Toronto construction executive William Metzler says that he still recalls his astonishment when, in late 1988, a real estate broker sent him a For Sale listing for a six-storey industrial building on 10 acres in downtown Buffalo, N.Y. The price: $1.4 million. “We thought they forgot to add a zero,” said Metzler, adding that a similar property in Toronto would have cost between $30 million and $50 million. Metzler’s company, Rae Brothers Inc., bought the building and is now spending millions more to turn it into an upscale shopping complex. Like hundreds of other Canadian firms that have established a foothold in Buffalo, Rae Brothers is hoping that its investment in the once-decrepit border city will soon yield healthy returns. Declared Metzler: “The beauty of an investment in Buffalo for a company with roots in Toronto is that it is only a few hours away by car. That gives us tremendous comfort.”
Although it began in the 1970s, the steady migration of southern Ontario companies to the Buffalo area has recently become a stampede. Between July, 1987, and June, 1990, 83
Canadian companies set up business in the Buffalo area, according to the Greater Buffalo Chamber of Commerce. Most say that they were attracted by Buffalo’s lower labor costs and its location within the huge U.S. market. They add that U.S. municipal and state authorities tend to be more supportive of business than their counterparts in Canada. Declared Buffalo Mayor James Griffin: “I try to cut through the red tape when I have interested business people from Canada.”
Griffin and his officials have laid out the welcome mat for many Canadian-based businesses. In the late 1970s, the economy of the Buffalo area declined sharply because of the departure or dramatic downsizing of several major employers. To lure new business, state and municipal officials now offer a wide range of incentives, including low-interest loans, employee training programs and property tax deferrals that can last up to seven years.
The pursuit of Canadian entrepreneurs has become an increasingly important aspect of Buffalo’s economy. New York’s state government has established an office in Toronto to
field inquiries from Canadian businesses. As well, both the Greater Buffalo Chamber of Commerce and the Buffalo Enterprise Development Corp. are actively trying to entice Canadian firms to the city. Virtually every large Buffalo law firm and bank has a department that caters to Canadian clients.
In total, Canadian companies have pumped about $263 million into Buffalo’s economy since 1989, making the city of 328,000 one of the few bright spots in the recession-battered U.S. Northeast. “Fourteen years ago, the Buffalo waterfront was a wasteland and the downtown was a disaster,” says Griffin. “The interest of Canadians has been a key contributor to the city’s recent success.”
Launchpad: Many Canadian companies in Buffalo appear to have prospered in their new surroundings. Last
0 year, the State University of New s York at Buffalo surveyed 58 Canadian
1 firms that had moved into the area, and found that their annual sales averaged $10.3 million in 1989, compared with $1.15 million in 1979. Food processing, furniture manufacturing and machinery companies achieved the strongest gains. Said Alan MacPherson, a geographer who co-wrote the report: “These companies are using Buffalo as a launchpad into the U.S. market.”
Canadian executives in the Buffalo area also speak of another factor: the huge potential for expansion. Jack Rogers, president of Mississauga, Ont.-based Canadian Spirit Inc., opened an office 18 months ago in Niagara Falls, N.Y., on the Canadian border just 38 km north of Buffalo. The company, which makes customized business gifts, now generates 25 per cent of its revenues in the United States. Said Rogers: “It will be a short time before the U.S. business surpasses the Canadian operation.”
Rogers says that he owes part of his success to lower costs. His firm pays workers about $5.75 an hour, compared with an average of $10 an hour in Canada. He added that the business environment in Buffalo is more positive than in Canada. “It’s exciting here,” he says. “The climate is excellent for our business.”
Newell Kraik is also enthusiastic about opportunities in the United States. Last June, Kraik moved his company, which manufactures plastic hoses for the petroleum and chemical industries, to Buffalo from Mississauga. “I was born in Canada, and it’s hard to leave home,” he acknowledged. But Kraik, 28, says that he was “fed up” with Canadian taxes and interest rates. He added that it was difficult in Mississauga to hire dedicated workers. “Last year, seven of my employees worked for 20 weeks and then quit to collect unemployment insurance,” he says. “The work ethic in Buffalo is different. People here value their jobs.” For Kraik, the short hop over the border has made an enormous difference.
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