Lower Costs Put Region in Position for Growth
YOUNGSTOWN, Ohio – No factor by itself will be the “silver bullet” that convinces a company to relocate or expand in northeastern Ohio, but the region’s cost advantages offer “a good argument,” a Team NEO official said.
The cost advantages of operating here are highlighted in Team NEO’s latest quarterly report, the Cleveland Plus Economic Review. Its authors say the cost of doing business in the 18-county region is nearly 10% below the national average.
“We have a very cost-competitive environment for doing business,” said Jacob Duritsky, vice president of research for Team NEO. “When companies decide they need to be somewhere in the eastern Midwest, we think we can come to the table with a good argument for why northeast Ohio is an ideal place for those companies to be.”
Duritsky provided an overview of the report, released this morning, during a conference call with reporters June 10.
Northeastern Ohio provides advantages in the four components that comprise Moody’s Analytics analysis of the cost of doing business: labor costs, energy costs, state and local taxes, and office rents.
Businesses in the 18-county region, for example, pay a median wage of $19.55 per hour compared to $26.26 in New York City. The cost of living in the region – “a bit of an icing-on-the-cake factor,” Duritsky said – is 11.4% below the national average as well.
In the Youngstown-Warren metropolitan area, the median hourly wage is $14.73, said Sarah Boyarko, senior vice president for economic development at the Youngstown Warren Regional Chamber. She noted that the metro area consistently ranks among the best for low cost of living.
On another metric, state and local taxes, an Ernst & Young LLP and Council on State Tax Rates report ranks Ohio as one of the top three states for favorable business tax rates, the Team NEO report found. Businesses pay no tax on corporate profits; investments in equipment, machinery and research and development; products sold to customers outside Ohio; and tangible personal property.
The region’s abundant oil and gas reserves should also mean a “continuing downward trend in energy costs” for businesses looking to locate here, the report said. It cites the more than 25 trillion cubic feet of recoverable natural gas and seven billion barrels of oil in the region.
Office rents and real estate are 33% lower than the national average, $3.90 per square foot here versus $5.83. In Los Angeles, businesses pay $9.17 per square foot on average. Cost to build is 2% lower than the national average.
While all of the factors outlined in the report are “extremely important,” there are two fundamental factors “that you can’t get beyond” in discussions with companies or site selectors, Duritsky said. Those are proximity to customers and proximity to suppliers if they need to be close to a source of raw materials.
“Those two factors generally initially drive the decision-making process, but after that you start to get down into cost variables at the local level and metro level that really can differentiate and offer a competitive advantage for markets,” he said.
After proximity to customers and suppliers, talent is increasingly becoming “the most important factor that we have to deal with,” he added. Part of that is cost but the other component is quality. “We tend to think we have a good argument for the quality of our workforce, too, particularly as it relates to manufacturing and professional services,” he said, again iterating a lower median wage than many competing markets.
In the section detailing development activity, the report points out that E! Digital Direct, a print and mail service, will move its headquarters and processing center to the former R.L. Lipton Co. building in Boardman. The project will create 176 jobs over three years, Boyarko said.
The report also forecasts gross domestic product in northeastern Ohio will increase 2.5% this year.
Copyright 2023 The Business Journal, Youngstown, Ohio.