Factors undergirding the decline of economic clusters

Having the throne doesn't make your firm impregnable.  One of my lines is that once McDonalds made it to the top of the fast food restaurant industry, they were always going to lose market share as the segment was vulnerable to niche operators and new business models.  

They're still the King, but always on the defense.  It's difficult to come up with huge breakthroughs that maintain preeminence in the face of constant competition.

Agglomeration economics.  Business clustering, or agglomeration economies, occurs because a firm develops in a place for particular circumstances--access to resources, capital, transportation efficiency, etc.--and as the economic segment develops, support businesses, financing, and other firms are created, strengthening the place as the center of that industry.

But over time, other places compete for pieces of that industry, diminishing the strengthen and preeminence of the original cluster.  This is abetted by how older firms have higher costs, such as pensions and wages, because of a more mature workforce, etc.

There are a couple of good articles about this.  

Washington, DC as a center for business around government.  One is in Greater Greater Washington, "DC has officially lost over 83,000 jobs. The reality is even worse," about Washington DC's economic decline, which results from three things: (1) work from home as a response to covid meant people left the city for cheaper places to live while retaining their high "in Washington DC" incomes, shrinking the local economy and the demand for housing; (2) federal government shrinkage; and (3) decline in international business and tourism.

This is abetted by what is called the multiplier effect, how each direct job supports indirect jobs either within that industry, or in consumption related jobs.  So the 22,000 jobs cut by the federal government has a total effect of 66,000 to 88,000 lost jobs.

DC's competitive advantages.  When I first got involved in revitalization 25 years ago, I identified what I believed were DC's primary competitive advantages.

These were, before covid and work from home, the city's competitive advantages.  WRT the federal government, the city also has to contend with the disinvestment agenda of the Republican party, including relocation of agencies to other parts of the county.

1. The steady employment engine of the federal government.
2. Historic residential, commercial, and civic architecture
3. Historicity (the nexus of people and place)
4. Walking City Urban Design.
5. Transit Network allowing for mobility without automobile dependence

Foremost was the steady employment engine of the federal government, even though long before the Trump Administration, other states and Congressmembers cherry picked agencies for their communities, like West Virginia at the behest of Senator Robert Byrd, a bunch of agencies are in Maryland, etc.  

Wholesale dismantling of agencies and bureaus like the Agency for International Development or the Department of Education both reduce the capacity of government to perform--which supports the neoliberal principle that government is less effective than market-based solutions--and the employment advantages to DC.

Just as bad, both Trump Administrations have moved agencies out of the city as a stratagem to reduce government capacity and employment, in moves like placing the USDA Economic Research Service in Kansas City or BLM to Grand Junction, Colorado--a majority of the extant employees didn't move. 

This is happening with the Forest Service division of USDA, which is consolidating, firing people, and moving its headquarters to Utah--a state at the center of fighting for the sale of public lands or their use for mining, oil production, etc., rather than for conservation.

The destruction of the US Agency for International Development wiped out the "international organization and contractor" economic cluster.  Etc.

Hollywood: LA and film and television production.  Los Angeles became the center of film production because it had a lot more sun than most places, which meant filming was rarely interrupted by negative weather.  But even Greater LA couldn't "stand in" for all environments, which led to Vancouver, British Columbia becoming an alternative.

And like McDonald's, Hollywood, the King of media production, always was vulnerable to losing elements of its business environment.  More and more places began offering tax incentives and other inducements that California didn't think it needed to provide.  To the point where the loss of business was substantial and too far along to reverse.

The LA Times covers this in "How L.A. stopped being Hollywood’s leading star."  From the article:

Film activity in the L.A. region plummeted in the second quarter of this year, with shoot days for feature films and TV productions falling 20% and 30%, respectively, compared with already anemic levels from a year ago, according to FilmLA.

The fallout has been devastating for local film crews and businesses. L.A.’s signature industry has shed some 57,000 jobs in the past four years, while more than 80 film and television production services businesses have closed since 2022. The production crisis has even become a political flashpoint alongside affordability, crime and homelessness in the race for mayor and governor.

The story of how L.A. steadily lost much of its homegrown industry to other locales is a tale of hubris, escalating costs, political inaction and fierce competition from states and countries hungry for a piece of the Hollywood pie. California eventually adopted a very limited film tax credit plan in 2009, but even then production had already gone elsewhere.

