Thursday, June 21, 2018

More Midwest Businesses Moving Back Downtown

Michigan Central Station. Photo Credit: Albert Duce, CC BY-SA 3.0

A couple more big companies just announced major relocations into signature downtown (or near-downtown) structures in the Midwest.

The big news is in Detroit, where Ford Motor Company is buying the decrepit Michigan Central Station, planning to renovate it into the heart of a campus that will include as many as 2,500 employees. It does not appear this will be the headquarters, but a home for the company’s new mobility services endeavors.

The symbolism of this is hard to overstate, given that the rotting train station served for so long as a visual emblem of everything wrong with Detroit. As Detroit Free Press columnist John Gallagher wrote:

Trying to sum up the significance of Ford’s plans for the Michigan Central Station, a quote by Winston Churchill seems apt.

“Now, this is not the end,” Churchill said of an early Allied victory in World War II. “It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

That’s what Ford taking on the old train station means for Detroit. Years of hard work lie ahead for the city to truly come back. But Ford’s act of faith in Detroit’s future with the enormous investment it will bring signals a new era.

Victory no longer seems so remote. The issue is no longer in doubt.

Meanwhile in Chicago, the hulking former main Post Office – a huge structure that straddles the Eisenhower Expressway – is coming back to life as Walgreens signs to be the first anchor tenant, moving 1,300 new jobs downtown from suburban Deerfield and apparently consolidating 500 others from elsewhere in downtown:

Walgreens has eyed the Post Office as an office destination before. It was negotiating a deal in 2014 with the building’s previous owner to move its headquarters to the building, but the agreement never materialized and the owner, British investor Bill Davies, died in 2016 just as his venture was selling the property.

Since Walgreens began those talks to move to the city, a flurry of companies have uprooted from their suburban homes for new downtown headquarters. Among the big movers have been Motorola Solutions, Kraft Heinz, Hillshire Brands, GE Healthcare, Beam Suntory and, most recently, McDonald’s. Smaller companies such as FTD and Peapod have also relocated to the city.

Again, my impression is that the quantity of suburban to downtown moves in Chicago is far higher than any other city out there. Unlike the out of town firms moving in the HQs, which tend to be smaller “executive headquarters” type operations, some of these suburbs to downtown relocations involve significant numbers of jobs.

These are both jobs moves within the region, so aren’t really net gains. In fact, it will be interesting to see what the over regional impact is. Neither Chicago nor Detroit is growing that much at a regional level. Chicago has significant suburban office vacancy problems. The Loop is a world class business destination but the Chicago suburbs are not especially competitive. It’s too early to tell but if these trend keeps going the changes in intra-regional economic dynamics will be interesting to watch.

from Aaron M. Renn

Wednesday, June 20, 2018

A Look at Rust Belt, USA

Last week I joined City Journal’s 10 Block podcast to talk about the latest trends in Rust Belt cities. This was prompted by jobs data out of New York that show virtually all of the state’s job growth coming from metro New York, and much of it from within New York City. I’m including the audio in my own podcast feed as well. If the audio player doesn’t display for you, click over to listen on Soundcloud.

Subscribe to podcast via iTunes | Soundcloud.

from Aaron M. Renn

Tuesday, June 19, 2018

Manufacturing a Comeback in Grand Rapids

Buildings on Grand Rapids’ Medical Mile (Photo by WMRapids)

My latest piece for City Journal is a major feature article on Grand Rapids that appeared in the Spring issue and is now online.

In the piece I look at the astonishing turnaround in Grand Rapids’ economic and demographic performance since 2010. By some measures Grand Rapids is beating every other Midwest metro area of one million people or more, a group Grand Rapids just recently joined. I examine the city’s industrial history, its Dutch demographic legacy, and the major institutional realignments it undertook in the last two decades or so that have contributed to its current performance. The question is, are there lessons from Grand Rapids other cities can apply?

