Regional Report: The West, for the Most Part, is Growing



ArroHealth, a national provider of medical payment analytics, opened a new operation in Reno, Nevada in mid-February. Three weeks later, Cam-Concept, a Canadian specialized industrial equipment manufacturer, announced it was opening a U.S. headquarters in Sparks. Three days after that, Sonwil Distribution cut the ribbons on a new logistics center in Reno.

The three were among the latest companies to relocate or expand in Greater Reno (population: 426,000) close to the California border. Their new neighbors include eBay, Switch, Black Ridge Technology, Clear Capital, Flirtey and Petco—and the not-to-be-missed Tesla Motors.

A company building a 10 million-square-foot battery plant in a recession-hammered market is tough to overlook. “Our world has just changed with Tesla!” proclaimed Mike Kazmierski, CEO of the Economic Development Authority of Western Nevada, when news broke that Tesla’s “gigafactory” would create 6,500 full-time jobs there.

Kazmierski’s team, working with the state’s economic development operation, won out over California and several other rivals for the most coveted build-out of the year by offering $1.25 billion worth of incentives over 20 years—larger by far than any preceding Nevada welcome package, and among the largest in U.S. history.

“Reno is hot right now, as hot as a firecracker,” says Jim Renzas, a site selector from Orange County, California who cites the region’s numerous advantages. Because of use of natural gas, “energy costs are about half what they are in California,” he says. Then there’s the workforce. “The labor market features a surplus of talented workers,” he notes.

Another major advantage is location. Employers pay lower taxes and comply with generally less restrictive environmental regulations while being able to easily service the California market across the nearby border. “Reno-Sparks can be the next Austin,” declares Floyd Rowley, a commercial real estate broker and senior VP with the Johnson Group in Reno. The city is “in a position to replicate this tech-driven growth.”

NEVADA | #9 | WHAT HAPPENS HERE…
Nevada, one of the states hit hardest by the Great Recession, has been among the slowest to recover. Las Vegas experienced 14% unemployment at the epicenter of the recession, now down to 5.8%. Jobs are coming back; the Sagebrush State ranked fifth last year in job creation. “We’ve turned the corner on the recession and the recovery,” says Steven Hill, Nevada’s top economic development official. “That’s all in our rear-view mirror right now.”

Expansions of local companies and an influx of tech businesses have fueled Nevada’s recovery. Apple’s decision to open a $1 billion data center in Reno in 2012 gave the state instant cred as a platform for tech operations. And the aforementioned Tesla decision instantly propelled the state into the economic development’s major leagues.

The elevated status comes at a cost to taxpayers; Nevada is the third most aggressive issuer of relocation and expansion incentives in the country, behind only Texas and Florida. Its flexible approach to property tax abatements enticed eBay to open a $412 million data center in the Reno-Sparks corridor last year.

While the lion’s share of economic attention goes to Reno, Las Vegas has made headway, as well. It inked a $1 billion factory development deal early this year with Faraday Future, the other electric car company, and is working hard to overcome what some suggest is a perception problem. “People perhaps don’t realize there is a large city outside the strip with a big labor force,” says Seth Martindale, a managing director with CBRE in Los Angeles.


WYOMING | #14 | ENERGY BLUES

For more than a decade, Wyoming—whose energy sector accounts for 40 percent of GDP—well outpaced national economic growth and job-creation activity. Not anymore. The air continues to rush out of the Cowboy State’s oil and gas balloon. Sector employment will bottom out this year at 13,800 jobs, before inching back beginning next year, predicts University of Wyoming economist Anne Alexander.

Mining has a bright spot—trona, which supplies about 90% of the nation’s soda ash and whose production is seen rising through 2019. Federal government employment, a main labor cluster, is also down. Agriculture is a mixed bag: better growing conditions have improved crop product, but increased supply has lowered prices. Many Wyoming residents feel the pain; personal income will drop 2.1 percent this year, estimate state economists.

