Buffalo Niagara Real Estate Primer for Canadians – Part 2

Following up to Buffalo Niagara Real Estate Primer for Canadian Companies – part I, below are additional frequently asked questions:

Q1: Can we reduce our ‘real estate costs’ by expanding into a less costly market, without jeopardizing our profits or business model?

A1: For many companies it is a resounding yes.

Average net asking sale price ($/sf) industrial real estate:

  • Toronto GTA (Greater Toronto Area) : $113.57 psf. *
  • Buffalo/ Erie County: $36.60 psf. ** = savings of approx.   68% per square foot.

Average land cost for fully serviced industrial land:

  • Toronto GTA: approximately $597,000/acre*
  • Buffalo/Erie County: approximately $45,000/acre = savings of approx. 92% per acre.

Q2: Can we potentially reduce not just our real estate costs but our ‘overall occupancy costs’ including but not limited to utility costs, real estate taxes, sales taxes, employee wages and costs, through available economic incentive programs?

A2:  Yes! In the United States and specifically in the Buffalo Niagara region companies of all different sizes can apply and potentially qualify for incentives programs to assist with utility costs, real estate taxes, sales taxes, employee wages and costs.  Most of these programs’ main criteria are based on the number of new jobs being created, the projects’ costs and plans, and the specific industry the company operates in.  Companies need to complete an application process and potentially compete for some of these programs.

by Carolyn Powell, Business Development Manager

Buffalo Niagara Real Estate Primer for Canadians – part 1

When working with Canadian companies considering a Buffalo Niagara business expansion, we find that real estate availability and costs are a primary concern due to differences in Toronto and Western New York markets.  Canadian business owners are unsure of the availability of commercial properties, average sale rates, and the current trends relating to Buffalo Niagara real estate.

Frequently asked questions include:

  1. How does Buffalo Niagara compares to the U.S. real estate market?
  2. Have real estate prices risen?
  3. Is there a shortage of properties which tenants and buyers are competing for?

To help address these concerns we refer to our partner CBRE|Buffalo, and their annual MarketView report.  This helpful publication summarizes the real estate market in Buffalo Niagara. Below are excerpts from the Annual 2014 report Canadian businesses owners find particularly useful:

Industrial Market

As forecasted in 2013 by CBRE|Buffalo, the 2014 Buffalo Industrial Market experienced a decrease in the overall vacancy rate, decreasing from 5.7% to 4.5%.  This equates to 900,984 sq. ft. being absorbed in the greater Buffalo MSA.  Noteworthy is that in 2011 the overall vacancy was 13.2%.

As a result of a rebounding economy and comparatively weak construction activity, the national overall vacancy rate decreased from 11.7% to 10.6% in the third quarter 2014. (CBRE, INC U.S. Industrial Market View Q3 2014).  The 2014 results mark the 10th consecutive year the Buffalo Industrial Market vacancy rate has remained below the national average.

commercial charts

* The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)

Office Market

The overall Buffalo office market vacancy rate continued to inch up this year to 14%, a 0.4% increase from last year.  The slight increase comes at a time when the national office vacancy reached its lowest level since 2008 at 13.9% (CBRE Research, Q4 2014).  Historically, Buffalo’s overall vacancy is below the national numbers, but the large amount of vacant space in the downtown core has proved to be a detriment to the overall vacancy rate.  Despite the increase in overall vacancy, more than 315,000 sq. ft. of new inventory was added across the submarkets.  The Majority of the space was pre-leased and aided in a positive net absorption of 158,786 sq. ft. Positive construction will continue well into 2015 with over 550,000 sq. ft under construction or planned.  As in previous years, the Buffalo market continues to remain consistent with the national office vacancy of 13.9% reflecting a relatively stable market. (CBRE, Inc. U.S. Office MarketView Q4 2014)

While the U.S. has had a slower recovery in new construction numbers, the Buffalo office market has continued to deliver new office product each year (CBRE Research, Q4 2014).

office charts2

* The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)

For questions frequently asked by Canadians evaluating U.S. expansion and real estate, click here for Real Estate Primer for Canadians – Part 2.

For additional information contact Steve Blake, CCIM, Partner at 716-362-8707 or steve.blake@cbre-buffalo.com

CBRE|Buffalo, an affiliate office of CBRE, Inc., staffs 16 professionals and offers a full range of commercial real estate services to Erie, Niagara, Chautauqua, Cattaraugus, Wyoming and Allegany counties, and portions of Orleans and Genesee counties.

by Carolyn Powell, Business Development Manager

Benefits of a Foreign Trade Zone

Flags

Do you import raw materials and goods from overseas?  Do you buy these goods in bulk and then resell them?  Do you add value to the imported components or raw material before they are sold again?  If you answered yes to any of the above, then a Foreign Trade Zone (FTZ) might save your company money and give it a competitive advantage.

