Knowledge-Value Cities
in the Digital Age
Joel Kotkin
Ross C. DeVol
February 13, 2001
KNOWLEDGE-VALUE CITIES
IN THE
DIGITAL AGE
February 13, 2001
by
Joel Kotkin
Senior Fellow, Milken Institute
Ross C. DeVol
Director of Regional and Demographic Studies
Milken Institute
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
ACKNOWLEDGMENTS
We would like to thank the U.S. Department of Housing and Urban Development
for commissioning this study.
Special thanks go to Perry Wong, Research Economist at the Milken Institute, for
his outstanding efforts in managing this project and to the many people at the
Milken Institute who provided valuable research. They are Nate Goetz, John
Catapano, Frank Fogelbach, Armen Bedroussian and Jorge Velasco. We are grateful to Judith Gordon for her patience and editing which greatly improved the
quality of this report. Lastly, we appreciate Sallylynn James’ outstanding design
work.
Copyright © 2001 by the Milken Institute.
The Milken Institute is a 501(c)(3) not-for-profit, nonpartisan, nonideological,
independent economic think tank founded in 1991. Based in Santa Monica,
California, the Institute is a resource for economic and public policy research and
analysis, and a center for advancing discussion about economic, financial, social
and policy issues. The Institute’s mission is to explore and explain the dynamics
of world economic performance and growth. The overarching goal is to provide
an understanding of the effects of economic, political, technological and regulatory changes on the world economy and its societies as a basis for a better-informed
public, more thoughtful public policies, improved economic outcomes, and better
lives for people.
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Knowledge-Value Cities in the Digital Age
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...........................................................................................V
SECTION 1 – T ECHNOLOGY AND THE CITY..........................................................1
The Nature of Post-Industrial Society .............................................................1
How Cities Lost Their Technological Edge.....................................................7
The Urban Revolutions of the 1990s: The Emergence of
“Soft” Technology.............................................................................................13
SECTION 2 – T ECHNOLOGY AND THE FIRST-TIER CITIES ..................................16
The New Urbanites...........................................................................................16
Entrepreneurism and the New Economy......................................................19
Knowledge-Value Neighborhoods.................................................................21
The Reinvention of Lower Manhattan...........................................................25
West Los Angeles: Digital Hollywood...........................................................30
Boston: Making of a Cyber District................................................................35
Chicago: Midwestern Revival.........................................................................37
San Francisco: Silicon Valley’s Urban Backyard ..........................................40
SECTION 3 – P ROSPECTS FOR EMERGING-TECHNOLOGY CITIES .......................43
Hyperinflation of Rents in First-tier Cities and Nerdistans.......................43
Housing Shortages, Sprawl and Anti-growth Sentiment ...........................45
Problems in Nerdistans: Sprawl and the Next Move Out..........................48
The Blue-Collar Internet ..................................................................................56
Reno: From Gambling Mecca to Silicon Valley’s Backyard........................60
Tulsa: Wired in the Heartland.........................................................................63
Omaha: A Stable, Growing Telecommunications Giant .............................68
Albuquerque: Powerhouse Emerging or Lost? ............................................70
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Milken Institute - February 13, 2001
Huntsville, Alabama: Success in the South...................................................73
Boise, Idaho: From Corporation Relocation to Entrepreneurial Hub.......74
SECTION
4 – C OMEBACK CITIES .........................................................................77
Baltimore: The Rise of the Digital Harbor.....................................................80
Kingston, New York: Hope on the Hudson?................................................84
Dayton: Rustbelt Revival.................................................................................86
Oakland: Find a ‘There There’ ........................................................................87
Central Dallas: The Emergence of the “214” Corridor................................89
Downtown Los Angeles: The Next Deep Ellum? ........................................93
CONCLUSION: T HE CITY IN THE DIGITAL AGE .................................................97
REFERENCES .........................................................................................................99
APPENDIX ...........................................................................................................111
ABOUT THE AUTHORS .......................................................................................127
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Knowledge-Value Cities in the Digital Age
EXECUTIVE SUMMARY
T
he revitalization underway in some of America’s urban centers
represents one of the most important, if surprising, developments of
the new millenium. Cities across the country are showing signs of a
new dynamism that would have been impossible to imagine only a
decade ago.
The origins of this renaissance are at once demographic, economic
and cultural. A growing interest in urban life among young,
unattached and well-educated individuals, and middle-aged emptynesters, constitutes one source of urban renewal. Immigration is
another, fortifying our cities’ traditional role as centers of
international trade and commerce in the process. Notably, tourism
has also contributed significantly to this rise in urban activity, but
perhaps the most salient reason for urban revival comes from the role
our cities are playing in the enormous technological revolution now
transforming the larger economy.
Until the early 1990s, cities were on the periphery of the technology
boom, with the vast majority of technology-driven activity occurring
in suburban and even quasi-rural areas. Later in the decade, however,
access to the Internet on a mass scale sparked greater demand for
entertainment and other creative web content. It is here, on the “soft”
side of the technological revolution, that the traditional strengths of
cities in the arts, marketing and graphics have come strongly into
play.
As the digital age enters a new and potentially tumultuous phase,
urban communities are faced with new challenges and opportunities.
The opportunity lies first in appreciating that, although it is in
consolidation, the shift to a digital economy is not slowing, but
accelerating. Despite the dramatic drop in many technology firms’
stock valuations in recent months, the business models of a large
number of firms having been proven unsustainable, the trend toward
use of the Internet as a communications and business tool remains in
place. Many were led to believe that the New Economy was a “dotcom” economy. Certainly, Internet-based business models have an
important role to play, but they, by themselves, are not the New
Economy.
Knowledge and the innovation capacities of human capital are at the
core of the New Economy. The key source of competitive advantage,
be it among regions or industries, is its intellectual capital – that is, the
knowledge embedded in its people. In the old industrial economy, the
The revitalization
underway in some of
America’s urban
centers represents one
of the most important,
if surprising,
developments of the
new millenium.
■ ■ ■
Perhaps the most
salient reason for
urban revival comes
from the role our
cities are playing in
the enormous
technological
revolution now
transforming the
larger economy.
■ ■ ■
Knowledge and
the innovation
capacities of
human capital
are at the core of
the New Economy.
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Knowledge-Value Cities in the Digital Age
To attain a
competitive
advantage in the New
Economy, urban
centers must access,
create and utilize
human capital.
■ ■ ■
Cities that tap the
knowledge assets in
their midst, such as
universities and
research centers, will
benefit from the
talent that they attract
to fuel local economic
growth.
■ ■ ■
Today these cities
have burgeoning
“cyber districts” that
have transformed
large blocks of
formerly destitute
warehousing and
manufacturing space
into highly desirable
post-industrial hubs.
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accumulation of hard assets determined economic success or failure.
Today, the knowledge, skills, experience and innovation potential of
talented individuals has greater value than capital equipment or even
capital itself. Talented individuals are highly mobile and can reward
those regions that attract them. Likewise, their loss can be punishing.
To attain a competitive advantage in the New Economy, urban centers
must access, create and utilize human capital. Cities that tap the
knowledge assets in their midst, such as universities and research
centers, will benefit from the talent that they attract to fuel local
economic growth. Life-long learning and retraining programs will
bolster urban economic success, forestalling the creation of a labor
force that is “finished at forty.” Urban areas that do not continually
educate their populations face the prospect of being left behind in the
New Economy.
The urban revitalization process is still in its early stages. The first
cities to see the full benefit of this transformation are those that held
the strongest appeal for artists, creative individuals and
predominately younger educated people. By the late 1990s, these
“first-tier” cities, among them, Manhattan, San Francisco, Boston, Los
Angeles and Chicago, emerged as leaders in the expanding digital
economy.
Today these cities have burgeoning “cyber districts” that have
transformed large blocks of formerly destitute warehousing and
manufacturing space into highly desirable post-industrial hubs. In
many cases, these districts have become knowledge-value
neighborhoods with strong residential, retail and cultural
components. Concomitantly, rent for both work and living space has
increased markedly in these districts, driving newer firms and
workers into adjacent, formerly depressed neighborhoods. Though
reduced affordability for housing, and traditional manufacturing and
warehousing space, is one consequence of this new development,
growing price pressure and anti-growth sentiment present prospects
for choosing from a broader range of urban locations that are only
beginning to harvest the opportunities of the digital economy.
Emerging-technology cities, whose populations are near or less than
500,000 persons, offer several advantages to firms, knowledge
workers and entrepreneurs over their first-tier counterparts. These
include far lower costs of living, a supportive business environment
and an often concerted effort by local officials and business leaders to
lure and nurture new industries.
A knowledge-based economy rests upon two interdependent but
distinctively different skill sets. Knowledge-generation is contingent
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Knowledge-Value Cities in the Digital Age
upon highly educated and skilled creative people at the pinnacle of
the skill continuum, typically found in first-tier urban areas.
Knowledge deployment requires widely held quality skills and
education in the middle of the skill distribution. A city will have
comparative advantage in one or the other area.
Most successful emerging-technology cities will find their
comparative advantage in the area of execution competence, but
many can position themselves as implementers of innovation. These
cities excel in making products or services based upon an
infrastructure and supply network that support high value-added,
cost-effective production. World-class manufacturers gravitate
toward execution cities.
Many cities around the country are trying to become emerging
technology centers and some have made particular progress. Our
research identifies several, among them, Reno, Albuquerque, Tulsa,
Huntsville, Omaha and Boise. These centers, for various and often
quite unique reasons, are positioning themselves well for the
information age, particularly by concentrating on the infrastructure
and “blue collar” functions connected with the Internet such as the
development of enabling software, customer support and on-line
order fulfillment.
Perhaps the most encouraging phenomenon of this digital revolution
has been the movement to yet another kind of urban area – the old
industrial center. Once seen as “basket cases,” these regions have
begun to attract significant investment and growth in their
technology-related sectors. Like emerging-technology cities, they
often offer lower costs than the first-tier urban centers, but often
possess an impressive mix of rich architecture, history, cultural
activities, institutions of higher education and well-developed
transportation infrastructure. These comeback cities represent
perhaps the most dramatic evidence of the potential for urban centers
in the information age. Our research identifies several such centers in
various stages of recovery, including Baltimore, Oakland, central
Dallas, downtown Los Angeles and Hollywood, as well as smaller,
old industrial communities like Kingston in New York’s Hudson
Valley, and Dayton, Ohio.
The resurgence of these first- and emerging-technology cities as
urban centers offers many positive examples of revival in older areas.
Executing clearly focused policies such as zone changes to
accommodate New Economy companies and “new urbanites,” crime
reduction, bolstering local education and training, and reinforcing
ties with local universities, creates wide-ranging urban recovery in all
Most successful
emerging-technology
cities will find their
comparative
advantage in the area
of execution
competence, but many
can position
themselves as
implementers of
innovation.
■ ■ ■
The most encouraging
phenomenon of this
digital revolution has
been the movement to
yet another kind of
urban area – the old
industrial center.
■ ■ ■
Like emergingtechnology cities, they
often offer lower costs
than the first-tier
urban centers, but
often possess an
impressive mix of rich
architecture, history,
cultural activities,
institutions of higher
education and welldeveloped
transportation
infrastructure.
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Knowledge-Value Cities in the Digital Age
Success also has its
downside as
evidenced by the
pricing-out of
traditional industries
and working class
populations resulting
in the emergence of a
“dual city” of rich and
poor.
■ ■ ■
As the information
revolution spreads
and deepens, cities
will need to find
ways to ameliorate
these unintentional
consequences of
success.
■ ■ ■
The imperative for
each city is to
recognize the
attendant challenges
and pursue a path
toward participation
in the New Economy.
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Milken Institute - February 13, 2001
cities. Success also has its downside as evidenced by the pricing-out
of traditional industries and working-class populations resulting in
the emergence of a “dual city” of rich and poor. As the information
revolution spreads and deepens, cities will need to find ways to
ameliorate these unintentional consequences of success.
Despite these dilemmas, the digital revolution presents enormous
opportunity for urban centers. The imperative for each city is to
recognize the attendant challenges and pursue a path toward
participation in the New Economy. Urban viability is linked to the
extent to which a region can establish local industry clusters that are
networked into the global business community.
The paradox of the global- and technology-based economy is that the
enduring competitive advantages lie in location-specific
competencies – knowledge, workforce skills, customer and supplier
relationships, entrepreneurial infrastructure, and quality-of-place
attributes – that allow firms and talent to thrive. In essence, thinking
locally to succeed globally. Cognizance of these components will
enable municipal economic development and political officials to
adjust their strategies accordingly, or risk being left behind. The
alternative is a return to the pattern of stagnation and hopelessness
that nearly buried America’s cities a decade ago.
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Knowledge-Value Cities in the Digital Age
SECTION 1:
TECHNOLOGY AND THE CITY
THE NATURE OF POST-INDUSTRIAL SOCIETY
Throughout history, the fate of communities and cities has largely
been shaped by technology. The development of irrigation, riverine
and sea-going transportation keyed the commercial and cultural
development of the earliest centers, from Mesopotamia and Egypt to
the Indus River Valley and China.
In modern times, the role of technology has become even more
determinative. The onset of the industrial revolution, characterized
by the railroad, telegraph and mass-production factory, transformed
the social and economic reality of cities, towns and rural hamlets in
the 19th century. Locations far from traditional trade routes, such as
the British Midlands and the American Midwest, suddenly
experienced the mushrooming of major urban areas. The
development of cheap power for heating made the mass
development of cities in inhospitable climates possible. Later,
electrical grids allowed for the urbanization of the dry, hot regions
such as the American Southwest.
Today, in a manner not seen since the onset of the industrial
revolution, technology is reshaping the landscape of American
communities. The digital revolution is not only accelerating the speed
with which information is processed and disseminated, it is
redefining space and time in our communities. Location decisions,
once dependent upon access to ports, roads, rails or raw materials, are
increasingly dependent instead on the ability to link human
resources.
In some senses, this process recalls the early period of the industrial
revolution. Then the rapid growth of railroads (mileage in the U.S.
alone increased nine-fold between 1860 and 19151) and the telegraph
similarly reinvented the existing urban geography by changing the
dynamics of time and space. The world was telescoped at a seemingly
remarkable rate. In 1800, it took six weeks to ship goods or people
from New York to the Midwest. By the middle of that century, it took
three days.2
Today, the Internet has accelerated this movement in ways previously
unimagined by enabling the easy and virtually instantaneous transfer
Today, in a manner
not seen since the
onset of the industrial
revolution, technology
is reshaping the
landscape of
American
communities.
■ ■ ■
The digital revolution
is not only
accelerating the speed
with which
information is
processed and
disseminated, it is
redefining space and
time in our
communities.
■ ■ ■
Location decisions,
once dependent upon
access to ports, roads,
rails or raw materials,
are increasingly
dependent instead on
the ability to link
human resources.
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Knowledge-Value Cities in the Digital Age
The rising importance
of the broad spectrum
of information
industries spanning
entertainment,
telecommunications,
computers, academia,
and much more, is
attributable to the
Internet.
■ ■ ■
Information has
doubled its share of
the U.S. economy over
the past 20 years and
now accounts for
nearly two-thirds of
the differential in
economic growth
between various
regions and most of
the nation’s growth in
productivity.
■ ■ ■
The information field
workforce, installed as
the ascendant middleclass of the 21st
century, is projected to
nearly double between
1994 and 2005, earning
roughly twice as much
as other private sector
workers.
2
Milken Institute - February 13, 2001
Table 1
Spread of Products to a Quarter of the Population
Product
Electricity
Telephone
Automobile
Airplane
Radio
Television
VCR
Microwave Oven
PC
Cellular Phone
Internet
Year Invented
1873
1876
1886
1903
1906
1926
1952
1953
1975
1983
1991
Years to Spread
46
35
55
64
22
26
34
30
16
13
7
Source: Federal Reserve Bank of Dallas
of information from point to point. The Internet phenomenon spread
more rapidly to more people than any previous development in
technological history, from electricity and the automobile to
telephones, VCRs and personal computers3 (Table 1).
The rising importance of the broad spectrum of information
industries spanning entertainment, telecommunications, computers,
academia, and much more, is attributable to the Internet. The Internet
has accelerated this process, and will do so for much of the coming
decades. Information has doubled its share of the U.S. economy over
the past 20 years and now accounts for nearly two-thirds of the
differential in economic growth between various regions and most of
the nation’s growth in productivity.4 (Figure 1).
The evolution of information technology has generated the
emergence of a social trend envisioned by Daniel Bell in the 1970s. His
premise stated that information would replace energy and
conventional manufacturing as society’s critical sources of wealth.5 In
fact, the information field workforce, installed as the ascendant
middle-class of the 21st century, is projected to nearly double between
1994 and 2005, earning roughly twice as much as other private sector
workers.6
The Internet is enabling radical business-concept innovation that is
metamorphosing established business models. Author Gary Hamel
defines business concept innovation as “the capacity to imagine
dramatically different business concepts or dramatically new ways of
differentiating existing business concepts.”7 This means that the unit
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Figure 1
High-Tech vs. Low Tech GDP
1992-2000
These changes are
altering the very
nature of place. Under
the new regime of
geography, wherever
intelligence clusters,
be it small town, big
city or any geographic
location, wealth will
accumulate.
■ ■ ■
of analysis for innovation in the New Economy is not a product or a
technology, but a business concept. A new business model is simply a
business concept that has been implemented in a market. Business
concept innovation, not only the technology that enables it, is the key
to creating new wealth.
These changes are altering the very nature of place. Under the new
regime of geography, wherever intelligence clusters, be it small town,
big city or any geographic location, wealth will accumulate. Such
concentrations are far less constrained by traditional determinants
such as strategic location near waterways or raw materials, or by the
proximity to dense concentrations of population (Figures 2a-c).
By its very nature, the emerging post-industrial economy, based
primarily on information flows in an increasingly seamless net, frees
location from the tyranny of past associations. Even the strongest
urban industrial agglomerations, such as Wall Street or Hollywood,
while still alluring, are no longer mandatory for the building of a
successful firm or career in a particular field. Increasingly, companies
and people locate not where they must, but where they will.
By its very nature, the
emerging postindustrial economy,
based primarily on
information flows in
an increasingly
seamless net, frees
location from the
tyranny of past
associations.
■ ■ ■
Increasingly,
companies and people
locate not where they
must, but where they
will.
3
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Figure 2-A
Employment in IT Occupations
1990-2000
Table 2-B
Annual Wages Per Worker
IT-Producing Industries
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Knowledge-Value Cities in the Digital Age
Figure 2-C
Median Weekly Earnings
Core IT Workers
New technological
advances have
diminished
transportation,
telecommunications,
and computational
costs, increasing the
ease of global flows
of information.
■ ■ ■
Globalization – the process of global economic integration and
interdependence – is causing profound change in the economic
structure of nations, industries, firms and urban areas. New
technological advances have
diminished transportation,
telecommunications, and computational costs, increasing the ease of
global flows of information. 8 Globalization is expanding the
movement of goods, services, capital investment (portfolio and
direct), people, ideas, and the diffusion of technology itself. In a
globalized world, successful firms, regardless of size, will be those
that can tap into a global network and meet global production
standards. Urban centers that use their comparative strengths to
promote integration with the global business network will excel.
Many analysts felt that location would become irrelevant in a world
of global input-factor arbitrage. Global networks enable industries to
source labor, materials and supplies more efficiently while
minimizing cost. Reduced transportation and communication costs
should theoretically diminish the advantage of one location over
Globalization is
expanding the
movement of goods,
services, capital
investment (portfolio
and direct), people,
ideas, and the
diffusion of
technology itself.
■ ■ ■
Urban centers that use
their comparative
strengths to promote
integration with the
global business
network will excel.
5
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
another. Yet, if location matters less, why are industries are becoming
more concentrated in fewer places?
If location matters
less, why are
industries are
becoming more
concentrated in fewer
places?
■ ■ ■
In reality, place
matters more now
than ever before.
■ ■ ■
If people, companies
or industries can truly
live anywhere, or at
least choose from a
multiplicity of
geographic locations,
the question of where
to locate becomes
increasingly
contingent on the
peculiar attributes of
any given location.
6
The ability of a particular location to provide and command
intangible assets will determine its relative position in a global New
Economy. Leveraging the human capital, technology and
characteristics of place to provide concepts, competence, and
connections are the core assets of a given location.9
Peters and Gilder view the new location paradigm as turning
established cities into little more than “leftover baggage of the
industrial era.” 10 They redefine the emerging system as a “telecosm”
– a global communications network driving a world information
economy – in which established communities are now subject to a
kind of “geographic arbitrage” devastating to the “curr ent
configuration of cities.”11 This fosters the notion that ultimately, our
compelling connections will be not with our physical neighbors but
with those with whom we share business, cultural or other interests.
The “cities of the future,” argues William Mitchell, are by nature antispatial.
The worldwide computer network – the electronic agora –
subverts, displaces and radically redefines our notions of
gathering place, community and urban life. The Net has a
fundamentally different physical structure, and it operates
under quite different rules from those that organize the
action of public places of traditional cities.12
Yet, despite the growth of cyber-space, people still live in brick and
mortar communities. The new technology that allows for distributed
work and greater options for living does not eliminate the importance
of geography. In fact, the telling irony of the digital era is quite the
opposite. In reality, place matters more now than ever before. If
people, companies or industries can truly live anywhere, or at least
choose from a multiplicity of geographic locations, the question of
where to locate becomes increasingly contingent on the peculiar
attributes of any given location.
What has changed, and profoundly, are the rules governing the
making of successful or unsuccessful places. Geographically, where
information industries and the skilled professionals who operate
them choose to locate will increasingly shape the geographic
importance of future cities and communities. 13 As technology
facilitates the distribution of work to virtually anywhere, choice of
location becomes more elastic. The growth of a given jurisdiction or
region now depends upon the decisions of entrepreneurs or workers
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Knowledge-Value Cities in the Digital Age
Figure 3
Factors in Determining Company Location
For cities, the more
technology reduces
the tyranny of place
and past affiliation,
the greater the need to
make that place a
more attractive one.
■ ■ ■
to locate there. This is particularly true in an era of acute and growing
shortages of high-technology workers. These individuals – investors,
engineers, systems analysts, scientists and creative people – are, as
one analyst describes them, “very sophisticated consumers of
place.”14 To them, the world is essentially a smorgasbord of locales
that compete for their affections and attention. As a result, the
important distinctions among locations, and the variables governing
their success, have, if anything, become more important.
For cities, the more technology reduces the tyranny of place and past
affiliation, the greater the need to make that place a more attractive
one. Surveys of high-technology firms find “quality of life” far more
important to skilled workers than traditional factors such as taxes,
regulation or land costs. 15 (Figure 3)
HOW CITIES LOST THEIR TECHNOLOGICAL EDGE
Surveys of hightechnology firms find
“quality of life” far
more important to
skilled workers than
traditional factors
such as taxes,
regulation or land
costs.
■ ■ ■
Nowhere perhaps are
these changes more
complex and
revealing than in the
evolution of our
major cities.
Nowhere perhaps are these changes more complex and revealing
than in the evolution of our major cities. For much of the last half
century, the impact of technology on the traditional urban economy
7
Knowledge-Value Cities in the Digital Age
Until recently, the
shift to a postindustrial society
appeared distinctly
hostile to the very
idea of cities.
■ ■ ■
It created a new
paradigm in economic
development, shifting
emphasis from the
traditional urban
centers’ ports,
railroads and large
pools of manual labor
to those places where
concentrations of
educated workers
could be lured and
harnessed.
■ ■ ■
These communities
have been coined
“nerdistans” for their
predominant appeal
to a new class of
information and
technological
workers.
8
Milken Institute - February 13, 2001
has been highly caustic. Cities have suffered the decimation of entire
industries. Decline has been exacerbated as well by the migration of
large corporate bureaucracies leaving a legacy of abandoned
shopping districts, ravaged neighborhoods and broken people across
the country. In the final decades of the 20th century, this process was
further accelerated by the growing inability of many urban
governments to restrain tax increases, provide reasonable regulation
of businesses and maintain decent educational systems. Despite large
increases in spending for schools, most city school systems have
continued to deteriorate in terms of graduation rates, reading and
math scores. This has resulted in a mounting exodus of middle-and
working-class families, including immigrants and minorities, from
the central urban districts. 16
Until recently, the shift to a post-industrial society appeared distinctly
hostile to the very idea of cities. America, noted Irving Kristol in the
mid-1970s, seemed to be bent on constructing “an urban civilization
without cities.”17 Between 1970 and 1990, central cities lost 1.3 million
two-parent families to the suburbs. In the process, America
fundamentally ceased to be a nation of traditional cities. Thirty years
ago, the suburbs had 25 percent more families than the city; today
they have 75 percent more.18 In 1950, only 23 percent of Americans
lived in suburbs; today over 50 percent do.19
New office development now tends to be less vertical and tilted more
toward the suburbs. Roughly 90 percent of all new office building
was taking place in suburban areas by last century’s end, housing 57
percent of all office stock compared to just 25 percent as recently as
1975.20 Between 1988 and 1998, office space in suburbia grew 120
percent compared to a mere 15 percent in the inner city with roughly
80 percent of all demand for office space and new jobs occurring in
the suburbs.21,22 (Figure 4)
By the 1970s, the continued ascendancy of science-based industry
over traditional manufacturing accelerated this process. It created a
new paradigm in economic development, shifting emphasis from the
traditional urban centers’ ports, railroads and large pools of manual
labor to those places where concentrations of educated workers could
be lured and harnessed.23 Anchored by complex organizations with
vast research and development capabilities, the emerging sciencebased industries gravitated early on, not to core cities but to suburban
and even hinterland areas such as North San Diego, Raleigh-Durham,
the Santa Clara Valley, Orange County, the Route 128 area of Boston
and northeastern New Jersey.24,25 These communities have been coined
“nerdistans” for their predominant appeal to a new class of
information and technological workers. These industries left the
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Knowledge-Value Cities in the Digital Age
Figure 4
Central City and Suburban Office Space Development
1986-1999
In 1974, core cities
accounted for over
half of the
information industry’s
employment.
■ ■ ■
urban core at an even higher rate than others for a host of reasons,
including the relative lack of distractions, low crime and lower taxes,
but most critically, availability and attractiveness to needed
employees.26 In 1974, core cities accounted for over half of the
information industry’s employment. By 1992, that had dropped to
barely one third.27
At century’s end, in some regions, the central city barely factored as
even a small part of the high-tech geography. The burgeoning
information economy in greater St. Louis, ranked second in the
Midwest after Chicago, does not look to the urban core even for such
traditional accoutrements as restaurants, theater or high-end business
services.28 Dave Steward, President of World Wide Technology, a
successful software company in midopolitan (old suburbs near
central core cities) Saint Louis County notes:
The preponderance of our people live in West County or St.
Charles. We haven’t seen an employee who lives in the
city….There’s easy access to everything we want here. We
have the entertainment, the offices. For technology
companies, this is the central core.
By 1992, that had
dropped to barely
one third.
■ ■ ■
At century’s end, in
some regions, the
central city barely
factored as even a
small part of the
high-tech geography.
9
Knowledge-Value Cities in the Digital Age
These communities
generally eschew
intense concentrations
of high-rise buildings
or massive factory
complexes, favoring
instead a more
“campus-like”
environment.
■ ■ ■
Much of this has to
do with the perceived
workstyles of these
predominantly highly
educated skilled
workers, who need to
collaborate not only
with one another, but
also with research,
engineering and
manufacturing
functions.
Milken Institute - February 13, 2001
The burgeoning communities on the western fringes of St. Louis
typify the kind of development that has also transformed once
relatively sleepy places such as Austin, Texas, southern Orange
County, Salt Lake City, Raleigh-Durham, North Carolina or the
Woodlands on the outskirts of Houston.29,30 These are not typical
suburbs in the traditional sense. They are targeted almost exclusively
toward servicing the needs of better-educated, more affluent workers
critical to the digital economy as opposed to a large array of
industries or worker classifications. In a sense, this parallels the
vision of a science-based society where power and privilege would
shift to a new technocratic elite described by Daniel Bell in The Coming
of Post Industrial Society. “Scientists, engineers and technocrats,” Bell
believed, were destined to become “the hierophants of the new
society.”31
These communities generally eschew intense concentrations of highrise buildings or massive factory complexes, favoring instead a more
“campus-like” environment, often with landscaped walkways and
access to bikeways and other recreational facilities. Much of this has
to do with the perceived workstyles of these predominantly highly
educated skilled workers, who need to collaborate not only with one
another, but also with research, engineering and manufacturing
functions.32 The essentially collaborative, often ad hoc nature of much
high-tech work creates an environment distinctly different from
traditional white-collar businesses in which hierarchies and common
schedules are the norm. Observes Louis Masotti, director of the real
estate management program at the University of California, Irvine:
This is a Birkenstock and jeans crowd, which has an
‘anytime, anyplace’ rather than the ‘same time, same place’
culture of the downtown office tower. [It’s]…all about
getting it done rather than playing some nine-to-five game in
some downtown office building. 33
■ ■ ■
This environment
tends to accelerate the
geographic
concentration of
knowledge talent and
the firms that seek to
employ them.
10
This environment tends to accelerate the geographic concentration of
knowledge talent and the firms that seek to employ them. Clustering
innovative activity geographically is imperative to creating
international comparative advantage in an information-age economy.
The spatial dimensions of economic activity are becoming an
interesting field of inquiry, especially in the technology-intensive
sectors. Space is central to understanding how an economy works.
If we really lived in a world of constant returns, we would not see the
high level of specialized economic activity within regions that we do.
Clustering results from businesses and workers seeking geographic
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
proximity with others engaged in related activities. Increasing returns
lead to competitive advantages, as in, the more that is produced, the
cheaper it is to make. Such agglomeration effects typically arise from
three primary sources: labor-force pooling, supplier networks, and
technology spillovers.
A common misperception of clusters is that they are based upon a
single industry. While one industry may be the core of a cluster,
without its partners, it may not endure for long. Clusters are
agglomerations of inter-related industries that foster wealth creation
in a region, principally through the export of goods and services
beyond the region.34 Industry clusters are geographic concentrations
of sometimes competing, sometimes collaborating firms, and their
related supplier network.
A common
misperception of
clusters is that they
are based upon a
single industry.
Clusters depict regional economic relationships – local industry
drivers and regional dynamics – more richly and aptly than do
standard industrial methods. An industry cluster differs from the
traditional definition of an industry group because it represents an
entire value chain of a broadly defined industry sector from suppliers
to end products, including its related suppliers and specialized
infrastructure.35 A cluster of interdependent linked firms and
institutions represents a collaborative organization form that offers its
members advantages in efficiency, effectiveness, and flexibility.35
Cluster members usually include governmental and other nongovernmental entities such as public/private partnerships, trade
associations, universities, think tanks, and vocational training
programs. These institutions provide specialized skill training,
education, research, and technical support. Cluster members include
both high-and low-value activities.
■ ■ ■
Clusters are interconnected by the flow of goods and services.
Supplier networks are indispensable to the success of clusters and
sustaining agglomeration processes. This flow is stronger than the
one linking them to the rest of the local economy. Ultimately, it is the
elite educational nature of such communities, not traditional
characteristics as race, religion or political orientation, that defines
their niche in the post-industrial geography to a level far above the
national norm. These high levels of educated workers characterize
areas such as Austin, Chandler, AZ, Irvine, and Raleigh, where the
percentage of college graduates and persons with advanced degrees
is well above the national average37 (Figure 5). Nearly 30 percent of
Irvine’s population has at least a bachelor’s degree, compared to 20
percent for the country in general and roughly 30 percent for all of
Orange County.38
Industry clusters
are geographic
concentrations
of sometimes
competing, sometimes
collaborating firms,
and their related
supplier network.
■ ■ ■
Cluster members
include both high
and low-value
activities.
11
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Figure 5
The success of such
nerdistans marks a
major shift in the
geography of wealth
and power in the 21st
century.
College Graduates as Percentage of Adult Population
Associates, Bachelor’s, Master’s, and Ph.D.
■ ■ ■
Nerdistans and their
residents can thrive
without achieving
giant scale or locating
near a powerful
global city unlike
traditional top
executives who often
seek a major city
venue.
■ ■ ■
“Engineers and
software people are
folks whose whole
lives are based on
logic and order so
this place appeals
to them.”
12
The success of such nerdistans marks a major shift in the geography
of wealth and power in the 21st century. Nerdistans and their
residents can thrive without achieving giant scale or locating near a
powerful global city unlike traditional top executives who often seek
a major city venue. Indeed, David Russo, director of human resources
at SAS Institute in Cary, North Carolina, believes there is something
in the very nature of these technical workers that attracts them not to
brighter lights, but space that is newer, better planned and more
orderly. From his office at SAS’s sprawling campus-like facility, Russo
observes:
It’s all in the mindset of the engineers. They might grouse
about not being in a big-league town, but the tradeoff is
there’s not much traffic and all the high-speed environment.
Engineers and software people are folks whose whole lives
are based on logic and order so this place appeals to them.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
THE URBAN REVOLUTION OF THE 1990S: THE
EMERGENCE OF “SOFT” TECHNOLOGY
The current technological revival in some of America’s cities marks a
major departure from the trends discussed above. As the digital
revolution expanded in the late 1990s, there developed a growing
need for culture-based content in the evolving New Economy. In
contrast to the first phase of the high technology revolution that
focused on manufacturing, engineering and the industrial application
of science, the emerging second phase of the digital economy
encompasses a whole host of subjective skills more suited to the
natural advantages of dense urban areas. This stems, in large part,
from changes within the digital economy itself.
In a trend first identified by futurists Alvin and Heidi Toffler, initial
technology development centered on large governmental and
corporate organizations and in its wake, created a secondary form far
more oriented toward customization and creativity suited to the more
flexible networks of smaller organizations.39 The information
economy, it turns out, has two faces: one “hard,” built largely around
quantifiable sciences and mathematics and a second that focuses on
the content of messages that flow through expanding information
pipelines. This has created a split in the geography of the digital
economy. The “hard” side, including activities such as the
development production of fiber optics and chips, remains
concentrated in the nerdistans of the periphery. The “soft” side,
focused primarily on such fundamentally creatively driven fields as
media, fashion, advertising and design, has taken on a decidedly
more urban cast.
Traditional cities have proven remarkably adept at exploiting such
industries. Major cities have declined as industrial, corporate and
“hard” technology centers, but their role as the creative fulcrum of
society has not. The expansion of media-related industries has been
central to their revival. Online services, video games and multimedia
software industries all grew dramatically in the latter half of the
1990s. Overall, spending on “new media” expanded from $7 billion in
1995 to roughly $14 billion by the year 2000. Other media-related
industries – cable, radio, publishing, broadcast television, film and
book publishing – are also expected to enjoy considerable growth.40
As more firms either move into or are started in a city, they make that
location more attractive for subsequent firms and skilled workers to
follow. Once a critical mass of knowledge workers develops in an
urban area, it can be self-perpetuating. Clustering of firms fosters a
pooled labor force of knowledge workers who possess industry-
As the digital
revolution expanded
in the late 1990s, there
developed a growing
need for culture-based
content in the
evolving New
Economy.