Casper, the state’s biggest city, has made strong gains in leisure and construction while holding onto its energy-sector workforce. Along with Cheyenne, the state’s second-largest municipality, both metro regions are seeing new businesses and restaurants opening, with more tourists coming for the scenery and recreation, says Alison Felix, economist at the Kansas City Fed.

COLORADO | #15 | LURE OF THE GREAT OUTDOORS
Colorado has been among the fastest-growing states this century. It’s posted faster economic growth than all but a few states this year. Prosperity indeed trickles down in this entrepreneurial, do-it-yourself state; which topped the nation in personal-income growth for three years running earlier this decade.

Colorado continues to add jobs in almost every business sector, says Richard Wobbekind, economist at the Leeds School of Business at the University of Colorado. Wobbekind foresees over 65,000 new jobs coming online this year for a 2.6 growth rate. Nearly a quarter will be in professional and business services, Colorado’s fastest-growing cluster. Biotech clusters are taking hold in the Boulder-Longmont corridor and south of there in Colorado Springs, says site selector Eric Dienstbach of Denver-based Binswanger.

On the red side of the ledger, the mining sector is slumping, reflecting plunging oil and gas prices. Agriculture, especially cattle farming, is softening due to rising feed prices and droughts. The state’s workforce delights employers, but Colorado needs more workers. Paced by fast-expanding metro Denver, the population is growing faster than all but three states, yet that’s not fast enough.

Housing is booming, and a well-utilized new rail line connects the airports to downtown and industrial parks. The region’s cultural offerings, iconic recreational opportunities and the availability of legal marijuana ensure that Millennials will continue to join the work force.

UTAH | #16 | BUSY AS A BEEHIVE
Utah was the No. 1 job-creating state last year, growing its labor force at a 4.1% rate. The pace has ebbed this year, but the Beehive State is still expanding—enough to add 1.4 million jobs since last spring. Tech expansion drove GDP and IT sector growth 7.7% in 2015.

Other sectors flexed their muscles as well. Construction reached its highest level in eight years, leisure and hospitality thrived and financial services companies displayed “Help Wanted” signs; Goldman Sachs alone hired 2,600. Less happily, state GDP growth stagnates; Utah seems mired at its 19th-lowest national ranking.

Utah ranks No. 4 among states in number of startups seeded, says the U.S. Chamber Foundation. Organic growth is essential in a state site selectors often shy away from, citing lack of workplace diversity and the dominant role of the Mormon Church in civic life.

Utah’s focus on collaboration underpins economic growth. Government worked with CEOs to identify issues and improve education outcomes, including making teachers’ salaries more competitive.

Office-building construction, as well as residential construction, is booming in greater Salt Lake City, Utah’s capital and by far its largest metro region. Strong technology-company hiring fuels the metro area’s sustained growth.

Utah is hot because of the work force, says site selector Renzas. “Because the state has a very high birthrate, there are a lot of young people in the area who are very good with computer and tech skills. They’re very well educated and they don’t want to leave.”


IDAHO | #21 | GROWTH, BUT BRAIN DRAIN CONTINUES
Idaho enjoyed its best year economically in more than a decade in 2015, adding 28,000 jobs—as much as it gained the previous two years combined. Gains in manufacturing, retail and leisure/hospitality continue to spearhead expansion. Less happily, thousands of jobs in computer and electronics manufacturing disappeared during the last recession, likely for good.

Nonfarm payrolls will expand 2.3% this year and 2.2% over the next three, Idaho’s government economists predict. Business leaders are looking to schools to fuel further growth. The Idaho Business for Education group contends that 805 of state secondary school students are poorly prepared for high school. Many top students don’t stick around; half the state’s grads leave Idaho for work within four years of graduation.

MONTANA |#25 | DOING BETTER THAN EXPECTED
Energy, mining and farming—Montana’s top three industries—all contracted last year. The state economy sustained a reverse trifecta of declining oil and gas prices, reduced metal mining activity and falling grain prices.

Despite the pressure on three fronts, the state’s economy did relatively well. In 2015, Montana generated 6,000 jobs—representing more than $60 million in wages and salaries—over the previous year. In 2015, job growth more than doubled as compared to 2014 and continues this year.

