Comments Off on The Power of Basic Job Announcements
Location remains the golden rule when making real estate investment and development decisions. Buying and developing in a growing, diversified market heightens the likelihood an investor/developer will make a profitable decision that meets discount rate thresholds. Your 401K and SEP IRA advisors have drilled diversification into your brain. While location, including the importance of a diversified market, is a critical driver of real estate success, there is more to making a profitable real estate investment. Determining whether an investment decision will meet an investor’s discount rate (preferred rate of return) can be a tedious, dynamic, and complicated process. Understanding market dynamics is critical to any successful real estate investment or development. This article will provide a crystal ball on how to decipher market stability while having a tool to help project market growth.
What is the single biggest impact on a local economic area? Jobs. But – and that is a big BUT – not all jobs are created equal. “Basic employment” is the queen to driving an economy. Basic employment is made up of industries that rely on external factors (beyond the local economic area) to fuel demand. Basic employment produces and/or supplies more goods and services than can be consumed by the local economic area (Ex: Morgantown MSA) which results in consumption outside of the local community. Examples of basic employers close to BDR’s home base include NIOSH, WVU Medicine and Mitsbuishi. On the other hand, non-basic employment depends almost entirely on local demand. Non-basic employment is defined as goods and services that are solely (or almost solely) consumed by the local economic area. Examples of non-basic employers include dental practices, pediatricians, hair stylists, and restaurants.
The two types work together. Non-basic employment supports the demand created by basic employment. This inflow of dollar (increased purchasing power) comes from outside the local economic area. The Economic Base Multiplier (EBM) is a measure that provides an estimate of how changes in basic employment will affect total employment, number of households and purchasing power within a local economic area.
Site To Do Business is an excellent tool for this type of analysis. The bullet points below provide Economic Base Multiplier data for several Multiple Statistical Areas (MSA) within three hours of Morgantown, WV.
Morgantown MSA: 4.06
Martinsburg, WV/Hagerstown, MD MSA: 6.56
Wheeling, WV MSA: 3.26
Pittsburgh, PA MSA: 9.69
Parkersburg/Vienna, WV MSA: 2.65
Charleston, WV MSA: 1.73
Huntington, WV/Ashland, KY MSA: 1.80
Over the past 12 months, West Virginia has enjoyed significant economic momentum.
Mitsibishi is in the process of bringing an additional 240 jobs to Harrison County. Another deal is in the works for Morgantown Industrial Park which could bring ~150 jobs with scalability for much greater employment. Beyond north central WV, Green Energy recently announced their intent to build electric buses in a new South Charleston manufacturing facility. Green Energy plans to hire 200 jobs initially with potential to scale to 900 WV workers within 24 months. Nucor is constructing a $2.7B, state-of-the-art steel making mill in Mason County, WV. Once fully operational, anticipated employment is 800.
Economic base multiplier theory tells us total job creation is well beyond the job announcements highlighted above. Utilizing the closest MSA’s EBM results in the following jobs created:
Mitsubishi: Utilizing Morgantown MSA’s EBM, 240 basic jobs results in 974 total new employees.
Confidential User: Utilizing Morgantown MSA’s EMB, 150 basic jobs results in 609 total new employees.
Green Energy: Utilizing Charleston MSA’s EBM, 200 initial basic jobs results in 346 total new employees. Assuming the operation scales to projected capacity, 900 basic jobs results in 1,557 total new employees.
Nucor: Utilizing Parkersburg MSA’s EBM, 800 basic jobs results in 2,120 total new employees.
Jobs drive an economy. Basic jobs lead to other support jobs, called non-basic, which is calculated via the economic base multiplier.
There are two final steps to fully understand the total impact of these announcements. Our goal is to understand the total dollars flowing into a community as a result of new basic jobs. The next step in the calculation process is to multiply the total jobs by the average household size to get an estimate on total population. The final step is to multiply total households by the average median household income. West Virginia’s state average household contains 2.4 individuals. As of 2019, West Virginia has the following statistics: Average household income is $63,680. Median household income is $46,711. Per capita income is $26,480.
The four announcements highlighted in this article result in guaranteed basic employment (could be more as the business scales) of 1,290. The economic base multiplier calculation provided a total new employment calculation of 4,049 new basic and non-basic jobs. The average household size is 2.4 individuals resulting in 9,718 individuals moving to and or being retained in West Virginia. The purchasing power of these individuals is determined by multiplying per capita income by the number of individuals. These four announcements result in a total increase in purchasing power of $257,332,640. For perspective, West Virginia’s 2020 annual budget was $4.495 billion. The four announcements represent purchasing power equal to 5.7% of West Virginia’s annual budget. These are big announcements for Almost Heaven!