■ ■ ■
The emerging second
phase of the digital
economy encompasses
a whole host of
subjective skills more
suited to the natural
advantages of dense
urban areas.
■ ■ ■
The expansion of
media-related
industries has been
central to their
revival.
13
Knowledge-Value Cities in the Digital Age
The opportunity for
cities lies in the
creation of new ideas
based upon tacit
knowledge that is
more difficult to
transfer across
distance.
■ ■ ■
Innovative activity
has a high propensity
to cluster in
industries where tacit
knowledge plays a
critical role primarily
because it is
transferred through
informal networks,
typically demanding
direct and repeated
contact and dialogue.
■ ■ ■
Theoretically, soft
technology industries
could function
electronically at great
distance from urban
centers.
14
Milken Institute - February 13, 2001
specific skills. Knowledge workers benefit by having the opportunity
to move next door to another position. Firms benefit by having an
available pool of workers nearby with industry-specific skills that
they require.
A local high-velocity labor market can result in knowledge spillovers.
New process and product innovation within a cluster can be shared
through informal relationships. As knowledge workers migrate
between firms, former colleagues generate labor-market networks
through informal contact. These informal relationships lead to new
knowledge being transformed into innovations and new companies.
This process keeps industry clusters dynamic and adaptive,
constantly striving to stay ahead of clusters in other regions.
The opportunity for cities lies in the creation of new ideas based upon
tacit knowledge that is more difficult to transfer across distance. The
comparative advantage of high-cost locations is increasingly based
upon knowledge-driven activity. The local spillover of knowledge
from a firm, research center or university to a third-party firm is a
prerequisite for innovative activity.41 Innovation clusters sustain cities
in a global economy.
Perhaps a city’s strongest advantage is its density and efficiency in
transmitting information. Tacit knowledge can best be described as
informal or how-to knowledge, created by teams that innovate within
a firm. Firms create value through development of knowledge
management strategies that foster sharing knowledge inherent in
individuals or groups throughout an organization. This knowledge is
embedded in the systems, processes, methodologies and technologies
of organizations, residing in people’s thinking and experiences, and
generating knowledge spillover.42
Innovative activity has a high propensity to cluster in industries
where tacit knowledge plays a critical role primarily because it is
transferred through informal networks, typically demanding direct
and repeated contact and dialogue. This led to the creation of cities in
the first instance.
Theoretically, soft technology industries could function electronically
at great distance from urban centers, but these linchpins of urban
commerce remain dependent upon the location preferences of their
talent pool. Employers who rely on such creative workers are forced
to conduct business in central city, even if their own headquarters are
located elsewhere. Even today, after decades of relative decline and
the loss of millions of middle-class families, the geography of art
remains overwhelmingly concentrated in major urban areas. New
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
York and Los Angeles alone, with less than 3 percent of the nation’s
population, are home to roughly 14 percent of America’s artists.43
While new technology may allow for greater outward movement,
that technology, particularly the Internet, also allows those who
choose to stay in the urban setting to “telecommute” comfortably
with distant headquarters. Staying physically present in the city
keeps access to the kind of “privileged information” that only comes
through personal networking, alive. Personal contacts also provide
solid economic reasons for locating close to the central core in places
like Wall Street, San Francisco, or the Chicago loop. 44
Contrary to predictions that social relationships would weaken in the
post-industrial digital age, high-tech industries are largely sustained
by interaction between specific groups that seek each other out in the
urban milieu.45 Certain psychological characteristics of urbanites,
such as intellectualism, individualism and abstract economic
relationships draw talent and create value.46 This is the essential
dynamic behind the current technological recovery of cities.
Industry clusters and their associated support infrastructure are a
city’s best defense against being arbitraged in a global costminimization game. Industry clusters can mitigate input-cost
disadvantages through global sourcing. Sustainability in a particular
location is contingent upon making productive use of its innovation
competencies. Clusters linked to the outside world offer access to the
best practices and latest industry developments. Cities will excel to
the extent that firms and talent can innovate successfully by being
there, rather than somewhere else. It is in this unique conjunction
between urban culture and the emerging new economic paradigm
that the successful cities of the future can be nurtured and developed.
Contrary to
predictions that social
relationships would
weaken in the postindustrial digital age,
high-tech industries
are largely sustained
by interaction
between specific
groups that seek each
other out in the urban
milieu.
■ ■ ■
Certain psychological
characteristics of
urbanites, such as
intellectualism,
individualism and
abstract economic
relationships draw
talent and create
value.
■ ■ ■
This is the essential
dynamic behind the
current technological
recovery of cities.
15
Knowledge-Value Cities in the Digital Age
The reemergence of
cities in the “soft”
technology fields
should be understood
as much in
demographic and
cultural terms as in
economic.
■ ■ ■
In this new era, the
essential geographic
advantage of core
cities lies not in
location near raw
materials, ports, rail
links and pools of
manual labor critical
to 19th and early 20th
century cities, but in
attracting a
population capable of
constructing an urban
economy based on
unique postindustrial niches.
Milken Institute - February 13, 2001
SECTION 2: TECHNOLOGY AND
THE FIRST-TIER CITIES
THE NEW URBANITES
In its essentials, the reemergence of cities in the “soft” technology
fields should be understood as much in demographic and cultural
terms as in economic ones. In this new era, the essential geographic
advantage of core cities lies not in location near raw materials, ports,
rail links and pools of manual labor critical to 19th and early 20th
century cities, but in attracting a population capable of constructing
an urban economy based on unique post-industrial niches.
To a large extent, these new urbanites are not, for the most part,
drawn from the typical American middle-class family, but groups
largely outside the mainstream.47,48 Besides immigrants, who have also
played an important role in other aspects of the urban resurgence, the
key class of new urbanites consists largely of childless people among
aging boomers, childless couples, homosexuals, “empty-nesters” and
singles.
This now constitutes an increasingly significant portion of the
nation’s population. Nearly one-third of all baby boomers are single,
childless or have one child, the largest such population in modern
history.49 Over the past decade, the percentage of single or singleparent households has grown from 29 percent to 38 percent. Of the 17
million new households created in the 1980s, a majority were formed
of single people and unrelated individuals.50
In contrast to most middle-class Americans, particularly those with
families, these demographic groups tend to hold far more positive
views of city life. For the most part, these are city-dwellers by choice.
They tend to like the pace and cultural offerings cities present.51 New
York City lost many middle class families in the 1990s, but these were
largely replaced by younger, better-educated people, many of whom
considered the proliferation of “cultural institutions” as a key reasons
for settling in there.52 The decade-long reduction in crime rates in
many favored cities, notably New York, Los Angeles and Chicago,
may have also accelerated this trend.53
The current wave of urban settlement tends to be young, affluent and
well educated. In lower Manhattan, 88 percent of residents are under
45, most are single and earn upwards of $120,000.54 But this is not
16
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 2
A Rise In Downtown Living
Selected Downtown Population Growth, 1998-2010
Current
Downtown
Population
2010 Projected
Downtown
Population
Change
(percent)
Boston
21,625
(1990)
23,580
9.0
Chicago
115,341
152,295
32.0
New York*
19,473
35,000
79.7
Seattle
15,236
(1997)
33,600
120.5
In most first-tier, and
some emergingtechnology cities,
central districts have
been gaining
residents, several at a
rapid rate.
■ ■ ■
*Includes Wall Street area only.
Sources: Brookings Institution; Fannie Mae Foundation
unique to New York City. In most first-tier, and some emergingtechnology cities, central districts have been gaining residents,
several at a rapid rate55 (Table 2).
These new urbanites constitute the critical fuel for the post-industrial
urban economy. Companies, wherever they might be located, rely
increasingly on skilled urban professionals in fields from fashion
design, entertainment and Internet commerce to international trade,
investment, specialized retail, banking and other business services.
The Internet industry’s growing need for design, marketing and other
creative skills has increased the demand for non-technical
professionals, such as writers and artists, in slight demand by “hard”
technology firms.
Tom Lipscomb, founder of Infosafe, a New York-based multimedia
software firm, notes:
You can put a chip firm in Boise, Idaho but you’ll never have
a major media play operating there. You can’t get the kind of
creative people you need to move to Plano, Texas. They want
to be somewhere they sense there’s action.
Although difficult to measure, the extent to which first-tier cities
predominate in the emerging Internet culture can be assayed in
several ways. Recent surveys show that Seattle and San Francisco
rank among the cities in America with better than 50 percent Internet
penetration.56 Domain names are another critical indicator, with New
York City, San Francisco and Los Angeles ranking in the top three. On
These new urbanites
constitute the critical
fuel for the postindustrial urban
economy.
■ ■ ■
The Internet
industry’s growing
need for design,
marketing and other
creative skills has
increased the demand
for non-technical
professionals, such as
writers and artists, in
slight demand by
“hard” technology
firms.
17
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
a per capita basis, San Francisco, Boston, Seattle, and Los Angeles all
rank near the top. 57
Recent analysis of
technology industries
shows that many
characteristics of
urban areas
particularly in firsttier cities correlate
well with technology
development.
■ ■ ■
Knowledge-talented
people are now
moving to large cities
in greater numbers.
■ ■ ■
In the post-industrial
economy such
individuals are
increasingly
becoming important
business assets.
18
Recent analysis of technology industries shows that many
characteristics of urban areas particularly in first-tier cities correlate
well with technology development. Cities that rank highly in terms of
cultural amenities, perceived “coolness” and a large homosexual
population, are also those places where information industry growth
has been strongest.58 The cities that we identify in this paper as firsttier are best known for their cultural, aesthetic and artistic
distinctiveness. The primacy of such factors explains why San
Francisco is among the wealthiest places in the nation and
aesthetically unpleasant places such as Fresno, CA, while
inexpensive, rank low in terms of economic health59 (Figure 6).
Knowledge-talented people are now moving to large cities in greater
numbers. The late 1990s saw a surge in demand for programmers in
urban areas such as New York, Boston, San Francisco, Seattle and Los
Angeles58 (Table 3). In the post-industrial economy such individuals
are increasingly becoming important business assets.
Figure 6
Metro Amenity Preferences
By Educational Attainment
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 3
High-Tech Employment (Thousands)
Selected (First-tier) Metros
Boston
Los Angeles
New York
San Francisco
Seattle
1980
274.2
432.8
169.6
53.4
119.1
Thousands
1990
323.7
459.7
161.8
60.8
178.1
1999
323.3
388.6
180.5
96.2
211.7
Growth Rate
1990-99
-0.1
-15.5
11.6
58.2
18.9
Percent of Total
Employment, 1999
16.3
9.7
4.3
9.2
15.3
Source: RFA
ENTREPRENEURSHIP AND THE NEW ECONOMY
In the coming decade first-tier and other cities will benefit from
trends in generational demographics. Younger people have shown a
distinct tendency toward entrepreneurship. Fully 10 percent of
people aged 18 to 34 already own their own businesses and most
surveys show them to be far more entrepreneurial than preceding
generations.61
Entrepreneurial capacity and behavior are prime drivers of economic
growth and job creation in the New Economy. Job creation statistics
display the importance of entrepreneurship to the U.S. economy and
its urban areas. In the second half of the 1990s, businesses with fewer
than 100 employees created 75 percent of all new jobs in the United
States. Moreover, 15 percent of the fastest growing new firms
accounted for over 90 percent of net new job creation.62 In contrast, the
Fortune 500 firms have shed more than 5 million jobs since 1980.
Small and medium-sized businesses are responsible for creating 38
million jobs in the United States since then.
Entrepreneurs are distinguished by their ability to see the economic
potential of new technologies and apply them to business concept
innovations. Young, technologically oriented entrepreneurs are
particularly adept at seizing these opportunities and harnessing new
forms of technology. New ideas are best implemented in new firms.
Existing businesses often hesitate to introduce new products for fear
of cutting into their existing sales. Long-established, large,
bureaucratic firms often fail to recognize the value of their own
discoveries and how they might be applied. Much innovation in the
U.S. has come about by virtue of new technology developed at
established companies being applied by entrepreneurial firms.
Entrepreneurial
capacity and behavior
are prime drivers of
economic growth and
job creation in the
New Economy. Job
creation statistics
display the
importance of
entrepreneurship to
the U.S. economy and
its urban areas.
■ ■ ■
Entrepreneurs are
distinguished by their
ability to see the
economic potential of
new technologies and
apply them to
business concept
innovations.
19
Knowledge-Value Cities in the Digital Age
The connectivity
between
entrepreneurship and
the New Economy
calls for development
of a conceptual
framework that
recognizes the
implications of this
relationship for
national and regional
economic growth.
■ ■ ■
Long-term economic
success of cities will
be heavily dependent
upon their ability to
foster entrepreneurial
capacity and create
the infrastructure to
nurture
entrepreneurial
success.
■ ■ ■
Demographic factors,
more than anything
else, are driving the
rapid technological
and information
industry growth in
the first-tier cities.
20
Milken Institute - February 13, 2001
The connectivity between entrepreneurship and the New Economy
calls for development of a conceptual framework that recognizes the
implications of this relationship for national and regional economic
growth. Entrepreneurial activity is a function of the extent to which
individuals recognize opportunity and possess the capacity,
motivation and skills to exploit it, reflected in start-up efforts and job
formation.63 It is molded by a consistent set of factors that include
training, support and the availability of early-stage financing. Longterm economic success of cities will be heavily dependent upon their
ability to foster entrepreneurial capacity and create the infrastructure
to nurture entrepreneurial success.
Entrepreneurship is even more marked in the Y generation or “baby
boom echo.” The Y generation is roughly twice the size of the now 20something X generation. They will reach maturity and pass their
parents’ generation in total numbers by 2010.64 This raises the promise
of a steady supply of the kind of young, single professionals who, in
the past, have shown a proclivity for city living (Figure 7).
These demographic factors, more than anything else, are driving the
rapid technological and information industry growth in the first-tier
cities. Firms such as Zefer, an Internet consulting firm based in
Boston’s “cyber district,” have been all but forced to locate their
Figure 7
Growth of Population
Between 14 and 17 Years of Age
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
satellite offices in areas where they feel they can get the best talent.
Lower Manhattan, San Francisco’s “South of Market,” Chicago’s
Bucktown and Pittsburgh’s “Cultural District” are among them. Zefer
co-founder Matthew Burkley notes that in the future these workers
will have even greater power to determine location in large part
because they are in such demand. As information content increases in
sophistication and importance, skilled employees gain greater
freedom and leverage to choose the environment they prefer, and
many of the most valued creative workers prefer to live in certain
cities. Burkley explains:
In today’s labor market you have to be where your team
members want to be. You don’t tell people how they want to
live – they tell you.
KNOWLEDGE-VALUE NEIGHBORHOODS
The last decades of the 20th century saw a precipitous decline in
many older city neighborhoods, particularly in former industrial
centers. The intricate street “ballet” of successful diverse, urban
neighborhoods such as those celebrated in the writings of urbanist
Jane Jacobs, was gradually replaced by a grim reality of depopulation,
decay and decline. 67 The growth of the first-tier cities suggests a new
opportunity for transforming old urban geography.
Urban decline was a national phenomenon. As recently as the 1960s,
New York’s manufacturing industries employed over 900,000
workers. Since 1974, that number has dropped from 610,000 to
roughly 280,000 two decades later, a 54 percent drop.66 Philadelphia
lost well over one-third in a single decade between the early 1980s
and early 1990s.67 Chicago, another major artisan center, suffered a
similarly huge drop, losing 60 percent of its manufacturing jobs
between 1970 and 1996. Between 1978 and 1997, the nation’s large
center cities lost nearly two in five of their manufacturing positions,
while the rest of the nation grew slightly.68
Today, artists, video producers, advertising executives and designers
are moving into old industrial areas deserted by blue-collar artisans
and workers. Changes in zoning have allowed for new uses, both
work-related and residential. Driven by demand for culturally related
products and aided by the shifting demography of cities, many oncefading industrial vicinities have been transformed into knowledgevalue neighborhoods. New York’s Hudson Square and Flatiron
districts, Camden in Baltimore, Wicker Park and Bucktown in
Chicago and South of Market San Francisco reflect this trend.
The growth of the
first-tier cities
suggests a new
opportunity for
transforming old
urban geography.
■ ■ ■
Today, artists, video
producers, advertising
executives and
designers are moving
into old industrial
areas deserted by
blue-collar artisans
and workers.
■ ■ ■
Driven by demand for
culturally related
products and aided by
the shifting
demography of cities,
many once-fading
industrial vicinities
have been
transformed into
knowledge-value
neighborhoods.
21
Knowledge-Value Cities in the Digital Age
It is critical to
understand that the
current
phenomenon
differs significantly
from the kind of
“gentrification” that
took place in many
cities during the
1980s.
■ ■ ■
Today’s improving
neighborhoods
are themselves
becoming centers of
wealth-creation and
innovation, places
of business, not just
residences.
Milken Institute - February 13, 2001
It is critical to understand that the current phenomenon differs
significantly from the kind of “gentrification” that took place in many
cities during the 1980s. Then, as urban economies rose in sequence
with the stock exchange and financial-services industries, large pools
of workers – brokers, advertising directors, accountants and
secretaries – poured into traditional downtown business districts,
many of which experienced rapid high-rise building booms. A
portion of these workers, particularly the young, often single and
educated, chose to settle in the city for reasons of preference and
convenience. In the process, they often “gentrified” formerly
ungenteel districts, rehabbing cheap housing stock and attracting
amenities such as upscale bars, restaurants and shops, but they did
not change the locale for wealth creation. There remains a major, and
critical, distinction.
Many of today’s improving neighborhoods are not merely convenient
in-town bedroom communities for the affluent. They are themselves
becoming centers of wealth-creation and innovation, places of
business, not just residences. They are knowledge-value
neighborhoods.
Residential buildings, older industrial spaces and class B and C space
have been transformed into space for information age companies
(Table 4). Industrial-age settings are becoming sites for post-industrial
work. At the same time, high-rise construction, the epitome of 20th
century success, has slowed down significantly despite a robust
economy.69
Intellectual capital is a bountiful resource that does not adhere to the
law of diminishing returns nor is it an easily manipulated asset.
Knowledge resides with an individual or group and grows when
Table 4
Change In Class B&C Vacancies
■ ■ ■
Vacancy Rate
They are
knowledge-value
neighborhoods.
Market
Houston
Baltimore
Manhattan
Seattle
San Francisco
U.S. Aggregate
Source: Reis.com
22
Submarket
CBD
CBD
Downtown
CBD
CBD
CBD
12/31/95
(percent)
42.8
24.1
27.6
9.2
14.7
19.9
12/31/99
(percent)
27.5
12.5
11.6
3.3
3.2
11.4
Change
(percent)
-15.3
-11.6
-16.0
-5.9
-11.5
-8.5
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
collaboration and sharing with others occurs. It is never depleted
because even if it is transferred, the original owner still possesses it.
Innovation, or the flow of new knowledge, thrives in an environment
of collaboration, but dies in an environment based solely on
competition.
The complexity of work can be seen as one dimension on a
continuum, with routine work at one end and knowledge work at the
other. Complex work involves unstructured problems with varying
degrees of detail, extended time horizons, imprecise information
inputs and diffuse scope. Routine work is characterized by structured
problems defined by its accuracy of detail, short time horizons,
clearly formatted information and narrow scope. Knowledge work
has a high degree of complexity and uncertainty demanding
independent judgement.
Knowledge workers create economic value. Industries have only
recently recognized the imperative of harnessing intellectual capital
and the value of knowledge workers to success. Knowledge workers
do not just access knowledge and apply it to firm-specific objectives.
They harness new information to generate new knowledge, bringing
both inductive and deductive analytic skills to complex problems and
create new concepts and processes. New knowledge can be generated
in the form of incremental innovation as well as radical innovation
that propels a business toward new endeavors.
Another dimension is the degree to which knowledge workers
operate in a collaborative, team environment or as independent
operators. The most important alteration in the form of knowledge
work is the movement toward a network or team-based model of
organization. The network model is not only highly complex work,
but requires high levels of interdependence. Knowledge workers
operating under this model are part of highly interdependent teams
with experts possessing different skill sets and frames of reference.
The network model integrates highly improvisational work reliant on
profound expertise across numerous functions, and depends upon
fluid deployment of flexible teams.
In order to achieve the project objective, team members develop
shared understandings, operating procedures and a common
vocabulary. In the network model, complexity is increased because it
necessitates consensus building as team members work to process
information individually and jointly, applying knowledge and
generating new outcomes. When teams form across firms, they make
knowledge-value urban areas very attractive locations.
Innovation, or the
flow of new
knowledge, thrives in
an environment of
collaboration.
■ ■ ■
Knowledge work has
a high degree of
complexity and
uncertainty
demanding
independent
judgement.
■ ■ ■
Knowledge
workers create
economic value.
23
Knowledge-Value Cities in the Digital Age
Knowledge value,
first articulated by
Japanese economist
Taichi Sakaiya, is
more than a function
of high technology.
■ ■ ■
The restructuring of
work in the digital
age has created a new
culture.
■ ■ ■
Since many of today’s
most valued creative
workers prefer to live
in cities, this has
helped restore the
importance of old
urban neighborhoods.
24
Milken Institute - February 13, 2001
Knowledge value, first articulated by Japanese economist Taichi
Sakaiya, is more than a function of high technology. Rather, the
regions and industries adept at incorporating a broader notion of
cultural knowledge, design distinctiveness and fashionability into
products or services would be those to accrue future economic
growth. As Sakaiya noted in his landmark book, The Knowledge Value
Revolution:
The significant criteria for the people of the next epoch will
not be simplistic, reductive measurements of the quantity of
goods or efficiency rates of services; they will be subjective
criteria that conform to the ethos of the groups to which
particular individuals sense they belong.70
In a knowledge-value economy, businesses must do more than
simply make products and dump them into the marketplace.71 The
consumer is more sophisticated and the marketplace more
fragmented. Advertising must now “make the inhabitants of a certain
social setting value more highly – both socially and financially – the
product in question.”72 Packaging, positioning and the culturally
intensive role in production have become far more important,
whether selling new clothes, furniture or restaurant concepts.
Although a thoroughly modern concept, knowledge value and the
emergence of districts that thrive on specialized, art-based
production, recall urban economies before the advent of mass
industrialism. Cities by their nature thrive by passing on cultural and
technical knowledge and blending that tradition with stimulus from
the outside. At its apex, this blending creates the innovative culture
that leads to new styles, art forms and fashions which, over time,
spread to more peripheral areas.
The restructuring of work in the digital age has created a new culture.
As the sophistication of information content increases in importance,
skilled employees have greater freedom to choose the environment
they prefer. Since many of today’s most valued creative workers
prefer to live in cities, this has helped restore the importance of old
urban neighborhoods.
The culture-intensive nature of knowledge-value production draws
upon a different, primarily younger demographic base
predominantly attracted to a distinctly urban environment. Software
giant Microsoft has been stymied in efforts to bring more creative
media workers to its sprawling Redmond campus, classically
nerdistan headquarters.73 One New York City editor, who himself
refused to move, was asked to help recruit for it. He doubts many
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
would want to join the company as long as it required moving to the
Seattle suburbs. He is located in Chelsea, one of New York’s growing
new media centers. He explained:
I have talked to a dozen people in New York about this but
only one even bothered to fly out for an interview. Microsoft
thinks they’d like to bring in the culture but they don’t
understand that creative people usually like to work in an
urban area where there are options to see and do a variety of
things. That’s what makes the city a joy.
The location decisions of such creative knowledge workers represent
a critical advantage for the urban geography. Unable to force them to
the hinterlands, Microsoft and other large corporations find
themselves forced to contract for creative input, usually in places like
New York, Los Angeles or San Francisco.
This greater range of geographic choice corresponds with the shifting
patterns of corporate governance. One of the fundamental
characteristics of what historian Manuel Castells calls
“informationalism” has been a “shift from centralized large
corporations to decentralized units made up of a plurality of sizes
and forms of organizational units.”74 Since the Internet and other
advanced communications can link various aspects of a task, the need
to do them in one place has diminished. Larger firms may control
more cash, but they tend to distribute their workload across a broader
network of suppliers that is almost Venetian:
…the new coordination technologies enable us to return to
the reindustrialized organizational model of tiny
autonomous businesses; businesses of one or a few,
conducting transactions with each other in the market. But
there’s one crucial difference: electronic networks enable
these microbusinesses to tap into global reservoirs of
information, expertise and financing that used to be available
only to large companies. 75
THE REINVENTION OF LOWER MANHATTAN
Until the 1950s and 1960s, lower Manhattan boasted one of the
nation’s most vibrant pools of small industrial firms. Its “industrial
culture of diversity” was involved in servicing the local market or
processing imports and exports. The city’s major industries, textiles
and garments, remained dominated by smaller firms. Its
manufacturing base was never characterized by the kind of giantism
The location
decisions of creative
knowledge workers
represent a critical
advantage for the
urban geography.
■ ■ ■
This greater range of
geographic choice
corresponds with the
shifting patterns of
corporate governance.
■ ■ ■
Since the Internet and
other advanced
communications can
link various aspects of
a task, the need to do
them in one place has
diminished.
25
Knowledge-Value Cities in the Digital Age
Rising taxes,
regulation, declining
public service, crime
and general
indifference to
smaller businesses,
were slowly
undermining the
artisan base.
■ ■ ■
The preference of
many highly valued
creative knowledge
workers to live and
work in lower
Manhattan has keyed
the resurgence of
many of its old
districts.
■ ■ ■
Instead of button
makers or specialized
manufacturers of
intricate machine
parts, the New
Economy consists
largely of small firms
with annual revenues
of less than $1
million.
26
Milken Institute - February 13, 2001
associated with basic industries such as steel, coal, or later
automobiles.76 This economy of small firms helped establish New
York as the nation’s leading manufacturing center, a thriving place
that grew even as mass-industrial centers such as Detroit fell into
prolonged decline.77
By the 1970s, however, there were clear signs of distress. Rising taxes,
regulation, declining public service, crime and general indifference to
smaller businesses, were slowly undermining the artisan base.
Historian Fernand Braudel described the process as “the decline one
after the other of little firms, sometimes employing less than thirty
people, which made up its commercial and industrial substance.”78
The preference of many highly valued creative knowledge workers to
live and work in lower Manhattan has keyed the resurgence of many
of its old districts. Instead of button makers or specialized
manufacturers of intricate machine parts, the New Economy consists
largely of small firms with annual revenues of less than $1 million.79
The clients of many of these small firms come from New York’s
extraordinary combination of advertising agencies, market research,
telecommunications, finance and other high-end business service
providers. New York City is still home to four of the top six
Figure 8
Number of New York Media Providers
By New York Area Location
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
accounting firms, six of the ten biggest consulting companies, five of
the largest insurance companies and all ten largest securities firms.80
The national and increasingly global mass communications media –
newspapers, radio and television – have clustered there, virtually to
the exclusion of all other regions. Some 30 percent of all jobs in book
and magazine publishing are concentrated in the New York area.81
Unable to compete with midtown or Wall Street rents, many of
Manhattan’s new-economy firms cluster in the industrial buildings of
older, distressed areas adjacent to Hudson Square and along lower
Broadway.82 (Figure 8)
This pattern, notes Concrete Media founder Aaron Cohen, has to do
with the nature of Internet businesses, which tend to expand, and
sometimes contract, at lightning speed.
Cohen, whose firm has grown from 13 to 70 in its sprawling industrial
space from 1999 to 2000, says:
You need a certain kind of space as a high-growth company.
You can’t put people in cubicles. It’s not an appropriate
economic environment. This kind of contiguous space is the
old industrial space – for ten people or fifty people. It’s hard
to do that in midtown or 55 Broad Street.
What’s more, says Cohen, these old warehouse and industrial
districts have allowed the new-media firms to stamp themselves with
their own character, one consciously distinct from the buttoned-down
corporate culture of midtown Manhattan or the outer suburbs. Cohen
continues:
When you are at the forefront of an economic revolution, and
that’s where we are, I don’t think you want to be in a salaried
man’s neighborhood.
In the 1990s, computer and data processing services – software and
Internet-related functions such as Web page design and information
retrieval services – was the fastest growing high-tech sector in the
New York metro area. Computer and data processing services jobs
more than doubled in the metro area over the last decade to 50,400 in
1999. Most of these jobs were created in Lower Manhattan (Appendix
Table 1). The second-fastest growing tech sector in New York in the
1990s was in motion picture services where 22,700 jobs were added, a
remarkable gain of 133.5 percent. In the aggregate, high-tech services
account for 89 percent of all high-tech jobs in the New York metro
area.
Unable to compete
with midtown or
Wall Street rents,
many of Manhattan’s
new-economy firms
cluster in the
industrial buildings
of older, distressed
areas.
■ ■ ■
This pattern has to do
with the nature of
Internet businesses,
which tend to expand,
and sometimes
contract, at lightning
speed.
■ ■ ■
Old warehouse and
industrial districts
have allowed the
new-media firms to
stamp themselves
with their own
character, one
consciously distinct
from the buttoneddown corporate
culture of midtown
Manhattan or the
outer suburbs.
27
Knowledge-Value Cities in the Digital Age
Once a declining area
with high vacancy
rates, lower
Manhattan was
virtually 95 percent
occupied by 2000.
Milken Institute - February 13, 2001
Figure 9
Lower Manhattan Office Rents
New York
■ ■ ■
Despite the
turndown in the
venture market, the
Internet sector
continues to expand,
accounting for onequarter of all leases
executed in
Manhattan during
the first quarter of
2000.
■ ■ ■
This growth is not
high-tech in the
traditional sense,
rather, it consists of a
broad array of
knowledge-value
information, fashion
and media companies.
28
In the process, lower Manhattan has been completely revitalized.
Once a declining area with high vacancy rates, lower Manhattan was
virtually 95 percent occupied by 2000. Class B properties exceeded
$40 per square foot.83 (Figure 9) In some industrial areas, rents
increased five-fold as Internet and other communications firms
moved into the once desolate industrial and warehouse districts.84
Despite the turndown in the venture market, the Internet sector
continues to expand, accounting for one-quarter of all leases executed
in Manhattan during the first quarter of 2000.85
This growth is not high-tech in the traditional sense, rather, it consists
of a broad array of knowledge-value information, fashion and media
companies. The “hip” appeal of these areas has lured ancillary
businesses out of midtown Manhattan. The Starrett-Leigh Building in
lower Manhattan now houses Martha Stewart, Hugo Boss Fashions
and Screaming Media, among others. 86 Design houses such as
Kenneth Cole and Diane von Furstenburg, along with growing
number of advertising agencies and related businesses that fit neatly
into a knowledge-value economy, have relocated as well.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
A supporting array of retailers, clubs and restaurants has followed
suit. Kirshenbaum, Bond and Partners moved from midtown to lower
Manhattan over a decade ago, in part to identify with the emerging
image of the area. Richard Kirshenbaum, its founder, explains:
If you are in a traditional area, you say you are a traditional
business. It’s taking risks – but we’re a young agency – and
the area has sprouted up. It’s having your own point of view
and knowing your own mind.
It’s not just accommodating growth or creating an image that makes
these areas appealing. Unlike traditional high-rise downtown offices,
such buildings lend themselves to the work patterns of knowledgevalue businesses. In place of elevators and cubicles designed for
segmented workforces, industrial spaces tend to have layouts better
suited to workforces that expand and contract on a project-by-project
basis and require opportunities for intense interaction. Open spaces
accommodate large-scale equipment such as video editing machines,
computers and scanners, the norm in such work environments, more
readily. Marty Herz, President of New York-based Environetics
Group, says such spaces “lend themselves to the exchange of group
creativity.”87
The space occupied by @Radical Media, another prominent firm in
the Hudson Square area, reflects this blend of individualist values
and high-tech concepts. The workspace, crammed with television
monitors, and film-editing, computer and graphics equipment, has
unfinished walls and ceilings, steel doors wrapped in black tin and
high, pre-air-conditioning era windows that open onto a sweeping
view of the midtown Manhattan skyline. In this work environment,
there are few individual offices. Space is flexible. Common areas are
designed specifically to accommodate conversation and discussion in
a comfortable, welcoming atmosphere. More importantly, notes
company founder and President Jon Kamen, this space fits the highly
individualistic, creative spirit that animates the company. Instead of
the mass-oriented approach of conventional large advertising
agencies, studios or networks, @Radical’s workforce is made up of
skilled artists, some 75 on staff and another 100 contract or free-lance,
who work on individual projects with considerable autonomy.
Kamen built this space not simply to be an enlightened employer, but
to lure his workforce there. Attracting such eclectic talent is
particularly critical in the digital age, when technology allows
companies to move effortlessly from producing commercials,
television, CD-ROMs and feature films in a way unimagined in the
past when each part of the visual production business was highly
Industrial spaces tend
to have layouts better
suited to workforces
that expand and
contract on a projectby-project basis and
require opportunities
for intense
interaction.
■ ■ ■
Open spaces
accommodate largescale equipment such
as video editing
machines, computers
and scanners, the
norm in such work
environments, more
readily.
■ ■ ■
Space is flexible.
29
Knowledge-Value Cities in the Digital Age
Knowledge-value
neighborhoods create
not only great
individual spaces, but
communities.
■ ■ ■
In this often ad hoc
work environment,
the ability to marshal
and coordinate highly
idiosyncratic, often
freelance talents –
usually under time
pressure – can make
the difference
between success and
failure.
■ ■ ■
Although less hyped
than similar
developments in
lower Manhattan or
San Francisco, the
growth of the tech
community in West
Los Angeles has
similar characteristics.
30
Milken Institute - February 13, 2001
segmented. Now the key is flexibility, attracting people who, like
creative artisans of the past, enjoy the diversity of different
challenges.
Perhaps most important, the knowledge-value neighborhoods create
not only great individual spaces, but communities. In the race to
generate new high-value services, no company, even as innovative a
firm as @Radical Media, can flourish in isolation.
In this often ad hoc work environment, the ability to marshal and
coordinate highly idiosyncratic, often freelance talents – usually
under time pressure – can make the difference between success and
failure. That provides good reasons for companies to locate close to a
concentration of specialized businesses and professionals who can be
called upon in short order to perform highly particular tasks. To put
together the critical creative teams, the 21st century organization
must still go to where those reservoirs of talent are concentrated – the
great urban centers and those specific urban districts that attract
them.
“It all falls back to community,” suggests Kamen, in his
award-filled, sunlit office. “The communities we surround
ourselves with are in the cities. You are what you eat and
what you are exposed to. You go to where the creative talents
are.”
WEST LOS ANGELES: DIGITAL HOLLYWOOD
Another large concentration of knowledge-value industries is
situated in Los Angeles particularly on the west side of the city
(Appendix Table 2). West Los Angeles has become a hotbed of
technology-oriented firms, many of them linked to the Internet. Three
communities within this wide area – Beverly Hills, Santa Monica and
El Segundo, rank among the top 25 in America for domain names per
capita.88
Although less hyped than similar developments in lower Manhattan
or San Francisco, the growth of the tech community in West Los
Angeles has similar characteristics. The region has many of the
positive attributes that typify Southern California and attract a
younger demographic – excellent weather, access to beaches and
unconventional vicinities. It also has the cleanest air in the region due
to its proximity to the ocean. West Los Angeles, ten miles from
Hollywood, the traditional heart of the entertainment industry, has
become particularly attractive to a new crop of production
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 5
Los Angeles Market Comparisons
Market
Los Angeles
Los Angeles
Los Angeles
Los Angeles
West Region
U.S. Total
Submarket
Downtown
S. Fernando
Valley/Central
West L.A.
