• Home  / 
  • Phoenix
  •  /  Phoenix & Canada: An Underrated North American Business Partnership

Phoenix & Canada: An Underrated North American Business Partnership

Via forbes.com

The longtime demographics of Phoenix have reflected both the fundamental newness and oldness about the place. The Valley of the Sun wasn’t even a significant metro area until the 1950s, when an inward flood of American transplants seeking warmer climates made it into a giant overnight sprawl suburb. Its ingrained aspects, on the other hand, lie in an indigenous culture that was there long before any talk about nations or borders.

But there is a wrinkle to this mix. From the beginning of its urbanization process a half century ago, Phoenix became a hub for Canadians, specifically the Canadian business elite, who view the metro area as a warm second home. Over the period, Canadians have become a massive subset within the local culture and economy. And having a critical mass of them travel back and forth between there and their homeland has created a significant trade route, and an interesting niche within America’s complex economy.

The relationship began in the 1960s and 1970s, right as Phoenix was beginning to grow, says Glenn Williamson, head of the Canada-Arizona Business Council, a network of CEOs in the two regions. Several developers, believing that Canadians would prefer warmer winters, decided to build some master-planned communities. In the 1980s, Williamson continued, the relationship evolved to include aerospace manufacturing, specifically with Toronto and Montreal. From there a critical mass of migration began to snowball, creating the complex economic arrangement of today. According to the council website, there is now $4.4 billion in bilateral trade and services annually between the U.S. and Canada. There are 350 Canadian companies in the state, spread over 1,100 locations. And while some of this activity exists in Tucson and other parts of Arizona, the lion’s share is in the suburbs around Phoenix, namely Scottsdale.

The complexity of the relationship has caused some idiosyncrasies. For example, Phoenix has long had a lot of housing growth, but not much native tree growth around to create lumber. So they import much of it from central Canada, which isn’t much further away than the timber-heavy Pacific Northwest. Different comparative advantages–caused by wildly different climates–have also surfaced in agriculture. But most notable is the housing market. As readers may recall, the Phoenix metro housing market was one of the hardest hit during the recession, creating practical ghost subdivisions in the suburbs.

Around then, Canada’s currency was stronger than in the U.S., and Canadians, seeing the bargain-basement prices, swooped into the Phoenix market. In 2012, Canadians accounted for 5 percent of regional sales, and they now account for 94% of homeownership by international buyers. A lot of these buyers are Canadians who, per the terms of their visa, can stay up to 6 months annually in the U.S.

Warm weather dictates which months they stay–obviously–but that just begs a question: given the mild climates throughout much of the U.S., why have Canadians zeroed in on Phoenix. Williamson says that some of it is historical, but that regulatory climates also have a lot to do with why Canadians choose it over, say, California.

“The cost of operations in Arizona are substantially less than in California,” claiming that this matters to Canadians looking to buy homes or start businesses.

There are, however, issues from outside the state that could affect this special Phoenix-Canada partnership. Take, for example, President Trump’s meddling in NAFTA; already the president stuck a tariff on Canadian lumber. But Williamson is unconcerned.

“I don’t think [NAFTA changes are] going to be as Draconian as people believe,” he said, at least not enough “to create massive changes in the trading block of North America.”

In other words, a strong bilateral relationship that began organically in Phoenix will stay that way, regardless of outside interference.