The purpose of an FTZ is to stimulate international trade and create jobs and investment in the United States rather than abroad.  In the U.S., an FTZ is a defined geographic space that is next to or within a short commuting distance from an official U.S. port of entry.  U.S. Customs and Border Protection supervise the Zones, but do not run them.  The space is secured and operated as a public good under a license agreement with the U.S. federal government.  In foreign countries, FTZs are typically referred to as Free Trade Zones.  Both U.S. and foreign goods can be moved into a Zone for storage, exhibition, assembly, manufacturing and/or processing.

There are multiple benefits to using an FTZ, but each company must research which specific benefits would apply on a case-by-case basis.  In doing so, they must consider: 1) what is being imported; 2) the volume and frequency of the imports; 3) will the imported goods be changed into something else; 4) whether the final good will be exported or enter U.S. customs territory; 5) what is the normal duty rate, if any, of the imported good, etc.  Generally speaking, an FTZ will provide the most savings to a company that imports a high volume of goods, the goods are not typically duty-free, and many of the goods will ultimately be exported out of the U.S. to the end user. Continue reading

Growing by Takeoffs and Landings

As both an economic development professional and lifelong Buffalonian, watching the companies that I help establish a business in our region grow and succeed is incredibly exciting and rewarding. Each company that we assist is unique; some begin with a large scale operation while other companies start small and grow their business over time.

Headquartered in Kansas, Executive AirShare is fractional ownership aircraft company that began with regional hubs in the central U.S.  In 2009, they decided to establish a northeast location to expand their business and reach new markets.  A successful location needed to meet four major criteria:

  • Appropriate space for both corporate aviation services and back office operations
  • A potential customer base
  • Available workforce, including pilots
  • Available incentives to assist with first year expenses and startup costs

BNE assisted Executive AirShare with the coordination of potential incentives and helped facilitate discussions for runway services and leasing hanger space.  In 2010, the company leased 26,000 square feet of hanger and office space at 485 Cayuga Rd, Cheektowaga, NY.  BNE was then able to assist them with their marketing efforts for a grand opening event and the launch of their first northeast location.

Since October of 2010 Executive AirShare has refurbished an 8,300 square-foot private aviation terminal and 53,000 square-feet of hangar space, doubling the size of its operations at Buffalo in less than three years.  Much of the added hangar space is being used to support demand for jet aircraft management services for a growing list of Western New York-based companies. The Buffalo based aircraft now totals seven in the fractional and managed fleet, with one or two additional aircraft that rotate into Buffalo from central U.S. bases.  This facility operates with 17 full-time employees based in Buffalo and supported by additional flight crew from other locations as needed.

by Carolyn Powell, Business Development Manager

Fichman Furniture Living the American Dream in WNY

Fichman

Sometimes a simple email can make your day.  This happened to me recently when I checked in with a business owner who BNE helped in establishing their first US manufacturing facility.  While I knew the company was doing well, the owner was so exuberant that it really brought a smile to my face and also demonstrated so clearly why the work we do is so important.

Toronto-based Fichman Furniture began working with BNE in 2009, seeking to bring their business to the US.  After assisting with site selection, cross-border due diligence and workforce development, in 2012 the company purchased an 8,000 square foot facility in Holland, New York.

The company designs and manufactures radiator covers, and 95% of its sales are in the US.  The new facility was selected to reduce shipping costs for both raw materials as well as finished goods, without the delays associated with cross-border logistics. And three years later, Erran Fichman, the company’s owner, reports that sales have DOUBLED since the move while shipping costs have been cut in HALF!

While labor costs are about the same, Fichman says in Western New York “you get far higher quality and value.”  He has six full-time employees and hopes to add additional workers in the future and says now he “can really focus on projects that will continue to grow the business.”  Thanks to improvements in technology and machinery, the facility is more productive while maintaining the highest safety standards.  “We never achieved this level of quality and we produce our covers in less than half the time it would take in Toronto,” he added.

Fichman has nothing but good things to say about his experience dealing with WNY officials and businesses, from the local Post Office to his M&T Bank branch in East Aurora, Holland’s town hall to local law enforcement.  The adjectives used were “straightforward, professional and reliable.”  What a testimonial!