Metro
N/A
N/A
Year End 1989
Asking
Vacancy
Rent
(percent) (dollars psf)
16.8
24.9
12.4
11.4
16.1
18.9
18.9
22.5
30.8
23.6
19.8
21.2
Year End 1999
Asking
Vacancy
(percent)
16.9
Rent
(dollars psf)
22.7
8.8
6.8
12.0
8.8
8.8
22
29.4
23.4
25.3
25.2
1989-1999 Change
Vacancy
(BP)*
10
-360
-460
-410
-1,010
-1,010
Rent
Growth
-8.9
-2.7
-4.6
-0.7
28.3
18.7
*BP = Basis Points
Source: Reis.com
companies. As a result, that area now has the lowest vacancy rates
and highest rents in Southern California (Table 5).
The region is also benefiting from the aerospace industry “hangover.”
The demise of that industry left Southern California with the nation’s
largest concentration of scientists and engineers of any region in the
nation, including the San Francisco Bay Area.89 While the losses from
the aerospace industry collapse have been strongly felt, the resulting
pool of technological talent has sustained the region’s technological
standing, enabling Southern California to grow its high-technology
industry at a faster pace than the rest of the country in the late 1990s.
In terms of physical space, the aerospace industry also left a large
supply of industrial, warehouse, and research and development
space ideal for Internet and other new media companies that prefer
such settings. 90 Rapid growth in new venture investments has
bolstered these firms. The area now ranks third, just behind Silicon
Valley and New England. 91
Although the area also has spawned numerous Internet commerce
firms, including eToys and Stamps.com, the distinguishing
characteristic of the digital economy of West Los Angeles lies in the
artful manipulation of images and concepts. This represents one of
the key growth sectors of first-tier city economies, generally. By the
mid-1990s, firms in the new media-related fields were, on average,
adding jobs at double-digit rates and enjoyed revenues per employee
better than twice that of Fortune 500 companies. 92 Overall,
entertainment-related spending in the United States rose from $185
billion in 1995 to over $257 billion in 2000.93
The demise of the
aerospace industry
left Southern
California with the
nation’s largest
concentration of
scientists and
engineers of any
region in the nation.
■ ■ ■
The resulting pool of
technological talent
has sustained the
region’s technological
standing, enabling
Southern California to
grow its hightechnology industry at
a faster pace than the
rest of the country in
the late 1990s.
31
Knowledge-Value Cities in the Digital Age
A city’s ability to
attract venture capital
provides an excellent
way to assess its
entrepreneurial
strength.
■ ■ ■
The risk-adjusted rate
of return in a location
is expected to be high
where venture
capitalists are willing
to support innovative
ideas.
■ ■ ■
Until the late 1990s,
companies in Los
Angeles labored in an
environment in which
it was nearly
impossible to attract
early round financing.
32
Milken Institute - February 13, 2001
A city’s ability to attract venture capital provides an excellent way to
assess its entrepreneurial strength. The risk-adjusted rate of return in
a location is expected to be high where venture capitalists are willing
to support innovative ideas. Until the late 1990s, companies in Los
Angeles labored in an environment in which it was nearly impossible
to attract early round financing. Some firms were required to move to
the San Francisco Bay Area as a condition of investment while others
were acquired by better-financed start-ups there.
Greater Los Angeles has been among the fastest growing venture
capital recipients in the nation over the past few years, altering
venture capital perceptions of the Los Angeles high-tech community.
Los Angeles experienced an 800 percent increase between 1995 and
1999, ranking second only to Colorado in the rate of increase of
venture capital flow.94 Most of this investment has been on the “soft”
side of the technology equation.
The fastest growing technology employment sector in Los Angeles in
the second half of the 1990s was computer and data processing
services, as was the case in New York City. Between 1995 and 1999,
computer and data processing jobs in Los Angeles increased by 46.3
Figure 10
Motion Picture Production & Services – California
As Percent of National Total for Industry
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
percent to more than 50,000. Motion picture production services
created 60,000 new jobs between 1990 and 1999. Many of these jobs
were in special effects such as digital animation and other forms of
digital editing techniques.
The confluence of entertainment talent and the emerging Internet
sector has been a critical factor in the rapid development of Internet
and digital businesses in the region. Film employment in Los Angeles
is three times larger than the next nine competitors (Figure 10).
Second place New York is ten times larger than third place San
Francisco. Other places barely even register.95 Local Internet
entrepreneurs, such as Sky Dayton, founder of Earthlink and cofounder of the Santa Monica-based incubator eCompanies, now
interact regularly with the entertainment industry:
…there’s a perception that Hollywood really needs the
Internet more than the Internet needs it. That said, you still
need actors, you still need content, you know nothing can
replace the artist…The Internet does give the artist a straight
line between themselves and the consumer of their art.96
The entertainment industry exemplifies a new economic paradigm
described by MIT economists Michael Priore and Charles Sabel as
“flexible specialization.” In this system, players within an industry
cooperate across size and areas of competency to produce highly
specialized, often customized goods, usually at the upper end of the
market.95 In Hollywood, flexible specialization translates into
increasing collaboration between the major studios and a host of
smaller, technically specialized independent entertainment
companies. These independent firms and freelancers provide most of
the entertainment industry’s creative input – the direction, look,
design and conceptualization. The studios provide marketing,
financial and technical infrastructure, and coordinate the creative
input provided by the smaller companies. This represents a massive
change from the traditional studio system, where virtually everything
was developed within a vast vertical structure that originated in the
1920s and continued, largely unchanged, for decades. In 1960, for
example, only 28 percent of all U.S. films were independently
produced. By 1991, that number had risen to over 60 percent. The
number of new entertainment-related specialty firms with unique
competencies in lighting, set production, special effects, postproduction, model-making, accounting and catering, has more than
tripled since the late 1970s.98 More than 90 percent of the roughly 7,000
firms in the Los Angeles entertainment industry have ten employees
or fewer. That proportion is far higher than in virtually any other
industry segment.99 Among the industry’s employees, only 80,000
The confluence of
entertainment talent
and the emerging
Internet sector has
been a critical factor in
the rapid development
of Internet and digital
businesses in the
region.
■ ■ ■
The entertainment
industry exemplifies a
new economic
paradigm: “flexible
specialization.”
■ ■ ■
Flexible specialization
translates into
increasing
collaboration between
the major studios and
a host of smaller,
technically specialized
independent
entertainment
companies.
33
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
work directly for studios and independent producers; 146,000 labor
as freelancers, writers, directors or craft specialists.100 In the late 1990s,
only 16 firms in the film industry employed over 1,000 people.101
This flexible and
decentralized
structure provides
enormous benefits for
the region.
■ ■ ■
LA’s appeal to
emerging digital
studios reflects the
region’s unique lead
position across a
broad array of fields.
■ ■ ■
These varied markets
provide critical cash
flow and flexibility
for technologyoriented firms.
34
This flexible and decentralized structure provides enormous benefits
for the region. Specialized digital content companies are continually
developing new products and services. Mini-studios – technically
oriented firms capable of extending into several industries ranging
from theme parks to special effects and full-length movie production
– have proliferated along the Los Angeles coastline.
At the same time the industry’s leading agents, artists and studio
executives have provided the fledgling New Economy with a soughtafter pool of skilled managers. Executives from E! Entertainment
Television, Creative Artists Agency and Disney have been recruited to
run Internet start-ups or media-oriented venture firms.
West Los Angeles dominates the production of film for the Internet.
Local firms such as Ifilms, Threshhold and Metafilmics are on the
cutting edge of this entertainment frontier. Video game companies,
such as Activision in Santa Monica, add to this concentration of
digital media expertise.102 Perhaps the most significant has been the
growth of digital effects firms. Digital Domain, Santa Monica Studios
and Rythym and Hues, which won an academy award in 1996 for its
work on the movie “Babe,” may well represent the future of digital
entertainment.
John Hughes, founder and President of Rhythm and Hues, says LA’s
appeal to emerging digital studios reflects the region’s unique lead
position across a broad array of fields:
I think Los Angeles is the only city in the world that can
support the kind of digital revolution that’s going on because
we have not only the animation, but we’ve got feature films,
we’ve got the theme parks with Disney and Universal, and
now we’ve got the video games.
These varied markets provide critical cash flow and flexibility for
technology-oriented firms. In many ways, the new economics of
effects is transforming the top houses from service providers to ministudios that have their own array of products for various
entertainment niches. Scott Ross, President of Digital Domain,
concurs. Digital Domain, a large effects house in Venice, CA, has
developed effects for numerous commercials, theme park attractions,
multimedia games and feature films. Hollywood’s increasing reliance
on technology has also made bidding on film projects more
competitive.
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Knowledge-Value Cities in the Digital Age
In spite of the ongoing siliconization of show business, it remains an
industry dominated by collaborative relationships and crafts values.
The increasing crossover among publishing, movies, advertising,
television, new media and theme park development can be best
described as a “cultural industrial complex.” Urban areas, with their
confluence of design, fashion, entertainment and publishing, are
unquestionably best suited to incubating the firms and industries that
service this growing and diversifying market.
As digital technology firms change the nature of industry, they will
locate predominately where they can assemble the appropriate
artistic and artisan talent, giving cities a unique advantage in the
ongoing New Economy competition.
BOSTON: THE MAKING OF A CYBER DISTRICT
Boston, historically a center of American higher education and
science, surrendered its hold on the technology industry to its
peripheral suburbs long ago (see Appendix Table 3). Yet, in the late
1990s, the knowledge-value economy began to seep back into the
city’s core, creating a remarkable resurgence in some of its longest
neglected precincts.
Until recently, the area near Boston’s South Station was little more
than a relic of the city’s industrial past. In the late 19th and early 20th
centuries, the leather district, adjacent to the South Station and nearby
Fort Point section, was a vibrant center for the city’s port trade,
fishing, textile and shoe industries. By 1872, roughly 300 wholesale
leather dealers, 189 leather concerns and 100 related businesses
operated there.
With the decline of Boston’s shoe industry in the first half of the 20th
century, the area went into what seemed to be a permanent decline.
Vacancies rose. Buildings fell into disrepair. Then in 1970s and 1980s,
these large warehouse facilities began to attract artists looking for
cheap, airy and centrally located space.103 Art galleries proliferated
and chic cafes began to sprout up amidst the greasy spoons that
served the remnants of the industrial community.
Later, the generally lower rents and the artsy ambience attracted
specialized media, advertising, and Internet software firms. Boston’s
economy recovered in the mid-1990s and at millennium’s end, the old
leather district and the area adjacent to Fort Point Channel became
home to scores of high-tech firms. Those firms employ an estimated
3,000 computer, Internet and information-related workers. Diners
In spite of the
ongoing siliconization
of show business, it
remains an industry
dominated by
collaborative
relationships and
crafts values.
■ ■ ■
As digital technology
firms change the
nature of industry,
they will locate
predominately where
they can assemble the
appropriate artistic
and artisan talent
giving cities a unique
advantage in the
ongoing New
Economy competition.
■ ■ ■
Boston’s economy
recovered in the mid1990s and at
millennium’s end, the
old leather district
and the area adjacent
to Fort Point Channel
became home to
scores of high-tech
firms.
35
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
have given way to nightclubs, coffeehouses and trendy restaurants
where digital age artisans exchange ideas.
The Boston metro
statistics illustrate
this economic
transformation.
■ ■ ■
Average rent for
office space in the 5.6
million square foot
South Station/Fort
Point Channel
submarket has
jumped by 26 percent
in the last three years.
■ ■ ■
What makes this
“cyber district” so
appealing is not real
estate speculation, but
a community
atmosphere conducive
to creative work.
36
The Boston metro statistics illustrate this economic transformation.
Computer and data processing services employment grew by 42,600
between 1990 and 1999 in the Boston area, an increase of 102.9
percent. A large share of this job creation occurred in the city itself.
Residential living has also grown rapidly, as in other knowledgevalue neighborhoods. High-income professionals working in the
technology industries built-out apartments there. In 1999,
condominiums and offices were selling for nearly three times the
price fetched five years earlier. Israeli-born real estate developer Ori
Ron, a key player in developing the area now known as Boston’s
cyber district, recalls:
When I bought this building people thought of me as the
crazy Israeli. Then the artists and photographers discovered
what great space this is. Then restaurants and nightclubs
began looking for this kind of space. Now there are the
Internet companies. People who are looking for space like
this want something different.
Similar increases have affected Fort Point Channel, which a decade
ago was largely a colony for artists seeking low rents. Market data
from REIS indicate that the average rent for office space in the 5.6
million square foot South Station/Fort Point Channel submarket has
jumped by 26 percent in the last three years. Developers of new office
buildings have not failed to notice the increase in demand for space
in submarkets like South Station. Reis.com identified five major
projects totaling 3.3 million square feet that are either under
construction or proposed for that area.
Yet what makes this “cyber district” so appealing is not real estate
speculation, but a community atmosphere conducive to creative
work. It was this atmosphere that attracted entrepreneurs such as 30year-old Rebecca Donovan, an MIT graduate who had worked for
large firms such as Salomon Brothers, Viacom and Fox. Donovan
chose to launch Opholio, her online picture agency, in Boston’s Fort
Point Channel area rather than in the more conventional confines of
the Route 128 suburban ring. Donovan exults:
It’s fantastic to be in this part of Boston. We have a great
connection here. There are photographers everywhere,
computer companies in the area. People are opening
businesses up and down. It’s a creative environment for
young talent…It’s a lot better than dragging people out to
the suburbs.
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Knowledge-Value Cities in the Digital Age
CHICAGO: MIDWEST REVIVAL
Perhaps nowhere has the shift to knowledge value been more
unexpected than in Chicago. Over the past five years, a series of
communities northwest of Lake Michigan have gradually
transformed from ghettos and barrios into information age
neighborhoods.
Much of this growth follows North Avenue, a major thoroughfare
cutting through the city from the fashionable Lake Shore districts
toward the city line. Prosperity and property values have risen
steadily from the lake through a series of inland communities
dramatically transforming them from blue-collar neighborhoods with
high welfare roles to centers of affluence and fashionability.
This proliferation reflects two basic changes, demographic and
economic, taking place in Chicago and other cities. On the
demographic side there has been a rapid growth among the ranks of
new urbanities, people who are largely affluent, well educated and
predominately single. The Brooking Institution reports that Chicago
has experienced the largest increase in new population close to its
Over the past five
years, a series of
communities
northwest of Lake
Michigan have
gradually transformed
from ghettos and
barrios into
information age
neighborhoods.
■ ■ ■
Figure 10
Computer and Data Processing Services – Chicago
Employment Level and Growth, 1990-1999
37
Knowledge-Value Cities in the Digital Age
Chicago’s information
age resurgence, like
that in New York City,
is due largely to the
continued presence of
business service
industries close to its
core.
■ ■ ■
This concentration of
services has created
both residential and
business markets in
adjacent districts that
were traditionally
industrially based.
Milken Institute - February 13, 2001
urban core than any city in the nation. This new urban population is
expected to nearly double by the end of this decade.104
Chicago’s information age resurgence, like that in New York City, is
due largely to the continued presence of business service industries
close to its core. Chicago ranked second in securities and
commodities trading and boasted the second highest percentage of
workers in information-oriented industries among the nation’s five
largest cities in 1999.105 Computer and data processing services
recorded strong growth in the Chicago metro area during the second
half of the 1990s (Figure 11). This sector created more new high-tech
jobs that any other sector. Consistent annual job gains of 10 to 15
percent have been recorded since 1995 and 25,000 jobs were added in
computer and data processing services. Chicago ranked third among
114 cities in the proportion of new jobs that were high tech between
1992 and 1997 (Appendix Table 4).
These pockets of expertise have helped Chicago adapt while suffering
the exodus of its major corporations over the course of the past three
decades. By the end of 1999, eight of Chicago’s ten largest public
companies were headed elsewhere, yet the city is enjoying its
strongest economy in decades, based largely on firms specializing
legal, financial, advertising and trade.106 In the professional service
fields, Chicago boasts the largest concentration of major firms, two to
three times greater than Philadelphia or Atlanta. 107
This concentration of services has created both residential and
business markets in adjacent districts that were traditionally
industrially based. Neighborhoods such as Lincoln Park and
Bucktown have become increasingly childless and expensive, with
Table 6
Apartment Crunch In Northwest Districts
Year End 1989
Market
City West*
Gold Coast**
Chicago MSA
Vacancy
(percent)
5.0
1.2
3.0
Asking
Rent
(dollars)
703
886
752
Year End 1998
Vacancy
(percent)
2.0
1.2
2.4
Asking
Rent
(dollars)
746
1,038
861
*Includes Bucktown, Wicker Park, Pilsen and parts of Lincoln Park
**Includes parts of Lincoln Park
***BP=Basis Points
Source: Reis.com
38
1989-1999 Change
Vacancy
(BP)***
-300
0
-60
Rent
Growth
1.5
4.0
3.4
1Q 2000
Vacancy
(percent)
2.1
1.3
2.4
Rent
(dollars)
753
1,057
872
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
housing prices rising as much as 40 percent annually by the late
1990108 (Table 6).
In Bucktown today it is not unusual for homes and condos to sell for
more than $300,000 to $400,000. Some properties are reaching $1
million. Vacant developable commercial lots that sold for $2,000 to
$3,000 just 20 years ago are now over $300,000.
More than land prices are affected by these changes. In the process of
gentrification, these areas have also become less family oriented and
less densely populated. In the 1950s, the average residence in
Chicago’s Lincoln Park had at least four occupants. That number
dropped to less than two by 1998. Urban scholar Robert Bruegmann
of the University of Illinois at Chicago and a Lincoln Park resident
notes that gradually, working-class whites, Hispanics and AfricanAmericans are replaced by a more affluent, largely single population.
He says:
Gentrification takes on the character of an invasion pattern.
It goes to the center and drives poverty out.
The current “invasion” pattern represents more than a repeat of the
gentrification process that affected Chicago and other cities in the
1980s. These neighborhoods are not simply home to white-collar
workers living downtown. Following the pattern established in other
first-tier cities, they are becoming knowledge-value neighborhoods
for information age industries focused on the Internet, new media,
graphic arts and advertising. For many of these areas, notably Wicker
Park and Bucktown, the shift from industrial to information age has
been largely positive. Many older structures are being refurbished,
bringing in a younger, more affluent consumer base.
Wicker Park was a working-class area west of Chicago’s loop with a
high proportion of welfare recipients, but that community’s eclectic
collection of restaurants, lofts and factory buildings is attracting large
number of new urbanites, including highly paid professionals and
web designers. In Bucktown, knowledge workers are replacing
hookers and drug-addicts, says Andre Fleurette, co-founder of
Lowtide Images, a Bucktown web design firm.
The progression seen in Bucktown and Wicker Park is common in
knowledge-value neighborhoods. Both started out as edgy artist
districts, but over time became home to creative companies and their
more traditional clients. Today, these neighborhoods have a
fashionable buzz. Jennifer Arterbury, 29-year-old co-founder of
Boom, a Chicago graphic arts firm, originally saw her firm’s niche in
Vacant developable
commercial lots that
sold for $2,000 to
$3,000 just 20 years
ago are now over
$300,000.
■ ■ ■
Following the pattern
established in other
first-tier cities, they
are becoming
knowledge-value
neighborhoods for
information age
industries focused on
the Internet, new
media, graphic arts
and advertising.
■ ■ ■
The progression seen
in Bucktown and
Wicker Park is
common in
knowledge-value
neighborhoods.
39
Knowledge-Value Cities in the Digital Age
Despite its many
advantages, San
Francisco, like other
first-tier cities, suffered
a significant decline in
the final decades of the
20th century.
■ ■ ■
Once the undisputed
center of the Bay Area
economy, San Francisco
now represents just one
of a series of
specialized regions in
the emerging 21st
century regional
geography.
■ ■ ■
Although this
“subsidiary” role
violated the city’s
traditional view of
itself as a prime
business center, being
an adjunct to Silicon
Valley has transformed
San Francisco and
conferred unprecedented prosperity on many
of the city’s
neighborhoods.
40
Milken Institute - February 13, 2001
developing fliers for the underground clubs that proliferated in the
Bucktown and Wicker Park area. This led to work for major record
labels but gradually attracted the attention of traditional ad agencies
such as JMP Worldwide, as well, which once, she wryly notes,
“thought we were all slackers.” The key, Arterbury suggests, lies in
the notion that “suits” see a sense of cutting-edge style not found on
the Loop, in creative neighborhoods and firms like hers.
SAN FRANCISCO: SILICON VALLEY’S URBAN BACKYARD
Perhaps no city has been as utterly transformed by the digital
revolution as San Francisco (Appendix Table 5). It is the urban
playground for Silicon Valley, the nation’s pre-eminent technology
region and boasts an urban ambiance that, many believe, is
unparalleled anywhere in North America.
Despite its many advantages, San Francisco, like other first-tier cities,
suffered a significant decline in the final decades of the 20th century.
Once the undisputed center of the Bay Area economy, San Francisco
now represents just one of a series of specialized regions in the
emerging 21st century regional geography; not quite an economic or
demographic center, but important as a cultural, business-service,
media and tourist mecca.
In 1950, it was home to nearly 30 percent of the region’s population.
It represents less than 13 percent today.109 Just 20 years ago, San
Francisco was the largest employment center in the Bay Area. Today
the city has about the same number of jobs as then, but the outlying
areas – Silicon Valley and the East Bay – now boast roughly twice as
many positions. In 1990, San Jose, the Valley capital with nearly
900,000 residents, emerged as the Bay Area’s largest city.110 By 1998,
roughly half the Bay Area’s 500 largest public companies were located
in Santa Clara County, more than five times the number for San
Francisco111 (Figure 12). Economist Lynn Sedway works in San
Francisco’s financial district. She notes:
Ever since the 1980s, the real growth in the Bay Area has been
San Jose and the other peripheral areas. Everyone realized
that San Francisco had to become a subsidiary of Silicon
Valley. There’s really no choice if we want to grow.
Although this “subsidiary” role violated the city’s traditional view of
itself as a prime business center, being an adjunct to Silicon Valley has
transformed San Francisco and conferred unprecedented prosperity
on many of the city’s neighborhoods. Growth controls on high-rise
construction have prevented ruinous overbuilding suffered by rival
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Figure 12
Share of Top 500 Bay Area Corporate Headquarters
By County, 1998
In 1981, South of
Market, as the area is
widely known, was
called the city’s “skid
row neighborhood”
and an “industrial
wasteland.”
■ ■ ■
With the emergence of
the “soft” side of the
digital industry, the
area turned around.
cities Los Angeles, New York and Chicago. Instead, development
pushed into other areas, notably South of Market, where some 2,000
multimedia, Internet and other firms ultimately would cluster.112 In
1981, South of Market, as the area is widely known, was called the
city’s “skid row neighborhood” and an “industrial wasteland,” yet by
the late 1980s, its low-rise warehouse and manufacturing buildings
and lower rents began to attract artists, the gay community and after
them, the more edgy, creative firms.113 With the emergence of the
“soft” side of the digital industry, the area turned around. Rents
doubled in the short three years from 1996 to 1999, driving out many
warehouse and industrial firms, along with the last remnants of bluecollar jobs, in the process.114 Information-age workers were the new
residents of the South of Market district, and other former workingclass neighborhoods such as the Mission.
By 1999, the digital economy centered in South of Market had become
a powerful force in San Francisco, employing an estimated 40,000
workers and bringing an estimated $5.7 billion into the local
economy, five times the amount estimated in 1995. The typical
company was relatively small, with an average of $4 million in
revenue, but the total payroll was estimated at $2 billion.115
The San Francisco metro area figures show remarkable gains in
computer and data processing services where most of these Internet-
■ ■ ■
By 1999, the digital
economy centered in
South of Market had
become a powerful
force in San Francisco,
employing an
estimated 40,000
workers and bringing
an estimated $5.7
billion into the local
economy, five times
the amount estimated
in 1995.
41
Knowledge-Value Cities in the Digital Age
San Francisco, in many
ways, brought together
all the essential
elements – the nearby
presence of great
universities, proximity
to Silicon Valley, and a
high degree of
amenities – to an
extent few locales
could hope to match.
■ ■ ■
These characteristics,
plus employees’ desire
to live in San
Francisco, were cited
by multimedia firms
as key reasons to
locate there.
■ ■ ■
Yet in its essence, like
other first-tier cities,
San Francisco’s success
rests on its urbanity
and the desire of
creative workers to
locate close to the
urban edge despite the
admitted problems
associated with city
life.
42
Milken Institute - February 13, 2001
Table 7
Location Decision Factors: Multimedia Companies In San Francisco
Access to Qualified Labor Pool
Affordable Facilities
Overall Quality of Life
Technological Infrastructure
Employees Desire to Work in S.F.
Availability of Expansion Space
Proximity to Industry Participants
Suitable Facilities
Affordable Parking
Access to Strategic Partners
Access to Investors/Capital
Social Amenities
Related Educational Resources
Diversity/Multicultural
Importance*
4.65
4.53
4.49
4.44
4.38
4.33
4.27
4.27
4.23
4.22
3.77
3.76
3.68
3.66
S.F. Meets Needs**
4.22
2.72
4.36
4.13
4.31
2.73
4.45
3.55
1.97
4.00
3.93
4.23
4.04
4.04
*Importance: 1=Low Importance, 5=High Importance.
**San Francisco Meets Needs: 1=Strongly Disagree, 2=Disagree, 3=Neither, 4=Agree,
5=Strongly Agree.
Source: Coopers and Lybrand; MGD.org
related jobs are recorded. Employment in computer and data
processing services rose from 12,900 in 1990 to 48,700 in 1999, an
increase of 278 percent. Even more impressive, jobs in computer and
data processing services accounted for 37.5 percent of all new jobs
created in the metro area between 1990 and 1999, despite representing
just 4.7 percent of total employment.
San Francisco, in many ways, brought together all the essential
elements – the nearby presence of great universities, proximity to
Silicon Valley, and a high degree of amenities – to an extent few
locales could hope to match. These characteristics, plus employees’
desire to live in San Francisco, were cited by multimedia firms as key
reasons to locate there. 116 (Table 7).
Yet in its essence, like other first-tier cities, San Francisco’s success
rests on its urbanity and the desire of creative workers to locate close
to the urban edge despite the admitted problems associated with city
life. As one South of Market resident put it:
There are the taxes, high rents, city controls and lack of
support. But we all stay because of the creative environment.
The cool air rolls in and chills our bones and keeps the blood
flowing.117
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Knowledge-Value Cities in the Digital Age
SECTION 3:
PROSPECTS FOR EMERGINGTECHNOLOGY CITIES
HYPERINFLATION OF RENT IN FIRST-TIER CITIES AND
NERDISTANS
The tech-driven success of San Francisco and other first-tier cities has
created a new set of opportunities for a large number of other, less
heralded communities. The rapid growth of information sectors with
their attendant high salaries has produced several repercussions,
political and economic, that could not have been foreseen in the
recessionary 1990s.
First and foremost, first-tier cities and most successful nerdistans
have experienced a huge upward spiral in both commercial and
residential rent structures. As Internet and related knowledge-value
businesses filled forlorn warehouse districts, these once cheap zones
– Bucktown in Chicago, New York’s Hudson Square and Santa
Monica in Los Angeles – became high-priced neighborhoods. In some
cases, rents approached those of the most desirable “class A” office
districts.
Table 8
Rent Growth in Technology-oriented Submarkets
1999
Rent
(psf)
Submarket
Rent Growth
1995-99
MSA
Rent Growth
1995-99
San Jose/Sunnyvale
$31.85
90.0%
71.3%
Boston/Harvard Square
$41.50
76.4%
64.3%
Washington, D.C./Reston
$25.74
47.6%
27.6%
Austin/Northwest
$23.32
52.1%
47.1%
Chicago/West Loop
$20.47
51.4%
33.0%
Los Angeles/Beach Cities
$27.53
61.0%
13.6%
San Francisco/
South Beach
$40.00
155.6
119.9%
Source: LaSalle Investment Management, “Market Watch 1Q 2000.”
The tech-driven
success of San
Francisco and other
first-tier cities has
created a new set of
opportunities for a
large number of other,
less heralded
communities.
■ ■ ■
The rapid growth of
information sectors
with their attendant
high salaries has
produced several
repercussions,
political and
economic, that could
not have been
foreseen in the
recessionary 1990s.
■ ■ ■
As Internet and
related knowledgevalue businesses
filled forlorn
warehouse districts,
these once cheap
zones became highpriced neighborhoods.
43
Knowledge-Value Cities in the Digital Age
These cost pressures
are one of the factors
leading investors and
entrepreneurs to look
more closely at what
may be seen as
emerging technology
markets.
■ ■ ■
Expansion into these
alternative markets
can now be seen in a
series of cities across
the country.
■ ■ ■
Whether these cities
can develop
knowledge-value
districts will have
some bearing on their
success in integrating
into the New
Economy.
44
Milken Institute - February 13, 2001
Today locales such as Silicon Valley, Austin and suburban
Washington, D.C. suffer from some of the highest commercial real
estate prices in the nation (Table 8). This has placed increasing
pressure on companies who want to expand or even maintain their
presence in these favored regions.
These cost pressures are one of the factors leading investors and
entrepreneurs to look more closely at what may be seen as emerging
technology markets. Houston-based entrepreneur Andrew Segal
made a considerable fortune investing in older business districts in
unheralded cities such as Baltimore, Houston, Tulsa, Kansas City and
Hartford. He filled the aging class B office buildings with Internet and
other information industry firms looking for lower costs.
Some entrepreneurs in Segal’s buildings, such as Salvagesale.com’s
Charlie Wilson, originally sought to start his business in San
Francisco but discovered that rents there would have set his
companies price structure out of whack. Rents in his new offices on
Houston’s Main Street, an older and long-discarded commercial
district now filling with new enterprises, are less than one-third of
those he would have paid in the Bay area. He says:
It’s nice to have a fancy location but it’s also nice to have your
costs under control.
Expansion into these alternative markets can now be seen in a series
of cities across the country. Some of them share the essentials of the
first-tier cities – sound and architecturally interesting older buildings,
thriving arts districts and an existing base of potential clients. As the
information revolution spreads, and with it the ethos of workstyles
developed in the first tier cities, the prospects are excellent that
similar phenomena may take place in a whole host of other locales.
Other cities offer the advantages of newness. Reno, Boise and
Huntsville, for example, have land to develop new housing, retail and
industrial facilities. They have classic booster cultures common in
western and Sunbelt cities enabling them to invent themselves and
spread across a vast landscape. Whether these cities can develop
knowledge-value districts will have some bearing on their success in
integrating into the New Economy. Constructive efforts toward this
goal include changes in zoning, improved policing, municipally led
investments in new entertainment and arts districts and the
restoration of historic districts. Taking such steps, supported by both
the private and public sector, has already helped some cities begin to
generate the kind of energy that has propelled urban recovery in the
first-tier communities.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
HOUSING SHORTAGES, SPRAWL AND THE EMERGENCE
OF ANTI-GROWTH SENTIMENT
The rapid increase in housing prices in many first-tier cities and
nerdistans has also influenced the emergence of new technology
centers in older cities and smaller metropolitan areas. Excepting
affluent singles, increasing unaffordability has become a major
constraint on luring new workers to these areas. Knowledge-value
neighborhoods suffer from among the most severe shortages of
affordable housing even for middle-income residents. These
problems have sparked a growing political reaction in many primary
information-age communities. The growth of knowledge-value
communities in cities like New York, San Francisco, Seattle and
Chicago is increasingly regarded in some circles, particularly those
concerned with the preservation of working-class industries and jobs,
as undermining the existence of whole communities. Thus, concerns
about overly rapid growth and lack of affordability could build
political resistance to inner-city recoveries (Figure 13).
Wicker Park, a working-class district west of Chicago’s loop, is a case
in point. Even as she promotes the area, long-time resident Joan
Welch is careful to state that she wants only certain kinds of
The rapid increase in
housing prices in
many first-tier cities
and nerdistans has
also influenced the
emergence of new
technology centers in
older cities and
smaller metropolitan
areas.
■ ■ ■
Knowledge-value
neighborhoods suffer
from among the most
severe shortages of
affordable housing
even for middleincome residents.
Figure 13
Median Home Prices – San Jose vs. U.S.
1985-2000
45
Knowledge-Value Cities in the Digital Age
Perhaps more
important in the longterm are growing
concerns of
neighborhoods where
rising land prices and
a decline in local
manufacturing
threatens to push out
large numbers of
minority, workingclass residents.
■ ■ ■
The development of
small artists’ colony
in the area is seen not
as urban renewal, but
as a harbinger of bad
things to come.
■ ■ ■
Similar concerns are
being expressed in
other cities, from
Santa Monica to
lower Manhattan
where fast growth
and rising costs could
impel political
resistance to urban
recovery.
46
Milken Institute - February 13, 2001
development. Citing Milwaukee Avenue, which still retains a jumble
of arts-related businesses, Latino stores and bohemian restaurants,
Welch states:
There’s a lot of talk in the neighborhood that people don’t
want a Gap or a Starbucks. Some of the yuppies may not
care, but what made this neighborhood go is the owneroccupied business. We have to strive to keep the
neighborhood that way.
Perhaps more important in the long-term are growing concerns of
neighborhoods such as Pilsen – a formerly Czech area now solidly
Latino – where rising land prices and a decline in local manufacturing
threatens to push out large numbers of minority, working-class
residents. The development of small artists’ colony in the area is seen
not as urban renewal, but as a harbinger of bad things to come. An
aroused Latino community, the city’s fastest-growing power block,
may create problems for pro-development forces in the city.
Community activist David Aragon, complains:
We’ve been targeted for development to bring yuppies in. It’s
a creeping effect that’s coming into Pilsen and could turn us
into another Lincoln Park.
Similar concerns are being expressed in other cities, from Santa
Monica to lower Manhattan, where fast growth and rising costs could
impel political resistance to urban recovery. Perhaps nowhere is this
more evident than in San Francisco, where the rise of what scholar
Richard DeLeon has called “postmaterialist populism” can be seen in
growing resentment and resistance to Internet and other related
information businesses.
There is a counter-concern that high rents are driving out working
and even middle-class residents along with the industries that
employ them.
Areas such as New York’s Varick Street in lower Manhattan is a
beehive of manufacturing activity, much of it associated with
Manhattan’s nearly $2 billion printing industry. The digital revolution
has printers on Varick Street apprehensive that this model industrial
neighborhood is about to be driven out of existence. As rents in the
surrounding areas rise, many printers fear that they will soon be
forced to find new homes further away from their client base among
Manhattan’s media, arts, advertising, business service and financial
firms. Their workers, largely minority, will also be forced to move
from the city.118 Garment, furniture and other specialty-manufacturing
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
firms have similar complaints.119 Stuart Leventhal is Executive Vice
President of Empire Graphics, the lone New York manufacturer on
1998’s Inc. 500 list of fastest-growing private companies. He says:
Fewer and fewer people feel they can remain in Manhattan.