Black Diamond Realty is hopeful this information provides a greater understanding of the dynamic analysis and projections that should be considered when making real estate investment decisions. Economists use many tools, including economic base multiplier, to determine the overall effect on a local economic area. Our team of experts looks forward to working with you on your next project.
Comments Off on MIP ‘strategically located’ to Attract businesses
The Morgantown Industrial Park (MIP) is preparing for expansion, and with expansion, owners hope to bring jobs into the area.
“We think we’re strategically located and will be an attractive place for someone looking to build and to come into north-central West Virginia,” said Glenn Adrian co-owner of Enrout Properties, which owns MIP.
MIP is more than 500 acres in total. Currently, most of the development is concentrated on the east-ern part of the park. During the past year, MIP has worked with the Monongalia County Commission, Morgantown Area Partnership and the City of Westover in hopes of expanding the western side of the park.
“The proposed development at the industrial park will have a positive impact on not only Westover, it will impact our entire county,” said Dave Johnson, mayor of Westover.
To fuel this expansion, the park has been working to establish an interchange in what is now known as the Harmony Grove TIF District. The goal of the interchange is to spur additional development within the park by giving better access to the interstate.
Adrian said the recent approval of the establishment of a new TIF district, or tax increment financing district, by the Monongalia County Commission has been a big step for MIP. He said this will allow MIP to move forward with West Virginia development offices in terms of getting approval for expansion of infrastructure and roads.
As MIP looks to create direct access to the inter-state, it also continues to bring new business to the area. Adrian said MIP will announce plans to add a manufacturing facility to the area within the next 30 days in conjunction with local and state officials.
He said because of COVID-19 as well as job loss following the announcement to close down Mylan Pharmaceuticals, bringing jobs to the area is vital.
“I think this is some-thing that has been a wake-up call for not only Mon County, but north-central West Virginia,” he said. “Jobs are important and these are blue-collar type manufacturing jobs —well paying jobs — with benefits and things of that nature.”
Currently, businesses located in MIP are mainly located along the Monongahela River. This includes the SI group, WVU commercial laundry facility, Central Supply Co. and a Republic Services transfer station. Garrick Electric Co., Black Diamond Equipment Rental and others also have locations on site.
Part of what draws businesses to MIP is that it is equipped to barge products in and out, as well as rail products in and out. These two abilities, along with looking toward access to the interstate, will make MIP a desirable location for manufacturing and distribution companies.
Adrian said significant studies are required before establishing an inter-change becomes possible. These include looking at the interchange’s geometric design, studying traffic in the area and looking at environmental impact, including anything from noise pollution to impact on waterways.
MIP is in the midst of conducting these studies with Thrasher Engineer-ing. Once complete, the studies will help determine the feasibility of an inter-change with the West Vir-ginia Department of High-ways and the Federal High-way Administration.
“Really what we’re hop-ing to generate is the avail-ability of industrial sites that, with the new inter-change, would attract other types of manufactur-ing, distribution centers, things of that nature,” Adrian said.
Do you know Marcellus & Utica? Let us introduce you to Mid-Atlantic’s most popular household names.
Throughout the latter part of the past decade, most people in north central WV and southwestern PA had never heard of Marcellus or Utica. Fast forward ten years, Marcellus and Utica have become household names. How did it all happen? What changes in the energy field have we experienced in the past decade? Where are things heading in the future? What challenges must we overcome in order to maximize natural gas’s potential? This article drills down (pun intended) into Mid-Atlantic’s next energy powerhouse.
During the first wave of oil and gas energy expansion, which started in 2008 and began declining in 2013-2014, drillers were using key geological metrics to “explore” Marcellus and Utica shale plays. In the early years, positive results led to increased drilling activity. Other companies took notice. Before we knew it, north central WV and southwestern PA had a natural gas and oil boom occurring in its backyard. Heavy drilling activity led to many service providers flocking to the area to secure profitable service contracts. Service contract work includes all aspects of servicing a well, from start to finish, such as engineering, excavation, fracking, pressure control, water hauling, valve repair/monitoring, amongst many others. Thousands moved to the area. Many of the workers were brought in from out-of-state because, our local workforce did not have the experience and expertise these companies needed. Many of these workers stayed in local hotels/houses, ate at our restaurants/taverns and shopped in our malls and retail outlets. Some businesses experienced exponential growth during this period. As drilling activity continued to increase, OPEC nations flooded the global energy market. Saturation led to quickly declining commodity pricing. Once the commodity pricing dipped to a level close to or at “break even”, it no longer made economic sense for drillers to drill. Over a period of a couple years, drillers slowed or completely halted drilling plans. Why? Supply outpaced the market. Additionally, infrastructure, via pipelines, was not in place to efficiently transfer the gas to larger markets.
