COOLIDGE — Business and economic experts from around Arizona and the United States met on Zoom early Friday morning to discuss the impact of the COVID-19 pandemic on the national and international economy as part of the monthly Pinal Partnership meeting.
The discussion was scheduled to examine Pinal County’s future as a hub for electrical vehicle manufacturing. However, the conversation veered into a deeper look at the impact that the pandemic, and the mandated shutdown of many businesses, will have on the economy.
While the entire panel of business leaders agreed that efforts to slow the spread of the virus have significantly slowed the full-steam-ahead progress of the economy prior to the start of the pandemic, some were in disagreement over what financial and enterprise opportunities could be available in a post-pandemic future, especially for Arizona and Pinal County.
Many panelists were optimistic that the efforts to stabilize the economy put forth by the most recent stimulus package will ultimately put ample funding opportunities on the table for businesses and make Arizona a more attractive destination for companies seeking to relocate from the east and west coasts.
According to Paul Hughes, executive vice president of business development at the Arizona Commerce Authority, companies that are seeking to move from regions known for their higher costs of living and employment like New York and California might be spurred by the pandemic to make those changes faster.
“For projects that are leaving high-cost markets, they need to get out even faster now and they need to find more practical markets to move their operations,” he said.
Those companies are not limited to tech startups, he noted. They include organizations that have been more traditionally based in New York and California, with companies like Nationwide Insurance announcing major plans to build a large scale campus in North Scottsdale.
“My personal prognostication is we’re going to see more banking and finance coming to the state, and we’re going to see more projects coming to the state that require a technical workforce without breaking the bank,” Hughes said. “They could still reduce the payroll for the people that they would be hiring, but these are still excellent wages for Arizona. When we see projects coming in where the average wage is $150,000 to $160,000, those are nice wages. We see more of that coming.”
But other experts were cautious against getting quite so optimistic so soon.
“What’s happening in New York, what’s happening in California, is coming for you,” said Tom Stringer, corporate real estate advisory managing director for BDO. “It is going to cascade across the country in terms of work slow-downs, stoppages, closed main streets and social distancing at a level that is really going to put significant pressure on you from an unemployment standpoint.”
As part of BDO, Stringer is among the leading site selection and incentives consultants in the U.S. and helps economic development prospects like Nikola Motor Company find the right location and negotiate incentives.
Stringer noted that despite the “sizable” number of major industrial projects BDO works with, all of them have been stalled for approximately three to six months.
“Most of our projects that were in the pipeline are all still a go because there is a lot of faith in the economy overall, but this is probably going to be a 12-month recession (or) depression,” he said.
The sentiment was also one that was shared by Joseph Van Orden, clinical assistant professor in the Department of Supply Chain Management at Arizona State University, who expressed concern over what a COVID-19 bottleneck on the economy may do for the electric vehicle market.
Despite the ingenuity and the promising future of projects like Inland Port Arizona, spearheaded by Saint Holdings, Van Orden noted that it’s difficult to determine if electric vehicle manufacturing projects will be able to pick up where they left off before the pandemic.
Given their status as “new capital,” the future demand of electric vehicles is unclear as markets and consumers brace for a global recession.
“I would say we were going full steam ahead into electric vehicles, if you would have asked me in January,” Van Orden said. “A lot of these projects that we’re doing here in Pinal County I was really excited about because I thought that there would be a ton of demand for it. The question is: Does that demand hold up or will we have to put a pause on that demand for a year?”
In addition, some experts were adamant that the major focus for businesses in the coming weeks and months will need to be less on growth and more on keeping workers employed.
Stringer indicated that programs provided through the Small Business Administration designed to stave off layoffs, like the Paycheck Protection Program, have been primarily created with the hope of keeping as many workers as possible employed until June.
But if the economy is not reignited by June, he warned, another round of stimulus funding will be needed. He advised businesses both big and small to focus more on retention amidst uncertain times to sidestep a recession or depression.
“The economy, regardless of anyone’s political affiliation, was humming along pretty nicely,” Stringer said. “Think of it as a race car speeding down an interstate, and somebody threw a giant monkey wrench into the engine. That doesn’t end pretty. That’s not a nice drift over to the side of the road to change a flat tire, that’s a horrific crash. And if you look at the market and you look at the job market, that’s where we are.”
Others, however, disagreed.
Julie Pettit, president of Arizona Gateway Logistics, said Arizona may be poised to recover faster from a recession now compared to previous crises in light of how well the economy was doing prior to the coronavirus outbreak.
Thus far, the economic toll of the coronavirus has not been irreparable for the local economy, with some experts pointing to the emergence of some economic development projects and the steady progress of others as a promising sign.
Nearly one month since the stock market began its slide in response to growing fears about the COVID-19 epidemic, upcoming development projects may be on hold, but few have been nixed all together, Hughes said. Out of 300, only two the Commerce Authority is involved with have been dropped.
He also noted that despite projections that responses to COVID-19 will spur an economic downturn greater than the one created by the 2008 financial crisis, Pinal County still sees the emergence of businesses planned for the region, such as the $3.3 billion natural gas facility proposed by Nacero Inc. The company is seeking to bring the plant, which would covert natural gas to gasoline, to Casa Grande.
“This event (COVID-19) for Arizona took the better part of March and put it on pause,” Hughes said. “And yet, we still had a project announcement of a $3 billion investment in Pinal County, making this the best single month we’ve ever had. So we still see deals happening, and we see some deals accelerating.”
Preparing for an eventual upswing by completing tasks like permitting during this time was another piece of advice area business leaders gave.
Jackob Andersen oversees the Scottsdale-based real estate company Saint Holdings, which has provided “shovel-ready” land for massive projects like the Lucid Motors manufacturing plant in Casa Grande and the highly anticipated Nikola Motor Company manufacturing facility in Coolidge. He said he believes that much of the prep work that goes into bringing an industrial manufacturer into the region can still be accomplished despite the stay-at-home order.
“All of these things can be happening now,” Andersen said. “And I say this to all of you to encourage you to continue that hard work and effort in permitting, in working through incentive programs, etc. That work can be done now, so that when we come out — and we will come out positively on the other end of this — we come out strong and ready for business.”