There’s a feeling that the real estate interests don’t want
printers and related businesses around there.
These fears have been compounded by announcements from Trinity
Real Estate, the area’s premier landlord, that industrial clients such as
printers are no longer desirable and that many of their leases would
not be renewed. Printers are particularly incensed by published
reports of comments by a spokesman for Trinity, the real estate arm of
the venerable Trinity Church, stating it wanted to replace companies
considered “noisy, dirty, with huge amounts of shipping and
receiving, and smelly.” One large Trinity tenant, who asked not to be
identified, vented:
It makes my blood boil. Printers are the second largest
industrial employer in this city. We’ve been important to this
city since the days of Peter Zenger.
The struggle over Varick Street reflects the problems associated with
preserving a modicum of economic diversity in increasingly postindustrial first-tier cities. Severely limited office, commercial and
housing space rapidly made San Francisco became one of the nation’s
most expensive and successful cities, the urban exemplar of the
digital geography. Yet, at the same time, this shift has had a negative
impact on the city’s economic diversity. Trade has shifted to Oakland
and San Jose, which now exports four times as much as San
Francisco.120 Blue-collar industries such as apparel have lost ground,
and scores of smaller manufacturing outfits have departed for other
locales or simply closed shop, particularly in the once-flourishing
garment industry.121
The result has been an urban economy that has precious little room
not only for the working class, but for the middle-income resident as
well.122 The gap between the average worker and the city’s elite can be
seen in the comments of Art Cimento, who runs San Francisco’s
McKinsey & Company office:
The biggest concern I have is a divide between the
investment banker who’s making $1 million a year and the
person who can’t stay here making $60,000. You need people
to run the dry cleaners and work in the restaurants, but they
can’t afford to be here.
The struggle over
Varick Street reflects
the problems
associated with
preserving a modicum
of economic diversity
in increasingly postindustrial first-tier
cities.
■ ■ ■
Blue-collar industries
such as apparel have
lost ground, and
scores of smaller
manufacturing outfits
have departed for
other locales or
simply closed shop,
particularly in the
once-flourishing
garment industry.
■ ■ ■
The result has been
an urban economy
that has precious little
room not only for the
working class, but for
the middle-income
resident as well.
47
Knowledge-Value Cities in the Digital Age
These conditions have
led to the growth of a
new kind of antigrowth, even antitechnology politics in
some cities.
Milken Institute - February 13, 2001
These conditions have led to the growth of a new kind of anti-growth,
even anti-technology politics in some cities. Perhaps the most obvious
example of this was the 1999 mayor’s race in San Francisco. The city’s
pro-growth mayor, Willie Brown, a well-established AfricanAmerican liberal, faced a surprisingly tough challenge from
“progressive” Supervisor Tom Ammiano, who ran almost entirely on
a platform aimed at restraining growth and rising rents.
Although Brown ultimately won, resistance to the information sector,
focused largely on the volatile dot-com sector, has mounted in the city
and even in some of its suburbs. One activist promoting restrictions
on Internet firm expansion said:
What we’re dealing with here is the preservation of a San
Francisco that is amenable to working families. The city’s
class and cultural character are at stake.123
■ ■ ■
This kind of “post
materialist” politics is
likely to spread as
information-age
companies continue
to transform key
urban economies.
PROBLEMS IN NERDISTANS: SPRAWL AND THE NEXT
MOVE OUT
This kind of “post materialist” politics is likely to spread as
information-age companies continue to transform key urban
economies. Still, the biggest opportunity for emerging-technology
cities may not come from overpriced urban locales, but from festering
problems now affecting the once relatively trouble-free nerdistans.
Today, this heavy concentration has its downsides, most particularly
in terms of a paucity of developable land and soaring real estate
prices. The premium of a San Francisco or Silicon Valley location has
Table 9
The Silicon Valley and Its Peers
Office Market
Rent Growth
Metro
San Jose
East Bay
Orange County
Sacramento
San Bernardino
San Diego
San Francisco
2Q 2000
Asking
Rent (psf)
$41.56
$29.35
$24.63
$20.22
$16.15
$22.44
$55.58
1st Half
1999
1.1%
2.8%
3.3%
0.2%
1.8%
3.2%
0.6%
*BP = Basis Points
Source: Reis.com, “Silicon Valley Tops Out.”
48
Average Vacancy Rate
1st Half
2000
25.5%
16.2%
2.0%
1.5%
0.4%
6.9%
30.7%
Change
(BP)*
2,449
1,345
-131
136
-135
370
3,005
1st Half
1999
4.2%
9.5%
8.7%
9.6%
18.1%
8.9%
5.6%
1st Half
2000
2.3%
6.3%
9.6%
9.7%
14.3%
7.5%
1.8%
Change
(BP)*
-190
-325
85
10
-385
-140
-385
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 10
The Silicon Valley and Its Peers
Apartment Markets
Rent Growth
2Q 2000
Asking
Metro
Average Rent
San Jose
$1,516
East Bay
$1,145
Orange County
$1,058
Sacramento
$684
San Bernardino
$687
San Diego
$895
San Francisco
$1,649
1st Half
1999
2.3%
10.2%
2.7%
2.8%
3.4%
4.7%
6.6%
1st Half
2000
9.6%
10.2%
4.0%
3.5%
4.2%
4.6%
7.8%
Average Vacancy Rate
Change
(BP)*
736
0
129
72
83
-16
123
1st Half
1999
3.1%
1.7%
2.5%
4.4%
2.8%
12.3%
1.7%
1st Half
2000
1.7%
1.4%
2.5%
3.9%
3.1%
12.2%
1.2%
Change
(BP)*
-140
-30
0
-50
30
-10
-45
*BP = Basis Points
Source: Reis.com, “Silicon Valley Tops Out.”
driven housing and commercial real estate prices to among the
highest in the nation. A one-bedroom cottage in Palo Alto costs as
much as $750,000, pricing all but a few elite out of the local housing
market.124 Silicon Valley is so expensive it makes other pricey markets,
such as those in Southern California, seem cheap (Tables 9 & 10).
Years of fast growth combined with strong environmental pressures
and lack of available land both for industry and housing, now appear
Figure 14
Rental Rates vs. Household Incomes
Santa Clara County
A one-bedroom
cottage in Palo Alto
costs as much as
$750,000, pricing all
but a few elite out of
the local housing
market.
■ ■ ■
Silicon Valley is so
expensive it makes
other pricey markets,
such as those in
Southern California,
seem cheap.
49
Knowledge-Value Cities in the Digital Age
More and more,
conditions in Silicon
Valley resemble those
often pejoratively
associated with
Southern California.
■ ■ ■
This has weakened
the traditional
“quality of life”
differential that
Silicon Valley
residents have often
used in comparison
with its traditional
rival, Los Angeles.
■ ■ ■
These festering
problems present a
challenge to
midopolises in their
competition to
maintain and grow
their high-tech
sectors.
50
Milken Institute - February 13, 2001
to be slowing the Valley’s growth and its future expansion (Figure 14).
Carl Guardino, head of the Silicon Valley Manufacturers’ Association,
suggests:
Forty years of bad land use planning can’t be fixed
overnight. It’s going to take a Herculean effort to gain
ground.125
More and more, conditions in Silicon Valley resemble those often
pejoratively associated with Southern California. The region’s
freeways are becoming progressively more congested and air
pollution, which has been markedly reduced in the Los Angeles Tech
Coast, has actually worsened in Silicon Valley. This has weakened the
traditional “quality of life” differential that Silicon Valley residents
have often used in comparison with its traditional rival, Los
Angeles.125
These festering problems present a challenge to midopolises in their
competition to maintain and grow their high-tech sectors. Although
rarely noted amid the hype over Silicon Valley, the fact that the Santa
Clara Valley now suffers from many of the undesirable traits that
plague traditional urban areas – increasing smog, traffic, juvenile
Figure 15
Silicon Valley Air Quality
In Excess of Federal and State Standards
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
crime and soaring home prices – has led to a significant out-migration
of middle-income families and companies to Stockton, Sacramento
and other states.127 (Figure 15)
Similar problems – soaring rents, increased sprawl, traffic congestion
– prevail in other new high-tech areas, including Austin, suburban
Atlanta, Orange County, the 101 Corridor running from Ventura
County and through the San Fernando Valley of Los Angeles, and
greater Washington, D.C. These problems have led to a growing
move to reign-in sprawl, in many cases successful, that have
attempted to slow the expansion process.128 Some locales are
restricting expansion through measures such as wetlands protections,
wildlife considerations and water supply considerations.129
While these efforts may help preserve some of the quality-of-life
aspects sought by high-tech companies and knowledge workers, they
also have ancillary effects, such as restricting the supply of residential
and business space, leading to even higher costs. Even without a
major imposition of restrictions, housing inflation is likely to be
greatest in first-tier and nerdistans over the next decade130(Figure 16).
Figure 16
Metro Area House-Price Growth Outlook
Annual Average Growth 1998-2010
Similar problems –
soaring rents,
increased sprawl,
traffic congestion –
prevail in other new
high-tech areas.
■ ■ ■
These problems have
led to a growing move
to reign-in sprawl, in
many cases successful,
that have attempted to
slow the expansion
process.
■ ■ ■
While these efforts
may help preserve
some of the qualityof-life aspects sought
by high-tech
companies and
knowledge workers,
they also have
ancillary effects, such
as restricting the
supply of residential
and business space,
leading to even higher
costs.
51
Knowledge-Value Cities in the Digital Age
High prices,
congestion and other
centrifugal forces are
diminishing the
attractiveness of
established first-tier
tech locations and
nerdistans as optimal
locations, even among
younger people.
Milken Institute - February 13, 2001
Figure 17
New Graduates Prefer Smaller Markets
Des Moines vs. Silicon Valley
■ ■ ■
As a result,
technology firms are
migrating to a new
series of locations
beyond first-tier
metropolitan areas.
■ ■ ■
Some predict this
back-to-the-country
movement could
foreshadow not only
rising re-segregation
but also the deagglomeration of even
the most skilled
professionals from
the major urban areas
to smaller ones.
52
High prices, congestion and other centrifugal forces are diminishing
the attractiveness of established first-tier tech locations and
nerdistans as optimal locations, even among younger people. Indeed,
there is some anecdotal information to this effect. A recent poll of
Iowa College graduates conducted by the Des Moines Register
revealed that most preferred not to relocate to Silicon Valley,
indicating that its reputation may be declining. (Figure 17)
As a result, technology firms are migrating to a new series of locations
beyond first-tier metropolitan areas. By the late 1990s, the fastest rates
of technology growth were occurring in less metropolitan
environments such as Albuquerque, Boise, Boulder, and Cedar
Rapids131 (Table 11). Technology employment in particular has been
surging in these areas, most notably in Idaho, Nevada, Montana, the
Dakotas and Colorado, far more than in the established centers of the
Northeast and California. Colorado now has a higher concentration
of high-tech workers than Massachusetts.132 Some predict this back-tothe-country movement could foreshadow not only rising resegregation but also the de-agglomeration of even the most skilled
professionals from the major urban areas to smaller ones.133 As one
University of Nebraska analyst suggests:134
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 11
Leaders in High-Tech Growth
High-Tech Output Growth, 1990-1998
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Albuquerque, NM
Pocatello, ID
Boise City, ID
Cedar Rapids, IA
Harrisburg-Lebanon-Carlisle, PA
Columbus, GA-AL
Merced, CA
Richland-Kennewick-Pasco, WA
Yuma, AZ
Austin-San Marcos, TX
Relative
Growth
4.4
3.1
2.9
2.7
2.6
2.4
2.2
2.0
2.0
1.9
Source: Milken Institute
We are right on the edge of a new form of social and
economic organization. We are rapidly approaching the
point where technology empowers people to live anywhere
in the U.S. People will be able to take their family and their
skills and settle somewhere based on the quality of life, not
how close they’ll be to a big city job market.135
Many emerging technology communities – generally smaller
metropolitan areas located away from the historic centers of the
information industry – clearly have a great opportunity. Yet, unlike
the first-tier cities, which can rely on historic strengths and powerful
business service bases, or the nerdistans, with their concentration of
large technology companies, the emerging-technology cities must
struggle to develop specific initiatives to tap into the New Economy.
Not all will succeed. Some regions, such as Milwaukee, worry deeply
about being left behind in the New Economy. Although the region has
excellent educational facilities and a tradition of artisan excellence, it
has been growing at about half the national rate as a high-tech center.
The city ranks only 50th among the nation’s top metros for its share
of high-tech output. Like many older cities, Milwaukee, as well as
other urban communities in Wisconsin, tends to lose many of its most
gifted students to other regions, notably California and Texas that
have greater high-tech reputations. Kids, says Robert Milbourne,
executive director of the Greater Milwaukee Committee, are “picking
a location, rather than a job…”136
Many emerging
technology
communities –
generally smaller
metropolitan areas
located away from the
historic centers of the
information industry
– clearly have a great
opportunity.
■ ■ ■
Yet, unlike the first
tier cities, emergingtechnology cities must
struggle to develop
specific initiatives to
tap into the New
Economy.
■ ■ ■
Not all
will succeed.
53
Knowledge-Value Cities in the Digital Age
In the case of
emerging-technology
cities, policy cohesion
between business and
government seems to
be critical.
■ ■ ■
Milken Institute - February 13, 2001
In response, Milwaukee and other Wisconsin communities are taking
a tough look at themselves. They are exploring new relationships
with local universities and ways to market the state’s many assets,
ranging from the well-regarded University of Wisconsin system to the
urban livability of Milwaukee and the many recreational assets of the
still largely rural state.
In the case of emerging-technology cities, policy cohesion between
business and government seems to be critical. In some cases, the
divergence between them can be quite remarkable. Colorado Springs
and Spokane are illustrative (Figure 18). They began the 1980s at
roughly the same point in terms of employment and income. Over the
past decade, Colorado Springs has sought to lure high-tech industry
by managing its growth, improving its transportation infrastructure
and revitalizing its downtown vicinity.137
In contrast, Spokane has been slower to make such adjustments and
to a large extent remains dependent on its old economy base. The
divergence in results is remarkable in terms of both income and
population growth.
Figure 18
Spokane is Smaller Than Colorado Springs
Total Employment
54
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
What works for various emerging-technology cities is not always
clear. Recent research suggests that, as in first-tier cities, relative tax
rates are generally not a critical advantage for job growth, particularly
in technology. More important are agglomeration effects, that is, the
presence of high-tech companies tend to attract others.138 Notes James
Clifton, President of Gallup Inc. in Lincoln, Nebraska:
Computer people like to be where there are other high-tech
computer people. You get a few people who want to come to
Nebraska or somewhere and try a different style of life, but
boy, they like that West Coast. It’s a disadvantage in Lincoln
for real high-tech computer electronics people because there
aren’t a lot of people like them here. We need to get a lot of
these people here to create a critical mass, like in a major
city.139
To make these gains, some of these cities can turn to their existing
academic institutions, universities or research laboratories, as did
Albuquerque. In others, such as Boise or Tulsa, the presence of a large
existing company, such as Hewlett-Packard or The Williams
Company, propels these gains. In still others, the location itself
combined with low relative costs and a high quality of life creates the
draw, as in Reno, NV.
Clearly there is no single formula for emerging-technology city
success, but there are commonalties, particularly in the desire of
private and public sectors to develop and promote the technology
industry, building on those sectors where the area has an advantage.
Emerging-technology cities, much more so than first-tier cities, must
“invent” themselves as they seek their place in the digital world.
One critical advantage that smaller cities and states enjoy is greater
responsiveness to business interests. Even substantial firms in a place
like Silicon Valley or New York often have a difficult time being
heard. That is not the case in smaller communities. Craig Benson,
Chief Operating Officer of Cabletron Systems, in Rochester, New
Hampshire observed:
What I like about New Hampshire is that it’s a small state, so
I can call the governor and get an audience and present our
case. We won’t always get what we want, but at least we
have access….It’s not like that everywhere.140
What works for
various emergingtechnology cities is
not always clear.
■ ■ ■
Clearly there is no
single formula for
emerging-technology
city success, but there
are commonalties,
particularly in the
desire of private and
public sectors to
develop and promote
the technology
industry, building on
those sectors where
the area has an
advantage.
■ ■ ■
Emerging-technology
cities, much more so
than first-tier cities,
must “invent”
themselves as they
seek their place in the
digital world.
55
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
THE BLUE-COLLAR INTERNET
One of the least
appreciated
opportunities for
emerging-technology
cities lies in what may
be called the bluecollar aspects of the
Internet.
■ ■ ■
Perhaps one of the least-appreciated opportunities for emergingtechnology cities lies in what may be called the blue-collar aspects of
the Internet. In contrast to nerdistans that flourished as centers for the
hard, science-based aspects of the digital economy, and the first-tier
cities that grew by developing content providers, emergingtechnology communities may be able to prosper by focusing on the
necessary, but less high-wage, tasks of fulfillment, data-entry,
assembly and technical support.
This process is particularly notable in numerous places around the
country that for reasons of location and infrastructure are emerging as
critical centers for the distribution of goods purchased on the Internet.
As John Kasarda, director of the Kenan Institute of Private Enterprise
at the University of North Carolina, suggests:
It’s the blue-collar logistics part that is increasingly critical.
The web can’t move a box.
In contrast to
nerdistans that
flourished as centers
for the hard, sciencebased aspects of the
digital economy, and
the first-tier cities that
grew by developing
content providers,
emerging-technology
communities may be
able to prosper by
focusing on the
necessary, but less
high-wage, tasks of
fulfillment, dataentry, assembly and
technical support.
56
Kasarda points out that web firms now understand that efficient
warehousing and shipping is every bit as critical to their success as
effective electronic portals and compelling product offerings. Speed is
a critical element for the 70 percent of e-commerce sales that depend
on express delivery. This high-speed process is further accelerated by
the emergence of quick delivery Internet service firms such as
Shipper.Com, based in City of Industry, CA and New York-based
Kozmo, Inc.141
The geographic requirements for this Internet fulfillment function
vary drastically from those of high-tech regions or content-driven soft
areas. Fulfillment-oriented real estate does not depend upon superb
schools, hip restaurants or appealing scenery. Rather, the logisticsbased Internet economy revolves around transport-relevant
characteristics like easy accessibility, good roads, state-of-the-art
manufacturing and warehouse space and the availability of a large,
affordable blue-collar workforce.
Given the high degree of dependence by web-commerce on air travel,
access to a major airport is a critical advantage. The geographic areas
best positioned for this new web-generated commercial environment
include aviation hubs such as Chicago’s O’Hare Airport, Dallas-Fort
Worth, Memphis (Federal Express hub), the areas neighboring
Atlanta, Charlotte, Columbus, Ohio and Ontario, east of Los Angeles
(Table 12). Clearly this represents a unique opportunity for emergingtechnology cities to find a niche on this new economic map.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Table 12
Commercial Real Estate Expansion
For Selected MSAs, as of 1Q 2000
Fort Worth
Atlanta
San Bernardino
Memphis
Dallas
Columbus
Charlotte
Los Angeles
Chicago
US Aggregate
Current
Inventory
(SF)
124,420,000
296,711,000
151,210,000
124,900,000
297,196,000
138,849,000
101,998,000
762,631,000
753,060,000
7,643,793,000
5Yr Anticipated
Completions
(SF)
20,230,000
40,793,000
18,206,000
12,380,000
20,708,000
9,582,000
6,637,000
41,293,000
39,230,000
619,306,000
Annual
Inventory
Growth
3.1%
2.6%
2.3%
1.9%
1.4%
1.3%
1.3%
1.1%
1.0%
1.6%
W’hse/Distr
Asking Rent
(SF)
$3.77
$4.04
$4.10
$2.77
$3.92
$3.88
$3.86
$5.27
$4.02
$4.49
Source: Reis.com
Kasarda maintains that these facilities represent a 21st century
equivalent of earlier transportation-driven growth “waves” such as
seaports, rivers, railroads and finally, cars and trucks. He notes:
We are now entering the fifth and most opportune
development era – the Fifth Wave – where aviation,
international markets, and time-based competition will
predominate…The combined thrust of these interacting
forces is creating new commercial growth nodes around the
world, with international airports supplanting seaports, rail
and highway systems as primary wealth and job
generators.142
These areas – each of which Kenan’s Kasarda dubs as an emerging
“aerotropolis” – share certain characteristics. They tend to have large
and relatively inexpensive expanses of land. Each has excellent access
to the interstate highway system, and most boast good connections to
ports and railheads. As relatively new areas, they tend to have a
modern infrastructure, with most of their standing structures built to
the needs of contemporary truck and intermodal transport.
“We are now
entering the fifth
and most opportune
development era – the
Fifth Wave – where
aviation, international
markets, and timebased competition
will predominate.”
■ ■ ■
Such aerotropoli are now major growth generators for many regional
economies, as were riverbanks and deep-water ports in the past. One
recent study has found that since the mid-1970s, more than 200,000
manufacturing, office and distribution jobs have located in the
vicinity of Chicago’s O’Hare Airport. By 2020, that airport will
57
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Figure 19
Ft. Worth Non-farm Employment Growth
New commercially
oriented airports
modeled after the
successful private
Alliance Airport in
Fort Worth may be one
of the most decisive
elements of this new
infrastructure.
■ ■ ■
Its airport helped
establish Ft. Worth as
one of the nation’s
fastest-growing
economies.
58
account for almost 500,000 jobs and create demand for more than six
million square feet of office space and four million square feet of
manufacturing/warehouse space. Jobs and high-tech related growth
are now seen as increasingly interrelated. 143
These impacts are not lost on local governments and developers who
are rushing to find ways to get into the fulfillment-driven
marketplace. Some new developments, including a 160,000-squarefoot facility developed by Trammel Crow adjacent to the Portland
Airport, follow the airport-oriented pattern.144 Others, like parts of
California’s Central Valley, are seeking to take advantage of relative
proximity to ultra-expensive high-tech hotbeds such as Silicon
Valley.145
New commercially oriented airports modeled after the successful
private Alliance Airport in Fort Worth may be one of the most
decisive elements of this new infrastructure. Its airport helped
establish Ft. Worth as one of the nation’s fastest-growing economies146
(Figure 19). Plans to expand operations at fields such as Stewart
Airport in the Hudson Valley and the El Toro airport in Orange
County are increasingly important in high-tech development plans
for their region.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
The rise of logistics-based opportunities in the digital economies can
be expected to grow for emerging-technology cities. As online
purchasing expands, the need for distribution facilities in areas with
lower real property values and labor costs to service broader regions,
will grow concomitantly. Gerard Keating, head of logistics operations
for the Chicago-based Hiffman Shaffer Associates, explains:
As companies have analyzed their logistics networks, many
have determined that they are able to locate their distribution
in smaller markets. 147
These developments are also important for the people who live in
these emerging-technology cities. Cities with sizeable populations of
skilled blue-collar workers may be more valuable to the digital era
than previously understood. Although some emerging-technology
cities, particularly those with federal labs or major universities, have
highly educated populations, many, such as Ontario in Southern
California, have relatively low numbers of college graduates.148 In
fact, after declines in the early 1990s, the demand for blue-collar
employees in some fields, notably wholesale trade and
transportation, has risen markedly.149
Economist John Husing notes that in Ontario, leasing costs for
manufacturing and warehouse space per square foot are as much as
80 percent lower than in the coastal sections of Los Angeles or Orange
Counties. “We have the real estate and that turns us into a magnet for
big space users,” Husing suggests. As a result, the region boasts an
estimated 220 million square feet of such blue-collar space, more than
Orange County, and an additional 30 million square feet are now
under construction or in the approval process required by local
governments.
This growth has sparked a full-scale logistics-based job boom. Nearly
43,000 new manufacturing and distribution positions have developed
in the area since the mid-1990s. Low-cost housing, at as much as half
that of coastal Southern California, attracts the kind of employees –
truckers, warehouse managers, factory assemblers and middle
managers – who work in these businesses and find Los Angeles and
Orange County too expensive for them to maintain a middle-class
lifestyle.150 Husing adds:
Everyone’s view of the New Economy is that it’s some
teenager sipping cappuccino at a workstation. But if you
really want it, you’ll also have to go to places like Ontario
where you have the people who do the work once the orders
have been placed. That’s a big part of the future, too.
The rise of logisticsbased opportunities
in the digital
economies can be
expected to grow for
emerging-technology
cities.
■ ■ ■
Cities with sizeable
populations of skilled
blue-collar workers
may be more valuable
to the digital era than
previously
understood.
■ ■ ■
This growth has
sparked a full-scale
logistics-based job
boom. Nearly 43,000
new manufacturing
and distribution
positions have
developed in the area
since the mid-1990s.
59
Knowledge-Value Cities in the Digital Age
In 1999, newly
relocated firms, many
of them high-tech,
brought roughly $92
million in new
revenue to the local
economy.
■ ■ ■
This has become a
growing factor in
Reno’s population
and job growth,
which has averaged
about 2 percent per
year.
■ ■ ■
Milken Institute - February 13, 2001
RENO: FROM GAMBLING MECCA TO SILICON VALLEY’S
BACKYARD.
For decades, Reno was a gambling and tourism mecca, albeit a
dimmer star than its long-time rival Las Vegas. However, now, with
the onset of the high-tech economy, this city of 300,000 no longer sees
itself as a bit player but rather, an emerging hub for information-age
companies.
Reno enters this competition with many assets not shared by other
emerging-technology cities (Appendix Table 6). Its location, just three
hours from the Bay Area, places it in a strong position to attract
workers from the highly priced epicenter of the New Economy. The
city also possesses excellent recreational amenities, including Lake
Tahoe and the Sierra Nevada mountain range. Property values are
much lower with lease rates for industrial space as little as one-tenth
those in Silicon Valley.
These assets have already led to rapid growth of technology-related
business in the Reno area. Some, such as iGo (1-800-Batteries) and
Solntech, have moved their headquarters from Silicon Valley. Many
top companies such as Cisco Systems, Intuit, Lucent, Amazon.com,
Microsoft and Barnes and Noble have established warehousing,
assembly and support operations in Reno’s burgeoning industrial
parks. In 1999, newly relocated firms, many of them high-tech,
brought roughly $92 million in new revenue to the local economy.151
This has become a growing factor in Reno’s population and job
growth, which has averaged about 2 percent per year. Bill Eadington,
Professor of Economics at the University of Nevada at Reno suggests:
Reno’s future is not going to be gaming. It’s more about
Silicon Valley moving over the mountains.
Between 1995 and
1999, computer and
data processing
services employment
rose 63.2 percent and
employment in
communications
equipment grew 36.5
percent in Reno.
60
High-tech activity does not represent a large share of Reno’s economy.
However, there are signs that high-tech sectors are becoming more
important. Between 1995 and 1999, computer and data processing
services employment rose 63.2 percent and employment in
communications equipment grew 36.5 percent in Reno.
Developer Roger Norman sees an almost unlimited market for
expanding high-tech firms. He is already laying out the infrastructure
for what he claims will be North America’s largest industrial park –
the Tahoe-Reno Industrial Center on the city’s outskirts. The 37-yearold Norman has plans to build 120 million square feet of state-of-theart industrial space, power plants and warehouses for Internet
companies as well as a speedway and movie studio, on this 104,000acre parcel.
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Knowledge-Value Cities in the Digital Age
Fred Sibayan, a venture capitalist who moved to the area in 1998 from
Silicon Valley, sees a vast opportunity to get other tech entrepreneurs
to move into the area. Sibayan, one of the original founders of Exodus
Communications, says Reno has all the essentials to make a major
drive not only for warehouses, but also for more sophisticated
technology enterprises:
The quality of life is better here. The fiber optics are here.
People can’t afford to stay in the Valley anymore and you
can’t hold onto people if they can’t afford to be there.
Yet Sibayan sees some serious limitations, as yet unaddressed, in the
city’s weak education infrastructure. This opinion is shared by Bill
Eadington who feels that this is a barrier to attracting high-tech
companies, particularly in higher value-added areas. Perhaps
because of its tradition as a low cost, low-tax mecca, much of the city’s
efforts today seem to be addressing not so much the workforce
problems, but how to attract and retain knowledge workers to the
area. Extensive efforts are underway to redevelop the downtown
area, which has some late-19th and early-20th century structures,
with apartments, lofts and an urban entertainment center. Perhaps
the most vexing challenge in the mind of business and political
leaders, lies in barriers to becoming an “aerotropolis.” Without
increased air service, developers such as Norman fear that many
future customers such as Internet, warehouse and media companies,
will avoid his location for easier to reach locations such as arch-rival
Las Vegas. Norman, who already owns South Meadow, another
largely completed industrial park closer to town says:
You can’t build things fast enough here, but without the air
traffic how do we accommodate the growth that wants to
come here?
Many trace a drop-off in air traffic to the purchase of locally based
Reno Air by American Airlines in November 1998. Local business and
political leaders complain that American Airlines has steadily
reduced service since then, dropping the number of markets served
by Reno Air from 28 to a mere 12. Non-stop flights, vital to luring
high-tech firms and their workers, have dropped precipitously from
127 in 1997 to 88 today.152
Lack of critical air transportation connections is a concern for the
leadership of emerging-technology cities, who feel they have a good
product to sell to high-tech firms, but can’t close the deal. Kasarda of
the Kenan Institute explains:
Reno has all the
essentials to make a
major drive not only
for warehouses, but
also for more
sophisticated
technology
enterprises.
■ ■ ■
Yet the city’s
weak education
infrastructure is a
barrier to attracting
high-tech companies,
particularly in higher
value-added areas.
■ ■ ■
Lack of critical air
transportation
connections is a
concern for the
leadership of
emerging-technology
cities, who feel they
have a good product
to sell to high-tech
firms, but can’t close
the deal.
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Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Many mid-sized cities have become preoccupied about this.
They see it as key to their economic development,
particularly in getting non-stop flights. Business people hate
to change planes and listen to the music at O’Hare. Time is
money for these people.
Business and political
leaders in Reno are
seeking ways to coax
other airlines into
expanding their
service.
Business and political leaders in Reno are seeking ways to coax other
airlines into expanding their service. Randolph Thompson, a Nevada
State Senator who chairs the state’s Commerce and Labor Committee,
has considered providing incentives, including lucrative state
contracts, reduced oil tax and landing rights to obliging airlines,
including new carriers such as Fresno-based Allegiant Air.
■ ■ ■
Townsend suggests that a failure to correct this problem could “really
hurt in the long run,” even though job and income growth in the area
has remained strong. One harbinger can be seen in the decision of
Reno’s largest private manufacturer, International Game Technology,
to keep its 300-person sales and marketing operation in Las Vegas,
where executives and technicians have access to a broader selection of
flights to places around the county and, increasingly, the world.
Flying out of Reno
rather than being
located near a major
hub can add as many
as two extra days of
travel to trips to the
East Coast and
abroad.
■ ■ ■
Lack of direct
service to major
markets keeps
customers away.
62
Flying out of Reno rather than being located near a major hub can add
as many as two extra days of travel to trips to the East Coast and
abroad. IGT’s President, Tom Baker also sites customer reluctance to
travel to Reno and the inability to attract sophisticated employees as
detriments to locating in an area without major air routes.
The same complaints can be heard by smaller businesses such as
Reno-based Addi Gallery, which also owns art galleries in Maui and
Las Vegas, as well as a new Internet-based art business,
GalleryRow.com. Winifred Addi, the firm’s chief operating officer,
says lack of direct service to major markets like Orange County and
San Diego keeps customers away from her Reno location while
reduced air transportation connections to San Jose and other hightech hubs have hurt her in building the website part of her business.
Addi recalls:
We had a meeting with 25 top representatives of Bay Area
and Orange County tech companies and people just didn’t
want to wait around. They were all worrying about how to
catch a flight to get themselves home. If the meeting had
been in a place like L.A., we could have started earlier and
gone into the evening. It really hurts.
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Knowledge-Value Cities in the Digital Age
TULSA: WIRED IN THE HEARTLAND
Like many cities in the oil-rich southwest, Tulsa’s economy has gone
up and down with the rise and fall of energy prices. Yet today, the
region of roughly 800,000 people, half of whom reside within the city
limits, appears to be moving toward securing a strong role in the
information age economy.
As in other emerging-technology cities, the remarkable
transformation of Tulsa’s economy was heavily aided by the efforts of
a key locally based company that re-engineered itself into a New
Economy firm. Founded in 1908, The Williams Company grew up
with Tulsa as an oil pipeline business. Then, in the early 1990s, the
firm began using its rights of way to transform itself into one of the
nation’s primary fiber optic providers, with an electronic network
expected to reach 33,000 miles by the end of the year. Williams’
telecom-related employment in Tulsa, roughly 200 in 1996, is now
over 2,000 and is expected to double by the end of next year.
Tulsa’s emergence as a high-tech center seems all the more
impressive, notes Craig Knutson, chief Oklahoma economist for
Southwestern Bell, because it is occurring in a state not widely known
for its high-tech infrastructure or educational system (Appendix
Table 7). The state, according to the American Electronics Association,
ranks only 28th in high-tech jobs among the 50 states and has a per
capita income below the national average. The region, with roughly
one-quarter of the state’s population, accounts for 60 to 70 percent of
Oklahoma’s high-tech employees and revenues. The job growth rate
in 1999 was a very impressive 3.3 percent.153 More impressive still,
much of that growth was in higher-end professions, notably finance,
insurance, real estate and telecommunications. Tulsa’s percentage of
growth in these jobs was well above the national average.
Telecommunication services employment doubled since 1990, having
risen 46.9 percent since 1995, alone. Telecommunication services are
30 percent more concentrated in Tulsa’s economy than for the U.S. as
a whole.
In many cases, suggests Carol Mersch, founder of Webzone, a
successful local Internet firm, emerging-technology cities like Tulsa
are trading off lower living costs, good business climates and a more
family friendly lifestyle to compete against more expensive, hectic
places like Silicon Valley, Boston’s Route 128 or Dallas-Fort Worth.
Mersch suggests:
It’s a good place to build a business and a life. It’s a lot calmer
than the Silicon Valley extreme. It’s got a very stable work
ethic although certainly it’s no great party town.
Like many cities in
the oil-rich southwest,
Tulsa’s economy has
gone up and down
with the rise and fall
of energy prices.
■ ■ ■
Yet today, the region
of roughly 800,000
people, half of whom
reside within the city
limits, appears to be
moving toward
securing a strong role
in the information age
economy.
■ ■ ■
As in other emergingtechnology cities, the
remarkable
transformation of
Tulsa’s economy was
heavily aided by the
efforts of a key locally
based company that
re-engineered itself
into a New Economy
firm.
63
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Figure 20
Composition of Employment Growth
Tulsa MSA, 1999
Downtown office
vacancy rates, which
stood in the 20 to 30
percent range in the
mid-1980s, have now
fallen substantially.
■ ■ ■
This resurgence
reflects a successful
transformation of the
economy.
■ ■ ■
“We’ve gone from a
hub of just oil
companies to a more
balanced economy.
We are based not
just on oil, but
information as well.”