Here are some excerpts:

Yet coming out of the Great Recession, and particularly since 2010, Grand Rapids has become a surprising economic star in the Midwest. Its job count has swelled 19.8 percent since 2010—the fastest rate of any major midwestern metro area, more than making up for the previous decade’s loss. Its regional population growth has also been more robust, rising by 5.8 percent, putting it in the top tier of midwestern cities. The city’s population also reversed its 2000s era decline, growing by 4.5 percent since 2010, according to Census Bureau estimates. Grand Rapids accomplished this while remaining heavily dependent on manufacturing. The region has the highest manufacturing-job share of any major midwestern metro, at 20.5 percent. It’s also the only one of those regions that has more manufacturing jobs today than it did in 1990.

Perhaps even more important was the city’s diverse base of small firms, recognized as a major strength long ago. A 1946 study by sociologists C. Wright Mills and Melville Ulmer contrasted Grand Rapids with Flint in this context. At the time, Flint was more prosperous, but the authors saw storm clouds on the horizon. GM-focused Flint was dominated by a few large employers, whereas Grand Rapids was more diversified, with many small firms. In 1940, Flint had 42 industrial firms, with an average of 1,270 employees each; Grand Rapids had 409 industrial firms, with an average of 83 workers. Flint had more jobs but was vulnerable to the decline of even a small number of large employers. Mills and Ulmer found that on many measures, cities dominated by small businesses had greater civic welfare than those with large employers.

The Dutch who settled western Michigan came to the United States much later than their predecessors, the colonists who founded New Amsterdam. They first arrived in the area in the mid-1800s, with a familiar story: they were religious dissenters, fleeing persecution. Originally bound for Wisconsin, they were forced to winter in Detroit when the Straits of Mackinac froze over. Michigan boosters persuaded them to stay in the Wolverine State rather than move on, and they established their settlement in what became Holland. Later waves of Dutch followed this migration path but with economic, rather than religious, motives. By 1900, about a third of all Dutch immigrants to America lived in Michigan. Other locations in the U.S. heavily settled by the Dutch have also done well economically. A separate group of Dutch religious dissidents, for instance, wound up in northwestern Iowa at nearly the same time as those who settled in western Michigan. A recent New Yorker feature branded the town of Orange in northwestern Iowa “the place where the small-town American Dream lives on.” And though there are few Dutch there today, the former Dutch colony now known as New York City remains the world’s premier metropolis.

The charitable habit has been especially notable in the Van Andel and DeVos families. Jay Van Andel and Richard DeVos founded Amway in 1959. Today, Amway is a multibillion-dollar company that generates 90 percent of its revenues overseas, but it remains headquartered in the Grand Rapids area, where it employs about 4,000 people. Van Andel and DeVos became billionaires. Too often today, local billionaires are more likely to extract value from their communities, via tax-subsidized transactions, than to put money back in through investment. While the Van Andel and DeVos families have done their share of public-private deals, they have clearly invested in and donated heavily to the community. The historic Pantalind Hotel was renovated into the Amway Grand Plaza Hotel in 1981, with an adjacent tower added in 1983—a $60 million investment at a bleak time for America’s downtowns. More recent years have seen the construction of the Van Andel Arena, the DeVos Place Convention Center, the Helen DeVos Children’s Hospital, and other projects.

With its beefed-up hospital cluster and independent research institute, Grand Rapids persuaded the Michigan State University College of Human Medicine to relocate from East Lansing to Grand Rapids in 2010. (The college retains an East Lansing campus and others throughout the state, but its main campus is now in Grand Rapids.) In 2012, Ferris State University, based 55 miles north of Grand Rapids in the town of Big Rapids, opened an extension of its College of Pharmacy on the Medical Mile. All third- and fourth-year students in its pharmacy program attend classes on the Grand Rapids campus. More than half the pharmacists practicing in Michigan went to school at Ferris State. Unsurprisingly, “eds and meds” job creation has soared in Grand Rapids. Positions in these sectors have more than doubled since 1990 and grown by nearly 20 percent since 2010. The city trails only Minneapolis and Columbus among major midwestern regions in eds and meds growth since 1990.

