HomeMy WebLinkAboutEconomic Impact Analysis•
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ECONOMIC IMPACT ANALYSIS
COLUMBUS OFFICE TOWER
(Office Development)
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- Prepared by -
Lambert Advisory, LC
- Prepared for -
Cousins Properties
December 3, 2003
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Economic Impact Analysis — Columbus Office Tower
Economic Impact Analysis
Columbus Office Tower
Lambert Advisory has completed an Economic Impact Analysis for the development of
Columbus Office Tower, a Class A office tower located on the northwest corner of
Biscayne Boulevard and Flagler Street in the City of Miami. The analysis contemplates
the tangible direct and indirect economic impact which will be derived from the
construction and operation of the development. The objective is to identify various
benefits created by the Columbus Office Tower development and prepare an estimate of
such benefits to the City of Miami. We have completed this analysis on the bask that
the performance of the project in terms of lease rates, absorption, timing, and costs as
provided by Cousins Properties. We have not independently verified this information or
data.
The Columbus Office Tower property is situated in the heart of Miami's downtown
Central Business District. The property is adequately accessible to major thoroughfares
including US 1, 1-95 and 1-395. The office and retail development will have a positive
impact on the downtown Miami area and surrounding community in terms of taxes and
jobs generated, general investment, as well as enhance the area's commercial/retail
demand. Accordingly, this development will at minimum help maintain economic
stability within the area and, if successful, attract on -going investment during the next
several years. To this extent, the project is deemed to be important to the downtown
Miami area because it should enhance the development momentum that has
strengthened recently with proposed projects such as One Miami and, furthermore, it
will: 1.) potentially pre-empt the development of new large scale office development in
surrounding areas of the region (such as West Dade, North Dade, and/or South Broward
Counties) that, if built, could draw business from outside of the City; and, 2.) provide
direct support and synergy for both current and proposed retail and housing
development in the downtown area.
Presently, the property comprises 30,000+ square foot of retail space', consisting
primarily of small, local shops and services. As will be identified herein, the economic
impact of the proposed development far outweighs that of the current use; specifically,
as it relates to employment, area expenditure potential and taxes/fees to the City.
A profile of the project is as follows:
Miami Dade County Property Appraiser
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Economic Impact Analysis — Columbus Office Tower
Columbus Office Tower
Building Features & Profile
General Features
Site Size
Building Height
Office Space (rentable area)
Retail Space (rentable area)
Number of Parking Spaces
Detailed Building Profile
Gross Building Area (wlparking)
Development Area (FAR)
Office FAR
Retail FAR
Gross Parking Area
1.30 acres
578 Feet
661,000 sq.ft.
30,000 sq.ft.
1,260 spaces
1,208,816 sq.ft.
691,101 sq.ft.
661,593 sq.ft.
29,508 sq.ft.
512,908 sq.ft.
Source: Cousins Properties
Development of the Columbus Office Tower property is expected to commence
construction by mid-2005. The development process is anticipated to be approximately
thirty six months, with occupancy planned for mid-2007.
Based upon the information provided by Cousins, construction and subsequent
operations of the Columbus Office Tower development will generate considerable
benefits to the immediate area, the City of Miami and the metro -Miami community.
There are four key areas where the project will provide positive economic benefit:
• Short -Term construction employment and expenditure
• Long -Term office worker (tenant) expenditure impacts and support for new
housing demand;
• Long -Term operating employment, operating expenditure, property taxes, and
occupation/use fees; and,
• Indirect secondary and tertiary flow through benefits.
For both short-term and song -term impacts, which are detailed in the following analysis,
the economic benefit to the area is the result of projected increase in revenue from
primary sources including employment, wages, and taxes. Accordingly, the impact from
these key sources comes from two distinct measures:
1.) Direct Expenditures — include disbursements for site acquisition and development
(hard and soft costs); and,
2.) Indirect Expenditures — net additional expenditures that flow into the local economy
as a result of the new development.
We have made an attempt to quantify the tangible impacts from direct and indirect
expenditures. However, potential intangible impacts such as the project's ability to
serve as a catalyst for future development in the immediate area is not included in the
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Economic Impact Analysis — Columbus Office Tower
analysis since it is almost impossible to capture these ethereal aspects of the project in
numbers.