Williams Company growth has taken place not so much in the city’s
sprawling suburbs as in its burgeoning downtown. In order to
maintain close communication between its employees, the company
is constructing a 15-story stacked campus with a 45,000 square foot
floor plan. The massive structure will be heavily wired to serve as the
nerve center of the company’s national fiber-optic network.
This surge in employment (Figure 20), including thousands of jobs
created by Williams’ subcontractors and temporary employees, is
rapidly transforming Tulsa’s once sleepy downtown. Overall,
downtown office vacancy rates, which stood in the 20 to 30 percent
range in the mid-1980s, have now fallen substantially154 (Figure 21).
This resurgence reflects a successful transformation of the economy.
In the 1980s, the city lost some 25,000 white-collar jobs as oil
companies downsized, left town or went out of business. Growth led
by telecommunications and service industries brought back 40,000
jobs back to the city’s core in the 1990s. Local developer Paul Coury
notes:
We’ve gone from a hub of just oil companies to a more
balanced economy. We are based not just on oil, but
information as well.
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Knowledge-Value Cities in the Digital Age
Figure 21
Tulsa Office Market Vacancy Rates
1989-1999
As seen in many first-tier markets, some of the dramatic progress is
occurring in older class B buildings, something that Tulsa has in
abundance. The city has a venerable treasure of classic art deco style,
Streamline and Classical style buildings, some with elaborate marble
entryways, murals and intricate carvings built in its days as an oil
boomtown in the 1920s and 1930s. Until the 1930s, Tulsa had a bigger
downtown than Dallas, today the dominant city in the Southwestern
region. Tulsa continued to grow, albeit far less quickly than its Texas
rival. Its classic buildings, although appreciated, lost their market to
both suburban locales and new downtown high-rise construction. By
the early 1990s, many of them were all but deserted. Developers such
as Coury saw an opportunity to acquire truly gracious buildings that
are a unique legacy of the city’s pre-1940s boomtown past. Recalls
Coury:
When I started picking up properties here, I was literally
picking up 1930’s buildings at 1920’s prices.
Since the early 1990s, these classic Tulsa buildings have become more
popular with technology, communications and other firms that have
emerged in the area. Besides the classic architecture, downtown Tulsa
has several other points of advantages – the huge fiber-optics capacity
The city has a
venerable treasure of
classic art deco style,
Streamline and
Classical style
buildings, some with
elaborate marble
entryways, murals
and intricate carvings
built in its days as an
oil boomtown in the
1920s and 1930s.
■ ■ ■
Since the early 1990s,
these classic Tulsa
buildings have
become more popular
with technology,
communications and
other firms that have
emerged in the area.
65
Knowledge-Value Cities in the Digital Age
For the most part, the
new growth
companies in the area
tend more toward
telecommunications
and the enabling
software side of the
information boom
than the creative,
more content-oriented
side.
■ ■ ■
The energy legacy
also bequeathed Tulsa
a large cadre of
skilled employees
who staff many of the
city’s high-tech
businesses.
■ ■ ■
This labor pool, plus
a low cost of living,
has attracted a host of
large information
businesses and
defense firms.
66
Milken Institute - February 13, 2001
as a result of Williams’ massive presence, close-in neighborhoods that
offer exquisite English Tudor, Spanish and French-provincial style
housing, low costs and what is regarded as a strong, family-oriented
atmosphere. For the most part, the new growth companies in the area
tend more toward telecommunications and the enabling software
side of the information boom than the creative, more content-oriented
side. Typical are companies like SecureAgent.com, which operates
out of a restored class B building in the city’s downtown.
The success of downtown Tulsa, economist Knutson suggests, owes
much of its current success to its legacy as an oil and gas boomtown.
For one thing, the explosive growth of the city in the 1920s
bequeathed to it a magnificent legacy of impressive art deco
buildings, many of which are now attracting Internet and other
information-oriented companies, and elegant close-in urban
neighborhoods ideal for skilled professionals and managers. Oil and
gas wealth-generated philanthropy has also provided Tulsa with an
extensive civic infrastructure, complete with respectable ballet,
orchestra and art museums that far outpace its larger cross-state rival,
Oklahoma City, and other similarly sized Southwestern towns.
But perhaps more importantly, the energy legacy also bequeathed
Tulsa a large cadre of skilled employees who staff many of the city’s
high-tech businesses. This labor pool, plus a low cost of living, has
attracted a host of large information businesses, including American
Airlines’ Sabre reservation center, Worldcom, and defense firms such
as Aeromet, Inc. and Allied Signal. This year another major
telecommunications player, Colorado-based Carrier Access Corp.,
announced its expansion in the city, bringing 300 new high-tech jobs.
Yet Tulsa high-tech growth faces some limitations. Despite its bounty
of lovely Art Deco and other classic buildings, it will not rival such
creative Internet centers as Boston’s Cyber District, lower Manhattan,
Santa Monica or San Francisco’s South of Market. A bible-belt city
with a modest nightlife that lacks both a highly recognized research
university and convenient air transportation connections, suggest
that Tulsa is unlikely to emerge as a full-fledged information-age
capital. Still for many companies, particularly those in enabling
software, technical support and other infrastructure-related firms,
Tulsa can be a very appealing locale.
Brent Johnson founder of SecureAgent.com, first came to Tulsa from
the Bay Area to work as a consultant for American Airlines which
maintains its vast reservation system there. SecureAgent.com
provides encryption software for major corporations, employs 24
people and plans to add 40 more in the next eighteen months.
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Knowledge-Value Cities in the Digital Age
Johnson says, “Tulsa is a little known secret. There’s a tremendous
amount of networking activity here.”
Engineer salaries are roughly 40 percent less than in the Bay Area,
which he sees as a major plus for his company, in addition to
relatively low office space and housing costs. Johnson, Coury and
other Tulsa boosters say developing Tulsa’s cultural, transportation,
educational and lifestyle offerings are fundamental to its growth. For
a city of its size, Tulsa offers considerable entertainment options and
has recently seen a series of new restoration projects, including that of
the art deco Ambassador Hotel. While zoning and building
regulations often slow or hamper development, city officials,
including Mayor Susan Savage, have proposed streamlining
procedures in order to speed up such renovation.155
Tulsa’s family
orientation and Bible
belt locale limit its
cultural appeal to the
creative knowledge
workers so critical to
parts of the
information
economy.
Tulsa’s family orientation and Bible belt locale limit its cultural appeal
to the creative knowledge workers so critical to parts of the
information economy. Eighty percent of SecureAgent.com’s
employees are married with children and, like the Tulsa region, is
almost three-quarters white and fairly homogeneous. There is also
little foreign immigration or domestic in-migration, which limits the
city’s long-term growth potential. Says developer Coury:
■ ■ ■
We don’t have to be Santa Monica to make it and we won’t
ever be. If you are minority or non-WASP, you might not
want to be here. I wouldn’t like to be single here but, all in all,
it’s pretty open-minded for a town in the Bible belt.
A major problem lies
in air transportation
connections, which
remain spotty.
Another major problem lies in air transportation connections, which
remain spotty. Light air service is not a problem for a company like
SecureAgent.com that has an international clientele but does not need
to see its clients often. It is difficult though for those dependent upon
regular “face-to-face” contact with prime customers.
■ ■ ■
Another limitation to contend with, as in many communities, lies in
workforce development. City officials admit that “education and
training” are the “foundation” for economic growth. Several new
initiatives that include Oklahoma State University and the University
of Oklahoma have been forged to stress contacts between private
industry and researchers. A major new medical campus is also being
developed in Tulsa.156 Enrollment at Tulsa Community College is
growing. In 1999, voters approved an $18.3 million expansion, and
Oklahoma State’s Tulsa campus is also expected to expand.157
Another limitation to
contend with, as in
many communities,
lies in workforce
development.
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Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
OMAHA: A STABLE, GROWING TELECOMMUNICATIONS
GIANT
Omaha is the
“1-800 capital of
the world.”
■ ■ ■
Though largely
unheralded
nationally, Omaha’s
concentration of hightech industries is
above the national
average.
■ ■ ■
An absence of
regulatory review has
given Nebraska a
comparative
advantage over many
states as a test site for
introducing new
services.
Like Tulsa, Omaha has also emerged as a major center of
telecommunications technology. Its proximity to the Strategic Air
Command has helped Omaha develop one of the strongest
telecommunications infrastructures in the nation with access to major
north, south, east and west fiber optics networks, multiple points of
presence and direct high-capacity connections.158 The city’s role as a
backup phone-switching center is also a factor in its position as a
telecommunication and computing hub.159 Omaha is the “1-800
capital of the world.” Some of the telecommunications companies
located there include Next Generation Call Centers, transaction
processing centers and computer outsourcing companies.
Deregulation has allowed these companies to flourish.
Though largely unheralded nationally, Omaha’s concentration of
high-tech industries is above the national average. For example,
employment in computer and data processing services is 2.5 times
more concentrated in Omaha than for the U.S. average.
Communications equipment employment is more than three times
more important to Omaha’s economy than for the nation. Still small
in the national context, both electronic components and medical
instruments have witnessed employment growth substantially above
the U.S. average since 1995. Dan Connolly, CIO at Alegent Health in
Omaha, remarks:
There’s more high technology here than many people realize.
There is an incredibly robust telecommunications
infrastructure that was initiated due to the Strategic Air
Command being positioned here, just south of Omaha. There
are a number of national companies with their headquarters
here, which would surprise many people.160
ConAgra, Peter Kiewet and Mutual of Omaha have their corporate
headquarters there, and investor Warren Buffet runs his Berkshire
Hathaway operation from Omaha. This progress has been further
accelerated by what is widely perceived as a favorable rate and
deregulation environment in Nebraska that has had a positive effect
on both investment and service innovation. An absence of regulatory
review has given Nebraska a comparative advantage over many
states as a test site for introducing new services.161
Compared to Tulsa, which only recently threw off the “bust and
boom” cycles associated with the energy industry, Omaha has been
able to develop its information expertise amid a remarkably stable
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Knowledge-Value Cities in the Digital Age
economy. For nearly a decade, the City of Omaha has fostered
remarkable economic stability and growth. According to the Omaha
Chamber of Commerce, total employment by place of work in Omaha
grew more than 25 percent between 1990 and 1999, compared to an 18
percent growth rate on the national level.162
One of the reasons for these remarkable statistics can be attributed to
the confidence that Omaha’s present high-technology sector holds in
the city (Appendix Table 8). The city seems to be a magnet for middlelevel workers and managers essential to the infrastructure part of the
high-tech industry. The cost of living is approximately 6 percent
below the U.S. average, while the median cost of housing in Omaha
is $110,000, compared to the U.S. median of $141,000. 163 Julie
Anderson, company spokeswoman for X.com says:
We are confident about the quality of service we can get in
this area. And we looked at education, telecommunications
and how quickly we could get a facility open.164
Close cooperation between business and government seems natural
in Omaha. The Greater Omaha Chamber of Commerce notes that one
of the reasons Omaha has been so successful is because of “strong
cooperation between government and business in the Omaha
metropolitan area and within the state of Nebraska.”165 The result of
this distinct public-private partnership is shown in various highrankings in national business climate comparisons and decades of
steady development across the metropolitan area.166 Such climate and
development have assisted Omaha in becoming a national leader in
the high-technology sector.
Legislation such as the Employment and Investment Incentive Act,
the Enterprise Zone Act and the Community Improvement Financing
Program, provides incentives designed to promote business growth
in the area.167, 168, 169 Another incentive includes technology education
for employees of high-tech firms and non-traditional students. Two of
the latest programs, offered through local universities, include the
University of Nebraska’s Peter Kiewit Institute and the Creighton
Institute of Information Technology Management. Michael Kock,
Executive Director of the Institute says:
The Creighton Institute was designed to appeal to the career
changer. Middle-aged people have the stability employers
like and some business experience, too. Some positions
require a college degree, but more and more companies are
putting an emphasis on practical experience or a two-year
degree.170
Total employment by
place of work in
Omaha grew more
than 25 percent
between 1990 and
1999, compared to an
18 percent growth rate
on the national level.
■ ■ ■
The cost of living is
approximately six
percent below the
U.S. average
■ ■ ■
The city seems to be a
magnet for middlelevel workers and
managers essential to
the infrastructure part
of the high-tech
industry.
69
Knowledge-Value Cities in the Digital Age
The
telecommunications
infrastructure, low
costs and an
atmosphere of
cooperation between
business and
government have led
to a strong demand for
space by high-tech
firms, especially those
that are web-based.
■ ■ ■
Among the many cities
in America’s heartland,
few have made the
transition to the New
Economy more
effectively than
Omaha.
■ ■ ■
While cities perceived
as less advantaged
gained ground in late
1990s, Albuquerque’s
high-technology sector
job and income growth
have slowed, causing
concern that the city
may be in danger of
falling behind in the
Digital Economy.
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Milken Institute - February 13, 2001
The telecommunications infrastructure, low costs and an atmosphere
of cooperation between business and government have led to a strong
demand for space by high-tech firms, especially those that are webbased. The National Bank of Omaha recently completed a new $60
million technology center in downtown Omaha and it is expected to
fill quickly.171 Nearly $1 billion in new construction is on tap there,
part of a concerted effort to create a truly livable urban core
community over a 33-square block area of downtown Omaha.172
Among the many cities in America’s heartland, few have made the
transition to the New Economy more effectively than Omaha.
ALBUQUERQUE: POWERHOUSE EMERGING OR LOST?
In many ways, among emerging-technology cities, Albuquerque
seems almost tailor-made for growth in the information age
(Appendix Table 9). The presence of Sandia Labs has provided the
city with an enormous base of federally paid technical talent. This,
combined with the appeal of the New Mexico climate, has made the
area attractive to some of the largest U.S. information technology
firms, including Intel Corporation and Honeywell, establishing the
city as a nationwide high-tech industry leader.
A scan of the state’s Information Technology sector shows many
strengths in a number of different categories of advanced IT
technologies. These technologies include supercomputers,
informatics, data mining, graphics animation and visualization, geospatial information, environmental software, educational
technologies, news and multi-media, Internet technologies, cybersecurity/encryption, networking technologies and more. Wired
Magazine ranked Albuquerque and Santa Fe among the top 46 tech
regions in the world, due in large part to the power and potential of
the IT industry.173
Still, in the new information economy, such advantages may not be
enough. While cities perceived as less advantaged – such as Reno,
Tulsa or even New York – gained ground in late 1990s, Albuquerque’s
high-technology sector job and income growth have slowed, causing
concern that the city may be in danger of falling behind in the Digital
Economy. Albuquerque recorded growth among the top metros in the
country in the early to mid-1990s when Intel located and expanded its
massive chip-plant in Rio Rancho, but the absence of any new major
expansion cut its high-tech output growth to 239th out of 294 metros
from 1994 to 1999.
The reasons for Albuquerque’s relative decline are complex.
Compared to cities such as Omaha, there seems to be a lack of strong,
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Knowledge-Value Cities in the Digital Age
dynamic, highly integrated, across-the-board efforts in the public
economic development arena as well as a lack of political will to offer
financial and other incentives necessary to attract or retain high-tech
companies. Some of the problem can be traced to New Mexico’s
deeply rooted history in traditional patron politics. An interview with
economic development expert Jim Covell that appeared in the New
Mexico Business Journal, titled “Get Cracking,” provides some insight
into this problem:
I think the worst problem in New Mexico is that when an
idea is suggested by somebody that might have merit it
becomes politicized the minute that it becomes something
that the state has to fund. I’m afraid it’s a dynamic of New
Mexico that we have to politicize everything and companies
don’t like this atmosphere. It has chased business away over
the years. 174
These problems can be seen in a tax and regulatory climate that in
contrast with competing emerging-technology cities such as Phoenix,
Denver or Salt Lake City seems particularly onerous. These
communities are in states that have lower income tax rates, and each
allows a tax credit for research, something New Mexico does not
have.175
Arcane regulatory burdens, another manifestation of the state’s
political culture, also hurt high-tech development. John M. Brown,
President and Chief Technical Officer of iHighway.net, an
Albuquerque-based provider of Internet services to businesses,
discussed the problem of New Mexico’s current tax and regulation on
high-tech firms involved with telecommunications:
I don’t think our state is very business-friendly from a tax or
regulatory standpoint. We need to afford incentives to
businesses that want to start up here. Our PRC (Public
Regulatory Commission) needs to work more cooperatively
with companies looking to enter the telecom market in New
Mexico.176
Many civic and business leaders are concerned about regulations that
impede the entry of new telecommunications firms into the region
that will hinder e-commerce growth. Internet-related companies are
attracted to locations with better and more efficient access to highspeed bandwidth. In a survey conducted by Connect New Mexico,
they discovered an extensive telecommunications infrastructure in
Albuquerque. In just the last three years independent carriers laid
1,500 miles of fiber optic cable in the metro area. However, that
Some of the problem
can be traced to New
Mexico’s deeply
rooted history in
traditional patron
politics.
■ ■ ■
These problems can
be seen in a tax and
regulatory climate
that in contrast with
competing emergingtechnology cities such
as Phoenix, Denver or
Salt Lake City seems
particularly onerous.
■ ■ ■
Arcane regulatory
burdens, another
manifestation of the
state’s political
culture, also hurt
high-tech
development.
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Knowledge-Value Cities in the Digital Age
Another important
challenge, particularly
in a state with a
relatively poor
educational system,
lies in the creation of
skills.
■ ■ ■
A well-educated
workforce is one of
the reasons that other
western regions such
as Denver and
Colorado Springs
have been doing so
well in attracting
high-tech jobs and
entrepreneurs.
■ ■ ■
These concerns have
begun to shift both
private and public
attention toward
fixing the basic
educational system.
Milken Institute - February 13, 2001
telecom capacity will not help Albuquerque’s burgeoning ecommerce firms if the New Mexico PRC is slow in approving
applications by new telecom service providers.
Fortunately a growing number of people in the political and
economic leadership recognize these issues. Groups such as the Next
Generation Economy Initiative (NGEI) founded and co-chaired by
Albuquerque Mayor Jim Baca and Wells Fargo Regional President
and CEO Larry Willard seek to develop a “regional economy
strategy” based on industry clusters – information technology,
electronics, optics, biotech, artisans and tourism – that drive the
region’s economy.177
Other efforts such as those launched by the New Mexico Information
Technology and Software Association (NMITSA) and Connect New
Mexico have also been trying to find ways to leverage the state’s large
high-tech infrastructure toward new entrepreneurial endeavors. An
awareness of the problems facing the region may suggest a
willingness to look at solutions.
Another important challenge, particularly in a state with a relatively
poor educational system, lies in the creation of skills. A well-educated
workforce is one of the reasons that other western regions such as
Denver and Colorado Springs have been doing so well in attracting
high-tech jobs and entrepreneurs.178 Tom Stephenson, managing
partner for Murphree Venture Partners in Albuquerque suggests:
If we can demonstrate that we are capable of fielding enough
software talent in New Mexico, three things will happen.
First, our local companies will find strong people with whom
to grow their businesses. Second, companies from outside of
the area will be attracted to locate operations here giving us
diversity and additional global views and jobs. Third, and
most important, many of these workers will become wealthy
via vested stock options and capable of starting or investing
in future companies. We saw it in Austin and you see it in
any successful technology region.179
These concerns have begun to shift both private and public attention
toward fixing the basic educational system. In May 2000, the Greater
Albuquerque Chamber of Commerce released, “Reinventing
Albuquerque’s Public Schools,” an educational reform study
conducted over a three-year period. The report stated:
Weaknesses in the public education system threaten
Albuquerque’s ability to move towards a high-wage
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Knowledge-Value Cities in the Digital Age
economy and hamper our ability to provide a high quality of
life for all of our citizens.180
These signs of a desire for change are encouraging. Among the
emerging-technology cities, Albuquerque still possesses many
advantages – climate, location, scenic beauty and existing high-tech
businesses. But the question remains whether the city and state have
the will and the time to get back on the right track. As Wells Fargo’s
Willard puts it:
How many surveys have we run and how many studies have
been done and are on the shelf, and how many panels do we
have? I think so often we have the study and the facts and
they don’t tell us what we want to hear, so we don’t think of
them as credible. We’ve studied this to death. What we’re
short on is action.” 181
High-tech firms
gravitated to the
Huntsville
metropolitan area and
established strong
roots, succeeding at an
impressive rate for
more than 30 years.
■ ■ ■
HUNTSVILLE, ALABAMA: SUCCESS IN THE SOUTH
Like Albuquerque, Huntsville, Alabama entered the information age
with an edge few emerging-technology cities have enjoyed. High-tech
firms gravitated to the Huntsville metropolitan area and established
strong roots, succeeding at an impressive rate for more than 30 years
(Appendix Table 10). NASA and its Marshall Space Flight Center led
the way for other firms, both public and private, and Huntsville soon
became one of the leading high-tech cities in the southern United
States.
Yet unlike Albuquerque, Huntsville appears to be economically and
politically better prepared to enter the next phase of the information
age. For one thing, the area, owing largely to the presence of NASA,
has an extraordinary concentration of scientific and engineering
talent. One out of 12 residents in the Huntsville area is a scientist,
engineer or technologist. The area is also home to more than 1,000
Ph.D.s not affiliated with the area’s colleges and universities.182
Equally important, the region has a powerful entrepreneurial spirit
and was ranked second among small metro areas as the nation’s top
location to start a new business by Cognetics.183 The area is also
supported by a number of academic institutions, including The
University of Alabama in Huntsville and Alabama A&M University.
An outgrowth of the cooperative spirit of the Huntsville technical
community is the Alliance for Technology Transfer. Started by the
Chamber of Commerce of Huntsville/Madison County, the alliance
formed active committees dedicated to technology transfer and
commercialization issues.
One out of 12
residents in the
Huntsville area is a
scientist, engineer or
technologist.
■ ■ ■
The region has a
powerful
entrepreneurial spirit
and was ranked
second among small
metro areas as the
nation’s top location
to start a new
business.
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Knowledge-Value Cities in the Digital Age
Huntsville has an
impressive diversity
of high-tech sectors,
especially for a small
to medium-sized
metro.
■ ■ ■
Perhaps Huntsville’s
most impressive
feature is that its
technology sector is
equally divided
between
manufacturing and
services.
■ ■ ■
In contrast to
Huntsville and
Albuquerque, Boise
enjoyed relatively
little in the way of
federal aid, yet the
community of slightly
more than 400,000
enjoys a strong and
growing high-tech
economy.
74
Milken Institute - February 13, 2001
Huntsville has an impressive diversity of high-tech sectors, especially
for a small to medium-sized metro. Given its NASA heritage, it is no
surprise that its most important technology sector is guided missiles
and space vehicles. Other technology manufacturing sectors such as
computers, office equipment and communications equipment are
substantially more concentrated in Huntsville than in the rest of the
county.
Perhaps Huntsville’s most impressive feature is that its technology
sector is equally divided between manufacturing and services.
Computer and data processing services has witnessed rapid growth
in recent years, resulting in a more diversified technology base. Job
growth of 100 percent was recorded between 1995 and 1999 in
computer data processing services, three times more concentrated in
Huntsville than the U.S. average.
Huntsville also seems to have developed a cohesive economic
development strategy. EDGE (Excellence in Marketing, Development
of Workforce, Growth in local Enterprise, Enhancement of Image) is a
five-year economic development initiative, created and sponsored by
the Huntsville/Madison County Chamber of Commerce. Its goal is to
“create and sustain key programs to prepare the community to
effectively compete in the global marketplace, support strong
economic expansion and enhance our community’s quality of life.”184
EDGE is made up of six initiatives spanning image enhancement,
retention and expansion of businesses, nurturing the already existing
aerospace industry, attracting specific value-added industry sectors
to complement and diversify the existing economic base, technology
and workforce development. These efforts, along with the successful
development of facilities such as the Cummings Research Park,
established in 1962, has become a major lure for key technology
companies. Companies such as United Technologies, SCI Systems,
ADTRAN, Lockheed Martin, SDI, IBM and Alabama Supercomputer
Network all have a presence at Cummings Research Park. In
partnership with the University of Alabama at Huntsville and the
newly opened Marshall Institute, dedicated to professional, high-tech
training for local professionals, the region has precisely the kind of
educational infrastructure needed for success in the New Economy.185
BOISE, IDAHO: FROM CORPORATION RELOCATION TO
ENTREPRENEURIAL HUB
In contrast to Huntsville and Albuquerque, Boise enjoyed relatively
little in the way of federal aid, yet the community of slightly more
than 400,000 enjoys a strong and growing high-tech economy
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Knowledge-Value Cities in the Digital Age
(Appendix Table 11). From 1981 to 1998, the contribution of the hightech sector to the local economy jumped from 12 to 43 percent and
high-tech manufacturing jobs increased from 1,900 in 1987 to 3,500 in
1998.186
Boise, once a rather mundane agriculturally based city, epitomizes the
power of entrepreneurship – and the importance of appealing to
technologists – for cities in the digital age. “The major factor behind
our growth is the quality of talent we’ve been able to attract and
retain,” says Idaho Department of Commerce Director Gary Mahn.187
Initially – Boise got its start by attracting major corporations such as
Hewlett Packard to the area. But soon Boise began to attract its own
entrepreneurs, most notably semiconductor upstart Micron
Technologies. Micron, notes Chief Executive Officer Joseph Daltoso,
was able to succeed in an environment that was ready to test
conventional wisdom and support “the home team,” although
virtually no one gave the chip-maker a chance against entrenched
Japanese and other competition. He recalls:
When you are out here, away from the major technology
hubs, you don’t have naysayers constantly wearing on you.
You’re not under the constant din of “that’s not the
prevailing thought today” or “that’s not the prevailing way
to do business.” 188
Micron is now one of the leaders of the fast-growing and increasingly
entrepreneurial technology community. From 1990 to 1996, Boise
ranked fourth in the nation in high-tech job growth.189 Bob
Southworth, Director of Software Engineering for the Boise Oak
Imaging Group says:
I think Boise is just a healthy place in general for technology.
There’s a lot of good engineering talent. Boise is getting
stronger and stronger as a technology center in the U.S.190
Employment in electronic components rose from 3,900 in 1990 to
10,200 in 1999. By 1999, electronic components employment was nine
times more concentrated in Boise than in U.S. as a whole. Boise
ranked third among all metros in the country for growth in high-tech
output from 1990 to 1998. To cement these gains, local companies and
government are investing in new technical education. In January
2000, for example, Boise State University dedicated its new Micron
Engineering Center. Along with its sponsorship of the new center,
Micron announced its plans for expansion at its campus in southwest
Boise in September 2000. Plans include 500 engineering and high-tech
From 1981 to 1998, the
contribution of the
high-tech sector to the
local economy
jumped from 12 to 43
percent and high-tech
manufacturing jobs
increased from 1,900
in 1987 to 3,500 in
1998.
■ ■ ■
Boise, once a rather
mundane
agriculturally based
city, epitomizes the
power of
entrepreneurship for
cities in the digital
age.
■ ■ ■
From 1990 to 1996,
Boise ranked fourth
in the nation in hightech job growth.
75
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
jobs when the project is completed in 2001. These jobs will be difficult
to fill given the low unemployment rate in Boise and growing
competition in the high-tech field.191
Boise is well
positioned to make it
in the New Economy.
Venture capital
investment in Boise is
growing, buffeted by
local successes.
■ ■ ■
Boise has the “quality
of place” reputation
that is irresistible to
many technology
companies and
information workers,
yet there may be a
problem looming.
■ ■ ■
Like other high-tech
hotbeds such as
Silicon Valley, space
availability has
become an issue.
76
Boise is well positioned to make it in the New Economy. Venture
capital investment in Boise is growing, buffeted by local successes.
Communication services, engineering and electronics all experienced
double-digit employment growth from 1997 to 1999. PixTech has a
major flat-panel display R&D facility in Boise. Akers Capital,
awarded its first venture capital funding to the Boise-based firm,
RidgeRun, Inc., in May 2000. Tom Loutzenheiser, Managing Partner
says:
The interest in the area is really, really good. Outside the
state, people are really watching this area and saying there
are opportunities there.192
Boise has the “quality of place” reputation that is irresistible to many
technology companies and information workers, yet there may be a
problem looming. Like other high-tech hotbeds such as Silicon Valley,
space availability has become an issue. According to the Idaho
Statesman, a recent report prepared by Colliers International, Inc.
estimated that the vacancy rate for industrial properties in Boise had
dropped to as low as 2.7 percent last summer, meaning very few
properties are available for large industrial businesses looking at
Boise to expand or relocate.193 “We need to take the initiative to make
these parcels available,” Boise City Councilman Jerome Mapp said.
“There is a lack of industrial space that’s causing businesses to move
to other municipalities.” 194
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Knowledge-Value Cities in the Digital Age
SECTION 4:
COMEBACK CITIES
Extending the benefits
of the New Economy
to those communities
that have been most
devastated by the
demise of the
industrial era is one of
the greatest challenge
for those cities in the
digital age.
Extending the benefits of the New Economy to those communities
that have been most devastated by the demise of the industrial era is
one of the greatest challenge for those cities in the digital age. Many
cities that were paragons of the industrial era, such as Newark,
Detroit and St. Louis, are marginal players in the New Economy.
These communities continue to suffer the most dramatic population
losses and remain among the least “wired” areas of the country, with
some of the lowest rates of connectivity to the Internet.195 (Table 13)
Some older industrial communities that neighbor first-tier cities –
Oakland, Brooklyn, and Tacoma, for example – are getting “spillover”
from those hyper-inflated digital centers. Others, such as Baltimore
and Kingston, NY, trade off of their historical charm while still others,
such as Dayton, Ohio, seek to use their cost advantages to carve out a
niche in the New Economy.
■ ■ ■
Trying to overcome
decades of decline,
these communities
have much to do to
reestablish their
reputations, rebuild
often-tattered
infrastructures and
find ways to attract
knowledge workers.
Perhaps even more than in the case of emerging-technology cities, the
recovery of older industrial communities depends heavily upon the
cleverness and cohesion of local policy-makers and business
executives. Trying to overcome what in many cases is decades of
decline, these communities have much to do to reestablish their
reputations, rebuild often-tattered infrastructures and find ways to
attract knowledge workers.
One area in which this transformation has progressed is that
surrounding Manhattan. As a result of surging Manhattan rents,
aging New Jersey communities such as Jersey City, once desperately
poor and widely abandoned, have seen some 20 companies sign deals
for more than 5.5 million square feet since the late 1990s, equivalent
Table 13
Population of Urban Places
City
Philadelphia
Detroit
Pittsburgh
St. Louis
1999
Population
1,417,601
965,084
336,882
333,960
1930
Population
1,950,961
1,568,662
669,817
821,960
Population
Change
-533,359
-603,578
-332,935
-488,000
1999
Rank
5
10
49
51
1930
Rank
3
4
10
7
Source: U.S. Census Bureau
77
Knowledge-Value Cities in the Digital Age
Success in this
process means
investing in new
amenities, cultural
and otherwise.
■ ■ ■
Once a heavily
industrial district, by
2020, Brooklyn’s
economy will more
closely resemble
Manhattan’s, with
services predominant.
■ ■ ■
The success of New
York in attracting
digital businesses,
and the resulting
spin-offs, have
encouraged other
cities such as
Philadelphia to lure
such firms to the
urban core.
78
Milken Institute - February 13, 2001
to half the space in the World Trade Center.196 In a sense, notes Mary
Ann Tighe, vice chairman of Insignia/ESG, a real estate services
company, “the boundaries of the city” are being redefined. What was
once seen as “unacceptable” has now become acceptable, or even
fashionable, leading to the renewal of once destitute and forgotten
parts of the urban geography.197
Even Newark, long seen as a marginal location, has managed to
attract telecommunications and other firms seeking reasonable rental
rates close to Manhattan. “The rent is cheaper than in New York but
it’s close to New York so when we have to meet with clients we can
just hop on the train,” notes Heather Dembaski, marketing consultant
for Sovereign Solutions, a new information technology firm that
recently moved into Newark. 198
Success in this process means investing in new amenities, cultural
and otherwise. Newark, representative of this new cultural focus in
redevelopment efforts, has taken a bold step by building a large new
art museum. Similarly, Brooklyn, just across the East River from
Manhattan, has made ambitious plans to turn itself into an artistic
haven, with a major cultural district emerging around the Brooklyn
Academy of Music. 199
Once a heavily industrial district, by 2020, Brooklyn’s economy will
more closely resemble Manhattan’s, with services predominant. The
borough’s downtown Chamber of Commerce, in cooperation with
the borough government, seeks to convert the area into a 24-hour
destination, as has already occurred in lower Manhattan.200 Signs of
this progress in Brooklyn were already evident in rising rental rates
and the movement of at least a handful of digital companies into the
area by 2000. Changes in residential areas are also evident. Although
there are concerns about “gentrification,” property owners, both
black and white, have been delighted by the changes in the old
neighborhoods. Writer Eric Blackwell, who grew up in the
predominately African-American, Fort Greene section of Brooklyn,
where homes are now going for upwards of $500,000, observes:
Now you are getting the artists here. They will stay and make
the area sexy. People can’t afford Manhattan anymore. In a
city, it’s about money and space. I don’t think anyone, black
and white, has any claim on the city. Fort Greene has become
the apple of many eyes.
The success of New York in attracting digital businesses, and the
resulting spin-offs, have encouraged other cities such as Philadelphia
to lure such firms to the urban core. Today 125 technology firms
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Knowledge-Value Cities in the Digital Age
operate in Philadelphia, the majority of them in the Center City
area.201 Over the past decade, computer-related services have enjoyed
the most robust growth of any in the area, along with other
knowledge-value sectors such as management consulting and
engineering services.202 Hoping to tap into this growth, the city
administration and the local tech community have developed
economic incentives and a promotional campaign to highlight these
firms’ contributions to the local economy.203 (Figure 22)
Pittsburgh has undergone similar recovery. Few cities went through
as much trauma when the industrial epoch ended. Its population
dropped by nearly half. In Pittsburgh, as in other “comeback” cities,
the city government, in cooperation with local business, has taken an
aggressive course, clearing some 700 acres of abandoned
manufacturing sites for new parks and housing. Today the city has
more jobs than residents, and is attracting younger people and new
digital businesses.204 (Table 14)
Over the past decade,
computer-related
services have enjoyed
the most robust
growth of any in the
area, along with other
knowledge-value
sectors such as
management
consulting and
engineering services.
Figure 22
Service Sector Growth – Philadelphia
By Number of Employees, 1988-1996
79
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Table 14
Communications Equipment
Top 10 Metro Growth, Index 1995=100
Few cities in America
were more devastated
by the end of the
industrial era than
Baltimore.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Pittsburgh, PA
Toledo, OH
Las Vegas, NV
Oakland, CA
Utica-Rome, NY
Jacksonville, FL
Macon, GA
Salem, OR
Montgomery, AL
Bakersfield, CA
1,528.5
805.9
667.9
577.1
571.8
566.8
555.7
532.2
530.8
480.9
Source: Milken Institute
■ ■ ■
In many parts of the
city only the business
of destruction was
booming.
■ ■ ■
Over 11,000 buildings
have been deemed as
beyond restoration,
twice the level a
decade earlier.
