As midsized cities go, the Buffalo Niagara region is a pretty inexpensive place to do business, a study released Tuesday found.
Thanks to low transportation expenses and competitive labor rates, the Buffalo Niagara region finished third among 12 U.S. metro areas in a ranking of cities with between 1 million and 2 million people by accounting firm KPMG.
On a broader scale, the Buffalo Niagara region ranked more in the middle of the pack -- 36th out of 75 U.S. and Canadian cities -- in the study that looked at a wide range of costs, including real estate, taxes, labor and utilities, in a comparison of business costs for companies in 17 different industries.
"Upstate New York and Western New York are a more competitive location for business than is often-times assumed," said George Tobjy, the managing director for KPMG's global location and expansion services practice.
"It's great news. It's very encouraging," said Paul Pfeiffer, a spokesman for the Buffalo Niagara Enterprise business development and marketing group.
Pfeiffer noted that the region's labor force has been a selling point in attracting companies such as insurance giant GEICO to the area, lured by the productivity, skill level and ample supply of the local labor force.
The KPMG study found that, while big cities tend to garner more attention and offer access to a bigger pool of labor, potential customers and suppliers, they also typically come with higher costs.
"While large cities may be of greater interest for some global investment projects, smaller regional cities can offer a more attractive investment location for other investment projects," the KPMG report said.
The study used the average cost of doing business in New York City, Los Angeles, Chicago and Dallas as its baseline cost figure.
The study ranked Buffalo third among mid-sized cities, 3.5 percent cheaper overall than the four biggest cities, trailing Oklahoma City (4.4 percent cheaper) and Raleigh, N.C. (3.6 percent cheaper). Buffalo fared better than metro areas such as Milwaukee (2.2 percent cheaper), Las Vegas (0.2 percent cheaper), Nashville (3 percent cheaper) and Salt Lake City, Utah (2.6 percent cheaper).
The report said labor costs, including wages and benefits, were about 12 percent lower in the Buffalo Niagara region than the national average. Facility costs also were about 12 percent less, while transportation costs were nearly 7 percent lower.
The one major drawback for the Buffalo Niagara region was its utility costs, which were an average 29 percent higher than the national average, the study found.
The region also ranked highly for its affordable housing, with the area's median home price selling for roughly 2 1/2 times the regional median household income, which was significantly better than the national average of 3.2 times the median household income. The area also scored highly because it has about 50 percent more doctors per 100,000 people than the national average, the study found.
While business costs and location issues are important factors when companies compare potential sites, the incentives offered by governments and economic development agencies can tip the scales in favor of alternate sites.
"Incentives won't make a bad location good, only a good location better," Tobjy said.
The report included more than a dozen Canadian cities, including the St. Catharines-Niagara Falls, Ont., metro area, which fared even better than the Buffalo Niagara region. The study pegged business costs there as being 5.3 percent cheaper than in the biggest U.S. cities.