers measuring 300mm. That requires bigger tools which in turn require more spacious housing. “From the floor to the ceiling deck, the space measures about 22 feet,” said D”™Orazio. In contrast, “almost all new buildings are about three stories high.” The building could be reconfigured to raise the roof; it would be simpler to find a tenant whose needs were more suited to the existing space, he said. Another problem is the current glut of semiconductor manufacturers.

Not that there hasn”™t been a lot of interest in the space. The problem is many of the inquiries have come from startups “looking for handouts,” said D”™Orazio. “A lot of companies are coming in with a shoestring. Being in the Empire Zone, a tenant would qualify for a lot of incentives from the state.” But he said for many, that”™s not enough. “They want a loan from IBM.”

A solar cell manufacturer the state is wooing is an example of this. “New York is trying to lure this company to Building 334. But it requires a lot of money to get started.” D”™Orazio said he thinks solar energy companies would be better off locating in the Southwest. That”™s where most of the market is, and shipment of the large panels, which measure 24 feet long by 6 feet high, would cost much less if a company was based in that region rather than in the Northeast.

A better fit for the space would be a pharmaceutical company ”“ provided it wasn”™t manufacturing a “white powder” or other substance with potentially toxic effects that could endanger the health of the on-site employees. Another good use would be data processing for an Internet company such as eBay, given the building”™s close proximity to New York City, which is only 65 miles away. High-capacity fiber lines from the Big Apple to the region are currently being installed, which makes this location”™s data capacity no different from Jersey City, N.J., which got most of the back-office systems by companies moving out of Manhattan after 9/11.Â Should the city ever be impacted by a similar disaster, Dutchess County”™s safe distance would be an added benefit, he said.

Is competition from other, lower-cost states a serious disadvantage? Not necessarily, said D”™Orazio, noting that there”™s a point at which subsidies just don”™t make sense. The clichÃ© of New York as a high-tax state unfriendly to business simply isn”™t true, he said, at least not from the standpoint of companies, which often don”™t pay taxes. (It”™s a different story for employees, who are stuck with high property taxes and energy costs.) In New York, “companies employing individuals, especially startups, operate almost tax-free for 10, 15 years.”

It”™s true that regional labor costs are higher. But then, the region offers an “education level that is better than other states. It”™s expected the payroll for engineers will be more here than in New Mexico.” In the Land of Enchantment, “you can”™t get the same quality of individual.”

D”™Orazio said he thought the past and current governors were doing everything possible to keep up employment levels in the state and that the Empire State Economic Development Corp., which is the primary state entity pushing business development, had been extremely cooperative. “They”™re willing to meet with outside companies. They”™ll have the helicopter ready to pick up a CEO to visit the site.”

He said the Hudson Valley Economic Development Corp. had put together attractive packages, and he also credited Central Hudson as “working hard to accommodate companies. They”™re bringing a lot of incentives to the table, such as guaranteeing power at a certain rate for so many years.” Despite all the challenges, “we have the right players in place.”