Another encouraging recovery story is being played out in Tacoma,
which for decades has declined in the shadow of Seattle, 30 miles to
the north. The city developed a strong fiber-optic system called Click
Network and began the refurbishment of old industrial and
warehouse space for technology firms. Since Click started in 1998,
more than 100 new technology firms have located themselves in the
area, and the town has suddenly emerged from the Emerald City’s
presence. “It’s like Tacoma was put in a time capsule,” suggests
commercial real estate broker Eric Cederstand. “All of a sudden
we’ve broken open the time capsule and we are literally creating a
brand new city.”
BALTIMORE: THE RISE OF THE DIGITAL HARBOR
Few cities in America were more devastated by the end of the
industrial era than Baltimore. In many parts of the city – South
Baltimore, East Baltimore and Cherry Hill – only the business of
destruction was booming. In these distressed neighborhoods, over
11,000 buildings have been deemed as beyond restoration, twice the
level a decade earlier. With the city’s population down nearly onethird since 1950, there was little hope that anyone would ever occupy,
much less restore, these aging structures. 205
Not long ago, many of these neighborhoods were solidly working
class. Bethlehem Steel, which once employed 35,000, now has only
7,000 on the payroll. Since 1950 the number of blue-collar jobs had
fallen by two-thirds, migrating to suburbs, the South, overseas, or
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Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
simply vanished. 206 Overall total employment in the city dropped by
70,000 between 1988 and 1997, forcing unemployment rates in some
neighborhoods into the 50 percent range.207 What work exists is in the
largely low-paid tourism sector, retail and in the hospitals that now
anchor the downtown blue-collar economy.208 In this Baltimore, most
shopping districts are bare and abandoned. The few that are close
enough to tourist attractions are slated for destruction by local
developers.209
In the face of national declines in violent crime, homicide rates remain
high210 and nearly one in 12 adults are in need of substance abuse
treatment,211 and fully half the young African-American men between
18 and 34 are behind bars, on probation or sought on a warrant.212
Some 130,000 residents are functionally illiterate and a majority of
public school children live in poverty.213
Amid this distress, there is another Baltimore rising, one that could
turn it into a comeback city in the 21st century (Appendix Table 12).
Just a short drive from some of America’s toughest urban
neighborhoods, other sections of town are rapidly transforming
themselves into hotbeds of the information economy.
Bill Struever, a local developer who converted four million square feet
of old Baltimore warehouses and factories into new offices is leading
much of this effort. He has plans to develop several million more.
Struever first came to Baltimore to attend Johns Hopkins in the mid1970s and remembers Baltimore as a forgotten and forlorn relic of the
industrial age. The city was on its knees, but to Struever, Baltimore
seemed to be “the best small town in America.” Bad times gave
Struever his start. The situation was so dire that the city offered
entrepreneurs like Struever houses for a dollar. In 1976, he started his
career by restoring and selling these homes, then branched out into
commercial real estate. These same houses now sell well in excess of
$100,000.
From his car window, Struever sees a city that has recovered its pride
attracting millions of visitors and ever more investment along its
lovely waterfront. More importantly, there’s now a New Economy
based on financial services, real estate, biotechnology and
telecommunications that employs tens of the thousand of largely
upscale workers for the kinds of restored industrial space Struever
specializes in. One key appeal comes from relatively low rents,
roughly $15 to $16 per square foot, up to $18 with parking, less than
half the rate in places like lower Manhattan and arguably the east
coast’s most charmingly preserved 19th century neighborhoods.
Already Struever’s buildings bristle with hot new companies like
Amid this distress,
there is another
Baltimore rising, one
that could turn it into
a comeback city in the
21st century.
■ ■ ■
There’s now a New
Economy based on
financial services, real
estate, biotechnology
and
telecommunications
that employs tens of
the thousand of
largely upscale
workers.
■ ■ ■
One key appeal comes
from relatively low
rents, roughly $15 to
$16 per square foot,
up to $18 with
parking, less than half
the rate in places like
lower Manhattan.
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Knowledge-Value Cities in the Digital Age
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Table 15
Baltimore Strikes Back
Market
Baltimore
Baltimore
D.C.
Northern VA
Northern VA
Baltimore
D.C.
Northern VA
Submarket
Ctrl. Baltimore*
E. Baltimore**
Downtown
Mclean
Reston
Metro
Metro
Metro
1Q 2000
Vacancy
Asking
(percent)
Rent
7.50%
$19.82
5.20%
$16.73
4.40%
$34.24
1.20%
$23.86
2.30%
$28.91
6.20%
$19.18
4.00%
$34.22
4.10%
$26.40
Vacancy
Change (BP)***
19951998
-1130
-130
-830
-270
-380
-640
-620
-430
1Q 19991Q 2000
-330
-210
-140
-60
-110
-260
-170
-100
Annual Rent
Growth (percent)
19951Q 1999
1998
1Q 2000
2.70%
2.60%
2.40%
-1.20%
3.10%
8.70%
9.50%
9.30%
11.60%
13.60%
2.80%
2.50%
2.90%
6.40%
7.50%
6.80%
*Contains Inner Harbor, Fell’s Point and Portions of Canton
**Contains portions of Canton
***BP = Basis Points
Source: Reis.com
Once hardscrabble
industrial areas like
Fell’s Point and
Canton are being
revived.
Gr.8, which is developing software for Internet Two, or E.imagination
which designs web pages for several of the Washington-Baltimore
area’s leading employers, from the U.S. Department of Justice to the
Baltimore Police. Struever’s long-term plan includes adding an
additional 7.5 million in office space and over 30,000 new jobs214 (Table
15).
Struever jokes as he pulls up to a former industrial site that is now
crowded with Internet-related firms:
■ ■ ■
One recent national
survey found small
tech firm growth is
now greater in old
Baltimore than in hot
North Virginia
nerdistans such as
McLean and Reston.
82
We like to see ourselves as white elephants unlimited. I think
the future looks great. You look at the New Economy and
these buildings are more important now than they have ever
been. It’s very exciting.
In the process, once hardscrabble industrial areas like Fell’s Point and
Canton are being revived. Trendy restaurants, smart boutiques and
antique stores are replacing dilapidated storefronts and grimy
luncheonettes. At least one recent national survey found small tech
firm growth is now greater in old Baltimore than in hot North
Virginia nerdistans such as McLean and Reston. Says Struever:
We have more cool places for a fraction of the rent they pay
in D.C. You can walk to work, have a beer, take a boat to your
next appointment. It’s a hell of a lot more fun than sitting in
the access road around Dulles. Now that’s boring.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
There are signs that Baltimore’s resurgence is more than just talk. Last
year the city led all communities in the greater Washington-Baltimore
area in the number of new technology jobs created in firms with
under 1,000 employees, some 12,400 in all. Many of these firms,
mostly small- to mid-sized entrepreneurial firms new to the area, are
clustered along the bay front in restored older buildings.215
The growth around the harbor is not the only sign of resurgent
confidence in Baltimore. A proposed $350 million redevelopment
project of the city’s historic west side includes plans for 2,000 new
housing units, upscale retail stores, a renovated theatre and parking
structure. Some developers see this as a means of injecting new life
into the downtown area that has lagged the harbor as a center for the
city’s resurgence. Over the past year, economic indicators, including
healthy declines in office vacancy rates and robust growth in housing
prices – among the nation’s greatest – suggest the city may be on the
mend. The recent election of a bright, reform-minded mayor, Martin
O’Malley, has also led to growing hopes that the city’s bloated and
woefully inefficient bureaucracy may finally be brought to heel.
Mayor O’Malley has also targeted high-tech as the city’s key growth
area. Plans to boost residential housing in the downtown area and in
increasingly high-tech Canton could help create a Baltimore version
of Lower Manhattan and Boston’s cyber district.216 The city has been
instrumental in providing infrastructure and financial assistance for
several technology incubators. The Baltimore-based Abell
Foundation has established its own venture funds to fund start-ups in
the area.217
Yet some observers, like urban historian Fred Siegel, warn that the
current atmosphere of optimism generated by these positive signs
could ultimately be undermined by the decay that surrounds it.
Despite the efforts of the new mayor, the city’s persistent problems in
terms of education and its aging infrastructure work against building
a strong information age economy. Perhaps most disturbing of all,
Siegel suggests, is that O’Malley has been unable to reverse the rise in
Baltimore’s high incidence of crime. The city’s homicide rate ranks
consistently among the nation’s five highest. Unlike most American
cities, Baltimore’s crime rate did not fall in the 1990s, suggesting a
particularly difficult pathology. Siegel, who teaches at New York
City’s Cooper Union College and has done extensive research on
Baltimore, observes:
The crime puts a strong limitation on how much the city can
rise. The greater success of other areas puts it at a
comparative disadvantage.
Over the past year,
economic indicators,
including healthy
declines in office
vacancy rates and
robust growth in
housing prices –
among the nation’s
greatest – suggest the
city may be on the
mend.
■ ■ ■
Plans to boost
residential housing in
the downtown area
and in increasingly
high-tech Canton
could help create a
Baltimore version of
Lower Manhattan and
Boston’s cyber district.
■ ■ ■
Despite the efforts the
city’s persistent
problems in terms of
education and its
aging infrastructure
work against building
a strong information
age economy.
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Knowledge-Value Cities in the Digital Age
For much of the late
20th century, the
Hudson Valley stood
at the epicenter of the
technological
revolution.
■ ■ ■
Milken Institute - February 13, 2001
Ultimately, Baltimore will need to weigh these factors when looking
at possible investments in the city. As a place of undeniable charm,
particularly along its waterfront and in its still vibrant
neighborhoods, Baltimore represents one of the last great
opportunities along the East Coast to tap into the kind of urban
resurgence seen in places like Boston and New York, at affordable
prices.
KINGSTON, NEW YORK: HOPE ON THE HUDSON?
For much of the late 20th century, the Hudson Valley stood at the
epicenter of the technological revolution. As home to IBM, once the
world’s dominant computer company, the scenic region north of New
York City flourished as stable high-tech jobs bolstered communities
from the edge of the Bronx north to Albany.
As home to IBM, once
the world’s dominant
computer company,
the scenic region
north of New York
City flourished as
stable high-tech jobs
bolstered
communities from the
edge of the Bronx
north to Albany.
Since the early 1990s, IBM’s retrenchment has hurt the area severely,
particularly in Kingston, an old Ulster County industrial town of
23,000 residents 100 miles north of New York City, where recovery has
been slow. Like the rest of the region, Kingston has recovered its job
base – unemployment is below 3 percent – from the free-fall of the
early 1990s, but faces a key problem that is common to the periphery:
under-employment. Robust job growth has not accompanied wage
growth, as has been the case closer to New York City.218
■ ■ ■
More than anywhere in the Hudson Valley, Kingston and Ulster
County bore the brunt of IBM’s downsizing. Its largely blue-collar
workforce proved far less able to find work in the more varied New
Economy that began to flourish closer to New York City. Second, its
distance from Manhattan made it an impractical location for
commuters.
More than anywhere
in the Hudson Valley,
Kingston and Ulster
County bore the brunt
of IBM’s downsizing.
84
Long-time local realtor Eugene R. Gruner sees the issue of underemployment in his everyday business. Occupancies in central
Kingston are up, mostly the result of small, service-oriented business
that take 1,000 square feet or less. However, rents have not moved up
for five years. “What’s happened here,” Gruner explains, “ is that all
these people used to work for IBM at high salaries. Now they have
jobs but not the salaries.”
Historically, Kingston is a blue-collar river town, dependent first on
canal trade, then heavy manufacturing and finally IBM. Much of
Kingston and Ulster County’s problems can be traced to Big Blue’s
decision to close its massive 256-acre facility in 1992, idling some
7,000 workers. Suddenly, some 2.5 million square feet of industrial,
office and warehouse space came onto the market with few notions of
who would move in.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
The problems facing Kingston and other communities on the outer
periphery may also contain the kernels of real estate opportunities.
Home, warehouse and office space are a fraction of New York or even
Westchester prices, notes Alan Ginsberg, President of TechCity, which
in 1998 bought the abandoned former IBM plant on the outskirts of
Kingston. Ginsberg, a promoter who brings a Brooklyn-bred
aggressiveness and drive to the generally more relaxed, even
somnolent, upper Hudson Valley environment, bought the property
from Big Blue for $16.5 million. His pitch is that his facility, and Ulster
County in general, offers a low-cost environment for tech-related and
information business. He believes the appeal of low housing prices
will lure some information workers and entrepreneurs to the area.
Furthermore, the area has New York State’s lowest electrical rates,
office and warehouse rents. Rates are $10 to $13 per square foot
compared to $30 in Westchester and upwards of $50 to $100 per
square foot in Manhattan. A host of state economic incentives,
including wage tax credits, investment tax credits, state sales tax
refunds and reduced electricity rates, may also appeal to costconscious businesses.219
Ginsberg predicts these factors will become increasingly critical as
firms return to their financial senses following the gradual collapse of
the late 1990s stock bubble. “We were beyond the Wizard of Oz in the
market,” Ginsberg suggests. “Now people need to find places in the
hinterland that are both affordable and attractive.”
Much of the focus will be on attracting back office, assembly and
warehouse operations that constitute the blue-collar part of the
Internet economy. He also has been encouraged by a recent decision
by Max Capital Management, based in Manhattan, to build a massive
server-farm in Newburgh, a mid-Hudson Valley town south of
Kingston.220
The transformation of TechCity has been gradual, but promising. To
date some 850,000 out of the 2.5 million square feet of space has been
taken, much of it by a data processing facility operated by Fleet Bank.
A new 25,000-square-foot lease was also signed with a small
semiconductor service firm.
One of the biggest challenges facing TechCity, typical of those
inheriting deserted large-firm facilities, is turning it into space that
appeals to smaller firms, particularly Internet-related companies.
Ginsberg is doing this by stripping away the cottage cheese ceilings,
eliminating the closed-in, cubicle format of many of the offices and
transforming them into airy “retro” spaces with exposed ceilings.
Ginsberg knows that he cannot hope to lure many creative-oriented
The area has New
York State’s lowest
electrical rates, office
and warehouse rents.
■ ■ ■
A host of state
economic incentives,
including wage tax
credits, investment tax
credits, state sales tax
refunds and reduced
electricity rates, may
also appeal to costconscious businesses.
■ ■ ■
Much of the focus
will be on attracting
back office, assembly
and warehouse
operations that
constitute the bluecollar part of the
Internet economy.
85
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
firms to his location, although he hopes some, particularly as they
start having children, will come for “lifestyle” reasons.
Ohio has made a
remarkable transition
from rust-belt center
to major player in the
nation’s digital
economy.
■ ■ ■
Between 1993 and
1998, Ohio added
more than 25,000
high-tech jobs.
■ ■ ■
As in much of the
country, this growth
has been primarily
suburban in character.
The City of Kingston is also trying to make changes that will make it
more attractive to knowledge workers. The city has redone its classic
City Hall and poured funds into restoring its older downtown.
Restaurants, antique shops and art galleries have sprung up along the
city’s Hudson River Roundout waterfront.
To some extent this strategy could succeed. This part of the Hudson
Valley does have excellent road and rail connections to the rest of the
country. But air service, largely out of Stewart International Airport,
30 miles to the south, is not well developed. Compared to other
burgeoning aerotropolis areas like Ontario, California or Memphis,
Tennessee, ideal for shipping air cargo, Kingston seems a like a bit of
a long shot. Ginsberg believes that is simply a matter of being ahead
of his time. With the benefit of a ten-year reprieve from state sales and
business taxes offered by the state to help the area recover, he thinks
that in time he can transform this lagging part of the Hudson Valley
into a secondary high-tech center. “Lightning changes don’t happen
overnight in places like this,” he cautions. “Will we get to 75 to 80
percent occupancy? Come back in three years and we’ll see.”
DAYTON: RUSTBELT REVIVAL
Ohio has made a remarkable transition from rust-belt center to major
player in the nation’s digital economy. Between 1993 and 1998, Ohio
added more than 25,000 high-tech jobs. According to the AEA and
NASDAQ report, Ohio’s technology industry paid an average tech
wage of $46,800, or 55 percent higher than the average private-sector
job. The AEA and NASDAQ report also had Ohio ranked 17th in
electronics merchandise exports with $2.4 billion in electronics
exports in 1999. 221
As in much of the country, this growth has been primarily suburban
in character. According to HUD statistics, the digital divide in the
Dayton area is significant, with suburbs adding high-tech jobs five
times faster than the city. High-tech jobs grew by 6.1 percent in
Dayton between 1992 and 1997, compared to 31.4 percent in the
suburbs.222 Phil Parker, President of the Dayton Area Chamber of
Commerce explains:
One reason for the divide is high-tech businesses have been
drawn to “campus” settings such as the Miami Valley
Research Park. Private and public sector cooperation is
needed to direct high-tech interests back into the core city.223
86
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Initiatives to encourage high-tech growth to return to the city include
the Information Technology Alliance, which offers incentives for
high-tech businesses to move into the Miami Valley, and investments
by communications companies, such as Ameritech and Time Warner,
which are creating infrastructure needed for high-tech jobs
(Appendix Table 13).
Dayton held its first Information Technology Exposition in June 2000.
Sponsored by the Greater Dayton Information Technology Alliance,
the exposition included sessions that looked at the problem of the
digital divide. A panel discussion on fostering technology growth
urged Dayton to get area cities and suburbs wired with the latest
high-speed Internet connections. 224 Absent high bandwidth
connections, industry and innovators would go elsewhere, was the
warning from Lloyd Waterhouse, President and COO of Reynolds &
Reynolds.225
Many observers, such as Daniel S. Maher, Founder and President of
TeamLinux Corporation, 226 and Ohio’s governor, Robert Taft, believe
Dayton could build upon its already existing information technology
industry with companies and installations such as NCR Corporation,
Lexis-Nexis, Reynolds & Reynolds, and Wright Patterson Air Force
Base.227 High-tech incubators not only foster new development in
downtown Dayton, but help their new firms succeed. Local business
people have said that one reason Dayton’s tech base isn’t as strong as
in other markets is that local companies don’t know where to go for
financing or help with strategic planning.228 In response to this
problem, one of the latest incubators, the Dayton/Miami Valley
Entrepreneurs Center, is not only giving local tech start-ups a place to
grow; it’s giving them the strength to thrive outside.229
Dayton has also received significant assistance from the federal
government to help solve the problem. In June 1999, the Senate
Finance Committee voted 11-0 in favor of a two-year, $22.5 billion
general operating budget that includes more money to link high
technology with economic development in the Miami Valley.230 This
funding helped support both the Edison Center for Information
Technology and created a job training tax credit program. The
program would offer companies a 50 percent tax credit beginning in
2002 to retrain employees with technical skills.231
OAKLAND: FIND A “THERE THERE”
Oakland native Gertrude Stein is said to have remarked about her
home town that “there is no there, there.” Still, the East Bay city,
Many observers,
believe Dayton could
build upon its already
existing information
technology industry
with companies and
installations such as
NCR Corporation,
Lexis-Nexis, Reynolds
& Reynolds, and
Wright Patterson Air
Force Base.
■ ■ ■
High-tech incubators
not only foster new
development in
downtown Dayton,
but help their new
firms succeed.
■ ■ ■
Local business people
have said that one
reason Dayton’s tech
base isn’t as strong as
in other markets is
that local companies
don’t know where to
go for financing or
help with strategic
planning.
87
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Table 16
Oakland Metro Area’s Tech Structure
Industry Output as a Percent of Total MSA Output
Though very much in
the shadow of San
Francisco and Silicon
Valley, is definitely
establishing itself in
terms of high
technology.
■ ■ ■
Oakland emerged in
the 1990s as among
the ten fastest
growing metros with
a population over one
million in high tech
during the 1990s.
■ ■ ■
It is now home to
over 300 hightechnology firms.
High-Tech Manufacturing
Drugs
Communications equipment
Electronic components and accessories
High-Tech Services
Computer and data processing services
Engineering and architectural services
Total High-Tech
1988
1.9
0.2
0.1
0.5
6.6
1.4
1.0
8.6
1998
4.2
0.9
0.8
1.3
8.7
3.1
1.3
13.0
Source: Milken Institute
though very much in the shadow of San Francisco and Silicon Valley,
is definitely establishing itself in terms of high technology. Indeed, the
town emerged in the 1990s as among the ten fastest-growing metros
with a population over one million in high tech during the 1990s.232 It
is now home to over 300 high-technology firms (Table 16).
Like New Jersey’s northern cities, Oakland is a beneficiary of its
location (Appendix Table 14). Surrounded by the densest
concentration of high technology of any region in the world, Oakland
is an ideal location for Silicon Valley-headquartered firms to set up
satellite operations.233 The city also supports a high technology
incubator that is home to over 30 growing firms, all under one roof. 234
Albert Lopez of Oakland’s Community and Economic Development
Agency (CEDA) points out that downtown Oakland is completely
wired with advanced fiber optics and that the city is reinforcing its
infrastructure to accommodate the demands of the growing high
technology marketplace.235 Much of the credit here goes to Mayor
Jerry Brown, who made bringing in new business a campaign issue.
At a recent gathering of high-tech workers and employers, Brown
said:
Let’s make this a town that lives and never sleeps and sets a
pace so the rest of the Bay Area realizes this is where they’ve
got to come. 236
One of the recent firms to move to Oakland is Scientific Learning
Corporation, which develops and sells proprietary neurosciencebased technology programs and services designed to enhance
learning and performance. Incentives for such companies are very
strong, with all commercial buildings in the city in a state-created
88
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
enterprise zone, qualifying businesses locating there for six types of
tax credits.237
In fact, Oakland’s biggest problem may soon be its success. With
high-tech firms moving in, limited office space has become a big
issue. Vacancy rates for top-quality office space in the city fell to about
3 percent this year from about 12 percent in 1996, while space in
emerging-technology cities dropped to a vacancy rate of 6 percent
from about 15 percent during the same period.238
“The difficulty is not so much space, it’s planning for the future,” says
Geoff Hunt, COO of CloudSource. “If I could take 20,000 square feet
now, I’d be happy now, but my growth projections say I need 60,000
in a year. If the landlord is nice, I only need to sign a five-year lease.
That means I have to get out of a four-year lease, or break up my
company into two places.” 239
Ultimately, moving into older industrial areas in places like West
Oakland may solve Oakland’s space problems. Some are already
being converted into live-work spaces and technology offices,
according to Larry Jones, First Vice President of CB Richard Ellis.240
The recent sale of port-owned land at Brush and Third Street in
downtown Oakland will help create additional space. This land is
intended for a new 120,000-square-foot Oakland Telecom Access
Center as a means of boosting Oakland’s high-tech sector.241
Like Baltimore, Oakland’s progress may be impeded not by space or
its geographic location, but by real and perceived problems of crime
and lack of livability. Ultimately, Brown hopes to overcome this by
cracking down hard on lawbreakers and transforming the core city
into a bustling upscale center with over 3,800 new lofts, under
construction. “A slum is not an icon of Oakland,” Brown maintains.242
CENTRAL DALLAS: THE EMERGENCE OF THE “214”
CORRIDOR
For the past decade, the booming economic machine that is greater
Dallas-Fort Worth, had one general direction: outward. As chip,
telecom and other high-tech firms flocked to the nation’s ninth largest
metropolitan area, they have forged what now stands as the second
most concentrated technopolis in the nation, behind only Silicon
Valley.243
Until recently, this boom, arguably, the strongest among the nation’s
ten largest economies, was barely noticeable in the area surrounding
the city’s historic core, which continued its economic decline
Oakland’s progress
may be impeded not
by space or its
geographic location,
but by real and
perceived problems of
crime and lack of
livability.
■ ■ ■
For the past decade,
the booming
economic machine
that is greater DallasFort Worth, had one
general direction:
outward.
■ ■ ■
As chip, telecom and
other high-tech firms
flocked to the nation’s
ninth largest
metropolitan area,
they have forged what
now stands as the
second most
concentrated
technopolis in the
nation, behind only
Silicon Valley.
89
Knowledge-Value Cities in the Digital Age
Unlike the hardware
intensive “telecom
corridor,” the action
closer to town comes
largely from newer
companies oriented
toward the “soft” end
of the information
revolution such as
Internet software,
information services,
media, website
development,
advertising and media.
■ ■ ■
These industries
constitute the
backbone of the
emerging “214”
technology
community.
■ ■ ■
Perhaps the most
important of these
companies is
Broadcast.com in the
thriving entertainment
district known as
Deep Ellum.
90
Milken Institute - February 13, 2001
(Appendix Table 15). Then, a remarkable transformation has begun to
take hold. From a tiny base in a once hardscrabble neighborhood
known as Deep Ellum, a raft of new developments related to
emerging technology and information industry firms began taking
root in areas around the city core (Figure 23).
At the heart of this change is the growing appeal of older
neighborhoods that offer “funky” loft class C and class B space to a
new generation of information industry entrepreneurs. Unlike the
hardware, intensive “telecom corridor,” along US 75 north of the city
(with more than 600 telecommunications and high-tech
manufacturing firms located in the peripheral nerdistans such as
Richardson and Plano),244 the action closer to town comes largely from
newer companies oriented toward the “soft” end of the information
revolution such as Internet software, information services, media,
website development, advertising and media.
These industries constitute the backbone of the emerging “214”
technology community – referring to the area code shared by central
Dallas and its environs – as opposed to the better known “972” of the
more established northern suburbs of the city. Perhaps the most
important of these companies is Broadcast.com, started by
entrepreneur Mark Cuban in the thriving entertainment district
known as Deep Ellum, just over the Central Expressway, east of
downtown’s traditional core.
Deep Ellum, once the home of early car factories and the Dallas
African-American blues and jazz scene, had decayed into a largely
abandoned jumble of redbrick storefronts and warehouses by the
1970s. It was home to the city’s largest homeless encampment. In a
pattern more familiar in northeast cities like Boston or New York, the
area became a magnet for artists, musicians and other creative
individuals attracted by the early 20th century cityscape and low
rents. Saved from the wrecker’s ball and massive new high-rise
construction by the Dallas real estate crash of the mid-1980s, the area
became dominated by a handful of real estate investors who began to
place clubs, restaurants, tattoo parlors and other unconventional
retail in the area. Brady Wood, a 31-year-old New Orleans real estate
developer, restaurateur and nightclub owner, suggests:
People are getting bored with housing tracks and strip malls.
They want to go someplace where they can experience
something different. It’s all about texture and character.
People want a sense of the past, the spontaneous, and more
than anything, the different.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
Figure 23
Dallas High-Tech Output
Percent of U.S. Industry Total, 1998
Broadcast.com founder Mark Cuban was one of those attracted to the
area. In the 1980s, he and Jeff Swaney who worked for HewlettPackard, began spending time in Deep Ellum. The former center of
1930s black jazz clubs was then largely inhabited by Dallas’
underground culture – artists, bikers, musicians and the city’s largest
homeless contingent. Attracted by the eclectic atmosphere, Swaney
decided to give up the corporate life and stay in Deep Ellum.
In 1985, Jeff Swaney and Barry Annino co-founded Club Clearview,
the first of the Deep Ellum nightclubs. Deep Ellum was gaining
notoriety. The district featured tattoo parlors, edgy stores, clubs and
restaurants. In the late 1980s, Mark Cuban approached Swaney and
his partner about acquiring space for a telecommunications startup.
The key requirement was room for a basketball court, reflecting a
passion that a decade later would be displayed by Cuban’s purchase
of the Mavericks, Dallas’ NBA franchise.
■ ■ ■
The former center of
1930s black jazz clubs
was then largely
inhabited by Dallas’
underground culture –
artists, bikers,
musicians and the
city’s largest homeless
contingent.
91
Knowledge-Value Cities in the Digital Age
After going public in
1998, tales of former
waitresses and
guitarists making
millions on the deal
turned the
entertainment district
into a high-tech hub.
■ ■ ■
Milken Institute - February 13, 2001
Cuban’s startup, which later became Broadcast.com, evolved into the
hottest Internet firm in Dallas. After going public in 1998, tales of
former waitresses and guitarists making millions on the deal turned
the entertainment district into a high-tech hub. Soon dozens of other
Internet, media and advertising firms rushed in, taking what had
been virtually worthless real estate and transforming it into milliondollar properties. Over a dozen new Internet firms relocated in the
district.245 Bret Strauss, whose eight-person firm Third Stone
Productions has been in the area since 1997, says:
This location is very good. There’s a talent pool. It’s a young
industry and this is a young part of town.
With a population of permanent residents estimated to reach 10,000
within five years, Deep Ellum seems destined to become the first
southwestern community to become a true 24/7 area along the lines
of New York’s lower Manhattan, or Boston’s cyber district. 246
Speculators and developers are developing hundreds of thousands of
new office and loft space, mostly by rehabilitating everything from
old factories and warehouses to grain elevators (Table 17).
Deep Ellum is not the only old Dallas neighborhood to feel the
growth of new information industries. Just west of downtown, in a
tonier area known as the West End, advertising agencies, media and
Internet firms have been gobbling up space. Well-known as the site of
the Kennedy assassination, the area has very low vacancies and a
spate of new construction on line.
Developer Robert Petrucello estimates that current vacancy rates are
Table 17
Winds of Change for Dallas CBD
1Q 1999
Submarket
CBD
CBD
Plano/Allen
Plano/Allen
Richardson
Richardson
Metro
Metro
Class
ALL
B/C
ALL
B/C
ALL
B/C
ALL
B/C
Vacancy
29.2%
37.0%
15.9%
9.2%
10.2%
6.8%
15.8%
16.5%
*BP = Basis Points
Source: Reis.com, “The Emergence of the ‘214s’.”
92
Asking
Rent
$19.59
$15.39
$21.66
$18.15
$19.54
$15.51
$20.64
$16.63
1Q 2000
Vacancy
23.5%
31.9%
19.3%
9.4%
10.2%
8.0%
14.9%
14.7%
Asking
Rent
$20.30
$16.19
$21.64
$18.26
$19.71
$15.29
$20.92
$16.83
Change
Vacancy
(BP)*
-570
-510
340
20
0
120
-90
-180
Asking
Rent
3.6%
5.2%
-0.1%
0.6%
0.9%
-1.4%
1.4%
1.2%
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
less than 10 percent throughout the area. Petrucello, whose firm,
Brook Partners, owns half a million square feet in the area, has seen
rents in his West End properties almost double over the past four
years. But his primary focus is on expansion of the Dallas Infomart
that would bring as much as 800,000 square feet of new tech-oriented
office space to the city’s somewhat desolate “arts” district, home to
many of the city’s major cultural institutions, located just north of
central core.
East of downtown, between the central business district and Deep
Ellum, lies yet another burgeoning new tech area. Known among
developers as “Reggie-land,” this area, once among the roughest and
least regarded in the whole region, has been almost single-handedly
revived by the efforts of developer Reggie Graham. He first started
investing in the area during the real estate recession of the 1980s.
Working one building at a time, “Reggie-land” blossomed into home
for smaller tech and design-oriented firms. As in the West End and
Deep Ellum, this area also experienced a surge in prices and rents,
still much lower than prime “Telecom Corridor” space and a rise in
occupancies. New advertising agencies, Internet and media firms are
moving in where tumbleweeds blew just a few years back.
Downtown Dallas and its environs, once a sunbelt afterthought,
perhaps best exemplifies the way in which the information age can
revive the central core. The key, notes developer Cliff Booth, is that
the central core provides digital companies and the people who work
in them an alternative to the isolation of the nerdistans. It becomes, as
Booth says, “a lifestyle alternative that’s not available anywhere
else…. It’s a human contact thing.”
DOWNTOWN LOS ANGELES: THE NEXT DEEP ELLUM?
Amid a generally buoyant economy and a full-fledged boom on the
digitally rich Westside, downtown Los Angeles has generally lagged
behind in staging a central city comeback. Yet there are signs that the
area may finally be reinventing itself along the lines seen in successful
revivals such as Dallas’ Deep Ellum (Figure 24).
There is a growing recognition that downtown L.A.’s new mission is
not to be powerful, but to be fun, different and interesting. Among its
great assets are impressive beaux-arts office buildings, a collection of
warehouse and industrial buildings suitable for conversion into
artists’ lofts and digital business locations. The key element in its
recovery is not how much it resembles other regional business
centers, but how it offers its dramatic array of one-of-a-kind ethnic,
retail and entertainment experiences.
Downtown Dallas
and its environs, once
a sunbelt
afterthought, perhaps
best exemplifies the
way in which the
information age can
revive the central core.
■ ■ ■
The central core
provides digital
companies and the
people who work in
them an alternative to
the isolation of the
nerdistans.
■ ■ ■
There is a growing
recognition that
downtown L.A.’s new
mission is not to be
powerful, but to be
fun, different and
interesting.
93
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Figure 24
Los Angeles Office Market
1995-2000
Even among the most
diehard advocates of
downtown as a
corporate center, the
departure of Arco and
Times Mirror has
provided an
unsettling, if
necessary, shock.
■ ■ ■
94
This is a long way from notions of just a decade ago when downtown
Los Angeles seemed poised to achieve the long-time boosters’ dream
of emerging as a new Manhattan, the self-proclaimed and selfconscious “capital of the Pacific Rim.” It was a vision built upon
several notions, including the primacy of downtown as a corporate
center and the permanent ascendancy of Japanese capital that no
longer holds much sway.
Even among the most diehard advocates of downtown as a corporate
center, the departure of Arco and Times Mirror has provided an
unsettling, if necessary, shock. In particular, the relocation of control
by the Chicago’s Tribune Co. over Times Mirror deprives downtown
of its last important face to the world. Today, the western pole of the
nation’s cultural industrial complex does not have a single institution
committed to downtown. Yet, if downtown L.A.’s plight seems dire,
there are several demographic, economic and cultural factors that
could work to its benefit. Here the experience of other downtown
areas may be relevant. If one looks at recovering central business
districts around the country, much of the impetus is coming not from
the old office core itself, but from surrounding older districts, once
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
largely discarded, that have become centers of knowledge-value
production, notably multimedia, Internet, artistic and culturally
oriented industries.
For downtown Los Angeles, the Dallas experience has tremendous
relevance. Los Angeles, notes Dallas developer Cliff Booth, President
of Southwest Properties, has far more of the kinds of structures –
historic as well as warehouse space – that attract new urbanites. On a
recent trip, Booth recalls that he was “astounded” by the enormous
inventory of classic buildings along such historic arteries as Olive,
Spring and Broadway in downtown Los Angeles.
Ironically, Los Angeles has such a great repository of buildings
precisely because it failed to exploit its historic core, leaving an
extraordinary array of classic buildings and a pre-World War II
cityscape. Other cities, such as New York, leveled much of their
history as their downtown expanded in the 1960s and 1970s. Los
Angeles’ business center of gravity simply moved to other areas or to
former residential or industrial districts downtown, notably Bunker
Hill.