For 24-36 months thereafter, Marcellus and Utica activity slowed dramatically. Market saturation, which lead to depressed commodity pricing, were the primary culprits for the lull in drilling activity. Most O&G drillers capped their wells and halted production. The industry retracted and many companies went out of business or were absorbed. Major producers developed strategies to control growth and mitigate risk. Many out of state service providers, who had moved to the region to capitalize on lucrative contracts, struggled to justify having a location within the Marcellus and Utica. Many witnessed numerous businesses vacate in the middle of the night or file for bankruptcy protection against creditors. In turn, this tailspin left some landlords in precarious positions with a tough decision of whether to “throw good money at bad money” in the way of hiring a real estate attorney to file suit or simply move on by looking for another tenant. At Black Diamond Realty, we saw industrial real estate demand and office demand, albeit to a lesser extent, decrease dramatically.
What has changed? Has there been a resurgence? Many have considered natural gas the cleaner wave of the future. For decades, numerous challenges, which included regulatory, economic and intellectual constraints, existed making extraction and transmission difficult. The story is changing. North central WV and southwestern PA are in the midst of a second wave of oil and gas expansion. Unemployment rates are near record lows and wages are rising. Hotel occupancy and ADR are sharply on the rise. Restaurants are enjoying a resurgence in top line revenue. All of this is the trickle-down effect sparked by a growing energy industry.
There are three major economic drivers which are in various stages of planning, construction and implementation. The first demand driver is natural gas pipelines. Pipelines provide the infrastructure needed to deliver the natural gas to primary and secondary markets. Simply put, northern West Virginia and southwestern PA are collectively sitting on more natural gas than the 250-mile region could ever feasibly consume. Several, large-scale projects are in process which will forever change the landscape and natural gas economics.
The Atlantic Coast Pipeline (ACP) project, stretching 600 miles from Bridgeport, WV through Chesapeake, VA and ending in Robeson County, NC, is currently under construction. According to Atlantic Coast Pipeline, “The infrastructure project will generate $377 million a year in energy cost savings, $28 million a year in new local tax revenue, 17,240 new jobs in the construction industry and 2,200 new jobs in manufacturing and other new industries.” Another major pipeline is called the Mountain Valley Pipeline (MVP). The Mountain Valley Pipeline, stretching 303 miles from northwestern West Virginia to southern Virginia, will be up to 42” in diameter and will have a 50 foot easement (post-construction). There will be three compressor stations along the route which include locations in Wetzel, Braxton and Fayette Counties in WV. Both pipeline projects have faced several regulatory hurdles, including federal injunctions to halt construction, but many are optimistic the challenges will be overcome. Many other pipeline projects are in the planning, construction and implementation phases. ACP and MVP are just the tip of the iceberg. According to MarcellusDrilling.com, “There is more than $23 billion in planned pipeline investment to build more than 3,200 miles of pipelines – for the Marcellus/Utica region. If you add these 15 projects together (see chart), they will move another 17 billion cubic feet of Marcellus and Utica natural gas and 345,000 barrels of natural gas liquids (NGL) per day.” Marcellus Drilling has provided a chart showing pipeline projects in various phases of the planning and implementation process. See below.
The second demand driver is natural gas fired power plants. Coal provides about one third of the United States’ electricity. Tides are turning with an abundance of gas available within the Marcellus and Utica Shale plays. On November 1, 2018, Sara Welch of Shale Gas Reporter, wrote an outstanding article (View Article Here) which forecasts natural gas powered plant production. A few key takeaways can be found in the following statements, “Over the next several years, 26 combined-cycle gas-tubing power plant projects are planned for Pennsylvania, West Virginia and Ohio. Pennsylvania will house the most with 15 to be built, contributing 14,730 MW of capacity. Ohio will be home to eight projects that would add 7,695 MW of capacity. Lastly, West Virginia is slated for three gas-fired power projects that would add more than 2,000 MW of capacity.” Ms. Welch went on to translate how the electric power generation will translate into natural gas consumption: “The proposed power generation in the Appalachian Basin is expected to come on line by 2020, adding about 1.16 Bcf/d of gas demand.”