In Billings, Montana’s largest city, commercial and industrial projects are breaking ground. Manufacturing and residential construction—the latter having flattened out several years ago—is again up in the state’s western region, especially fast-growing Bozeman.

Montana’s business leaders fret over brain drain and hope the high-tech cluster taking root in the state’s western half opens opportunities for digital-economy workers. The High-Tech Business Alliance, formed in 2014, says members expect to add 940 jobs this year. A clutch of out-of-state companies including Workiva, Helix Business Solutions, Advanced Technology Group and SoFi recently located offices in the state.


ALASKA | #30 | A SHRINKING ECONOMY
Once characterized by boom-and-bust economic cycles, Alaska’s economy settled in the ’90s into slow but steady growth driven by its key sectors: federal government, mining, tourism, fishing, air cargo and healthcare. More recently, slow-but-steady has become drip-drip-drip. Since July 2013, job growth has been negative.

Federal government employment has shrunk nearly 1 percent, a big problem in a state where nearly a quarter of residents cash federal paychecks. This and the effects of plunging oil prices have Alaskans wondering if they’re back in a recession. Business leaders, some of whom suspect recent economic changes are permanent, are pressing government officials to begin planning for a smaller revenue base to avoid raising taxes or postponing infrastructure repairs.

WASHINGTON | #31 | HELP WANTED

Washington is experiencing year-over-year growth in nearly every sector. A construction boom is driving employment gains, including a 4.6 percent rise in King County, which encompasses Seattle. In a tight labor market, many employers struggle to staff up. State employment will rise 1.8 percent this year, down from last year’s 2.8 percent, predicts Steve Lerch, executive director of Washington’s Economic and Revenue Forecast Council. Seattle, the state’s business capital, will grow at a 2.5% rate this year, down from last year’s 3 percent, projects Chris Mefford, CEO of Seattle consultancy Community Attributes. “Companies want to hire more people, but it’s not easy,” he says.

Metro Seattle’s Big 3—Boeing, Microsoft and Amazon—dominate the region, although iconic retailer Starbucks and tech expansionists like Expedia are gaining attention. Expedia recently opened a 40-acre, 4,500 employee site three miles from the central Seattle waterfront. The city’s mojo comes increasingly from fast-growth startups in technology, business and professional services. A fledgling biotech cluster has taken root in the South Lake Union neighborhood, tapping startup money provided by Microsoft’s Paul Allen.

One of America’s fastest growing cities, Seattle is rapidly transforming into a global city even as it guards a unique sense of place that attracts well-educated newcomers. Employers compete with housing developers for prime waterfront space; the economy needs to accommodate both. Housing all the recent newcomers is challenging, but essential; the labor pool must expand for growth to continue.


OREGON | #39 | BUSIER THAN BEAVERS
Oregon enjoys full-throttle growth and rising wages in all major industries in the state. The state’s average paycheck, while still lower than the nation’s, has risen to its highest relative point “since the mills closed in the early 1980s,” says Josh Lehner of the State’s Department of Economic Analysis.

Oregon’s surging economy is pulling workers into the labor market, as the participation rate increases from recessionary lows. Lehner attributes Oregon’s strong growth to the state’s industrial structure and net migration flows. Legal sales of recreational marijuana have bolstered sales tax revenues. while exports, traditionally a foundation of the regional economy, are down nearly 20 percent year over year, reflecting the strong dollar and soft markets in China and other trading partners.

Job growth has been concentrated in two suburban counties in greater Portland, Multnomah and Washington Counties. The Oregon part of Portland is the state’s biggest urban center. In Eugene, the Beaver State’s second-largest municipality, more than $300 million in downtown real estate and business projects have transformed downtown.

Developers are busy replacing dilapidated, counterculture-era storefronts with technology complexes and operations for specialized-food producers, craft-beer brewers and more. New corporate arrivals include Avago Technologies, Winnebago Industries and Firstsource.


