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COMMENTARY

David Robinson: Business winners and losers in an 'un-Buffalo' year

This has been a very un-Buffalo year.

Workers – not jobs – are hard to find. Housing prices are rising faster than they have in decades – and buyers have been bidding against each other for really desirable homes. And by and large, the mood around Buffalo Niagara is pretty upbeat and hopeful – a dramatic change from years ago, when it seemed it was always one step forward, two steps back.

Of course, that's not to say everything came up roses in 2018, which is why we still can look back at some of the year's losers, as well as the winners.

Winners

Job seekers – Unemployment is at a nearly 30-year low, and companies still are trying to hire. So if you want to work, you can probably get a job, though not necessarily the job of your dreams. The downside: While wages ticked higher last year and during the first half of this year, all the competition isn’t pushing up wages in an outlandish way, as companies are generally holding the line. Part of that is because many of the openings are replacements for older workers who are retiring. Companies can hire new employees at lower starting wages, saving money over the top-of-the-scale pay the retiring workers were earning.

Tesla It’s finally happening – more than two years later than expected. The Buffalo factory is up to 800 jobs between Tesla and its solar cell-making partner, Panasonic. Tesla said its hiring will grow quickly once it starts making its solar roof in Buffalo, although production of that complex and innovative new product has been pushed back repeatedly, now until sometime during the first half of 2019. And Tesla will need to reverse the steady decline in its solar installations to meet its 2020 target of having 1,460 jobs in Buffalo.

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Home sellers – It’s been decades and decades since home sellers had it this good. With low – but rising – mortgage rates and a strong economy, there are still plenty of people looking to buy homes that, for the most part, remain relatively affordable in Buffalo Niagara. But after several years of strong sales, there just aren’t as many sellers left, spurring bidding wars and pushing up prices to record highs. Higher mortgage rates may start to change that, though, with the rise in prices slowing during the second half of this year.

Downtown – The city is suddenly the place to be. After years of losing ground to the suburbs, the city is hot. It started more than a decade ago with the Chippewa Street revival and now has spread to a new Buffalo Niagara Medical Campus, Canalside, dozens of new restaurants, bars and night spots. Suburbanites are coming downtown again, and there’s a groundswell in downtown living, led by millennials lured by the trendy but expensive apartments now popping up in old buildings.

Craft brewers – Local brewing is back. At least a dozen new breweries or taprooms are scheduled to open before the end of 2019. And many of the craft brewers that already are established here are looking to add new locations or expand. Resurgence Brewing is building a second location on Ohio Street. Thin Man Brewery has tapped out its brewing capacity at its current site and is shifting production to a bigger facility in the city. And those are just a few of the developments. Even the big boys are trying to get a piece of the action: Labatt USA opened its Labatt Brew House next to the KeyBank Center.

Losers

JP and Ulla Bak – The Danish entrepreneurs tried their best to be winners. The founders of Bak USA had the best intentions when they set out to make tablet and laptop computers in Buffalo, employing disadvantage workers, manufacturing in the U.S. and providing a spark to the Buffalo economy. But business isn’t about good intentions, it’s about money, and the Baks didn’t have enough of it to keep going after investor B. Thomas Golisano cut off the tap.

New Era Cap – In a time when most clothing comes from low-cost markets in places like Vietnam and Central America, a textile manufacturing plant in Derby had to be run just about to perfection to survive. And perfection is hard to come by, especially when you’re competing against low-paid foreign workers. The Derby plant had been on New Era’s hit list before and survived, but it doesn’t look like there’s even a remote chance of a reprieve this time. There is a silver lining: The tight job market means that, if there ever was a good time to lose your job, this is it, with plenty of local manufacturers looking to hire.

Tops MarketsThe local supermarket chain is a case study in how private-equity owners can devastate an otherwise healthy business. After piling on debt to pay themselves $350 million in dividends, Tops’ former private-equity owners in 2013 sold to management, who tried operating on a shoestring in a highly competitive market. When they couldn’t increase sales fast enough to handle their massive interest payments, they ran out of cash and filed for bankruptcy in February. The good news is that the restructuring was quick, with Tops emerging from bankruptcy in November. That's a victory in itself. But Tops still has big interest payments.

Department storesWe bid farewell to Bon-Ton, which filed for bankruptcy and liquidated. Toys R Us is gone. Sears filed for bankruptcy, too, shutting down in the Boulevard Mall and leaving only its McKinley Mall store in the region. J.C. Penney is on thin ice, with its sales sliding and its stock down in the $1 range – a sign that investors don’t hold out much long-term hope for the chain. Blame it all on the rise of online shopping, where prices often are better and the convenience of sitting at home almost always beats the hassle of taking a trip to the mall.

Louis CiminelliJurors found Ciminelli, once the king of Buffalo developers, conspired with Alain Kaloyeros, one of the key players in the Buffalo Billion, to ensure that LPCiminelli won the contract to build the Tesla solar panel factory. Odds are that LPCiminelli would have won the job anyway, given the state’s understandable preference to give the work to a local contractor, but Kaloyeros and Ciminelli didn’t want to leave anything to chance – except the possibility that they’d get caught. Which they did. And now they’re headed to prison, pending appeals.

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