Los Angeles’ historic core has great potential precisely because it
deserted its downtown and left it as a junkyard of failed businesses,
suggests developer Tom Gilmore, who is spearheading the revival of
the area, turning older offices into more than 100 new upscale
apartments.247
Until recently, Gilmore notes, most Los Angeles property owners
were either uninterested in such structures or contented themselves
with low-end retail functions, sites for creating largely peopleless
“telecom hotels” or government offices. Now some developers see
the potential for the creation of a kind of Southland Deep Ellum in
these architectural gems. Changes in zoning policy, encouraging
rather than blocking refurbishing of old buildings into
live/workspace has helped. Several major projects, including the
completed Staples Center and the new Cathedral and Disney Hall,
both under construction, should add to downtown’s allure. Also
important is downtown’s first studio, Los Angeles Center Studio,
busy since its inception. 248
As in Deep Ellum and other cities, several factors may be working to
accelerate this process. One is the growth of the new urbanite
demographic – largely young, educated and childless – that
gravitates to interesting urban spaces. A plethora of new restaurants
and bars have opened over the past few years. This, notes Tom
Gilmore, is critical to a recovery:
Much of the impetus
is coming not from
the old office core
itself, but from
surrounding older
districts, once largely
discarded, that have
become centers of
knowledge-value
production, notably
multimedia, Internet,
artistic and culturally
oriented industries.
■ ■ ■
Los Angeles’ historic
core has great
potential precisely
because it deserted its
downtown and left it
as a junkyard of
failed businesses.
■ ■ ■
Several major
projects, including the
completed Staples
Center and the new
Cathedral and Disney
Hall, both under
construction, should
add to downtown’s
allure.
95
Knowledge-Value Cities in the Digital Age
Another factor that
may work in
downtown’s favor is a
gradual reassessment
among digital firms
that profits are indeed
important, and that to
achieve profitability,
costs must be
controlled.
■ ■ ■
Companies are
looking at the bottom
line and may find
parts of downtown at
roughly 50 percent the
rental rate a more
attractive bargain.
■ ■ ■
One building, 548
Spring Street, has
come to life with
dozens of Internet
and
telecommunications
companies.
96
Milken Institute - February 13, 2001
The problem in LA is we are always laying lots of eggs, but
we need places for the chickens. We need places for the nerds
to go when they knock off work at 11 p.m.
Another factor that may work in downtown’s favor is a gradual
reassessment among digital firms that profits are indeed important,
and that to achieve profitability, costs must be controlled. Until now,
notes Mark Sullivan, Executive Vice President of Julien J. Studley
Company, the soaring stock market for dot-coms and other digital
firms allowed these money-losing ventures to house themselves in
some of the region’s most expensive space, particularly on the
Westside. Today these same companies are looking at the bottom line
and may find parts of downtown at roughly 50 percent the rental rate
a more attractive bargain.
The 60-year-old Terminal Annex is now being converted into a hightechnology and telecommunications complex, creating a “technology
village” that is slated to bring in 1,000 jobs to the area.249 But for the
most part, it is a matter of small, incremental change. One building,
548 Spring Street, has come to life with dozens of Internet and
telecommunications companies. Lovingly maintained, the structure is
a classic Century Beaux Art gem. Vacancy rates, once almost half,
have dropped to roughly 10 percent. The whole building teems with
the energy of entrepreneurial and creative ventures. Laurence Tietz,
who runs Studio Software Multimedia Inc. from an airy space there,
says:
I am from New York and this feels like the funky parts of
Manhattan. The energy and pulse of it gives it a feel we enjoy.
Of course, the fate of a downtown cannot be seen in the success of one
building. But as in Deep Ellum, the recovery on Spring Street and
other parts of the historic core has to start somewhere, and in small
steps. It may not be the long-awaited “capital of the Pacific Rim,” but
it could presage the resurrection of a downtown that might once
again become an important element in the region.
CONCLUSION:
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
THE CITY IN THE DIGITAL AGE
This report has surveyed an array of cities – large and small, new and
old – and found that there is much hope for urban America in the
digital age. The New Economy, particularly with its dependence
upon human capital, is giving urban areas a chance to reshuffle the
geography “deck” and find new niches in which to sustain
themselves.
These niches are not going to be the same in every city. To a large
extent first-tier cities – with their enormous appeal to younger
creative talent and cultural institutions – are most likely to reap the
benefits of the expanding “soft” or content part of the technological
revolution. Lower cost, emerging-technology cities are most often
best suited to take advantage of the infrastructural and blue-collar
functions associated with the digital economy. And the old industrial
cities, depending upon their characteristics, may be able to pick up
business in both, particularly as costs rise in both first-tier cities and
nerdistans.
Despite these many differences, there are several basic premises that
are critical for urban success in the digital age. Perhaps the most
important regards lifestyle concerns. In the digital economy, where
people want to live becomes the paramount concern. Thus, reducing
crime, creating new arts districts, refurbishing historic structures,
encouraging new restaurants and clubs have become primary
economic development tools.
The other major concern lies in educating the workforce. Recent
studies by the Corporation for Enterprise Development conclude that
investments in skill development are far more effective than
traditional economic development incentives. If lifestyle factors lure
new workers, training initiatives can go far in keeping employers in a
particular geographic area.
The most pressing challenge for future communities is to build and
cultivate the skills and energies of their citizenry, both as
entrepreneurs and workers. Writing about New York in the 1950s,
Jane Jacobs observed: “A metropolitan economy, if it is working well,
is constantly transforming many poor people into middle class
people...greenhorns into competent citizens...Cities don’t lure the
middle class, they create it.” 250
Entrepreneurs play pivotal roles in the most rapidly growing sectors
in the New Economy and are responsible for a higher share of total
The New Economy,
particularly with its
dependence upon
human capital, is
giving urban areas a
chance to reshuffle
the geography “deck”
and find new niches
in which to sustain
themselves.
■ ■ ■
In the digital
economy, where
people want to live
becomes the
paramount concern.
■ ■ ■
Recent studies by the
Corporation for
Enterprise
Development
conclude that
investments in skill
development are far
more effective than
traditional economic
development
incentives.
97
Knowledge-Value Cities in the Digital Age
Entrepreneurs play
pivotal roles in the
most rapidly growing
sectors in the New
Economy and are
responsible for a
higher share of total
net-job creation.
■ ■ ■
Utilizing information
and communication
technologies such as
the Internet, newly
chartered firms can
develop business
models that create
new markets and
destroy existing
markets.
■ ■ ■
For cities to flourish,
they must provide an
environment that is
conducive to
entrepreneurship.
98
Milken Institute - February 13, 2001
net-job creation. The success in creating technology start-ups and
their rapid growth in recent years highlights the importance of
entrepreneurship to economic performance. Utilizing information
and communication technologies such as the Internet, newly
chartered firms can develop business models that create new markets
and destroy existing markets. Small-firm growth is strongly tied to
the availability of early-stage risk capital. For cities to flourish, they
must provide an environment that is conducive to entrepreneurship.
Finally, more than anything else, success in the digital age comes
down to the quality of “community.” In interview after interview –
whether in New York’s Hudson Square, Boston’s cyber-district,
Dallas’ Deep Ellum or downtown Los Angeles – entrepreneurs,
investors and other urban tech workers mentioned this sense of
commonality as critical to their decision to locate in an urban space.
Oakland Mayor Jerry Brown is correct, if somewhat unconventional,
in looking back to the Greek city-states, or the early Christians, for a
sense of meaning to hold together a community.251 The post-industrial
city would do well to look at its pre-industrial predecessors as models
for those communities seeking to secure their place in the geography
of the future. The citizens of the ancient Greek polis, the Italian citystate, early modern Amsterdam and London all shared a peculiar
passion for the mythology, history, sites, sounds and smells of their
cities. This remains the critical intangible element in urban culture.
Even in a virtualized world, cities remain, as Jane Jacobs noted,
“thoroughly physical places.”252
In the 21st century, and even beyond, communities can only survive
and prosper by being something more than soulless zip codes of brick
and glass, inter-connected by fiber-optic cables. They can do this only
by fostering a sense of connectivity in human bonds, not just
electronic links, between the various communities, businesses and
neighborhoods. More than anything, this reclaimed sense of civic
spirit, not technology or government intervention, will determine
how cities secure their place in the geography of the digital age.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
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Andrew. 1999. Feature Films to be Produced for Direct Release on the Web. New York Times, August 24. Gumbel,
Peter and Rick Wartzman. 2000. Los Angeles Gets its Groove Back as the Web Discovers Hollywood. Wall Street
Journal, January 5.
102
Lockwood, Lee and Martha Davidson. 1982. Historical Background in The Leather District and the Fort Point
Channel by Susan R. Channing, Boston Photo Documentary Project, Boston, CA: The Artists’ Foundation. pp.5-12
103
Urban Futures Program, Reason Foundation, based on Brookings Institution Center on Urban and
Metropolitan Policy and the Fannie Mae Foundation; and US Census estimates.
104
105
Castells, The Informational City, op. cit.,p.144-146
Longsteth, R.C. and Greg Burns. 1999. The Global City: Challenge for the New Century. Chicago Tribune,
Feburary 7.
106
107
Greater Philadelphia First. 1997. An Economic Development Strategy for the Greater Philadelphia Region. May.
108
Benderoff, Eric. 1999. Home Prices Soar. Chicago Sun Times, August 3.
DeLeon, Richard E. 1991. San Francisco: Post-modernist Populism in a Global City in Savitch and Thomas,
eds. Big City Politics in Transition. Newbury Park, CA: Sage Publications.
109
110
Source: Center for the Continuing Study of the California Economy. 1999. Palo Alto.
103
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
DeBare, Ilana. 1998. The Chronicle 500: One County is Home to Half the 500 Firms. San Francisco Chronicle,
April 19.
111
The Bay Area Economic Forum. 1996. The Bay Area: Leading the Transition to a Knowledge-based Economy;
Carronade Multimedia Directory, 1997; Louis, Arthur M. 1997. New Owners Have Big Plans For Multimedia
Gulch Building. San Francisco Chronicle, July 11; The Changing Telecommunications Environment and New York City.
1995. A Three-Day Colloquium Sponsored by New York University. June 18.
112
Wolfe, Mark R. 1999. The Wired Lot: Lifestyle Innovation Diffusion and Industrial Networking in the Rise of
San Francisco’s Multimedia Gulch. Urban Affairs Review, May.
113
Rosen, Kenneth T. The San Francisco Economy: A Case Study of the Multimedia Gulch. Working Paper No. 99269. Fisher Center for Real Estate and Urban Economics.
114
115
Carr, Laura. 2000. SF Digital Economy Worth $5.7 Billion. The Industry Standard. August 3.
Rosen, Kenneth T. The San Francisco Economy: A Case Study of the Multimedia Gulch. Working Paper No. 99269. Fisher Center for Real Estate and Urban Economics.
116
117
Cuneo, Alice Z. 1994. Getting Wired In the Gulch: Creativity and Coding Merge in San Francisco’s
Multimedia Community. Advertising Age, November 28.
Trinity Declares It Won’t Renew Majority of Its Leases to Printers. Printing News, May 4, 1998; Bagli, Charles
V. 1998. As Landlords Seek Higher Rents, Manhattan’s Printers Face Eviction. New York Times, September 27.
118
119
Eaton, Leslie. 1999. No Room to Grow. New York Times, June 1.
120
DeLeon, op. cit.,p.205
Abate, Tom. 1995. Examiner’s Bay Area 100. San Francisco Examiner, April 24; Levine, Daniel S. 1998. One on
One With Randall Harris. California Apparel News, May 1.
121
122
Curtius, Mary. 1999. New Money Driving Out Working-Class San Franciscans. Los Angeles Times, June 21.
Taylor, Chris. 2000. When Dotcoms Move In. Time, August 28; van Slambrouck, Paul. 2000. USA Today
Christian Science Monitor, August 11; Grimes, Ann. 2000. San Franciscans Start to Rye Dot-Com Influx. Wall Street
Journal, August 17.
123
124
Nieves, Evelyn. 2000. Silicon Valley Housing Only For Rich. Daily News, Feb. 20.
125
Piller, Charles. 2000. Job Slowdown Offers Respite for Silicon Valley. Los Angeles Times, January 10.
126
Joint Venture Silicon Valley. Joint Ventures 1999 Index of Silicon Valley.
127
Ibid.
128
King, Peter H. 2000. Sprawl Spills into Central Valley. Los Angeles Times, May 13.
Daryl Kelly. 2000. Ruling Reflects Critical Shift in Water Policy. Los Angeles Times, June 14; Laris, Michael.
2000. Growth Battleground Moves to Courts; Town Sued by Developer, Landowner. Washington Post, September
7; Jeff Speck, 2000. Sprawl and the Future of the Old Neighborhood. Asheville Times-Citizen, September 3.
129
130
Zandi, Mark. 2000. Outlook for Housing Prices. Mortgage Banking, January 1.
Labich, Kenneth. The Geography of an Emerging America. Fortune, June 27, 1994; DeVol, America’s HighTech Economy, op. cit.
131
132
104
Cyberstates Update, 1998. American Electronics Association.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
133
Shepard, John C. 1993. The New Economy of the Great Plains. Economic Development Quarterly, November.
134
Study Projects Rising Poverty in LA Despite Immigrants’ Upward Mobility. 1997. USC News Service. January
Richards, Bill. 1994. Many Rural Regions Growing Again: A Reason: Technology. Wall Street Journal,
November 21.
135
Bergquist, Lee. 2000. Wisconsin Unplugged: State on Verge of Being Left Behind in High-tech World.
Milwaukee Journal-Sentinel, June 24.
136
137
City of Colorado Springs Strategic Plan. 2000.
138
Ellen, Ingrid Gould and Amy Ellen Schwartz. 2000. No Easy Answers. Brookings Review, June 22.
139
Pappas, Ben. 1997. My Kind of Town. Forbes, October 20.
140
Ibid.
141
Colker, David. 2000. Amazon Invests $60 Million in Kozmo for Faster Delivery. Los Angeles Times, March 21.
Kasarda, John. Time-based Competition and Industrial Location in the Fast Century. Real Estate Issues, Winter,
1998/9.
142
143
Kasarda, op.cit.; Kasarda, John. 2000. Aerotropolis: Airport-Driven Urban Development. Urban Land, June.
144
Murphy, Todd. 2000. Developers Rush to Meet Demands of E-Commerce. New York Times, January 23.
Muto, Sheila. 2000. As Warehouses Fill Farmland, Concern Grows. Wall Street Journal, California Edition,
March 15.
145
Richter, Marice. 2000. Directing Traffic, Growth Top Priorities; Northeast Tarrant Boom will Continue, Civic,
Business Leaders Told at Conference. The Dallas Morning News, November 4.
146
147
Webb, Bailey. 1999. Now Its Internet 101. National Real Estate Investor, November.
148
Husing, John. 1999. Economics and Politics, Inc., Highland, CA.
149
Hershey, Robert D. 1997. The Rise of the Working Class. New York Times, September 3.
150
Husing, John. 1998. Search for Aerotropolis. Inland Empire Economic and Demographic Trends. April 22.
151
Source: Economic Development Authority of Western Nevada
152
Source: Reno Tahoe International Airport Authority
153
Tulsa’s Outlook: Growth, Jobs. Center for Economic and Management Research, 2000. Tulsa World. January 2.
154
Tulsa’s Outlook: Growth, Jobs. Center for Economic and Management Research, 2000. Tulsa World. January 2.
Tiernan, Becky. 2000. Urban Growth Pains: Building Code Hinders Tulsa’s Redevelopment Plans. Tulsa Word,
January 9.
155
156
Tulsa’s Outlook: Growth, Jobs. Center for Economic and Management Research, 2000. Tulsa World. January 2.
157
City of Tulsa 1999 Annual Report.
158
Ibid.
Greater Omaha Chamber of Commerce. 1999. Communications Technology.
http://www.accessomaha.com/Business/ bicommun.html
159
160
Linkins, Kim Fulcher. 1999. Midwest Lures Family-based IT. Computerworld, May 24.
161
Ibid.
105
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Greater Omaha Chamber of Commerce. 1999. The Omaha Economy. http://www.accessomaha.com/Economy/
economy.html
162
163
Greater Omaha Chamber of Commerce. 2000. Metro Omaha Statistical Profile. http://www.accessomaha.com
164
Russo, Ed. 2000. X.com Taps Omaha for 500 Jobs. The Omaha World-Herald, March 28.
Greater Omaha Chamber of Commerce. 2000. Economic Development.
http://www.accessomaha.com/Economy/ economy.html
165
166
Ibid.
167
Ibid.
168
Ibid.
169
Ibid.
McMahon, Cindy Murphy. 2000. Empty Info-Tech Jobs Beckon People To Shift Jobs In Mid-Life. The Omaha
World-Herald, January 9.
170
171
Russo, Ed. 2000. Firms Seek Lifeline For Web Business. The Omaha World-Herald, April 2.
Greater Omaha Chamber of Commerce. 2000. Economic Development.
http://www.accessomaha.com/Economy/ economy.html
172
173
Burge, Randy. 2000. It’s IT. New Mexico Business Journal, Volume 24, Issue 7, August.
174
Shepherd, Shawn. 2000. Get Cracking. New Mexico Business Journal, Volume 24, Issue 7, August.
175
McGhee, Tom. 2000. New Sales Pitch. Albuquerque Journal, January 23.
176
Odenwald, Ralph. 2000. Faulty Wiring. New Mexico Business Journal, Volume 24, Issue 7, August.
Office of Albuquerque Mayor Jim Baca. 2000. Mayor Leads Efforts to Expedite Tech Park Development. Press
Release, February 28.
177
178
McGhee, Tom. 2000. New Sales Pitch. Albuquerque Journal, January 23.
179
Burge, Randy. 2000. Its IT. New Mexico Business Journal, Volume 24, Issue 7, August
180
The Greater Albuquerque Chamber of Commerce. 2000. Reinventing Albuquerque’s Public Schools, May.
181
Shepherd, Shawn. 2000. Get Cracking. New Mexico Business Journal, Volume 24, Issue 7, August.
Huntsville / Madison County Chamber of Commerce. Cummings Research Park.
http://www.hsvchamber.org/crp/technology.htm
182
Huntsville / Madison County Chamber of Commerce. Cummings Research Park.
http://www.hsvchamber.org/crp/technology.htm
183
184
Huntsville / Madison County Chamber of Commerce. The Edge. http://www.hsvchamber.org/the_edge.htm
185
Ibid.
The City of Boise. 2000. State of the City Address by Mayor H. Brent Coles. September 28.
http://www.ci.boise.id.us/mayor/state_of_city_address.asp
186
187
Jackson, Tim. 2000. Boise Makes The Top 5 on Forbes List. The Idaho Statesman, May 16.
188
Pappas, op. cit.
Menser, Paul. 1999. Advanced Technology Industry Leader To Be Keynoter for EIEDC Meeting. Idaho Falls Post
Register, May 31.
189
106
Milken Institute - February 13, 2001
190
Knowledge-Value Cities in the Digital Age
Womack, Brian. 2000. Oak Tech Opens Boise Office. The Idaho Business Review, July 3.
Editorial Opinion. 2000. Micron Expansion A Plus, But Filling Jobs Won’t Be Easy. The Idaho Statesman,
September 10.
191
192
Edwards, Marcelene. 2000. Boise Firm First To Use Capital Fund. The Idaho Statesman, May 29.
193
Tucker, John. 2000. Boise Buys Land To Lure Properties. The Idaho Statesman, September 24.
194
Ibid.
195
Scarborough Research, October 18, 1999; New York State Bureau of Labor Statistics. Compiled by Robert Fitch,
New York University.
196
Bagli, Charles V. 2000. Office Shortage in Manhattan Imperils Growth. New York Times, September 19.
197
Holusha, John. 2000. Commercial Property: An Up Cycle Just Keeps Rolling. New York Times, September 24.
Porpora, Tracey. 2000. N.J.’s Hot Locations Offer Great Access to Telecom Infrastructure. New Jersey Tech News,
March.
198
199
Barnes, Julian E. 2000. In Brooklyn, a Vision of a Cultural Haven. New York Times, September 28.
200
Source: Regional Planning Association. 1996. Downtown Brooklyn: A Plan for Continued Progress. September.
201
Center City Digest, Fall 2000.
202
Center City District and Central Philadelphia Corporation, 2000. State of Center City 2000.
203
Woodall, Martha. 2000. Campaign Aims to Attract More Tech Firms to City. Philadelphia Inquirer, September 15.
204
Nick Harrison. 1999. Leaving Soot and Slag Behind in Pittsburgh. Urban Age, Summer.
Hula, Richard C. 1990. The Two Baltimores in Leadership and Urban Regeneration, Dennis Judd and Michael
Parkinson, eds., Newbury Park, CA.: Sage Publications; David Rusk. 1996. Baltimore Unbound, Baltimore, MD:
The Abell Foundation; Lisa Snell. 1997. Analysis of U.S. Census Bureau Data. Reason Foundation. James Bock, 1997.
Baltimore Population Lowest in Eight Decades. Baltimore Sun, March 21. Haner, Jim and John B. O’Donnell. 1997.
Dreams, Debts, Demolitions. Baltimore Sun, April 6; City of Baltimore, Department of Planning. 1999. Plan
Baltimore! A Vision for Baltimore: A Global City of Neighborhoods.
205
Inner Cities: Battling Smoke. 1994. Economist, September 10. Hula, op. cit., p.193; Rusk, op.cit., p.16; Plan
Baltimore: A Vision for Baltimore: A Global City of Neighborhoods. 1999.
206
City of Baltimore. Estimates by City Officials; Memo from Greater Baltimore Alliance to author. December 7,
1988.
207
Downtown Partnership of Baltimore. 1998. The State of Downtown Baltimore. November; Downtown
Partnership of Baltimore. 1995. Toward an Economic Growth Strategy for Downtown Baltimore. November;
Memo from Greater Baltimore alliance to author, December 7, 1988.
208
209
Rath, Molly and Breenen Jensen. 1999. West-Side Story: What’s At Stake in the Rush to Develop Baltimore’s
Original Downtown. City Paper, March 18.
210
Wolf, Richard. 1999. Homicide Too Real in Baltimore, USA Today, March 19.
Abell Foundation. 1993. Baltimore’s Drug Problem: It’s Costing Too Much Not to Spend More on It. Baltimore,
October.
211
Kaufman, Jonathan. 1998. Prison Is All Around For a Girl Growing Up In Inner-City Baltimore. Wall Street
Journal, October 27.
212
107
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
The State of Downtown Baltimore. 1998. op. cit.; Downtown Partnership of Baltimore. 1995. Toward an
Economic Growth Strategy for Downtown Baltimore, November
213
214
Mills, Emory Julian. Developers are Pushing for `Digital Harbor’ Tag. Baltimore Daily Record, May 19.
215
Opinion. 1999. Baltimore Has Future in Tech. Baltimore Business Journal, December 3.
216
Harlan, Heather. 2000. O’Malley Targets High-tech. Baltimore Business Journal, May 22.
217
Snyder, Robert G. 2000. Baltimore’s Tech Industry Emerges from the Shadows. Baltimore Sun, May 8.
218
Rozhon, Tracie. 2000. Plans for Industrial Revival Divide Hudson River Towns. New York Times, March 13;
Gaines, Sam. 2000. New York: A Continuing Economic Renaissance. Cahners Business Information, Special
Promotional Supplement.
219
Estimates: TechCity.
220
Holusha, John. 2000. Plans for Upstate `Server Farm.’ New York Times, September 6.
Bizjournals.com/dayton. 2000. Ohio’s High Tech Industry Added 25,000 Jobs Between 1993 and 1998. May 17.
http://www.bizjournals.com/dayton/stories/2000/05/15/daily14.html
221
222
Chow, Andrew. 2000. Dayton In The Digital Divide. The Dayton Daily News, June 12.
223
Ibid.
Governor Commends Development of Information Technology in Dayton Area. 2000. The Associated Press
State & Local Wire, June 2.
224
225
226
227
Ibid.
Bohman, Jim. 2000. Participants Urge Taking Reins In Higher Technology. The Dayton Daily News, June 29.
The Associated Press State & Local Wire, June 29, 2000.
Bizjournals.com/dayton. 2000. New Incubator On Right Track. Week of May 29.
http://www.bizjournals.com/dayton/ stories/ 2000/05/29/editorial2.html
228
229
Ibid.
230
Hershey, William. 1999. Senate Finance Panel Offers More For High Technology. The Dayton Daily News, June
9.
231
Ibid.
DeVol, Ross C. 1999. America’s High Tech Economy: Why Should Oakland Care? Presentation to the
Oakland 2000 Technology Summit, November 12, 1999.
232
233
Ibid.
234
Oakland Net. 2000. Technology. http://www.oaklandnet.com/business/industry/industry_tech.html
235
Oakland High Technology Mixer. The Oakland Post, July 14, 1999.
Oakland Mayor Jerry Brown Welcomes Scientific Learning to the City’s Historic Rotunda Building. PR
Newswire Association, March 21, 2000.
236
108
237
Young, Eric. 1999. There’s “There” There Now. The Sacramento Bee, August 29.
238
Levine, Daniel S. 2000. Spaced Out In Oakland. San Francisco Business Times, March 24.
239
Ibid.
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
240
Ibid.
241
Business Editorial. City Floats Seaport Fixes. The San Francisco Examiner, February 26.
242
Bailey, Eric. 2000. He’s Made Them Proud of Oakland. Los Angeles Times, Feb. 10.
243
Source: America’s High-Tech Economy.
244
North Texas Commission. 1999. Dallas/Fort Worth Metroplex: Logistics Center of the Americas. November
245
Source: Barry Annino, Delphi Properties
246
Source: Westdale Management
Siciliano, Stephen. 2000. Redone Downtown Apartments Draw Upscale Tenants. Los Angeles Business Journal,
August 14.
247
248
Hayes, Elizabeth. 2000. Hollywood Central: New Sound Stages Getting Plenty of Business. Los Angeles
Business Journal, November 22.
249
Maese, Kathryn. 2000. Historic Terminal Annex Gets Modern Makeover. Los Angeles Downtown News, April 2.
250 Siegel, Fred. 1997. The Future Once Happened Here: New York, D.C., L.A. and the Fate of America’s Big
Cities. (uncorrected proof). New York Free Press.
251
Brown, Particia Leigh. 2000. Intellectual Forum Brings Jerry Brown to the Table. New York Times, September.
252
Jane Jacobs. 1961. The Death and Life of Great American Cities. New York: Vintage Books
109
Knowledge-Value Cities in the Digital Age
110
Milken Institute - February 13, 2001
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
APPENDIX:
APPENDIX TABLES 1–15
GLOSSARY OF TERMS
MSA = Metropolitan Statistical Area
SIC = Standard Industrial Classification
LQ = The Location Quotient (LQ) equals percent output in metro divided by percent output in the
U.S. If LQ > 1.0, the industry is more concentrated in the metro area than in the U.S. on average.
Tech Pole = Equivalent to the percent of national high-tech real output multiplied by the high-tech
real output location quotient for each metro.
111
Appendix Table 1
New York Economic and Technology Snapshot
MSA
1980
3747.8
586.8
2565.1
596.0
7.8
1990
4094.8
410.8
2992.4
691.7
6.3
1999
4156.2
302.5
3203.3
650.8
6.1
80 - 89
10.4%
-25.7%
17.7%
14.8%
-30.9%
90 - 99
1.5%
-26.4%
7.0%
-5.9%
-3.9%
95 - 99
8.3%
-8.0%
11.8%
1.2%
-21.5%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Motion Picture Production & Services
3. Research & Testing Services
169.6
161.8
180.5
-8.0%
11.6%
15.4%
14.2
15.4
12.3
23.8
17.0
21.0
50.4
39.7
23.4
73.0%
4.8%
60.7%
111.9%
133.2%
11.7%
72.6%
32.2%
18.0%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Research & Testing Services
3. Motion Picture Production & Services
254.7
14533.0
322.4
22452.8
384.6
29884.5
27.4%
38.3%
19.3%
33.1%
22.6%
26.7%
1047.7
877.2
1410.1
2295.1
1683.7
2191.2
5516.9
1855.5
3979.3
116.5%
89.6%
82.9%
140.4%
10.2%
81.6%
69.1%
32.8%
28.9%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
3647.8
98.1
11842.0
8282.0
8.6
4001.8
220.8
25836.0
8547.5
9.0
4093.1
315.2
36316.0
8679.3
15.6
9.1%
108.9%
101.9%
3.4%
62.1%
2.3%
42.7%
40.6%
1.5%
72.8%
7.5%
17.3%
16.3%
0.8%
113.9%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
2902.2
2903.6
216.3
NA
3038.4
261.5
3213.5
NA
NA
Business Establishments
Unemployment Rate
184.0
11.0%
196.1
NA
NA
6.7%
Output
1998 LQ
0.1
0.2
0.2
0.2
Emp.
1998 LQ
0.2
1.0
0.2
0.2
1998 Emp.
(Thou.)
18.9
8.4
2.0
2.1
High Tech Services
1. Motion picture production & services
2. Telephone communications
3. Computer & Data Processing services
1.4
3.8
2.0
0.8
1.1
5.1
1.2
0.9
158.8
39.0
38.1
44.8
Total High Tech
0.9
0.8
177.7
By Total Number
of High Tech
Jobs ('97)
1
By Total Number
of New High Tech
Jobs ('92-'97)
1
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
18
Location
Quotient
Rank ('98)
82
% of National
Real Output
Rank (98)
3
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
283 1. Drugs
382 2. Measuring & controlling devices
384 3. Medical instruments & supplies
781
481
737
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
9
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities
*** High tech rankings out of 315 MSAs
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Citties 2000."
Relative
Output Growth
Rank ('90-'98)
149
Appendix Table 2
Los Angeles Economic and Technology Snapshot
MSA
1980
3610.4
912.3
2215.4
482.8
NA
1990
4134.3
835.0
2759.6
539.9
6.2
1999
4005.4
643.9
2799.4
562.3
6.0
80 - 89
13.9%
-5.3%
23.0%
8.1%
NA
90 - 99
-3.1%
-22.9%
1.4%
4.2%
-2.7%
95 - 99
6.9%
0.9%
8.8%
5.0%
-25.0%
High-Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Communications Equipment
3. Motion Picture Production & Services
432.8
459.7
388.6
6.0%
-15.5%
8.2%
13.2
1.0
42.9
28.2
5.0
75.9
51.5
5.5
136.1
125.3%
414.1%
56.6%
83.0%
10.4%
79.5%
46.3%
28.2%
22.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Communications Equipment
2. Computer & Data Processing Services
3. Aircraft & Parts
198.9
19976.6
283.6
34751.7
268.8
34357.9
41.6%
72.0%
-5.2%
-1.1%
4.4%
16.8%
56.0
1054.8
1443.4
408.3
2478.3
5706.0
1514.9
4955.2
4267.7
675.0%
131.7%
266.2%
271.0%
99.9%
-25.2%
145.8%
53.2%
31.9%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
91.0
12125.0
7507.0
28.7
4509.4
195.8
22056.0
8875.3
25.1
4658.4
246.9
26773.0
9223.8
13.8
NA
98.3%
69.3%
17.1%
69.1%
3.3%
26.2%
21.4%
3.9%
-44.9%
7.6%
14.4%
11.9%
2.2%
76.8%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
1614.3
1425.0
117.6
NA
1342.7
120.2
1738.7
NA
NA
Business Establishments
Unemployment Rate
94.5
11.1%
91.7
NA
NA
6.8%
Output
1998 LQ
1.0
6.8
2.4
0.8
Emp.
1998 LQ
1.7
7.2
3.9
1.0
1998 Emp.
(Thou.)
158.1
36.5
64.3
8.8
High Tech Services
1. Motion pictureproduction & services
2. Computer & data processing services
3. Research & testing services
1.6
14.7
1.1
0.8
1.7
16.1
1.0
0.8
228.8
121.8
50.4
16.2
Total High Tech
1.4
1.7
386.9
By Total Number
of High Tech
Jobs ('97)
2
By Total Number
of New High Tech
Jobs ('92-'97)
67
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
NA
Location
Quotient
Rank ('98)
39
% of National
Real Output
Rank ('98)
2
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
381 1. Search & navigation equipment
372 2. Aircraft & Parts
384 3. Medical instruments & supplies
781
737
873
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
3
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Citites 2000."
Relative
Output Growth
Rank ('90-'98)
258
Appendix Table 3
Boston Economic and Technology Snapshot
MSA
1980
1474.3
295.0
965.5
213.6
NA
1990
1825.1
263.4
1336.2
225.5
5.3
1999
1981.5
212.2
1533.8
235.7
3.0
80 - 89
28.3%
-3.5%
42.8%
6.8%
NA
90 - 99
8.6%
-19.5%
14.8%
4.5%
-43.8%
95 - 99
8.8%
-5.0%
11.9%
4.0%
-36.8%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Motion Picture Production & Services
2. Drugs
3. Computer & Data Processing Services
274.2
323.7
323.3
23.9%
-0.1%
11.1%
0.4
2.0
14.6
1.6
3.0
41.5
2.9
9.4
84.1
220.1%
45.5%
175.2%
75.8%
215.3%
102.9%
53.6%
49.7%
47.2%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Communications Equipment
2. Drugs
3. Computer & Data Processing Services
112.0
11398.4
165.0
22750.8
205.4
29362.4
54.0%
107.1%
24.5%
29.1%
13.0%
19.4%
676.0
82.2
1246.4
1322.2
228.3
3719.1
3740.8
779.3
6831.2
103.5%
162.2%
189.1%
182.9%
241.4%
83.7%
63.8%
42.4%
35.1%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
NA
NA
5347.0
NA
1786.7
NA
NA
5688.7
NA
1818.4
NA
NA
5863.7
8.5
NA
NA
NA
6.30%
NA
1.78%
NA
NA
3.08%
NA
3.92%
NA
NA
1.88%
29.86%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
263.1
450.3
37.3
NA
504.8
49.2
289.4
NA
NA
Business Establishments
Unemployment Rate
16.8
8.0%
18.0
NA
NA
3.1%
Output
1998 LQ
1.9
5.4
4.0
3.5
Emp.
1998 LQ
2.3
5.1
4.1
3.3
1998 Emp.
(Thou.)
165.0
11.1
29.1
30.5
High Tech Services
1. Computer & data processing services
2. Research & testing services
3. Engineering & architectural services
1.3
1.9
1.9
1.4
1.5
2.0
1.8
1.4
157.2
76.8
26.5
31.5
Total High Tech
1.5
1.8
322.2
By Total Number
of High Tech
Jobs ('97)
9
By Total Number
of New High Tech
Jobs ('92-'97)
11
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
45
Location
Quotient
Rank ('98)
28
% of National
Real Output
Rank ('98)
4
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
376 1. Guided missiles, space vehicles, parts
382 2. Measuring & controlling devices
357 3. Computers & office equipment
737
873
871
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
4
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
173
Appendix Table 4
Chicago Economic and Technology Snapshot
MSA
1980
3221.0
812.3
1989.8
418.9
7.8
1990
3709.4
670.7
2585.3
453.5
6.0
1999
4178.8
639.5
3042.3
497.3
4.0
80 - 89
14.0%
-16.8%
28.1%
6.6%
-29.0%
90 - 99
12.7%
-4.6%
17.7%
9.6%
-33.3%
95 - 99
6.9%
-2.1%
9.8%
2.5%
-20.0%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computers & Office Equipment
2. Computer & Data Processing Services
3. Measuring & Controlling Devices
215.1
228.5
248.8
4.3%
8.9%
6.9%
7.1
11.6
14.7
4.9
32.5
13.5
9.0
59.6
12.0
-20.0%
160.8%
-6.8%
83.6%
83.4%
-10.6%
57.3%
53.7%
5.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Computers & Office Equipment
2. Guided Missiles, Space Vehicles, Parts
3. Communications Equipment
178.0
10020.7
221.0
15678.0
277.5
23745.4
24.2%
50.6%
25.5%
51.5%
10.5%
18.6%
224.8
0.0
1463.2
384.0
0.0
1394.4
718.5
1.7
4581.0
23.3%
NA
-24.3%
87.1%
NA
228.5%
86.2%
54.8%
48.9%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
3465.3
87.4
12053.0
7247.0
13.9
3943.4
170.8
23002.0
7424.7
27.8
4265.3
263.8
33181.0
7949.1
38.6
-5.1%
82.6%
79.2%
1.9%
130.7%
8.2%
54.4%
44.3%
7.1%
38.7%
5.3%
18.9%
16.3%
2.3%
18.9%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
1199.7
1165.3
94.6
NA
1172.9
111.5
1263.0
NA
NA
55.5
9.5%
57.1
NA
NA
5.4%
Output
1998 LQ
1.1
2.6
1.5
0.6
Emp.