There’s much more so click through to read the whole thing. At least for now, Grand Rapids is a major Midwest success story.

from Aaron M. Renn

Monday, June 18, 2018

Half Paved Street Shows the Case for Merger

Last year I put out a study called “Merger May Rescue Declining Suburbs.” One of the ten specific places I highlighted was Norwood, Ohio, about which I wrote:

Norwood is entirely surrounded by the city of Cincinnati. Enclave suburbs such as Norwood may prove especially politically challenging to merge, as their identity in part comes from having resisted historical annexation attempts. Norwood is losing population (down 8.3% since 2000, to 19,876) and its poverty rate, 22%, is up 9.1 percentage points. Inflation-adjusted median household income ($27,270) has declined by 15.4% since 2000. Last year, the state auditor declared a state of fiscal emergency in Norwood, after 12 years on fiscal watch. The tax base was once supported by a General Motors plant, with payroll tax revenues providing 28% of Norwood’s budget in 1987, the year the plant closed. Since then, the city has struggled. The city’s financial condition is not dire, but it is finding it hard to provide services.

Last week WCPO-TV in Cincinnati ran an interesting story about a street on the Cincinnati-Norwood line that was half-paved. Here’s a screen cap from that:

The report says:

The road sits on the Cincinnati-Norwood city line. A year later, the half of the road owned by Norwood remains bumpy, cracked and uneven. “It’s definitely uncomfortable,” Ryall said. “And your kids, if they’re asleep, they’re waking up for sure.”

Norwood Mayor Thomas Williams said it’s the result of a fiscal emergency and the city having no funds to spare. “Ask them, ‘How are you going to pay for that?’ Where are you going to get the millions of dollars?” Williams said.

Last week, a similar issue popped up on Section Avenue. City of Cincinnati contractors repaved the Rhode Island Avenue side of the street. Norwood’s side remains worn down.

Click over to watch/read the whole thing.

The mayor of Norwood reacted badly to my merger proposal when it was released:

77-year-old Norwood Mayor Thomas Williams has lived in the city his entire life and says he won’t be the one to tell residents that Norwood isn’t Norwood anymore.

“We’ve always been independent,” Willams said. “It’s not going to happen.”

He scoffed at the idea of a New York think tank telling Norwood what it should do.

“Any time you hear the word think tank, that should discourage you right there,” he said. “Tell them to think on something else.”

Nobody should compel Norwood to merge, but the city can’t provide basic services because of fiscal problems. Might the citizens of Norwood feel differently about merger if they received a major infusion of capital spending, upgraded services, and some type of legal assurances about representation? Regardless, this problem of smaller inner suburbs not being able to provide basic services is not going away.

from Aaron M. Renn

Tuesday, June 12, 2018

The New Basis of City Diplomacy

I was in Chicago last week for the Chicago Forum on Global Cities. One of the panels I was looking forward to seeing was about city diplomacy.

People have been talking for a while about cities conducting their own foreign policy. But it was very clear at this forum that in the United States at least, the entire basis of that idea has shifted radically in a very short period of time.

Here, for example, is an article in the Chicago Tribune about the topic in advance of the 2015 edition of the Chicago Forum:

It’s one example of an outward-looking strategy that has been labeled “foreign policy for cities,” “city diplomacy” and by some academics, “paradiplomacy.” Sao Paulo, London, Hong Kong, New York and other megacities are swapping information and forging powerful alliances with far-flung counterparts in new and strategic ways.

The efforts go beyond traditional business attraction moves, branching into collaboration in the arts, education and urban issues, from pollution to poverty. If done well, a city can gain a reputation as a hotbed of innovation, a team player on pressing urban problems and a prime location for foreign investment, business partnerships and tourism.

“In a world where national governments are negotiating more and more trade agreements that make national borders much less relevant, it is essential for cities to have a strategy for international relations,” said former Toronto Mayor David Miller. Otherwise, he said, “they risk becoming insular and isolated.”

We see here that city diplomacy is focused on position cities to thrive in a borderless world, focusing on building global networks, attracting investment, sharing ideas, building the brand, etc.

This year’s panel on the topic was very different. I don’t have an article for it but will embed the video below. If it doesn’t start at the right place, skip to 3:10:20 for the start of the panel. It’s worth watching how Peter Spiegel from the Financial Times frames the discussion even if you don’t watch the entire thing. (If the embed doesn’t display, click over to watch on You Tube).

