Benjamin Pitts

Volkswagen and related industries could create demand for 3 million square feet of existing and future commercial space, but fabricate fewer jobs than has been widely anticipated, one commercial Realtor says.

Benjamin Pitts, a commercial Realtor at Herman Walldorf & Co. Inc., conducted a study of economic development in Greenville, S.C., area following BMW’s decision in 1992 to build an assembly plant in that area. Greenville in 1992 is similar to Chattanooga today, he said.

The Greenville area in 1992 had a similar population and median income to the Chattanooga area’s population and median income, Mr. Pitts said. The national economy was in recession in 1992 as today’s is “a little flat,” he said.

“Greenville made sense as an example for what might happen here,” he said.

Mr. Pitts said he analyzed a 2002 report issued by the Moore School of Business at the University of South Carolina, studying the 10-year impact of BMW on Greenville and the surrounding region. BMW Manufacturing Corp. financially supported the study.

Mr. Pitts said his estimate of 3 million square feet of space that would be needed in the Chattanooga region breaks down into three categories: 1.2 million square feet of retail/wholesale space, 1.2 million square feet of manufacturing space and 600,000 square feet of office space.

In anticipation of an explosion in demand for commercial and residential real estate, land use planners are re-examining their previous growth estimates for the eastern end of Hamilton County.

The Chattanooga-Hamilton County Regional Planning Agency is re-evaluating the Wolftever Creek Area Plan, said senior planner Kelly Martin. The land use plan adopted by city and county officials last year identifies growth priorities for roughly 21,000 acres in eastern Hamilton County. Planners are identifying vacant commercial and manufacturing locations and needed transportation improvements, he said.

HIGHWAY 58 GROWTH

The Highway 58 commercial corridor area typically lags Hixson and Ooltewah in growth, said Robert Fisher of ReMax Renaissance Realtors.

“Along 58 you’ll see new restaurants, people upgrading their properties,” he said.

One business owner who works in the shadow of Enterprise South industrial park anticipates growth because of Volkswagen.

“I absolutely do anticipate an increase in business,” said Darren Patrick, owner of Musician Training Center at 5515 Highway 58 in Harrison. The business is across from Enterprise South.

“These workers will have families,” he said. “Children are the vast majority of our client base.”

Mr. Patrick said he has heard some people complain that a portion of Volkswagen’s workers will come from out of town instead of being hired locally. But he said that bringing new people to town will create more of an economic boost to businesses such as his instead of just shuffling the existing work force.

“Helping out local businesses always helps out everyone in the immediate community,” Mr. Patrick said. “Highway 58 has struggled over the years with sustaining many of its businesses. In the year and a half I’ve been open I’ve watched many businesses come and go.”

Not all the growth will be in the eastern county such as along Highway 58, Mr. Pitts said. Downtown office vacancies created by BlueCross BlueShield of Tennessee’s move to Cameron Hill will fill some of the demand for office space, he said. Demand for office, retail and manufacturing space will be spread out over a 100-mile radius, he said.

JOB MULTIPLIERS

BMW initially announced it would employ 2,000 and opened with 2,033 jobs, Mr. Pitts said. The carmaker expanded in 1998, he said. Last March, BMW announced it would create an additional 500 jobs.

By 2002, the BMW plant had created or spun off a total of 16,691 jobs, according to the University of South Carolina study, including 3,857 employees at BMW, for a job multiplier of 3.857.

That multiplier applied to Volkswagen’s expected 2,000 jobs would mean the creation of about 7,715 jobs, Mr. Pitts said, including the 2,000 working for Volkswagen.

There has been speculation about Volkswagen creating 14,000 jobs, Mr. Pitts said.

“I came up with a number lower than the others,” he said. “I’m just trying to get a good idea on a conservative basis what the demand will be. For it to be a seven-times job multiple would be unparalleled in the auto industry.”

Not all the job creation will be in the metro area, nor will it happen overnight, Mr. Pitts said. Instead, it will be spread over a large area and will take three to five years to occur.

The 7-times multiple might be reached, he said, if Chattanooga lands additional Volkswagen operations. Volkswagen’s Audi brand is expected to announce next year where it will assemble cars, he said. As yet, Volkswagen has not announced where it will build powertrains for the vehicles produced in Chattanooga, he said.

Audi could bring Chattanooga an additional 1,500 jobs, Mr. Pitts said, and the powertrain work could bring 500 to 1,000 jobs.

Regardless of how many direct jobs Volkswagen brings, there will be growth throughout the Chattanooga region, Mr. Pitts said. There will be three categories of jobs: direct jobs (the car plant), suppliers to Volkswagen (both services and goods) and induced jobs (jobs supporting the workers).

“When somebody goes to work at VW they buy groceries, they eat out, they buy clothes,” Mr. Pitts said.

enhanced recruiting power

In the end, having a car assembly plant is about more than just the number of direct and indirect jobs, said John DeWorken, a vice president with the Greater Greenville Chamber of Commerce.

“A lot of immeasurable are as important as the measurables, the measurables being the capital investment, the jobs created,” he said. “What message does that send to the economic development world? How much was the Chattanooga regional area a player before Volkswagen?”

Volkswagen, combined with the research abilities of the University of Tennessee and Oak Ridge National Laboratory, will make the region more competitive for industrial recruitment, Mr. DeWorken said.

“You have pushed forward that buzz that East Tennessee continues to be a player,” he said.