The following analysis sets forth the economic impact the four key sources as follows:
Impact from Short -Term Construction Employment and Expenditure
The impact from short-term construction employment and expenditure is directly
associated with the project's development; the following table details estimated
development costs as provided by Cousins Properties (rounded):
Development Costs
Columbus Office Tower
Item
Cost
Hard Costs
$ 122,500,000
Additional FF&E (Tenant Build -out Cost)
$ 6,400,000
Soft Costs
$ 52,500,000
Total
$ 181,400,000
Note: Hard Costs indicated above include $40/sq.ft. for developer's tenant improvement allowance (TI).
However, developer indicates that an average $10/sq.ft. in furniture, fixtures and equipment (FF&E) will be
expended by Tenant in excess of the 11 allowance; therefore, this additional estimated build -out expenditure
has been added to the total development costs.
While the vast majority of expenditure of each of these items will be made within Miami -
Dade County, the City of Miami will capture a significant share of the outflow from
development.
Of hard costs, approximately 60 percent ($77.3 million) will be spent in labor and 40
percent ($51.5 million) in materials. Over an estimated 36 month pre -construction and
construction period at an average annual construction wage of $34,420 in Miami -Dade
County' and a 1.4 times benefit/overhead multiplier per worker, there will be nearly 535
Full Time Equivalent (FTE) jobs created over the period.
Additionally, based upon soft cost budgets provided by Cousins Properties,
approximately $20.0 million will be spent in professional fees including but not limited to
architecture, and engineering, legal, and brokerage commissions; at least 60 percent of
these fees is assumed to be entirely to Miami area firms. Given an average profit
margin of 15% and 30% overhead for these firms, this equates to $6.0 million in total
professional wages.
Taxes and impact fees to the City and County during the construction period will be
approximately $1.8 million which will be available for public expenditures associated with
the project including developmental, administrative, permitting, and other costs. A
detail profile of impact fees and other relevant non -impact fees paid to the City and
2 State of Florida 2002 ES-202 (Quarterly)
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Economic Impact Analysis — Columbus Office Tower
Miami -Dade County as a result of the development of Columbus Office Tower is included
in the following table:
Columbus Office Tower
Economic Impact Analysis
Impact and Other Fees
Impact Fees: Total
City of Miami Development Impact Fee (Ord. 10426) $830,012
City of Miami Development Impact Admin. Fee $24,900
Miami Dade County Schools $0
TOTAL IMPACT FEES $854,913
Other/Non-Impact Fees:
Miami Dade W.A.S.A. Connection Fee $439,671
Building Permit Fee $229,195
Roadway Impact Fee $0
Variance Fee (height) $0
Energy Installation Fee $120,401
M.U.S.P Application Fee $65,000
Dade County Code Compliance $83,030
Radon Gas Fee $12,040
Fire Plan Review Fee $10,836
Ground Cover Fee $1,133
Land Use/Zoning, Review for BIdg.Permit $1,076
Certicate of Occupancy $250
Application Fee $35
TOTAL OTHER FEES $962,666
TOTAL PROJECT FEES $1,817,579
Source: City of Miami Planning, Building & Zoning Dept.; Miami Dade County; Cousins Properties
Note: Represents primary impact and Other/Non-Impact Fees related to Columbus Office Tower. Additional
Fees (including but not limited to inspection fees, demolition fees, installation fees) may be required
by developer upon commencement and/or progression of development.
On -Going Impact from Tenant and Shopper Expenditure
Based upon, approximately 661,000 total rentable office square feet and 30,000 square
feet of rentable retail square feet, including a 10% vacancy factor, and an average 250
square feet per employee for office and 500 square feet per employee for retail3,
Columbus Office Tower will accommodate approximately 2,434 workers. We assume
that approximately 50 percent of the Columbus Tower office workers will be new
workers to the Downtown area; or, 1,217 net new office workers to the downtown
district. Based upon data published by the National Retail Association (in conjunction
with a 2002 survey conducted by the International Council of Shopping Centers), the
average office worker spends roughly $3,900 annually on goods and services during the
work day, Therefore, with a total of 2,434 workers in the building, and an estimated
3 BOMA Experience Exchange Report 2001; ULI Dollars and Cents of Shopping Centers 2000
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Economic Impact Analysis — Columbus Office Tower
average expenditure per worker of $3,900, total worker expenditures are estimated to
be more than $9.5 million. Considering that 50 percent of the workers represent net
new expenditure to the downtown area, the marginal expenditures to flow into the
Miami area is in the range of $4.75 million.