Here we see something completely different. City diplomacy is now about explicitly attempting to subvert national government policy on the global stage. The three issues Spiegel highlights are climate, immigration, and trade. This has obviously been driven by a global trend towards more populist governments, such as the election of Donald Trump or Brexit, along with developments in other countries.

Listening to the Americans at the conference, the older ideas of city diplomacy have fallen by the wayside. I didn’t hear talk about them. Those from other countries not experiencing a flashpoint domestic conflict with the national government continued to conceptualize things more in the previous way.

It makes me wonder if some of these cities are taking their eyes off the prize to engage in short term political squabbles that have little tangible upside. In any case, the shift in focus is clear.

Cover image by Daniel Schwen, CC BY-SA 4.0

from Aaron M. Renn

Monday, June 11, 2018

The Gravitational Power of Washington

Bechtel, America’s largest construction company that worked on such famed projects as the Hoover Dam and Bay Bridge, just announced it was relocating its headquarters from San Francisco to Washington.

International construction firm Bechtel Corporation plans to move its corporate headquarters from San Francisco to Reston, Virginia, by the end of 2018, executives said Thursday, moving the company’s headquarters out of California for the first time in more than a century.

The firm’s Reston office has functioned as a de facto “operational headquarters” since 2011, with chairman and chief executive Brendan Bechtel based there alongside about 1,300 employees.

Bechtel has been headquartered in San Francisco since the early years of the 20th century. But in recent decades the company’s business units in Houston and the D.C. area have grown to greater prominence as the firm’s work has grown with oil and gas construction services, management of nuclear facilities and government contracting.

As technology related firms – or more broadly, firms that operate according to Silicon Valley style principles – continue to prosper, the Bay Area’s high costs make traditional business less attractive. Bechtel is similar to what I’ve seen elsewhere with say Chevron. The HQ remained in the Bay Area, but the jobs gradually shifted elsewhere. Now Bechtel is officially relocating the HQ, but at this point few workers will be affected. It will be interesting to see how long Chevron sticks around there, especially given the region’s hostility to fossil fuels.

But this also says something about Washington. As I noted in my 2013 City Journal article on Washington:

All this intrusion emanates from the legislative and especially the regulatory machinery in Washington. The city has become, in effect, the Brussels of America. So a wider and wider variety of businesses and organizations must be located there to lobby the government that decides their fate. (According to the Center for Responsive Politics, total spending on lobbying rose from $1.6 billion in 2000 to $3.3 billion in 2011.) These firms pay local taxes. So do their workers, who also buy houses, patronize stores, pay tuition at private schools, employ local doctors and lawyers, and so on. The regulatory superstate is turbocharging Washington’s local economy.

This new basis for prosperity could pay huge dividends to the region. The model here might be the defense industry, which has already centralized many operations in the area. Northrop Grumman, for example, recently moved its headquarters from Los Angeles to Washington. Boeing shifted its headquarters from Seattle to Chicago to be closer to defense operations and customers in Washington. Other industries, such as health insurance, may follow suit.

As the article on Bechtel notes, its business is now heavily driven by government contracting, so Washington is the logical place to be. But the fact is almost every business has more to do with the federal government than it used to, voluntarily or not. This creates a gravitational pull for businesses into the Washington area.

Right now San Francisco and Washington are duking it out to see which one can be America’s #2 city behind New York in terms of national/international power and influence. It will be interesting to watch to see how things develop.

from Aaron M. Renn

Friday, June 8, 2018

Superstar Effect, Harvard Graduate Edition

The Harvard Crimson just published a piece on where the Harvard class of 2018 is going after graduation.

22% of them are going to New York (state I believe), 20% to Massachusetts, and 15% to California. The next biggest destination is Washington, DC at 4.9% (District of Columbia only?)

Another 9.1% are going international and 7.3% are undecided on where to go.

Add these numbers up and we see that 57% of Harvard grads are in NY, MA, or CA.

We also see that less than 22% of graduates definitively chose a US location other than NY, MA, CA, and DC.

Here’s the Crimson’s map, which doesn’t fully show the degree of concentration, but is interesting nevertheless.

Click through to read the whole Crimson article.



from Aaron M. Renn