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Thursday, June 3, 2010

Economic Impact of Immigrants' Exodus from Arizona Debated

Arizona Republic

The exodus of illegal and legal immigrants predicted by some as a result of Arizona's tough new immigration law is expected to hurt a variety of businesses that directly and indirectly cater to immigrant populations.

It is difficult to estimate the potential economic impact, but economists and market analysts agree it could be substantial.

The fallout could cause a decline in sales at retailers and, ultimately, could cause some businesses to go under.

It could push up vacancy rates at older, Class C apartment complexes and retail centers in immigrant neighborhoods. Other businesses that cater to immigrants, such as check-cashing stores and taxi services, also could be impacted.

Senate Bill 1070 takes effect July 29. Arizona's immigration law makes it a state crime to be in the country illegally. It states that an officer engaged in a lawful stop, detention or arrest shall, when practicable, ask about a person's legal status when reasonable suspicion exists that the person is in the U.S. illegally.

Despite the expectation of economic fallout, many businesses say it hasn't come yet. Many of those same businesses reported an almost immediate impact after Arizona's employer sanctions bill took effect in 2008.

The Legal Arizona Workers Act, which took effect Jan. 1, 2008, gave the state authority to suspend or revoke the business license of any employer found to have knowingly or intentionally hired an illegal immigrant.

An estimated 100,000 illegal immigrants left the state as a result of the bill and some predict another 100,000 could leave as a result of SB 1070.

The impact of employer sanctions was quickly felt by Hispanic supermarkets such as Food City, which saw sales drop, and by retail centers that cater to the Hispanic population, such as Westcor's Desert Sky Mall.

Most of the businesses say they haven't yet seen a similar impact as a result of SB 1070, but note the measure hasn't yet taken effect, and they remain wary.

The apartment market is one area expected to take a hit.

"It could be significant," said Jim Kasten, president of Kasten Long Commercial Group, a Phoenix commercial real-estate brokerage that focuses on apartments.

The company recently surveyed Valley apartment owners and found that 60 percent believed they would be negatively impacted by SB 1070.

There are approximately 90,000 older Class C apartment units in metro Phoenix and about half of those are thought to be occupied by Hispanic immigrants, both legal and illegal.

Kasten said that increased vacancies could prompt landlords to lower rents even further to attract tenants, which could be detrimental to owners of Class A and Class B apartments as well.

Phoenix commercial real-estate analyst Bob Kammrath said that Class C landlords saw an immediate impact after the employer-sanctions bill was passed.

"They saw vacancies go up, and it became harder to lease up vacant units," he said.

Retail impact

Retail business in heavily Hispanic areas such as southwest Phoenix and downtown Mesa also saw an impact as a result of the employer-sanctions bill, but as of yet haven't seen a similar impact as a result of SB 1070.

"It's too early to tell, but the potential is there," Kammrath said.

He said that while many immigrants left after the employer-sanctions bill was passed, many may have returned because there have been few prosecutions under the law.

Kasten said that much of the impact of the employer-sanctions bill was felt between the time the law was passed and when it took effect.

"The perception of the law was scarier than the actual implications of the law," he said.

If that is the case with SB 1070, it could mean that the impact may not be much greater that what is currently being felt, he said.

Mall operator Westcor saw sales fall off at its Hispanic-oriented Desert Sky Mall in west Phoenix after the passage of employer sanctions, but like others hasn't seen a similar effect as a result of SB 1070.

"We're monitoring it," said Westcor spokeswoman Anita Walker.

Another business that caters to the immigrant population is the Phoenix Park 'n Swap near Washington and 40th streets.

Operations director Susan Barrett said the local swap meet attracts more than 10,000 people per week and caters to a predominantly Hispanic market.

On Wednesday night, which has been dubbed "Hispanic night," Barrett estimated that more than 90 percent of the vendors and customers are Hispanic.

She noted that the business saw an impact after the passage of the employer-sanctions law and also when there have been weekend rallies against SB 1070. But, she added the business hasn't yet seen a direct impact as a result of the new law.

"We're waiting," she said.

Small businesses hit

However, some small-business owners that cater to northeast Phoenix's Hispanic population saw an immediate drop in business since the passage of SB 1070.

Owners say they were already affected because their clientele was more likely to work in industries disproportionately affected by recent economic woes, such as construction. Many are contemplating closing.

"This is just going to make it worse," said Marissa Ruiz, owner of Contact Cellular, on Cave Creek Road. "On every corner on every street, there are empty businesses."

Owner Nick Solomon said business at shops he owns in northeast Phoenix's Palomino neighborhood, such as a laundry and grocery, decreased by 50 percent in the days after the passage of SB 1070.

An official at the Arizona Hispanic Chamber of Commerce said it only made sense that the state's small businesses would be affected by the state's new immigration law because many of their customers may no longer be in the state.

"When they leave, the local businesses that may have been catering to them . . . those people have to take a hit. The aisles are just not as crowded, it's a real impact but it's also an impact that has been steadily building," said James Garcia, spokesman for the organization.

Garcia said the chamber hasn't done any statistical research but has heard that small businesses in the Valley have been affected by the policy.

He said people tell him, "I had a restaurant in Guadalupe or I have a place in west Phoenix and it's been a real struggle" and "I've also heard recently, we were talking to one of these people with the ice cream in a little cart say, 'There used to be 35 of us with this small company. Now there are two,' " he said.