Additional lessons: changes in production and technology are "earthquakes" in industry tradition that support industry shake up and relocation.

-- "Next Level Clustering of Business away from the Midwest" (2022)

Emerging versus mature markets.  There are many ways to look at how to assess vulnerability.  One is the Alexander Gerschenkron thesis of "the economic advantages of backwardness."  His point is that established economies have vast investments in maintaining legacy systems of production.  While emerging economies can adopt the latest technologies without having to strand billions of dollars in previous investments.

The perfect example is China and electric cars.  Its automobile industry was nascent and did focus on traditional technology at first.  But as the new technologies of EVs were developed, just on the basis of the size of its market, it was well positioned to be a first mover in the field.  This was probably furthered because China isn't a large oil producer and therefore centering its car industry on alternatives to the internal combustion engine had other benefits of reducing demand and dependence on oil for transportation.

New technologies within industries.  This is an issue within industries as well.  The US automobile industry is a good example as the development of electric cars has allowed new entrants, although Tesla is the only real successful firm in the car market.  The truck sector, the most profitable for the old Big 3, faces competition from new entrants like Rivian.  But even so, because the US automobile market is so mature, with demand for "only" a few million vehicles per year, it can't compete with China.  

Film and video is another example.  Not only was Hollywood vulnerable to other states angling for a piece of the production pie, but as the industry atomized and vastly expanded from four main broadcast channels to hundreds, and then from centralized to decentralized distribution such as through streaming via the Internet IT infrastructure.

Now the big companies are all Internet based--Netflix, based in the SF Bay as is Apple, and Amazon, using its Prime platform as a media delivery system, is based in Seattle.  The traditional firms keep merging, and none seems to have the heft to make video streaming content profitable, unlike Netflix.

Centralized versus decentralized distribution.  This repeats from above.  Video media is a primary example.  But its enabled by the Internet and its massive "back of the house" information technology infrastructure.

It's comparable to the difference between "big iron" more centralized computing as typified by Boston and Route 128 businesses like Data General versus the microcomputer oriented Silicon Valley.  This is discussed by AnnaLee Saxenian in Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (review).

Which has also spawned "cloud computing," although the foundations of such systems, starting with ADP payroll processing, are quite old. Amazon and Microsoft make a majority of their profits from cloud computing services--which is also driving the demand for data centers.

The Internet as a platform has similarly made direct distribution, complemented by extensive package delivery systems, much cheaper than before, allowing companies to sell products directly to customers with minimal transaction costs.

Previously, wholesale and large scale retail stores were the primary distribution points for goods, because this minimized transaction costs for the producer and the customer.

Electricity is now proving vulnerable to decentralized delivery through the adoption of solar energy systems and distributed energy resources (batteries) at the point of individual households and businesses ("Are plug-in DERs going to spark a grid revolution?," Volts).

New versus old companies and legacy cost structures.  New companies have the advantage of small workforces earning less money and benefits than established companies.

High fixed costs, e.g., for the automobile industry pensions and insurance for current and retired workers, make it harder to take risks.  

Marketing's Five Ps: Product, Price, Place, Promotion, and People.  There's a maxim in business: your choice of price, quality, or speed of delivery, pick any two.  The 5 Ps are the shorthand for how products have been developed and promoted.  Changes in the conditions of any of those Ps provide a space for business opportunities to develop, threatening existing agglomeration economies of various business segments.

Source: Corporate Finance Institute.

For example, place means where a product is sold, but also how it gets there.  Cheap gas and the highway network trumped railroads.  Before railroads, many industries developed across the country, such as stove production, because the cost of transporting heavy items was so high.

Promotion no longer means the newspaper or broadcast television, but all sorts of digital media.  This has made Facebook and Google the largest sellers of advertising, supplanting traditional firms.  And social media--yes there are paid influencers--mean businesses and products can get great exposure without payment of any kind.

Nice looking five story brick apartment building, Parks at Walter Reed development, Washington, DC

The Walter Reed Army Medical Center was a large hospital and research campus on Georgia Avenue NW in Washington, DC.

It was merged and moved into the Bethesda Naval Hospital in Bethesda, Maryland.

