The risk of failing to move quickly
Foxconn is a generational opportunity
As commercial real estate professionals, we work directly with business executives and owners on making decisions about where to locate their operations every day. Appropriate site selection for a business is an art form that takes into account many different factors, including workforce availability, dependable infrastructure and the time needed to get a shovel in the ground.
First and foremost, business executives look for certainty in the process.
Which is why Wisconsin appears so attractive on the national stage right now.
The state has rapidly gone from the 41st best state to do business to 10th best based on the highly impactful economic development initiatives that Gov. Scott Walker, the Legislature, the Wisconsin Economic Development Corp. and Milwaukee 7 have worked tirelessly to implement. With decreasing property taxes, the elimination of state income tax for manufacturers, the passage of right-to-work legislation and significant investments to workforce development, we are competing — and we are winning — on the global stage.
Foxconn presents a generational opportunity for Wisconsin. The land and real estate component is unprecedented and could represent the largest direct foreign investment ever made in the United States. Foxconn plans $10 billion of investment, a 20 million-square-foot campus and up to 13,000 direct jobs. For perspective on the scale of the development, the entire industrial real estate markets of Racine and Kenosha counties are individually approximately 29 million square feet in total.
And this development represents so much more than just Foxconn. There have been numerous predictions as to the amount of supporting jobs that will be generated based on this single development, with some predicting as many as 22,000 indirect jobs. Businesses inside and outside the Foxconn supply chain will choose to locate near the company. Our industry intuitively understands the trickle-down effect that will be a boon for housing, retail and service business throughout the region.
Momentum begets momentum, and should Foxconn’s business continue to grow in our state, the people of Wisconsin are going to be the benefactors of what is a transformative economic development project. When Amazon, Uline, Haribo, Generac, Snap-on or any other business decides to locate or expand in Wisconsin, it suggests to all others, that we are the place to do business. This opportunity is garnering international attention, creating a new paradigm for Wisconsin, and that’s
an enviable position to be in.
The scale of the project aside, it represents a new day for the state. For decades, we have seen our region’s growth rely on the movement of Wisconsinbased companies from one building to the next. While retaining and growing local companies continues to be a net gain for the region, it has not produced the catalytic effects of new, inbound investment dollars. Foxconn would bring new people, new money and new opportunity with each dollar produced, turning over multiple times within the state. Multiply that by the number of new employees and you have created a brand new economy. This is also an incredible recruitment tool to draw new talent into Wisconsin and retain higher education graduates who continue to flee Wisconsin for the coasts.
Wisconsin commercial real estate markets have been on a roll for several years after the depths of the recession. Lease rates have increased 20% in southeastern Wisconsin, and statewide vacancies for industrial properties are at historic lows, with some markets showing less than 3% vacancy. Our fundamentally strong markets have led to increased property values and increased property tax collections for the state and for local communities.
With limited supply in the markets, the sentiment across the state is that the activity in one region bolsters the activity in another, and a new construction boom will have to occur to accommodate the capacity needs that suppliers and support companies will need to service such a large customer. That’s the virtuous cycle in action.
Opportunities such as this are scarce, and when they come along, extraordinary measures must be taken to ensure their success. Making decisions quickly requires bravery and trust. Economic development agencies and the governor’s office have worked tirelessly over the past several months to bring this deal to the finish line.
The complex and unprecedented incentive package before the Legislature ensures accountability while leveraging the tools that have been put in place by our state. The clawback provisions and the “pay as you grow” requirements should help quell fears about the state losing money. No jobs. No money.
With the passage of the proposed incentive package through the state Assembly, it is now on to the state Senate for deliberation. While we have cleared some major hurdles to make this a reality, several remain. And just as with any real estate transaction —
We must not let this opportunity pass. It is imperative that we ask legislative leaders to do what is best for the economic future of the state and get the incentive package done so Foxconn can get a shovel in the ground and show other global companies why they should also be investing in Wisconsin.
Curt Pitzen is with NAI MLG Commercial and chair of the Commercial Association of Realtors Wisconsin. This commentary was submitted on behalf of Ben Adank, SARA Investment Real Estate; James Barry III, The Barry Co.; Dan Cohen, Mid-America Commercial Real Estate; Scott Furmanski, CBRE; Paul Galbraith, Irgens; Jeff Hoffman, Cushman & Wakefield, The BOERKE Co.; Mark Irgens, Irgens; Steve Pape, Founders 3; Scott Revolinski, Founders 3; Dan Rosenfeld, Mid-America Commercial Real Estate; Tom Shepherd, Colliers International Wisconsin; Scott Welsh, Colliers International Wisconsin; and Adam Williquette, Anderson Commercial Group.