Economic Development Corporations are friends of commercial real estate developers and city planners no matter what is happening in the broader economy. But when economic uncertainty hits, like today when developers, construction firms and lenders face rising interest rates and stubbornly high inflation? Economic Development Corporations – or EDCs – are more important than ever.
EDCs can help communities attract new developments, projects that can bring jobs, tourist dollars and new life to areas. They can entice large companies to open new headquarters or regional offices in struggling cities and towns, providing a much-needed economic jolt during tough times.
And they can help both developers and companies reach the agreements with city officials that can lead to new restuarants, stores, industrial facilities, office buildings and mixed-use developments opening in cities that desperately need the new commercial activity.
Midwest Real Estate News recently spoke with Matt McCauley, senior vice president of regional prosperity with the Lansing, Michigan-based Michigan Economic Development Corporation, about the important role that EDCs can play today when the commercial real estate industry faces so much economic uncertainty.
Matt McCauley, Senior Vice President of Regional Prosperity, Michigan Economic Development Corporation
These are challenging times for many communities, including those in Michigan. How important are EDCs today when communities might need extra help to bring in new companies and developments to their areas?
Matt McCauley: There has always been an important connection between state and local EDCs and the communities that they serve. There is no question about that. Communities seek businesses. Businesses seek talent. And talent seeks community. Those are the three buckets of economic development.
In this new landscape that we are in, when looking at the labor force and talent and how talent dynamics have changed in a post-COVID environment, we have to focus not only on the importance of growing and building businesses at the community level but also on opportunities for building the conditions that will make a community one in which talent wants to locate. It’s not to say that we didn’t focus on that previously, but as work-from-home has been embedded within our economic mix, the importance of creating an infrastructure that talent wants to be a part of is definitely a rising role of economic development activities.
What is talent looking for in a community?
McCauley: My personal view is that ultimately people are looking to connect with other people and to connect with amenities that create activity. We look at communities that create assets around recreation, dining, walkability, trails, housing and so on as moving in the right direction. Those are often the communities that are the most successful when it comes to the attraction, retention and building of talent.
Whether you are a large metropolis like Detroit or even a smaller community of 10,000 people, your ability to show connections between a variety of assets that meets the needs of a diverse set of individuals is your competitive advantage. People want to access different things in different ways. The goal is to offer assets that you know are proven to appeal to how people want to live, work and play. That applies to the city of Detroit, Saginaw, Grand Rapids, Houghton and every Michigan community in between.
What makes Michigan an attractive destination for companies seeking new locations?
McCauley: The selling points for Michigan are tremendous. Just look at the quality and quantity of the four-year universities in the state. We are second to none in that category. In other states, such academic institutions are often centralized to a community or two. We can point to numerous communities that benefit from first-rate academic institutions. That dispersion of talent across the state is attractive to communities. There is not just one community that is an asset to Michigan, but a network of many different communities. Having that network makes it easier to create that connection between talent, business and community.
Another benefit is our access to water. Water is a needed infrastructure for everything that we do. We know that in this labor market, when people are seeking out places, the accessibility of water is usually a top priority. We have different kinds, whether it’s rivers, the Great Lakes or any of our inland lakes. Water is a prime asset that this state has that many other states don’t.
What about affordability? Is it more affordable for companies to locate in Michigan than it is in many other markets?
McCauley: It is more affordable here. When we look at tax rates in the state of Michigan we are very competitive when compared to our neighbors and the nation as a whole. Whether looking at income tax, sales tax or property taxes, there is a level of competitiveness there that goes across the board. That puts us in a unique position where we can offer competitive tax rates both at the income and property level but also have a high quality of life. We have tax policies that promote a diverse population across the state.
How about the labor pool in Michigan? Is the presence of a skilled labor force a big draw for companies?
McCauley: We have a tremendous labor force in the state of Michigan. There is no question that there are some headwinds across the board with regard to labor. But the reputation of Michigan is built on labor, built on the notion that the people in the state want to work hard and want to contribute to something larger. That is one of the great perceptions of Michigan that remains.
With interest rates still high and inflation so stubborn, are people in the commercial real estate and business worlds worried about the economic uncertainty in the country?
McCauley: Businesses are looking for certainty. If they can look at 2023 and see an economic environment where they can have confidence and certainty in their decision-making, I think they will be less worried. Volatility is never a friend of businesses. If inflation plateaus and decreases in 2023 and interest rates are doing the same, I anticipate that business activity will remain strong or even stronger coming in 2024.
Is there anything that the Michigan Economic Development Corporation is working on now that you are especially excited about?
McCauley: I continue to have tremendous pride in the leadership within this organization, the governor’s office and the state legislature around increasing Michigan’s role in the mobility sector. Michigan has a long history and reputation around mobility. As the mechanisms that power mobility move to electric and into electric vehicles, we are shifting and evolving as a state. We are not here to work against the history of the automobile industry here but to evolve with it and move into new types of mobility and new types of autos. Along with that, we are growing a new and evolved 21st Century workforce that is multifaceted above and beyond autos. The skillsets that are required for that industry go beyond just the auto industry. We are helping our workforce move into other high-tech areas involving technology such as semiconductors and software, and that is an impressive thing to see. Whether you are in the public or private sector, your ability to adapt and evolve is the key to your growth.
Are you surprised at how quickly Michigan has accepted the electronic vehicle push?
McCauley: I think that when you are in the private sector, you are keenly aware of the marketplace. Your success is determined by how quickly you can adapt to that marketplace. No question that many consumers are seeking electric vehicles as a means to achieve greater fuel efficiency, greater energy efficiency and less impact on the landscape. Consumers are very good at communicating directly or indirectly to the private sector what they wish. The auto industry has done a great job in reacting to that.