BNE is privileged to promote Western New York’s business-friendly attributes on a daily basis. Fichman Furniture’s success story beautifully illustrates that our region has all the right stuff for businesses that are seeking to expand in the US.

by Carolyn Powell, Business Development Manager

New York State Tax Reform Benefits Manufacturers

International companies that expand into the U.S. often apply for and receive major tax incentives.  But what if the tax law were amended to create a significant incentive across the board, without companies even having to apply?  Well, that is exactly what New York State has done.

On March 31, 2014 New York State enacted significant changes to reform its corporation tax laws, most of which took effect January 1, 2015.   Many of the changes are aimed at simplifying an overly complex system of taxation and include the elimination of some taxes and revisions to the tax bases.    Included in the corporate tax reform are changes that will greatly benefit qualifying New York State manufacturers by reducing the income tax rate to 0% and creating a 20% real property tax credit.

To qualify, a manufacturer must have property in New York that is principally used by the taxpayer in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing and during the tax year more than 50% of its gross receipts are derived from the sales of goods produced by these activities.

To be eligible for the zero percent tax rate the manufacturer must have either:

1) property located in New York with an adjusted basis for federal income tax purposes at the close of the taxable year of at least $1 million; or

2) all of its real and personal property is located in New York.

The zero percent tax rate applies to the business income tax base and is only available for qualified manufacturing corporations taxed under Article 9-A, franchise tax on business corporations.

The real property tax credit for qualified manufacturers is a credit equal to 20% of real property taxes paid during a tax year for real property located in New York and principally used in manufacturing.  The property can be owned or leased by the taxpayer.  Leased property must be leased from an unrelated third party.  The lease must be in writing and require the lessee to pay the real property taxes. The lessee must make the real property tax payment directly to the taxing authority.

For those that are not qualified manufacturers, the tax rate on business income will be reduced from 7.1% to 6.5% beginning January 1, 2016.

The legislation is a huge step forward for encouraging businesses to expand and grow in New York and it doesn’t stop there.  New York offers a number of attractive incentive programs available at the state and local levels to help businesses locate and grow here.  Additionally, there is no sales tax on machinery, equipment, tools or supplies used in manufacturing and New York State does not have a personal property tax on inventories, machinery and equipment either.  

 

Guest blog: Andrew J. Toth, CPA, Partner at Tronconi Segarra & Associates, LLP, atoth@tsacpa.com ,(716) 633-1373

Canadian Company’s American Plant Awarded for Sustainability Success in Buffalo

Avanti

In 2011, Avanti Advanced Manufacturing opened its first US location in Buffalo, specializing in custom fabrication and plastic injection molding.  They currently have seven full-time employees and plan to double their employment in the next year. This year, Avanti was named a winner in Business First’s Manufacturing Awards in the Sustainability Category.  These prestigious awards are presented to companies in the manufacturing industry that are a major economic force in the region.

Avanti has found US success in a variety of ways and by growing their business slowly.  The company purchased a reasonably priced building and made the needed improvements to it, all while developing and strengthening relationships with neighboring residents and working with local organizations such as churches to recruit employees.  Avanti’s owner and president, Jim Wei, has found that the local residents and members of these congregations have a willingness to learn and a great work ethic, and he provides training on his specialized equipment.

Wei has developed a system to use the outside air to cool Avanti’s machines and save on power costs.  He continually looks for ways to improve efficiency within his operations so that he can then increase manpower and quantity of products manufactured.

One of the products Avanti designs and manufactures is a tile for the building construction industry that is made from recycled materials, allowing the building to claim LEED credits during the construction process.  The tiles are sourced approximately 30 miles from the facility, which qualifies them as a local supplier and meets the requirements for LEED credits.  Another sustainable Avanti product is Ecoglo, which is a no-slip and natural glow-in-the-dark strip for stairs and sidewalks.  These strips have been installed locally at the front entrance of The Mansion on Delaware as well as many high-profile buildings across the country.

The BNE team offers our congratulations to Jim Wei and the employees of Avanti Advanced Manufacturing Corp on your success in Buffalo, NY and your well-deserved award.

by Carolyn Powell, Business Development Manager

Powerful Utility Savings a Plus for Canadian Companies

Many Canadian companies considering US expansion are heavy power users and electricity costs can easily eat away at profits.  As Canadian companies seek US expansion for many reasons (made in USA requirements, supply chain, bridge issues/delays, etc.), being able to manage operating costs is yet another major consideration.