The third demand driver, which also poses the greatest downstream opportunity, is cracker plants. Why? Think chemistry. Cracker plants have sophisticated equipment in which the “cracker” takes ethane, a component of natural gas and breaks it down into ethylene. Extreme heat is used during the process to break apart the molecular bonds holding it together. Ethylene is the root chemical for plastics, resins, adhesives and synthetic products used in every aspect of modern life. Our society depends on this natural gas extraction process in order to enjoy many of the end products and daily conveniences, such as plastic containers, shirts, and plastic bags. Cracker plants and large industrial facilities are necessary to make this happen. One is already in the construction phase. According to MarcellusDrilling.com, “Shell Chemical Appalachia LLC broke ground in 2017 on the $6 billion complex in Monaca, PA, about 30 miles northwest of Pittsburgh. It is Shell’s first petrochemical plant built outside the Gulf Coast in decades.” Two additional cracker plants are in various planning stages. The two other potential cracker plant locations are Belmont County, OH and Wood County, WV.
To fully capitalize on the O&G boom and recognize significant downstream economic opportunities, this region needs to overcome three primary challenges.The challenges listed below can be overcome via collaboration and cooperation amongst various public and private sectors.
Black Diamond Realty continues to work to resolve some of the commercial real estate challenges. John Denver wrote a popular song, Country Roads, in which “mountain mama” is an internationally recognizable phrase. Our landscaping is picturesque. Our mountains are breathtaking. Both also create challenging topography. Moving dirt and expanding utilities requires significant capital which ultimately drives up land costs. Many Marcellus & Utica end-users (drillers, service providers) need large tracts of land for laydown yards, industrial buildings and eventually, as a downstream opportunity, manufacturing operations such as the plastics industry. Industrial land is typically on the lower end of the commercial real estate value spectrum. Industrial acreage in north central WV, on average, ranges in value from $75,000/acre to $225,000/acre. Our mountain-filled region provides us with natural beauty and scenic enjoyment, but it also creates a reality in which there are few opportunities to secure large tracts of land at reasonable pricing.
We would like to explore two cases that include many stakeholders, mixed with private investment, that resulted in positive outcomes for the community and business. Both assets are currently being marketed by Black Diamond Realty. Please spend a few minutes reviewing our detailed marketing flyer.
In 1910, Michael J. Owens opened Owens Bottle Works on a 40 acre site in Fairmont, WV. During its peak, Owens Illinois employed over 1,000 people and produced 180,000 bottles a day. The site was operational from 1919-1982. After closing its doors in the early 1980s, the site sat vacant for roughly 35 years. A local entrepreneur and developer, Tom Laurita, purchased the asset with the intent of revitalizing Fairmont’s east side. Mr. Laurita and his team, including Russell Bolyard, worked tirelessly and diligently with numerous federal, state, county and local agencies including WVDEP, City of Fairmont, amongst others. Over a two year period, a plan was formulated then implemented to remediate and convert the brownfield site into a thriving business park. Soil remediation, FEMA considerations and stream preservation were key factors in revitalizing this site. For their efforts, Merit Development received 2016 Brownfield West Virginia Environmental Impact Award. Today, infrastructure improvements are well underway and steel is rising from the once motionless dirt. Boasting 40 acres less than one mile from I-79, Exit 137, Speedway Business Park has three new tenants with a fourth building under roof. Explore this project via our detailed marketing flyer. Click HERE to view. Source:Merit Development’s Development Conference Powerpoint slides.
Formerly 825 acres of farmland near the Monongahela River, today’s Morgantown Industrial Park started to take shape in December 1940. In November 1941, the property was dubbed “Morgantown Ordinance Works” with a purpose of supporting the United States war efforts in World War II. A plant was built to produce ammonia for army ammunition. At its peak, the plant had more than 1,400 employees and produced about 18,700 tons of ammonia monthly. Alcohol, hexamine and formaldehyde were also produced in the plant. Near the end of World War II, operations ceased. Morgantown Ordinance Works, owned by J.W. Ruby, took over the property and turned it into an industrial park.
Fast forward several decades, and local entrepreneurs, Kevin and Glenn Adrian, purchased the park under Enrout Properties LLC. They were attracted to the investment opportunity partially because of its tremendous access (truck, rail, river and barge) plus abundance of developable land. The Adrians worked with state, county and local officials to create a tax increment financing (TIF) district. According to Wikipedia, “TIF is a public financing method that is used as a subsidy for redevelopment, infrastructure and other community-improvement projects.” Establishing a TIF in the industrial park allowed the Adrians to invest significant capital into excavation, site stabilization and infrastructure with the purpose of creating large industrial pads which are rare in north central WV. In addition to TIF, the Adrians have worked with federal and state agencies to mitigate brownfield areas within the park.
