Startups Moving to Big Cities
In August 2012, the Wall Street Journal published an interesting article that suggested that startups are moving to big cities in greater numbers. Now, in 2016, New York City is a perfect example of why startups are locating their businesses in the Big Apple: lower business taxes.
A major part of Governor Cuomo's agenda for New York State was to attract more businesses by lowering the tax rate from the former 6.5% to 2.5% over a three year period. The end result for startups is $32 million in tax relief. The theory for businesses in other states seems to be that as NY City goes, businesses in other states follow. Already, neighboring states are discussing lower tax rates for businesses to attract startups.
Why are Startups Important to the Economy?
In many states in the US, startups represent a unique and very lucrative economic factor that has a proven track record of increasing the private sector business base and also private sector employment. With such economic impact on cities, this is a 'win win' for cities and startup businesses.
Why Startups are Moving to the Big City
Every decision is a big one for a small business. Deciding to move to the big city is not as simple as making a decision and booking a moving company. NYC is a thriving metropolis, and you have to be certain before you can take the chance on entering that jungle.
For startups, the natural inclination is to locate in high visibility areas where the largest numbers of consumers exist. Formerly, as the Wall Street Journal article of August 2012 stated, startups located in small suburban malls or large business complexes. The basic reason these venues are no longer the locations of choice for startups is due to higher local municipal taxes and costs associated with daily business operations.
Access is a key element that also plays a role in why startups are moving to the big city. In major cities, startups have the advantage of a permanent urban base of business in greatest volume. Startups also enjoy an increase in customers due to big cities with state-of-the-art transportation and airlines that also expose these businesses to a broader national and international consumer base.
Less Zoning Restrictions in a Big City
Another reason startups move to the big city is zoning. Startups are not as restricted by zoning regulations since a big city zoning is likely to provide for greater commercial zoning density. Startups find this a big savings in the cost of zoning permit applications, meeting with zoning boards and providing costly location and use maps and other business specifications. In a big city, it is a simple matter of registering the business in existing business zoned locations. The other problem for startups in suburban areas is usually whether or not their choice location will meet with the suburban residential base. This often causes long, drawn out battles between startup business owners and homeowners who feel business is encroaching on residential areas. The type of startup may also cause problems if they are located near schools or churches. Many zoning boards in suburban areas can be selective of startup locations that are not conducive to the overall 'tone' of the town.
More Opportunity for Savings
In big cities, there is another feature startups consider. Most cities have redevelopment agencies that refurbish and upgrade older buildings on a regular basis to suit business needs.
In suburban areas, startups find they must apply for land development permits and build new business structures once all permit applications have been approved. This also involves local land development and zoning agencies monitoring the density of businesses applying for land use and construction permits.
Big Cities - Ready for Business Startups
One thing that is a major consideration for startups is the time involved in locating a business site and getting a business up and running as quickly as possible. Many certificates of occupancy in big cities are required only if the startup builds a new structure or if the existing structure has a use, occupancy or egress change. However, each big city has variables in requirements for certificates of occupancy. Big cities offer the advantage of providing these certificates in a timelier manner than many suburban towns.
Startups are moving to the Big City in larger numbers due to stable urban economies and for lower costs to startups for use of utilities and natural resources. Perhaps, the biggest reason for startups to move to a big city is to become part of a proactive, cost-effective business community.