When BNE is working through the due diligence process with a prospective company, energy needs and consumption are discussed.  With a large power user, we typically run a comparison between Canadian costs for monthly usage and what the same usage would cost in Buffalo Niagara.  The company shares its current electric bill and our local utility runs the numbers.  Most times there are significant savings.

Many of the larger power users are companies in plastic injection molding or extruding, food processing, or steel processing and fabrication.  A recent example is a plastics company that currently pays $0.13 per kWh for power in Canada. By comparison, they would pay an estimated cost of $0.082 per kWh for that same operation in Buffalo Niagara and realize a savings of over $18,000 each month. A different plastics company could save more than $20,000 per month by reducing their electric costs from $0.14 per kWh to $0.098 per kWh. We were able to identify over $50,000 in monthly savings for a food processing company currently paying $0.19 per kWh for electric.  Their pricing in Buffalo Niagara is estimated at $0.083 per kWh.

Steel processing in Buffalo Niagara.

Steel processing in Buffalo Niagara.

In addition to standard utility savings, companies may also qualify for special incentive programs that further reduce power costs. New York State offers some programs and others are administered by the local utility.  Many are contingent upon the number of new jobs that the company will be creating and the total investment into the new facility.  Prospective companies should consider these programs once they have identified a potential building or land site.   Thanks to our ability to offer low-cost power, selecting Buffalo Niagara for US expansion can make great economic sense for our Canadian neighbors.

by Carolyn Powell, Business Development Manager

Canadian Expansion Makes Sense in Buffalo Niagara

I’ve been working with Canadian companies for several years and I love learning about their businesses and also why they are looking to expand. There are the typical reasons – the desire for a “Made in USA” label or contract requirement, currency rates, and the ability to gain access to a market ten times larger than their own. But have you ever though about border crossing costs?

Some companies are starting to look at their U.S.-based suppliers and what percentage of sales is going back into the U.S. market. Once companies start to analyze these percentages, they then start to look at border crossing costs. For example, I am currently working with a Southern Ontario company that purchases most of its raw materials from our west coast and thirty percent of its sales go back to the U.S. Another company is sourcing ninety-eight percent of its raw materials from the U.S. and has sixty percent U.S. sales.

There are several layers of border crossing costs to consider. There is the cost of physically moving the goods over the border twice. Then there is the cost of customs paperwork and fees associated with shipping and potential time delays. This becomes critical when it is a food product or other perishable items.bridge

So what is the total cost of moving these raw materials across the border to be manufactured in Canada to then be sold and shipped into the U.S.? Can these costs be reduced by opening a small manufacturing facility in the U.S.? Can the shelf life of a perishable product be maximized by making it in the U.S.? If the answer is yes, it makes sense for Canadian manufacturers to consider a facility in Buffalo Niagara where they can easily manage their U.S. facility and share key resources. All while saving time and money.

Learn more about Canadian Business expansion and view available resources on our website

By Carolyn Powell, BNE Business Development Manager

We All Scream For Ice Cream!

by Carolyn Powell, Business Development Manager

Cornell University’s College of Agriculture & Life Sciences’ Department of Food Science has undergone a major two-phase renovation project. Its Stocking Hall now houses an impressive dairy processing plant, teaching winery, product development kitchen, conference center, two floors of research facilities and a brand new dairy bar. The Buffalo Niagara Enterprise (BNE) staff recently traveled to Ithaca and toured the 10,000 sq. ft. facility that contains impressive pilot-scale equipment for use in research, teaching and extension. Cornell produces milk, yogurt, pudding, cheese and its popular ice cream. In fact, the university worked closely with Perry’s Ice Cream in Akron on the design and layout of the new ice cream facility.

During the tour, we learned that Cornell has 160 cows on site that are utilized for various processes. They are also researching and testing to increase the shelf life of milk from 7 to 21 days. Who knew that milk is 85% water?

Cornell’s Dairy Processing Plant

Cornell’s Dairy Processing Plant

Cornell’s fully automated plant is a resource to New York State businesses for research and product development. They offer incubator space and programs, a state-of-the-art lab for product testing and development, and a wine lab. Their Extension Programs also assist business owners in producing safe, healthy and wholesome foods. They offer a variety of programs from wine and beer to milk and dairy; fruits and vegetables; entrepreneurship and small scale processing; food safety, sensory analysis and many others. For further information visit: http://foodscience.cals.cornell.edu/extension