The old campus went through a de-accession process and DC bought it and did a plan, calling for housing and retail mostly, with civic uses in some of the historic buildings.

I fell in with some people, too late in the process, who proposed instead of a predominately housing oriented project, a graduate medical education and biotechnology program for the site, with the aim of building back the jobs element of the campus--which when fully staffed had almost 8,000 employees.

The original hospital building is still there, but still hasn't been redeveloped.

But DC isn't particularly innovative when it comes to economic development planning.  They are comfortable with housing and retail, but not much of anything else ("Demolition Marks Turning Point for Decommissioned Hospital Site," Engineering News Record). From the Washington Business Journal article "Historic hospital building at former Walter Reed campus for sale":

The Parks at Walter Reed’s main square, anchored by a Whole Foods, other retail and apartments, is the centerpiece of the larger $700 million development, which is slated to include 2,100 housing units, 100,000 square feet of retail and 200,000 square feet of office at buildout. 

The long-term plan is for most of the historic buildings remaining on the campus to be redeveloped or preserved. But the development team has also marketed a few other properties on the campus, largely aimed at developers with niche ambitions.

Partly because the lead was somewhat of a wack job, even though a credentialed medical doctor with some affiliations with the Royal College of Surgeons Medical School in Dublin was part of the group and we were working with the nearby Washington Adventist University, which like many 7th Day Adventist colleges, has a number of health professional programs (Loma Linda University in California is a bonafide graduate medical school), we just never got anywhere.

Photo: Critical Systems.

Although later, lobbying directly with Congress, Children's Hospital Center took over the old Armed Forces Institute of Pathology there, which would have been turnkey for a medical school, and set it up to do research ("Children's National Health System Accepts Walter Reed Property").  

They're there, but I don't know how its progressing.  They call it the Innovation Campus ("NIH awards $6.7M to build additional lab space at Children’s National Research & Innovation Campus").  But it's a $6 billion project, so it's a big deal.

I ended up rewriting the concept for the St. Elizabeths campus in Southeast DC, where DC ended up building a new hospital.  

But that program ended up being a pretty ordinary hospital, not the public health innovator, graduate health education and biotechnology campus I proposed.  Again, because DC just isn't very innovative.

-- "Ordinary versus Extraordinary Planning around the rebuilding of the United Medical Center in Southeast Washington DC | Part One: Rearticulating the system of health and wellness care East of the River" (2018)
-- "Part Two: Creating a graduate health and biotechnology research initiative on the St. Elizabeths campus," (2018)
-- "Part three: the potential for donations around an expanded program," (2018)

-- "The new Cedar Hill Regional Hospital opens in Southeast DC" (2025)

-- "Revisiting East of the River medical care: United Medical Center" (2018)
-- "Update on DC's plans to build a new United Medical Center" (2018)

I also suggested University of Maryland could have done it at Largo.

-- "University of Maryland could seed a complementary biotechnology and medical education initiative in Prince George's County" (2021)

And I keep revising it...

-- "Hospitals as urban anchors/revitalization levers, not usually, but with great potential to serve communities in important ways: Examples are two forthcoming projects by Intermountain Health and University of Utah Health" (2023)

Although later I realized, when writing about the conversion of the Pfizer research campus in Ann Arbor, Michigan, seeding a biotechnology program is quite hard.  That facility had a lot of drugs in the pipeline which Pfizer was no longer interested in, and they willingly let new startups take them over.

-- "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector" (2021)

Although I have to say the development is pretty impressive.  A lot is there, and nice public spaces, a super beautiful Whole Foods supermarket, and other stuff.  Lots of apartments.

Because it was designated as a historic district during the planning process, there is design review for renovation of old buildings as well as new construction.  While most buildings aren't nearly as nice and historically compatible as the one at the top of the entry, they're not terrible.  But nowhere as good as the one pictured above.

The first building is so good because it abuts a historic building.

This building has the Whole Foods on the ground floor.  It looks quite good architecturally for new construction.

The Plaza area

Whole Foods.  Because there are charter schools on the campus, the kids/youth grow up being able to experience this at lunch and after school.  It's open to all, not limited to residents of the development.  So it's a great public park amenity that the city doesn't have to pay to maintain--and couldn't at this high level of design and maintenance.