1998 LQ
1.1
3.6
2.0
1.2
1998 Emp.
(Thou.)
107.8
32.7
17.5
25.2
High Tech Services
1. Research & testing services
2. Computer & data processing services
3. Telephone communications
0.9
1.2
1.0
0.9
1.0
1.4
1.0
1.0
140.4
28.1
51.3
33.0
Total High Tech
1.0
1.0
248.2
By Total Number
of High Tech
Jobs ('97)
4
By Total Number
of New High Tech
Jobs ('92-'97)
5
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
3
Location
Quotient
Rank ('98)
67
% of National
Real Output
Rank ('98)
5
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
Employment
Total Employment
Private Sector Employment
High Tech Employment
Business Establishments
Unemployment Rate
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
366 1. Communications equipment
283 2. Drugs
367 3. Electronic components & accessories
873
737
481
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
8
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
78
Appendix Table 5
San Francisco Economic and Technology Snapshot
MSA
1980
875.3
91.3
647.1
136.8
5.6
1990
947.5
78.1
730.4
139.1
3.3
1999
1043.1
74.5
842.8
125.5
2.3
80 - 89
6.6%
-13.6%
11.0%
-0.4%
-44.8%
90 - 99
10.1%
-4.5%
15.4%
-9.8%
-28.2%
95 - 99
13.9%
2.4%
17.3%
0.3%
-53.3%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computers & Office Equipment
2. Computer & Data Processing Services
3. Measuring & Controlling Devices
53.4
60.8
96.2
14.0%
58.2%
36.1%
0.7
6.7
1.0
1.1
12.9
2.5
4.4
48.7
3.6
13.9%
72.8%
197.8%
316.9%
278.7%
44.8%
201.9%
106.3%
43.9%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Computers & Office Equipment
2. Computer & Data Processing Services
3. Telephone Communications
58.8
3529.4
79.1
5569.0
94.2
10765.6
31.0%
52.3%
19.1%
93.3%
15.9%
45.5%
21.7
566.3
1307.7
78.8
1534.6
1081.8
307.5
5203.8
1740.2
140.8%
124.9%
-19.8%
290.1%
239.1%
60.9%
122.1%
95.9%
48.0%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
1650.1
23.6
15833.0
1492.0
4.2
902.5
50.5
31516.0
1603.1
2.7
957.0
76.1
45199.0
1683.2
4.6
-46.2%
98.7%
85.2%
7.3%
27.7%
6.0%
50.6%
43.4%
5.0%
67.3%
6.7%
23.2%
20.2%
2.5%
89.0%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
373.8
462.9
33.9
NA
516.8
43.6
408.2
NA
NA
Business Establishments
Unemployment Rate
30.6
6.9%
31.5
NA
NA
3.1%
Output
1998 LQ
0.6
1.3
1.2
0.8
Emp.
1998 LQ
0.7
1.6
1.7
1.1
1998 Emp.
(Thou.)
15.5
3.4
4.0
2.5
High Tech Services
1. Computer & data processing services
2. Research & testing services
3. Motion picture production & services
1.5
2.8
1.7
1.6
2.1
3.2
2.4
2.0
76.6
42.7
12.5
3.9
Total High Tech
1.1
1.5
92.1
By Total Number
of High Tech
Jobs ('97)
11
By Total Number
of New High Tech
Jobs ('92-'97)
14
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
66
Location
Quotient
Rank ('98)
58
% of National
Real Output
Rank ('98)
16
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
283 1. Drugs
382 2. Measuring & controlling devices
366 3. Communications equipment
737
873
781
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
22
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
63
Appendix Table 6
Reno Economic and Technology Snapshot
MSA
1980
114.3
8.0
90.2
16.1
5.5
1990
143.9
9.0
116.8
18.3
5.0
1999
187.5
13.3
150.1
23.9
3.8
80 - 89
23.1%
7.3%
27.2%
7.8%
-12.1%
90 - 99
30.3%
47.5%
28.5%
30.5%
-25.0%
95 - 99
13.1%
7.6%
13.8%
11.7%
-25.0%
5.6
4.9
5.3
-8.9%
8.2%
6.0%
0.3
0.1
0.0
0.7
0.1
0.1
1.5
0.3
0.1
258.4%
-22.5%
554.6%
117.0%
196.1%
0.0%
63.2%
36.5%
34.8%
5.9
266.4
7.4
309.9
10.4
439.0
23.6%
4.7%
39.9%
41.7%
12.6%
19.5%
0.3
0.5
4.7
4.2
1.2
0.3
8.6
8.8
1.0
1134.5%
-24.3%
-94.9%
107.8%
652.3%
224.2%
70.5%
70.2%
52.7%
122.1
2.6
13418.0
195.0
NA
149.2
6.1
23623.0
256.3
NA
173.3
10.3
33040.0
313.0
NA
12.01%
106.1%
62.14%
27.32%
NA
16.15%
70.8%
39.86%
22.11%
NA
5.91%
21.6%
12.76%
7.87%
NA
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
NA
NA
NA
NA
NA
NA
NA
NA
NA
Business Establishments
Unemployment Rate
Poverty Rate
NA
NA
NA
NA
NA
NA
NA
NA
NA
Output
1998 LQ
0.1
0.2
0.1
0.1
Emp.
1998 LQ
0.4
0.2
0.4
0.4
1998 Emp.
(Thou.)
1.6
0.1
0.4
0.2
High Tech Services
1. Telephone communications
2. Computer & data processing services
3. Engineering & architectural services
0.6
0.7
0.7
0.7
0.5
0.8
0.5
0.7
3.5
1.1
1.2
0.9
Total High Tech
0.4
0.5
5.1
By Total Number
of High Tech
Jobs ('97)
NA
By Total Number
of New High Tech
Jobs ('92-'97)
NA
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
NA
Location
Quotient
Rank ('98)
184
% of National
Real Output
Rank ('98)
139
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Communications Equipment
3. Motion Picture Production & Services
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Motion Picture Production & Services
2. Computers & Office Equipment
3. Communications Equipment
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
357 1. Computers & office equipment
367 2. Electronic components & accessories
384 3. Medical instruments & supplies
481
737
871
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
159
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
124
Appendix Table 7
Tulsa Economic and Technology Snapshot
MSA
1980
308.2
63.8
211.1
33.1
NA
1990
319.1
57.0
224.7
37.4
4.6
1999
394.2
55.9
295.8
43.0
3.2
80 - 89
-0.4%
-15.7%
2.4%
11.3%
NA
90 - 99
23.5%
-1.9%
31.7%
14.9%
-30.9%
95 - 99
12.6%
3.9%
16.0%
4.7%
-24.0%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Electronic Components & Accessories
2. Communications Equipment
3. Telephone Communications
16.8
17.4
19.2
-7.7%
10.3%
24.7%
0.2
0.8
2.6
0.2
0.4
2.1
1.1
0.4
4.4
8.4%
-24.8%
-21.1%
399.1%
3.6%
111.2%
202.5%
48.6%
46.9%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Electronic Components & Accessories
2. Communications Equipment
3. Aircraft & Parts
15.7
619.7
17.5
1199.8
23.4
1953.8
9.8%
60.5%
33.2%
62.8%
19.8%
47.5%
0.9
8.0
73.7
4.1
9.5
395.6
23.0
18.8
716.8
227.0%
66.7%
305.1%
464.7%
98.3%
81.2%
311.8%
166.2%
121.2%
NA
7.5
11273.0
661.0
5.4
369.8
13.7
19271.0
710.8
2.0
418.8
20.6
26533.0
776.7
5.2
NA
67.5%
57.1%
6.6%
-66.2%
13.3%
50.5%
37.7%
9.3%
152.6%
10.5%
19.9%
15.1%
4.2%
47.0%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
189
227.1
17.3
NA
253.5
22.2
218.8
NA
NA
Business Establishments
Unemployment Rate
13.6
5.50%
14.5
NA
NA
3.60%
Industry
High Tech Manufacturing
372 1. Aircraft & Parts
381 2. Search and Navigation Equip
382 3. Measuring and Controlling Devices
Output
1998 LQ
0.7
4
1.2
1
Emp.
1998 LQ
0.9
2.3
2.6
1.3
1998 Emp.
(Thou.)
7.8
3.7
1.3
1.2
High Tech Services
1. Telephone Comm
2. Engineering and Architectural
3. Research and Testing
0.8
1.2
1
0.7
0.8
1.3
1.1
0.6
11.4
4.2
3
1.2
Total High Tech
0.8
0.8
19.2
By Total Number
of High Tech
Jobs ('97)
39
By Total Number
of New High Tech
Jobs ('92-'97)
36
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
63
Location
Quotient
Rank ('98)
99
% of National
Real Output
Rank ('98)
76
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
City
High Tech Profile - MSA
SIC
481
871
873
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
78
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Source: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
204
Appendix Table 8
Omaha Economic and Technology Snapshot
MSA
1980
266.9
36.1
188.4
42.4
4.8
1990
334.0
36.2
249.2
48.3
2.8
1999
415.3
40.0
325.3
50.3
2.7
80 - 89
21.8%
-0.9%
28.4%
11.6%
-28.1%
90 - 99
24.4%
10.6%
30.5%
4.1%
-5.9%
95 - 99
11.2%
5.0%
14.0%
-0.2%
-11.1%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Electronic Components & Accessories
2. Medical Instruments & Supplies
3. Motion Pictures Production & Services
14.3
19.7
26.4
33.6%
34.0%
16.8%
0.1
0.1
0.0
0.2
0.1
0.1
0.9
1.8
0.1
155.2%
-68.3%
84.6%
300.4%
2173.6%
95.8%
181.4%
146.9%
49.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Electronic Components & Accessories
2. Aircraft & Parts
3. Communications Equipment
14.0
896.1
16.5
1463.9
24.0
3085.4
17.6%
62.5%
45.3%
110.8%
21.2%
60.9%
3.6
0.0
245.3
15.4
0.5
349.6
55.0
0.9
1255.9
343.3%
796.8%
44.7%
256.9%
91.6%
259.2%
204.7%
123.8%
99.1%
274.7
6.3
10421.0
607.0
NA
335.5
12.6
19698.0
641.3
NA
385.7
20.3
29307.0
693.0
NA
20.4%
84.0%
75.8%
4.6%
NA
15.0%
60.8%
48.8%
8.1%
NA
4.3%
21.2%
17.1%
3.5%
NA
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
174
227
15.8
NA
254.6
23.7
202.8
NA
NA
11.4
3.90%
NA
NA
12.2
2.80%
Industry
High Tech Manufacturing
366 1. Comm Equip
384 2. Medical Instruments and Supplies
283 3. Drugs
Output
1998 LQ
1.2
4.8
0.3
0.2
Emp.
1998 LQ
0.6
3.3
1.7
0.3
1998 Emp.
(Thou.)
5.6
3
1.5
0.3
High Tech Services
1. Computer & Data Processing
2. Telephone Comm
3. Engineering and Architectural
1.1
1.7
1
1
1.4
2.5
1
1
20.7
12.9
3.3
2.9
Total High Tech
1.2
1.1
26.3
By Total Number
of High Tech
Jobs (''97)
37
By Total Number
of New High Tech
Jobs ('97)
19
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
50
Location
Quotient
Rank ('98)
56
% of National
Real Output
Rank ('98)
55
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
City
Employment
Total Employment
Private Sector Employment
High Tech Employment
Business Establishments
Unemployment Rate
High Tech Profile - MSA
SIC
737
481
871
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
52
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
sources: WEFA; Milken Institute,"America's High Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
86
Appendix Table 9
Albuquerque Economic and Technology Snapshot
MSA
1980
183.0
17.3
123.6
42.1
7.8
1990
265.1
24.2
186.2
54.8
5.5
1999
344.8
27.0
251.6
66.4
4.0
80 - 89
41.5%
39.1%
47.3%
25.0%
-34.0%
90 - 99
30.1%
11.7%
35.1%
21.3%
-27.3%
95 - 99
7.7%
-7.7%
9.4%
9.0%
-4.0%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Guided Missiles, Space Vehicles, Parts
2. Motion Picture Production & Services
3. Telephone Communications
17.9
28.8
34.7
63.7%
20.5%
-0.6%
0.0
0.0
2.8
0.0
0.2
2.0
0.1
0.6
3.0
323.7%
294.8%
-13.1%
366.0%
223.3%
49.2%
56.3%
49.6%
43.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Guided Missiles, Space Vehicles & Parts
2. Motion Picture Production & Services
3. Drugs
9.9
934.1
12.4
1581.0
27.2
7258.7
25.3%
579.6%
118.8%
359.1%
24.7%
14.3%
0.0
1.1
0.2
0.4
6.0
5.5
2.3
18.4
14.4
873.5%
522.9%
2351.3%
528.3%
208.4%
159.0%
35.3%
33.7%
30.9%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
210.0
4.7
9020.0
518.0
3.1
299.5
10.1
17118.0
591.6
2.4
354.5
16.8
24842.0
676.5
5.3
26.5%
101.8%
79.1%
12.7%
-29.5%
18.4%
66.0%
45.1%
14.4%
126.0%
3.4%
15.5%
12.5%
2.7%
-18.8%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
203.3
173.4
13.6
NA
218.6
20.6
231.1
NA
NA
Business Establishments
Unemployment Rate
12.5
4.8%
13.8
NA
NA
4.1%
Output
1998 LQ
7.6
37.6
0.6
0.5
Emp.
1998 LQ
1.7
5.4
0.8
1.6
1998 Emp.
(Thou.)
13
9.3
1.1
0.7
High Tech Services
1. Research & testing services
2. Engineering & architectural services
3. Telephone communications
1.0
5.6
1.1
0.5
1.8
6.5
2.4
0.9
21.4
10.5
5.7
2.5
Total High Tech
3.6
1.8
34.4
By Total Number
of High Tech
Jobs ('97)
40
By Total Number
of New High Tech
Jobs ('92-'97)
27
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
80
Location
Quotient
Rank ('98)
3
% of National
Real Output
Rank ('98)
18
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
367 1. Electronic components & accessories
382 2. Aircraft & parts
381 3. Search & navigation equipment
873
871
481
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
7
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD, "State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
1
Appendix Table 10
Huntsville Economic and Technology Snapshot
MSA
1980
119.5
35.9
49.2
34.3
NA
1990
157.8
40.8
78.1
39.0
5.1
1999
180.5
35.5
104.9
40.2
3.1
80 - 89
28.0%
10.4%
53.0%
10.2%
NA
90 - 99
14.4%
-12.8%
34.3%
3.0%
-39.3%
95 - 99
9.0%
-5.4%
18.7%
1.7%
-35.1%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Drugs
3. Medical Instruments & Supplies
16.2
32.7
34.1
87.0%
4.3%
5.6%
0.7
0.0
0.0
2.8
0.0
0.0
9.1
0.1
0.1
269.2%
NA
265.1%
231.1%
NA
285.8%
100.1%
53.9%
41.2%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Drugs
3. Communications Equipment
4.7
638.4
8.3
1648.1
10.1
1865.4
70.8%
137.0%
22.1%
13.2%
8.7%
11.2%
48.6
0.0
50.4
213.0
0.0
44.5
608.4
11.8
100.8
336.4%
NA
-5.0%
185.7%
NA
126.7%
92.9%
61.3%
17.6%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
2.1
8755.0
244.0
NA
153.8
5.8
19535.0
294.5
NA
172.1
8.6
25305.0
340.3
NA
NA
149.6%
110.0%
18.7%
NA
11.9%
49.7%
29.5%
15.6%
NA
6.6%
17.4%
13.1%
3.8%
NA
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
NA
NA
NA
NA
NA
NA
NA
NA
NA
Business Establishments
Unemployment Rate
NA
NA
NA
NA
NA
NA
Output
1998 LQ
1.7
15.2
6.4
1.5
Emp.
1998 LQ
4.2
33.1
13.8
5.1
1998 Emp.
(Thou.)
17.3
4.1
7.2
2.0
High Tech Services
1. Engineering and Architectural
2. Reseach & Testing Services
3. Computer & Data Processing
1.9
4.5
3.0
2.4
2.7
5.2
3.1
3.2
17.0
6.7
2.8
7.0
Total High Tech
1.8
3.3
34.3
By Total Number
of High Tech
Jobs ('97)
NA
By Total Number
of New High Tech
Jobs ('92-'97)
NA
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
NA
Location
Quotient
Rank ('98)
23
% of National
Real Output
Rank ('98)
71
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
376 1. Guided missiles, Space Vehicles, Parts
357 2.Computers and Office Equip
366 3. Comm Equip
871
873
737
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
50
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs
Sources: WEFA; Milken Institute, "America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
239
Appendix Table 11
Boise Economic and Technology Snapshot
MSA
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Electronic Components & Accessories
3. Telephone Communications
1980
79.3
8.5
54.3
16.0
NA
1990
135.7
23.8
87.9
23.8
4.9
1999
211.2
36.5
142.3
32.1
3.8
80 - 89
62.0%
165.7%
53.2%
40.6%
NA
90 - 99
55.7%
53.9%
61.9%
34.6%
-23.7%
95 - 99
17.9%
15.4%
19.4%
14.6%
-6.3%
6.7
11.1
19.2
52.2%
73.0%
23.9%
0.1
0.4
1.4
0.4
3.9
0.9
1.1
10.2
0.9
250.7%
731.0%
-50.2%
197.3%
159.8%
2.2%
53.3%
50.5%
13.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Computers & Office Equipment
3. Medical Instruments & Supplies
5.1
421.2
6.6
908.7
15.3
3372.4
30.2%
133.7%
131.4%
271.1%
30.1%
16.0%
3.5
207.3
1.4
13.5
500.6
4.9
51.0
912.5
5.9
227.5%
159.4%
293.0%
278.0%
82.3%
18.8%
146.8%
94.2%
16.7%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
2.5
9708.0
258.0
NA
153.3
5.4
18036.0
298.2
NA
230.2
10.5
26461.0
396.0
NA
NA
95.2%
73.9%
12.3%
NA
50.2%
94.8%
46.7%
32.8%
NA
16.4%
21.1%
10.4%
9.8%
NA
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
74.2
80.7
6.5
NA
105
10.8
101.5
NA
NA
5.4
4.20%
32.3
NA
NA
3.00%
Output
1998 LQ
6.4
23.1
15.2
0.2
Emp.
1998 LQ
3.5
9.4
10.3
0.2
1998 Emp.
(Thou.)
16.1
9.9
6.1
0.1
High Tech Services
1. Engineering and Architectural
2. Telephone Comm
3. Computer & Data Processing
0.3
0.6
0.4
0.1
0.5
0.9
0.5
0.3
3.4
1.3
0.8
0.9
Total High Tech
2.7
1.7
19.5
By Total Number
of High Tech
Jobs ('97)
77
By Total Number
of New High Tech
Jobs ('97)
41
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
67
Location
Quotient
Rank ('98)
7
% of National
Real Output
Rank ('98)
38
City
Employment
Total Employment
Private Sector Employment
High Tech Employment
Business Establishments
Unemployment Rate
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
367 1. Electronic Components and Accessories
357 2. Computer and Office Equip
384 3.Medical Instuments and Supplies
871
481
737
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
Tech-Pole
Rank ('98)
24
MSA
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
3
Appendix Table 12
Baltimore Economic and Technology Snapshot
MSA
1980
965.8
160.8
576.3
228.5
NA
1990
1151.8
129.5
807.1
215.3
5.1
1999
1213.6
98.1
901.2
214.7
4.0
80 - 89
18.5%
-18.3%
39.2%
-7.5%
NA
90 - 99
5.4%
-24.3%
11.7%
-0.3%
-21.3%
95 - 99
7.5%
-4.7%
10.2%
3.0%
-32.4%
55.0
65.4
54.1
18.7%
-17.3%
4.8%
4.3
0.2
0.5
9.3
0.6
0.4
13.5
0.5
0.7
122.0%
161.8%
8.5%
44.5%
-27.8%
101.3%
41.3%
34.3%
32.7%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Communications Equipment
2. Guided Missiles, Space Vehicles & Parts
3. Computer & Data Processing Services
46.3
2835.7
62.1
3800.9
74.4
3989.9
33.2%
33.3%
19.8%
5.0%
13.4%
12.6%
149.9
0.2
273.4
152.5
24.6
628.8
227.5
35.0
921.1
3.0%
32783.8%
125.7%
49.1%
42.2%
46.5%
151.1%
53.1%
44.2%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
24.4
11066.0
2203.0
8.3
1257.4
52.5
21988.0
2389.2
13.6
1300.2
73.3
29548.0
2481.0
12.4
NA
102.6%
89.1%
7.2%
116.3%
3.4%
39.5%
34.4%
3.8%
-8.4%
1.4%
15.5%
14.6%
0.8%
9.4%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
300.2
292.1
22.9
NA
296.4
26.1
284.9
NA
NA
Business Establishments
Unemployment Rate
14.7
6.20%
14
NA
NA
3.10%
Output
1998 LQ
0.3
1
1
0.5
Emp.
1998 LQ
0.5
4.8
1
0.6
1998 Emp.
(Thou.)
13.84
7.2
2.5
0.5
High Tech Services
1.Research and Testing
2. Engineering and Architectural
3. Computer & Data Processing
0.8
1.77
1.23
0.7
1
1.6
1.2
0.8
40.7
9.4
10.2
12.3
Total High Tech
0.6
0.8
54.6
By Total Number
of High Tech
Jobs ('97)
32
By Total Number
of New High Tech
Jobs ('92-'97)
52
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
6
Location
Quotient
Rank ('98)
122
% of National
Real Output
Rank ('98)
37
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Computer & Data Processing Services
2. Medical Instruments & Supplies
3. Motion Picture Production & Services
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
381 1. Search and Navigation Equip
283 2. Drugs
376 3. Guided Missilies, Space Vehicles, Parts
873
871
737
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
58
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
233
Appendix Table 13
Dayton Economic and Technology Snapshot
MSA
1980
397.1
111.1
211.6
74.7
7.4
1990
451.4
103.1
271.7
76.9
5.1
1999
478.5
95.8
311.1
71.3
4.0
80 - 89
12.9%
-5.6%
26.4%
1.5%
-29.2%
90 - 99
6.0%
-7.0%
14.5%
-7.3%
-21.3%
95 - 99
2.8%
-5.6%
6.9%
-2.4%
0.0%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Search & Navigation Equipment
2. Computer & Data Processing Services
3. Electronic Components & Accessories
21.8
23.7
27.2
6.0%
14.8%
24.8%
0.0
2.5
1.7
0.0
5.8
1.6
0.0
10.8
3.0
-95.0%
92.0%
-6.9%
1614.5%
88.2%
95.3%
70.3%
55.8%
46.1%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Electronic Components & Accessories
2. Search & Navigation Equipment
3. Computer & Data Processing Services
17.9
876.3
21.9
1660.0
26.5
2214.6
23.2%
68.2%
21.2%
33.4%
8.1%
15.8%
31.1
0.0
132.5
46.6
0.0
397.0
86.9
0.1
664.7
56.8%
-90.1%
130.5%
86.7%
1017.0%
67.5%
59.0%
39.8%
31.2%
390.4
9.7
10286.0
942.0
NA
476.8
18.1
19000.0
952.1
NA
470.8
25.4
26422.0
961.6
NA
22.5%
78.9%
77.5%
0.9%
NA
-1.2%
40.4%
39.1%
1.0%
NA
-0.1%
10.8%
11.3%
-0.5%
NA
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
71.1
107.5
9.4
NA
106
9.9
73.1
NA
NA
4.3
10.90%
4.1
NA
NA
6.50%
Output
1998 LQ
0.8
5.7
0.4
0.4
Emp.
1998 LQ
0.8
1.4
1.6
1.2
1998 Emp.
(Thou.)
8.2
2.8
1.6
2.9
High Tech Services
1. Computer and Data Processing
2. Engineering and Architectural
3. Research and Testing
0.9
1.6
1.2
0.7
0.9
1.6
1.2
0.8
18
9.9
4.3
1.9
Total High Tech
0.9
0.9
26.2
By Total Number
of High Tech
Jobs ('97)
82
By Total Number
of New High Tech
Jobs ('92-'97)
104
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
NA
Location
Quotient
Rank ('98)
84
% of National
Real Output
Rank ('98)
59
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
City
Employment
Total Employment
Private Sector Employment
High Tech Employment
Business Establishments
Unemployment Rate
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
372 1. Aircraft and Parts
382 2. Measuring and Controlling Devices
367 3. Electronic Components and Accessories
737
871
873
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
66
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
198
Appendix Table 14
Oakland Economic and Technology Snapshot
MSA
1980
683.6
110.8
418.3
154.3
NA
1990
879.3
111.0
600.3
168.1
5.0
1999
1905.7
249.2
719.8
172.7
3.0
80 - 89
25.4%
-0.1%
39.1%
6.7%
NA
90 - 99
116.7%
124.5%
19.9%
2.7%
-40.0%
95 - 99
12.5%
8.7%
16.2%
1.7%
-45.8%
High Tech Employment (in thousands)
(Fastest Growth '95-'99)
1. Communications Equipment
2. Electronic Components & Accessories
3. Computer & Data Processing Services
36.8
66.4
90.2
70.1%
35.8%
23.2%
0.3
4.5
5.0
1.4
6.4
10.4
3.1
11.7
24.9
218.1%
19.7%
92.3%
112.7%
82.1%
140.3%
91.1%
77.8%
59.4%
Total MSA Output* ($bil, '92)
†
Total High-Tech Output ($mil, '92)
(Fastest Growth '95-'99)
1. Communications Equipment
2. Motion Picture Production & Services
3. Electronic Components & Accessories
40.5
1935.8
64.0
5952.9
77.2
11328.6
55.1%
180.2%
20.5%
90.3%
9.4%
41.4%
14.2
2.8
110.8
94.2
30.6
339.1
1479.4
45.5
1017.5
362.7%
789.9%
140.3%
1470.0%
48.6%
200.0%
477.1%
97.7%
65.7%
Labor Force (in thousands)
Personal Income* ($bil, 92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
22.6
12783.0
1769.0
10.1
1122.5
51.7
24451.0
2115.0
7.0
1211.7
77.9
33667.0
2315.0
8.8
NA
111.9%
82.3%
16.2%
33.9%
7.9%
50.7%
37.7%
9.5%
26.0%
6.5%
22.3%
16.7%
4.8%
42.2%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
163.3
137
10
NA
147.5
13.1
180
NA
NA
9.3
10.10%
9
NA
NA
2.90%
Output
1998 LQ
1.2
1.8
1.7
1.6
Emp.
1998 LQ
1.3
2.1
1.8
2.1
1998 Emp.
(Thou.)
29.9
5
3.9
10.8
High Tech Services
1. Computer & Data Processing
2. Telephone Comm
3. Engineering and Architectural
1.6
1.9
1.6
1.5
1.7
1.8
2
1.7
58.9
22.7
16
12.4
Total High Tech
1.4
1.6
88.8
By Total Number
of High Tech
Jobs ('97)
66
By Total Number
of New High Tech
Jobs ('92-'97)
54
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
23
Location
Quotient
Rank ('98)
32
% of National
Real Output
Rank ('98)
14
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
†
City
Employment
Total Employment
Private Sector Employment
High Tech Employment
Business Establishments
Unemployment Rate
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
382 1. Measuring and Controlling Devices
283 2. Drugs
367 3. Electronic Components and Accessories
737
481
871
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
14
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
57
Appendix Table 15
Dallas Economic and Technology Snapshot
MSA
1980
1026.4
213.3
688.8
124.6
NA
1990
1420.9
233.6
1019.5
168.0
4.2
1999
1009.8
117.4
1446.5
209.9
3.3
80 - 89
34.9%
10.2%
43.3%
30.2%
NA
90 - 99
-28.9%
-49.8%
41.9%
25.0%
-22.0%
95 - 99
19.3%
8.1%
23.1%
9.8%
-39.0%
High Tech Employment† (in thousands)
(Fastest Growth '95-'99)
1. Medical Instruments & Supplies
2. Computer & Data Processing Services
3. Telephone Communications
115.1
161.3
204.5
37.6%
26.8%
23.6%
0.7
12.6
10.2
0.7
29.0
21.6
10.7
57.7
42.6
55.9%
105.6%
94.5%
1372.5%
99.1%
97.1%
254.3%
57.2%
40.0%
Total MSA Output* ($bil, '92)
Total High-Tech Output† ($mil, '92)
(Fastest Growth '95-'99)
1. Medical Instruments & Supplies
2. Computers & Office Equipment
3. Electronic Components & Accessories
57.8
4759.8
92.6
11343.1
153.7
25096.5
54.6%
126.5%
65.9%
121.2%
34.4%
145.0%
13.6
156.3
628.1
13.6
231.1
1743.4
282.7
644.7
4712.3
31.4%
87.6%
184.3%
1973.4%
178.9%
170.3%
352.8%
95.9%
60.0%
Labor Force (in thousands)
Personal Income* ($bil, '92)
Per Capita Income* ('92 Dollars)
Population* (in thousands)
Housing Permits (in thousands)
NA
24.3
11727.0
2070.0
21.9
1545.9
58.4
21710.0
2689.9
14.8
1913.3
103.8
32406.0
3202.7
36.4
NA
124.1%
76.4%
27.1%
-55.9%
23.8%
77.7%
49.3%
19.1%
146.6%
11.9%
29.7%
19.8%
8.2%
38.6%
1992
(Thou.)
1997
(Thou.)
1999
(Thou.)
Employment
Total Employment
Private Sector Employment
High Tech Employment
540.8
694.2
59.2
NA
785.9
81.3
653.8
NA
NA
Business Establishments
Unemployment Rate
36.6
8.70%
37.5
NA
NA
4.00%
Output
1998 LQ
2.3
4.7
4.1
3.2
Emp.
1998 LQ
2
1.9
2.8
5.8
1998 Emp.
(Thou.)
85.3
7.8
26.6
23
High Tech Services
1. Telephone Comm
2. Computer & Data Processing
3. Research and Testing
1.7
2.3
1.9
0.8
1.9
2.9
2.4
0.7
117.5
42.8
53.5
6.5
Total High Tech
1.9
1.9
202.8
By Total Number
of High Tech
Jobs ('97)
5
By Total Number
of New High Tech
Jobs ('92-'97)
4
By New High Tech
Jobs as % of all
New Jobs ('92-'97)
38
Location
Quotient
Rank ('98)
NA
% of National
Real Output
Rank ('98)
NA
Total Non-ag Employment (in thousands)
Manufacturing
Private Non-mfg
Government
Unemployment Rate
City
High Tech Profile - MSA
SIC
Industry
High Tech Manufacturing
384 1. Medical Instruments and Supplies
367 2.Electronic Components and Accessories
366 3.Comm Equip
481
737
873
HUD High Tech Rankings - City **
City
Milken High Tech Rankings - MSA ***
MSA
Tech-Pole
Rank ('98)
NA
* Used 1998 number to calculate growth
†
Ranked by growth 95-99
** High tech rankings of 114 selected cities.
*** High tech rankings out of 315 MSAs.
Sources: WEFA; Milken Institute,"America's High-Tech Economy."; HUD,"State of the Cities 2000."
Relative
Output Growth
Rank ('90-'98)
NA
Milken Institute - February 13, 2001
Knowledge-Value Cities in the Digital Age
ABOUT THE AUTHORS
Ross C. DeVol is the Director of Regional and Demographic
Studies at the Milken Institute. He runs the Institute’s research efforts
on the dynamics of comparative regional growth performance,
especially in the context of the world’s sixth-largest economy,
California. His particular interest is in the quantification of those
factors that determine the relative economic success among regions.
He is an expert on the New Economy and advises regions on how to
successfully prepare to compete. He is examining the effects of
information technology, education, labor-force skills training, cost of
doing business, and quality-of-life issues on the geographic
distribution of economic activity.
DeVol is the author of America’s High-Tech Economy: Growth,
Development, and Risks for Metropolitan Areas and Blueprint for a HighTech Cluster that examine how clusters of high-technology industries
around the country affect economic growth in those regions. DeVol’s
data is published annually in Forbes as part of its reporting on the best
cities and high-tech.
Prior to joining the Institute, DeVol was senior vice president of
WEFA, Inc. (formerly Wharton Econometric Forecasting), where he
supervised the Regional Economic Services group. DeVol supervised
the respecification of WEFA’s regional econometric models and
played an instrumental role on its U.S. Macro Model originally
developed by Nobel Laureate Lawrence Klein. He was the firm’s chief
spokesman on international trade and also served as head of WEFA’s
U.S. Long-Term Macro Service. DeVol is a frequent guest on national
television and radio programs, and is regularly quoted in the media
such as The Wall Street Journal, Investor’s Business Daily, Los Angeles
Times, Forbes, The Industry Standard, and others. He is a columnist for
Real Estate Southern California and Zone News.
Joel Kotkin is a Senior Fellow at the Milken Institute in the
Regional and Demographic Studies group examining the relationship
between metropolitan real estate markets and high-tech startups. He
is internationally renown as an expert on global and regional
economic, political and social trends. Kotkin is also Senior Fellow,
Davenport Institute for Public Policy at Pepperdine University, and
Director of Content for PrimeVentures, a venture capital firm in Santa
Monica specializing in Internet-related measures.
127
Knowledge-Value Cities in the Digital Age
Milken Institute - February 13, 2001
Kotkin is a Contributing Editor to the Los Angeles Times Opinion
section as well as a frequent contributor to The Wall Street Journal, The
New York Times, The Washington Post, Inc. Magazine, Los Angeles
Business Journal, Jewish Journal and Los Angeles Magazine. He serves as
the business trends analyst for KTTV/Fox Television in Los Angeles
for which he won the 1984 Golden Mike Award for Best Business
Reporting on the changing dynamics of the entertainment industry.
Kotkin lectures widely in the United States, Japan and Europe before
business and financial organizations, has addressed both Houses of
Congress, and testified before the Joint Economic Committee of the
Congress and the State of California Economic Strategy Panel.
128
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