The Crier

What Google + Pfizer Mean(t) to Ann Arbor, part 2

How has the area workforce and real estate market in Ann Arbor been affected? What will the impact in the immediate future be?

Andy Kroll · The Exchange · Nov 06, 2007

The most obvious part of Washtenaw County’s economy to feel effects of Pfizer’s departure and Google’s arrival will, undoubtedly, be the area workforce. But, in looking at current job totals for both companies, it appears that the aggregate impact of both moves will be less than what experts first suspected. Although early reports detailing Pfizer’s departure estimated the loss of up to 2100 Ann Arbor-based jobs, in reality, the amount of jobs to be relocated or eliminated by the pharmaceutical company is much lower than that. Michael Finney, president and CEO of Ann Arbor Spark, a not-for-profit economic development organization, said the current figures surrounding Pfizer’s departure amount to less than half of the initially reported figures. “In the early going Pfizer announced their intent to take with them roughly 70 percent of the people,” Finney said. “The most recent information that I have is that roughly 500 [Pfizer employees], which represents about 25 percent of the workforce, have actually accepted offers and agreed to move.”

He added, “In fact, I heard that only 1000 or so offers had actually been made, which is only 50 percent of the workforce.” Thus it appears the impact upon the workforce of Ann Arbor resulting from Pfizer’s untimely departure, though still significant, will likely be much less than first feared.

If Google finds Ann Arbor to be a good location for its purposes, it will be more likely to bring additional components of the company to the area.

Down the road about three miles from Pfizer’s state-of-the-art facility is the McKinley Town Centre building, home to Google’s new, colorful downtown office. Despite Google’s current staff numbering just over a hundred, the Mountain View, Ca. company plans to increase that total to around 1000 over the next three to five years. And, according to Finney, it is during this rapid growth period that Ann Arbor must strive to make a positive impression on Google executives and employees, to prove that the company’s decision to put roots down in Ann Arbor was, in fact, a smart one. Finney said that if Google finds Ann Arbor to be a good location for its purposes, it will be more likely to bring additional components of the company to the area. “We think this community will prove to be one where they [Google] perhaps could do some of their development work and other things here,” Finney said. If Google did bring parts of its IT or product management operations, in addition to its AdWords advertising offices already here, then it would go a long way towards filling the gap left by the loss of the Pfizer’s jobs.

(Note here: Given the nature of the company, most Google positions brought to Ann Arbor will be highly-skilled “brainpower-oriented” positions. And with an influx of these kinds of jobs, local economic experts hope this will reverse the trend of talented university graduates feeling the state to pursue jobs elsewhere. This might explain Governor Granholm’s presence at almost every important Google announcement leading up to the company’s arrival.)

Along with being the single largest private employer in Washtenaw County, Pfizer is also the county’s single largest taxpayer, and losing the company will likely take its toll on area tax revenues. The Michigan Daily reported in January that Pfizer paid the city around $13 million in taxes in 2006, which represented more than four percent of the city’s property tax revenues. Finney said he believes the loss of Pfizer’s tax dollars could affect public organizations and services. He said there will be “a clear impact” in local government-funded entities like public schools, local law enforcement and other city services.

The impact seen in the real estate market – a noticeable dip in property values midway through the year, followed by a steady increase – has much more to do with Pfizer’s departure than Google’s arrival.

In Google’s case, the amount of taxes it will have to pay to the city has yet to be seen. There have been no reports suggesting how much the company will have to pay, and there are no tax records filed on Google’s behalf available. The company reportedly received a 20-year tax credit worth $38 million, approved by the Michigan Economic Development Committee, upon agreeing to open an office in Ann Arbor. Economists familiar with Google’s tax credit say it will likely reduce the amount Google is required to pay annually, if they pay anything at all for the duration of the credit.

According to real estate agents Eric Pointer and Todd Waller, representing Real Estate One of Ann Arbor, the impact seen in the real estate market – a noticeable dip in property values midway through the year, followed by a steady increase – has much more to do with Pfizer’s departure than Google’s arrival. Interestingly enough, in the case of Pfizer leaving Ann Arbor, it has been somewhat of a blessing in disguise for area homebuyers and homesellers compared to markets elsewhere in the state. “Pfizer’s pullout simply accelerated the learning curve in our market,” Pointer and Waller said. What this means is that Pfizer leaving forced buyers and sellers to recognize that Ann Arbor housing prices appear to be heading toward, if they’re not already at, prices representative of the real estate market in 2001. It’s the stuff of Econ 101 classes: When demand falls (as it did in the aftermath of Pfizer’s departure), so does price.

“When you look at the housing crisis and the decline in southeast Michigan versus the decline just in Washtenaw County,” Waller explained, “Pfizer pulling out, and the sheer number of units that they had in this county, dropped the prices. And it forced homebuyers and homesellers to look around and say, ‘Oh, that’s how we sell a house.’” Pfizer leaving forced homeowners to drop their buying and selling prices to a certain amount, as dictated by the local real estate market, where the need to buy and sell real estate (the former representing supply; the latter, demand) meet, and, essentially, where houses begin selling again.

In the case of Google, Pointer and Waller both believe that the company’s arrival won’t have any negative effect on the local housing market. It is also very unlikely that Google’s arrival will impact the cost of living for nearby students as they will not be renting or purchasing the same types of homes and properties that Google employees will be purchasing. Ultimately, the housing market will likely continue its upward trend, with the entrance of Googlers into the market increasing the market’s current success.