Whatever It Takes To Grow

EXPERTS TOUT REGION’S POISE FOR FUTURE

Mike Luttrell of Springdale and property owner Tom Lundstrum, left, look over the proposed site Dec. 20 for a new Walmart Supercenter to be on Elm Springs Road near the intersection with North 48th Street. While Walmart and other legacy companies are important to the region’s economy, they cannot continue to expand at the same pace, economic experts say.

Mike Luttrell of Springdale and property owner Tom Lundstrum, left, look over the proposed site Dec. 20 for a new Walmart Supercenter to be on Elm Springs Road near the intersection with North 48th Street. While Walmart and other legacy companies are important to the region’s economy, they cannot continue to expand at the same pace, economic experts say.

Friday, December 28, 2012

Editor’s Note: Northwest Arkansas’ economy didn’t fall as far as many during the recession and is recovering faster. In a six-part series that began Sunday and ends today, NWA Media explores what’s driving the rebound and how it’s changed our future.

FAYETTEVILLE - The companies that drove growth in Northwest Arkansas’ boom times lead their fields today - and cannot expand at the same pace in the future,experts agree.

But they helped create a sound basis for the region’s future growth.

“The growth is coming from startups and tech companies, which should benefit from the scope, support and mentorship of the existing companies here,” said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas.

No one knows yet what the next growth driver will be, Deck and others said. Northwest Arkansas is in competition with other communities to find it, but the region has major advantages, she said.

“It’s not like we’re going to ignore that the world’s largest retailer has its headquarters here,” said Deck, referring to the Bentonville headquarters of Walmart Stores.

The founding of Walmart and J.B. Hunt along with the emergence of Tyson Foods and other poultry processors and food companies are recent enough the region’s business community knows and appreciates the risks involved, Deck said.

“Starting something new is a high-risk strategy,” she said.

Deck’s remarks matched a recent study of the region’s growth potential commissioned by the Northwest Arkansas Council. The council is a group of business and community leaders who commissioned the study, in part, because they recognized the region’s traditional growth industries have grown up.

“For years, growth did not need encouragement, and the region continued to prosper despite the absence of a comprehensive regional economic development plan,” according to the 2010 study. “Very simply, Northwest Arkansas can no longer afford to be only reactive.”

Market Street Services, a consulting firm based in Atlanta, examined the skill set and other economically relevant factors of the local population such as average age. The study had recommendations on likely areas of growth but no guarantees.

Perry Webb, executive director of the Springdale Chamber of Commerce, agreed: “Are we going to have a new surge with the vendors supplying Walmart or with the poultry processors? No, we’ve probably seen all of that we are going to see.”

“What we do know is that we have the right combination,” Webb said. “We have the capital, the entrepreneurial outlook, the work force, the quality of life, the technological expertise, and we’re starting to work on the infrastructure needs. All the ‘magic ingredients’ are there. If you made a list of what makes economic development occur, we have all of these.”

“It doesn’t have to be just one thing,” Webb said. “Overtime, each of the communities in this region is going to create its own little niche. We’re all going to have our own little definition in the future.”

The Market Street study found Northwest Arkansas ranked very high in ability to fill demand for workers, ranking eighth out of 353 metropolitan statistical areas reviewed. A major part of this was the population in the area kept growing despite the recession. This was thanks largely to a resilient job market with key industries that proved largely recession-proof such as food processing.

The region needs to attract other businesses, particularly retailers, to open headquarters or oftces here, according to the study.

“The region is unlikely to attract offices for major discount retailers that directly compete with Walmart, but certainly possesses the potential to attract specialty retailers that are not direct competitors,” the study said. Market research firms should also be a major target for recruiting here, the study said.

Professional services - legal work, marketing, information technology - are too low, the study found. In “a region flush with corporate activity, occupations supporting this target make up only 15 percent of total regional employment,” according to the study. The region needs another 1,125 lawyers, accountants and auditors to reach the average for an area this size, it said.

“These are core support professions that are required” to grow new firms in the region.

Specialized design and consulting jobs are particularly lower than normal for a region this size, according to the study. The apparent reason for this is that the region’s largest companies hire firms outside the region for such work. More jobs along those lines are moving here, though, according to the study.

The study proved to be an accurate forecast, particularly in its statement that there was an unfilled demand for professional services, said Mike Malone, executive director of the NWA Council.

“We’ve continued to seea lot of white-collar professional job growth, which remained strong and is coming back post-recession even stronger,” Malone said.

“From late 2009 to late 2012, professional, scientific and technical jobs in Northwest Arkansas grew 3.5 percent, compared to 1.1 percent in Arkansas and 1.2 percent in the U.S.,” Malone said. “That’s 2,300 positions that are great paying jobs that don’t have a significant environmental impact. They’re jobs anybody would love to have.”

“They’re coming from a little bit of everything,” Malone said. “Some are from expansion from our fl agship industries. Some are small and mid-sized companies expanding. Some, such as APAC-Central in Fayetteville, a highway contractor, are a regional business that decided to create a headquarters and locate it here. Others are startup companies that grew out of university research.”

Then there’s the arts, entertainment and tourism, Malone said.

“The opening of the Crystal Bridges Museum in Bentonville was obviously a huge step, but there was growth in other areas of the arts,” Malone said. “There was also the opening of destination-type restaurants and in the hospitality sector,” such as hotels.

“They did hit the mark, but in some cases they were stating the obvious,” Malone said of the Market Street study. “There are some things we are good at, and they recognized that as our categories of expertise. That’s what you should do: Figure out what you’re good at, then sell and promote it.”

New ventures will not have to turn into major players like Tyson Foods, J.B. Hunt Transport or Walmart to succeed, Deck said.

“We have to remember that if one person starts a business, it grows and hires 10 people, that’s a success,” Deck said. Enough of those smaller successes can drive the economy as well as the upward march of a few major companies, she said.

“I don’t see anything guaranteed for the future,” Deck said. “We need to take care of those businesses, that grew in the past, but they aren’t going to sustain us in the future. We have to work for this.”

There are also the lingering doubts left by recession.

“There’s an absolute fear it’s going to happen again,” Deck said of recession. “We used to have more of a sense of optimism.”

The optimism is returning, Webb said, although he agreed that businesses have been conservative and still are.

“So there’s an unbelievably huge amount of money out there sitting on the sidelines,” he said. “The communities that showed the patience and make the preparation will benefit.”

News, Pages 1 on 12/28/2012