NOLAN FINLEY
Consumers shop in those cavernous warehouse stores not for the aesthetics or service, but because they offer bargains. Maybe Detroit's best hope for revival is to sell itself as the Sam's Club of American cities.
In a fine example of turning lemons into lemonade, Detroit -- once the poster city for high labor, tax and operating costs -- is getting noticed as a low-cost place to do business.
"Detroit is now competitive with many of the offshore locations," says Timothy Bryan, chairman of Galaxe Solutions, a New Jersey software firm that plans to bring 500 jobs to the 1001 Woodward Building over five years.
"Companies are looking to bring back jobs from overseas, and Detroit is in the best position of any city in the United States to compete for that investment."
It's about supply and demand. Vacancy rates in downtown buildings are at 70 percent. That creates a "make-me-an-offer" environment, driving down rents. Class A office space is listed in the $18 to $19 per square foot range, with many deals coming in much lower. That's half the going rate in Chicago, and about the lowest in the country.
Bryan says he got a "very favorable rate" on his space. He also got $4.2 million in tax incentives from the state, which is more than happy to buy jobs.
As much as the cheap rent and gift from the state, Bryan says he was attracted to Detroit by the pool of skilled workers. Employees who have washed out of the automotive and finance industries are a perfect fit for his positions, which he says pay on average $63,000 a year.
That's a good salary in this town today. Overall, the cost of labor in Detroit and Michigan is coming down, thanks to concessions won by the domestic automakers. The Big Three set the wage standard here, and now that they're paying new hires $14 an hour instead of $30, it brings down the overall cost of labor for everyone else.
Depending on which side of the paycheck you're on, that's good news or bad. But it tears down what once was a barrier for jobs coming into the region. And lower wages are offset in part by lower housing costs.
There are still things we have to work on to exploit our low-cost status.
Businesses like the one Bryan is bringing here are human resource operations. Most of their costs are in employees, not equipment. And yet the Michigan Business Tax is set up for the benefit of manufacturers, providing most of the advantages to firms that invest in heavy machinery.
Detroit has the potential to become a high-tech hub -- Strategic Staffing Solutions is adding hundreds of new IT jobs to the Penobscot Building -- with smarter government policies.
If the city -- the whole state, for that matter -- were able to market itself as the low-cost locale for land, labor andtax and regulatory burden, it could parlay that into a jobs boom, and the start of a comeback.
The marketplace is taking care of land and labor costs. Now we have to get the policy right.
Nolan Finley is editorial page editor of The News. Reach him at nfinley@detnews.com">nfinley@detnews.com. Watch him at 8:30 p.m. Fridays on "Am I Right?" on Detroit Public TV, Channel 56.
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