Real Estate Development: What is a HUBZone?

HUBZone

Businesses located in a HUBZone benefit from federal government contracts

The Small Business Administration’s HUBZone program is designed to incentivize businesses to locate in areas designated as “historically underutilized business zones.” When you locate in a real estate development in a HUBZone, you get special preference in receiving federal contract business.

Introduction to HUBZones

Created by the Small Business Reauthorization Act of 1997, the HUBZone program was intended as an adjunct to government-sponsored employee training programs. At that time, new training programs were churning out large numbers of newly-qualified workers. However, there were no conveniently located jobs for them to occupy. The HUBZone program was created to incentivize business to create those jobs.

HUBZones are located all over the country. Typically, they are in areas that have low median household income or that have above average unemployment rates. When the SBA designates the area as a HUBZone, the idea is to spur commercial real estate development, business in-migration and job creation. Low income housing surrounds industrial space in St. Louis.

HUBZone Benefits

Businesses located in HUBZones benefit from preferential access to federal government contracts. In support of this, the government has a goal of awarding 3 percent of all of its prime contracts to businesses located in HUBZones. The fact that the government frequently doesn’t hit this goal indicates that there is pent-up demand for more businesses in HUBZones.

Government bidding is a complicated process. One of its many provisions is that, sometimes, not every price is equal. If you’re located in a HUBZone, your bids receive a 10 percent price evaluation preference. This means that your $1,000,000 bid could beat another firm’s $920,000 bid.

HUBZone Business Prerequisites

To receive government certification as a HUBZone business, you need to meet four basic standards:

  1. The SBA must consider you to be a small business based on its definition, which changes depending on the type of business that you do.
  2. You must be at least 51 percent owned by a U.S. entity like a citizen, Indian tribe or community development corporation.
  3. Your “principal” office must be in a real estate development in a HUBZone. A principal office isn’t your headquarters, though. It’s the place where the largest number of employees in a given area work.
  4. At least 35 percent of your employees have to also live in the HUBZone.

If you meet these four standards, you are eligible to apply for acceptance into the program. Bear in mind, though, that once you’re in, you’ll need to continue meeting the standards. If your number of employees in the HUBZone drops below 35 percent, for instance, you could lose your certification.

Locating in a HUBZone

HUBZone locations are similar to properties outside of a HUBZone. For instance, the Alton Center Business Park real estate development in Alton, Illinois is located in a HUBZone. It offers highway access, rail connections and fiber optic data service. The park is modern, attractive and landscaped, just like any other suburban location. However, you get HUBZone contracting preferences as well as access to local government programs to help make your business more profitable.

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