HAWAII | #44 | TOURISM WILL GROW, SLIGHTLY
Hawaii’s economy is expected to show modest growth during the rest of 2016 and into 2017. The Aloha State’s economy is largely dependent on tourism and conditions in Japan, its major trading partner. Tourism is expected to grow 1.9 percent this year; yet with the stronger dollar, tourists will squeeze their dollars tighter than originally projected.

Stagnation in Japan and softening in China constrict tourism and trade revenues. Improving labor and construction markets buoy optimism. Overall, Hawaii’s economy, as measured by real GDP, is projected to grow 2.3% in 2016. State economists predict 2.4% real GDP growth forecast for 2017. Unemployment is projected to be 3.5% this year, sliding to 3.3% next year, say forecasters.

CALIFORNIA | #50 | THE ABCS OF CORPORATE RETENTION
California is the place CEOs love to hate. Consistently named the worst state for business by Chief Executive readers, the Golden State also houses the nation’s biggest debt—$2.4 trillion. Its output surpasses all but seven nations. California supplies more agricultural products to the world than any other state and is home to TV, film, video-game and music producers, as well as to Silicon Valley, the engine of the Innovation Economy.

There are warning signals in many of those areas. Most noticeably, VC money, which has fueled a small army of startups, began tailing off last summer. Still, California addresses abound on patents, a proxy for sector robustness.

The Bay Area is thriving. San Francisco has become the world’s most expensive office market as measured by rent increases. Demand so exceeds supply that Oakland—of which Gertrude Stein once wrote, “There is no there there”—has collected the overflow.

In Southern California, advancing industries include healthcare and social assistance, construction, professional and business services, scientific and technical services, and environmental and waste removal, according to the Kyser Center for Economic Research at the Los Angeles Economic Development Corporation.

The economists at the Anderson School of Management at UCLA point to a decidedly mixed-bag future. Innovation from the research departments at Stanford and other institutions supply California with innovation, fueling its GDP. “L.A. is seeing a little bit of a tech boom,” says native-son relocation advisor Seth Martindale of CBRE. “Even downtown is undergoing revitalization. There are a lot of smart young, educated people, and companies taking advantage of the fact that L.A. is cheaper” than Seattle, Portland and San Francisco.

San Diego continues to grow its biotech hub, attracting a broad range of high-tech companies glomming onto its labor market, sunshine and lifestyle. Recent arrivals include Bizness Apps, GoPro and Wrike. Earlier this year, local biotech BD announced an in-town expansion that would keep over 3,000 jobs local.

Still, there’s significant churn in a state where the acronym ABC could mean “Anyplace But California.” Executives, middle managers and salaried employees alike are seeing incomes stagnate. Real personal income growth is estimated at 3.6% this year, slipping to 3.2% next year and 3% in 2018. It’s no surprise that California business owners eyeball locations across their borders and fantasize about less expensive, less congested and less regulated places to do business—but usually stay put.


WHY WE’LL BE HERE

WHO Mark Riddlesperger, Founder and President, LA Propoint

SITE HISTORY After a long-term project working for Universal Studios in Japan came to an end, Riddlesperger returned home to Southern California. Working with a business partner, he opened LA Propoint as a designer, fabricator and installer of stage and show systems, museum exhibits and entertainment modules. The company began in a 5,000-square-foot warehouse just outside downtown Los Angeles. Seeking more space, it moved to a 15,000-square-foot location in the San Fernando Valley, in 2004. Four years later, when the space next door was vacated, the company moved once more, again doubling its size.

WHY CALIFORNIA “Most of the entertainment companies are here in L.A. Our business involves theme parks, museums, sciences centers and theaters. San Fernando Valley is very desirable because the suppliers, the customers and the talent in the industry are all here. So are our customers. We’re near Warner Bros, Universal and Disney and they are all, or have all been clients.”

REASON FOR LOCATION “Real estate is cheaper than in downtown L.A., and you can get larger spaces. We’re between the St. Gabriel mountains and the ocean, which is very appealing, at a location that’s very close to a major commercial thoroughfare serving the region.”

" Warren Strugatch : Warren Strugatch is a writer, speaker and consultant based in Stony Brook, NY. He covers economic development, global business, management and marketing.."