Columbus Office Tower
Office Worker Expenditure and Retail Demand Estimates
Stabilized Year - 2008
Net New
Employees
Avg.
Annual
Expend./
Employee
Total Office
Worker
Expenditure
Sales
Per Sq.Ft.2
Net New Retail
Demand
(Sq.ft.)
GAF01
1,217
$1,143
$1,391,000
$247
5,631
Eating and Drinking
1,217
$2,150
$2,616,000
$375
6,977
Conv,/Services
1,217
$616
$750,000
$370
2,026
Total
1,217
$3,909
$4,757,000
$325
14,634
1.) General Merchandise, Apparel and Accessories, Furniture and Appliances, other Comparison Goods
2.) Urban Land Institute: Dollars and Cents of Shopping Centers 2000; Lambert Advisory
To measure the marginal impact of $4.75 million in office and retail worker expenditure
on retail sales and additional space demanded, the table above highlights additional
retail expenditure and the amount of net new retail space in the downtown area that
may be supported as a result of development of the office tower upon stabilization
which is anticipated to be mid-2008.
In addition to the impact that Columbus tower workers will have both locally and
regionally, the development includes 30,000 square feet of retail that will occupy the
ground floor of the building. This additional retail space will primarily attract
expenditure from the building and surrounding properties, as well as a limited amount of
additional support from visitors from outside of the area. Assuming that 15 percent of
the expenditure in the Columbus tower stores comes from outside of the City, and based
upon a Sales per Square Foot (for Shopper Goods) of $308, dose to $1.35 million will be
expended within the City per year which is now going to other areas. Accordingly,
increased sales tax revenue would result from the operation of the 30,000 of retail
space. Assuming the net new retail expenditure in the stores of $1.35 million,
approximately $87,000 in additional sales tax will be collected from retail sales.
Importantly; along with the retail demand that may be supported by the Columbus
development, the project will help support new housing demand as well. In order to
derive a factor to "convert" this downtown employment to residential demand, we
reference a study conducted by the Miami Downtown Development Authority (1998)
that surveyed downtown office workers to measure their interest in living within the
CBD. The survey indicated that 18 percent of all office workers were "very likely" to live
downtown (provided desirable available product) and an additional sixteen percent
indicated that they would be "somewhat likely" to live downtown. Therefore, if we
assume that 70 to 100 percent of the "very likely" candidates will actually move
downtown, and 10 to 20 percent of the "somewhat likely" move downtown, we estimate
an office worker -to -resident "conversion" factor of 18 percent to 26 percent. Therefore,
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Economic Impact Analysis — Columbus Office Tower
based upon the 1,217 net new employees that will be working downtown, and utilizing a
"conversion" factor of 20 percent, the Columbus Office Tower may support demand for
240+ housing units in the downtown area.
Impact from On -Going Operations of the Building
There are a number of areas where there will be positive public benefit or economic
impact from the on -going operation of the office space. These include:
• Additional Employment from Operation of the Office Tower
• Property Tax Revenue to the City of Miami and Miami -Dade County
• Occupation/Certificate of Use Fees to the City of Miami
• Purchase of Goods and Services
We estimate that approximately 60 FTE workers will be needed to operate the building.
Skills ranging from building management, parking garage attendants, maintenance and
engineering staff, cleaning and security personnel will be required. Accordingly there
will be at least an additional 40 FTE workers to operate the retail. At an average Miami -
Dade County wage of $34,6354 the operation of the building will create approximately
$3.5 million in wages each year. Jobs created will be available to a wide range of area
residents with various skill levels,
Additionally, an estimated $1.7 million in goods and services will be purchased on an
annual basis within Miami -Dade, This includes cleaning services, maintenance supplies,
utilities, etc.
Finally, the Columbus Office Tower development will provide significant benefit to the
City and County by way of real property and personal property (ad valorem) taxes. The
tax amount is based upon the County Tax Collector's (2002) millage rate of 26.8205 (per
thousand dollars of value), broken down as follows:
State of Florida 2002 ES-202 (Quarterly)
5 BOMA Experience Exchange Report 2001
Economic Impact Analysis — Columbus Office Tower
Columbus Office Tower
Economic Impact Analysis
Ad Valorem Tax Breakdown
Annual
Item Millage Tax,
City of Miami Operating
City of Miami Debt
School Operations
School Debt
Environmental Projects
S. Florida Water Management
FIND
County Millage
County Debt
Library
TOTAL
8.850
1.218
8.482
0.77
0.100
0.597
0.0385
5.889
0.39
0.486
$1,440, 559
$198,260
$1,380,658
$125,337
$16,278
$97,177
$6,267
$958,582
$63,482
$79,109
26.$205 $4,365,707
Source: Dade Miami Dade County Property Appraiser
Real property is typically assessed at between 80 and 90 percent of Fair Market Value.
