Why Detroit’s bankruptcy isn’t scaring away West Michigan businesses

Posted on July 29, 2013

DETROIT, MI — Retailer Meijer Inc. celebrated the opening of its first Detroit store last week as the city made its debut in bankruptcy court to begin the process of clearing billions of dollars of debt.

Although bankruptcy is expected to take years and make it harder for the state’s biggest city to borrow money, the move isn’t scaring away West Michigan companies.

Just eight miles from the new Meijer store, down Woodward Avenue in downtown Detroit, another Grand Rapids business quietly opened its first location within the city limits this month.

OST is the fourth Grand Rapids business in less than a year to take up residence in Detroit’s historic Grand Circus Park. The firm’s 17th-floor office offers a bird’s eye view of Comerica Park.

The location can’t be beat, says Dan Behm, founder and chief executive officer of OST, short for Open System Technologies.

“It’s really cool because I’m a huge Tigers fan,” said Behm, whose firm has season tickets for employees and clients to use.

The company has leased a 1,000-square-foot office in Grand Park Centre, at 28 W. Adams Ave., but hopes to expand its space and add more employees.

“We are really shocked with the vibrancy of the downtown,” said Behm, describing his initial response after a tour of potential sites.

Detroit’s Little West Michigan

The area has garnered the moniker “Little West Michigan,” because of the growing concentration of businesses from the west side of the state. They include web marketing firm Mindscape at Hanon McKendry, web development company Atomic Object Inc. and public and investor relations firm Lambert, Edwards & Associates.

Grand Valley State University also opened its charter school office in a three-story building in the neighborhood.

LE&A led the trend when it traded its suburban Troy location, which came with the2009 acquisition of John Bailey & Associates, for a high-profile downtown Detroit spot last fall.

The company invested $1.1 million in a nearly 9,000-square-foot leased space on the vacant first-floor retail space at Grand River Avenue at Broadway Street. (The firm even made a slick video about the build out.)

The company’s Detroit-based staff numbers 14, and continues to expand.
“We want to grow in Detroit,” said Jeff Lambert, the firm’s managing partner and president.

He credits Detroit billionaire Dan Gilbert’s Bedrock Real Estate Services for finding a location that offered a small footprint with a big presence.

Along with the West Michigan investment comes much-needed jobs for the region.

The opening of the Detroit Meijer store created 550 full- and part-time jobs in an area plagued by chronic unemployment. OST plans to double its current Detroit-based workforce of seven, with high tech jobs in the areas of application development, technical consultants, project managers and sales.

Taking long view of bankruptcy

Firms that will be served out of OST’s Detroit office include Blue Cross Blue Shield of Michigan, Cummins, University of Michigan, Roush industries and Cooper Tire. Part of the appeal of a Detroit office is that the region is home to so many large companies.

“There is business to be had there,” Behm said.

That’s why the city’s high-profile bankruptcy, which has made international headlines, doesn’t have these Grand Rapids business rethinking their Detroit strategy.

Meijer co-chairman Hank Meijer told MLive and The Grand Rapids Press that the retailer is moving forward with plans to open a second store in the city.

“It’s the kind of thing when it happened, it’s hard for us to read about it but it’s not unexpected,” said Meijer of the bankruptcy.“I think of it as the closing of one chapter in Detroit’s history, and the opening of another. And I would like to think of this (Detroit) store as the opening of a new chapter.”

Meijer’s investment in Detroit provides another solid indicator that the level of private sector investment is increasing, will continue to rise and will represent the path to the city’s revitalization.

The business community has taken a long view of the city’s bankruptcy.

“Everybody recognizes Detroit’s fiscal government system is broke and this is the first step in fixing it,” said Benjamin Erulkar, vice president of economic development-new development strategies for the Detroit Chamber of Commerce.

Incentives ‘level the playing field’

Incentives, from Detroit and the state, have been a carrot to make it easier for companies to justify what some might call a risky investment.

“There are subsidies to be had,” said Lambert. “All that does is level the playing field.”

Ultimately, he says, West Michigan businesses’ decision to expand into Detroit has to be supported by good financial reasons.

“This is not an economic handout,” said Lambert. “Companies are coming because it is a good business decision.”

In less than a year, Lambert says his firm already is seeing a return on its investment with increased business.

The East-West rivalry has given way to more of a East-West collaboration, observes Lambert.

He credits that shift in attitude to Business Leaders for Michigan, which brought together the CEOs of Michigan companies to work on ways to improve the state. The group, which emerged from the Detroit Renaissance group, includes Meijer co-CEO Mark Murray among its members.

“I’m sensing a very definite recognition that we are in this together and in order for the state to do well, all regions must do well,” Erulkar said.

Behm says he is encouraging other businesses who want to tap into the state’s Southeast market to move into his firm’s downtown Detroit neighborhood.”

“We’re trying to build up momentum,” said Behm. “We want to be part of the revitalization.”