Today, Morgantown Industrial Park boasts 20+ diverse businesses that offer a range of industrial services and products. On November 1, 2018, Dominion Post quantified the park’s success with the following TIF update: “Established in 2008 with a base amount of approximately $39 million, the district was last assessed at about $79 million.” The Adrians set out to further the legacy of 825 riverfront acres in Monongalia County. Statistics show they have been very successful in overcoming challenges and capitalizing on industrial demand growth. They are far from done. Dirt is currently being moved to create two 6+ acre sites and by mid-2019. The park will add over 30 acres of additional industrial sites including one site which will provide 20+ flat acres. It doesn’t stop there. Currently, the Adrian’s are working with the appropriate county and state organization looking to improve interstate access to the park which would provide over 100 acres of additional industrial sites. The Morgantown Industrial Park understands the potential downstream impact that the oil and gas boom could have on North Central WV. They plan to be ready with sites and infrastructure to support that growth. Explore this project via our detailed marketing flyer. Click HERE to view. Source:http://www.uppermon.org/news/dominion%20post/DP-MIP-22Aug11.html, http://wajr.com/monongalia-county-commission-receives-good-news-on-tif-districts/
Coal will, most likely, always be a source of energy in the United States. It is virtually impossible to completely eliminate it as an energy source. However, coal’s days of being the “black diamond” of West Virginia, are fading. Marcellus and Utica have taken center stage.
Westover mayor seeks support for possible new interstate exit
Westover Mayor David Johnson encouraged citizens of Westover and council members to attend an upcoming Morgantown Monongalia Metropolitan Planning Organization meeting to show support for a possible new exit coming out of the Industrial Park.
Johnson informed Westover council members about the meeting at the Westover city council meeting Monday. The MPO meeting will be from 4-7 p.m. Thursday, September 20th. “This Thursday, we have an MPO meeting at the council chambers,” he said. “What they are going to discuss is the possibility of another way in and out of this Industrial Park out here. The first initial idea was to go on past, out to where the overpass goes over the interstate and make that a full-fledged exit.”
Second ward council member Leonard Smith said, “I thought that’s what they were going to do.” Johnson said with studies on various possibilities, alternative routes and ways of doing things are necessary in case of problems arising, but the exit would be a good thing for Westover and its residents.
“The first option that we discussed was coming out where the Master Graphics Road is,” he said. “Just before you get to the overpass, there’s a road that turns down to your left. They want to come out of the Industrial Park and come out about where that road comes out because that Industrial Park comes clear out almost to the interstate, with the exception of a few properties between the two. They would have the off and on ramp there.” “The significance of this is that we would be able to get about 90 percent of this big truck traffic out of Westover because about 90 percent of it will be able to get off and on at that exit, and we’d never see them on Dupont Road or on our streets, making the turns down there by the bank. You’d still have some local traffic, but you wouldn’t have the traffic like the big garbage trucks, especially the sand trucks from the oil and gas industry. They could all use that exit, and they’d be right on the interstate.”
Johnson said another benefit would be for the residents that live near the Industrial Park. “That coupled with the fact that everyone who lives out that way will not have to come all the way down by the school, all the way out Dupont Road, all the way down to the interstate,” he said. “They can get on the interstate right there and switch on and off. It will be very successful.” Johnson said funding would be the main issue to work through. “The exit at Star City is going to be completely redone in the next year and a half or so, and that money, that’s going to be funded by TIFF money. They already have the money for that” he said. “The problem with this new exit, or whatever alternative route we decide on, there’s no funding for it yet.” “I do know this much, the MPO is going to put in whatever we decide on, they are going to put in for a—they have to change their long-term control plan and get that approved by the federal government. It’s going to be a process.”
After the meeting, Johnson issued a statement requesting residents to attend. “The meeting on Thursday is very important,” he said, “and I’d like to reach out to a lot of people that live on River Road and in that area, and everybody in Westover because we are being impacted by the trucks here in Westover. Not only do the people of River Road have to come through Westover and deal with that truck traffic as well, so they can just jump on the interstate.” “I think the important thing is to have a good showing and have people here to voice their opinions to the MPO, and the people at the MPO will listen. They’re open-minded. Several of us think this interchange is the best option we have to look at.”