For this analysis, we estimate ad valorem taxes for Columbus Office Tower based upon
85 percent of the projected total acquisition and development cost of $190+ million, or
$162 million in assessed value. Therefore, the real property taxes to the County that
will be generated annually from the property should exceed $4.3 million by 2008
(roughly 40 percent of which flows to the City). Accordingly, this represents an
estimated net marginal increase of roughly $4.0 million ± over the ad valorem tax
collection the County would receive based upon the 2003 assessed value of $8.6+
million.
Lastly, the City will benefit from Occupational License fees and Certificate of Use from
the business occupying the tower. The City has a comprehensive fee schedule for
determining Occupational License rates for various types of professional businesses — for
example, Attorneys and CPA offices are charged $110 for each licensed individual within
in the business, as opposed to a four person consulting practice that may be charged a
single $110 fee for the office. Although it is very difficult at this point to determine the
precise composition of the tenant mix that will determine Occupational License fees to
the City, representatives of the development anticipate that there will be 25 office
tenants (companies) and 5 retail tenants occupying the building of which 50 percent are
estimated to be net new businesses to Miami (or 15 net new companies). Assuming
that the average Occupational License fee per company is $1,000, the City will generate
$15,000 per year in fees.
Certificate of Use permits are charged to each business and comprise Fire/Safety fee
which is fixed at $50 for each business, and Supplemental Waste fees which
approximates $0.25 to $0.30 per square foot of space. Considering this, Certificate of
Use fees are estimated to generate roughly $175,000 per year to the City.
Economic Impact Analysis -- Columbus Office Tower
Indirect Flow -Through Benefits
There will be a number of long term indirect flow through benefits beyond construction
from the project particularly from the increase in retail and operations employment. The
100 FTE jobs created as a result of building operations is assumed to have a multiplier
impact 1.2, or 120 additional jobs. All multipliers are derived from the U.S. Department
of Commerce's 1999 RIMS II model. These are indirect secondary and tertiary impacts
which are created as the ripple impact of the primary employment related to the
operation of the building which will be felt throughout the region.
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Economic Impact Analysis — Columbus Office Tower
Summary
Economic Impacts from Columbus Office Tower
Short Term Construction Employment & Expenditure
Full Time Jobs Created
Impact
535
Total Direct Wages Created
Additional Professional Wages (Miami -Dade County)
Impact Fees Toward Public Expenditure
$77,300,000
$20,000,000
$2,750,000
Total Impact from Short Term Const. Employment & Expend. $100,050,000
Impact from On -Going Office Worker Expenditure
Marginal Expenditure Growth — Office Worker (2008)
Marginal Expenditure — Shoppers (2008)
Marginal Impact from On -Going Office Worker Expend.
Additional Housing Units Supported (Downtown)
Additional Retail Sq.Ft. Supported (Downtown)
Impact
$4,750,000
$1,350,000
$6,100, 000
240 units
15,000 sq. ft.
Impact from On -Going Operations of the Building
Impact
Full Time Jobs (Office and Retail Space)
100
Total Direct Wages Created
$3,460,000
Goods & Service Purchased in Miami -Dade County
$1,700,000
Occupational License/Certificate of Use Fees
$190,000
Ad Valorem Taxes (County)
$4,000,000
Total Impact from On -Going Operations of the Building
$9,350,000
Indirect Flow Through Benefits — Employment
Impact
Full Time Jobs (Indirect) — Miami Dade County
120
Total Indirect Wages Created
$4,150,000
Total Flow Through Indirect Benefits
$4,150,000
Based upon the analysis set forth herein, the Columbus Office Tower project will clearly
have a positive economic impact on both the City of Miami (and specifically the
downtown area) and Miami -Dade County. Total employment created during the
development phase is approximately 535, with on -going annual employment (direct and
indirect) of 220 full-time jobs. Accordingly, there is an estimated $100 million impact
from short term construction employment and expenditures, and more than $15.0
million annual revenue stream from direct office worker and shopper expenditures and
building operations (including real property taxes).
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