Loss of business clustering/headquarters hurts secondary cities

 1.  "Boston has lost its financial services clout. Santander’s latest move is just another example," Boston Globe.

As recently as 25 years ago, Boston punched above its weight in financial services, with powerhouse mutual fund managers at almost every corner, a top 10 retail bank in FleetBoston, even a stock exchange of our very own. Now? That supremacy feels like it has slipped away. This is just the latest example.

... With each passing year, it seems, Boston’s Financial District sheds just a little more of the sector’s clout that gave the place its name. The big post-COVID hope for the district’s future hinges on real estate conversions: hotels, dorms, apartments, tourist attractions. Anything but new offices. (And many of the offices that remain are being taken over by the likes of tech firms such as SimpliSafe, DraftKings, and Klaviyo.)

(Baltimore too had at one time been a regional financial center with national heft.  The first private equity bank was founded there.  Some big mutual funds.  Insurance companies.  No more.)

Norfolk Southern headquarters, shown here in an aerial photo on Tuesday, March 10, 2026, sits squarely in the Midtown Atlanta landscape, reflected in its gleaming glass facade. (Hyosub Shin/AJC)

2.  A merger of Union Pacific and Norfolk Southern railroads likely means the serious diminishment of the importance of Atlanta to the new company--NS is based in Atlanta ("Atlanta is at the center of a railroad merger with big economic implications," "Coming soon to Midtown: A Union Pacific building?," Atlanta Journal-Constitution).  From the second article:

In addition to a Fortune 500 headquarters, the proposed plan would cost Atlanta jobs as operations consolidate in Nebraska, the application outlined. In total, more than half the Midtown headquarters’ management employee headcount would either relocate to Omaha or lose their jobs, the filing said.

... expects the company’s total Georgia headcount to remain at about 3,000 post-merger — versus its current 4,000.

3.  Corporate headquarters are leaving California.  Part of it is consolidation to bigger business clusters, such as Chevron from suburban San Francisco to Houston, but also conservative company owners like Elon Musk making political statements.  

Focus on new business development and growth.  The business columnist for the Orange County Register ("How can California survive the departures of big companies?") suggests the response should be to focus on the state's strength as a place for start ups and new businesses, some of which end up growing to be quite large.

4.  Another issue is the relocation of divisions from a corporate headquarters city.  For example, Starbucks, based in Seattle, has relocated its logistics division to Nashville, and appears about to sign a lease for space that could support up to 2,000 workers, far more than the size of the logistics group ("Starbucks reportedly eyes Nashville office large enough for hundreds," Seattle Times).

==========

Also see:

-- "A wrinkle on corporate headquarters: leaving the city as buildings age," 2026
-- "Clustering/agglomeration economies and revival of Southern California's space sector," 2025
-- "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector," 2021
-- "Federal government research hub development initiative," 2023
-- "Universities and ancillary economic development (versus the anti-research agenda of the Trump Administration)," 2025
-- "Next Phase of Clustering of Business away from the Midwest," 2022
-- "Do tax incentives pay off? : Illinois; Tennessee; Rosslyn + "The Airport Access Factor"," 2017
-- "Corporate headquarters relocating to the center city: GE chooses Boston," 2016
-- "Businesses moving back to the center: not a universal trend," 2015 
-- "A lesson that seeing is believing: Panasonic's new building in Newark, NJ as an example, positive and negative, in businesses coming back to the city center," 2015
-- "Pennsylvania Avenue DC planning initiative," 2014
-- "Could bringing premier regionally headquartered business enterprises to the Pennsylvania Avenue Corridor be key to its renewal and revitalization?," 2014

Clustering/agglomeration economies and revival of Southern California's space sector

 

The book, The Rise of the Gunbelt: Military Remapping of Industrial America, describes how the Southwestern industrial economy was built on military spending.  

Southern California's industrial sector in part was built on the military-defense industry, and out of that grew businesses focused on "space" as opposed to aerospace.

As companies consolidated, manufacturing facilities closed and headquarters operations moved, leading to a severe decline in industrial employment.

The Los Angeles Times is reporting on a renewal of business development in the sector, "The space race is transforming Southern California’s economy — again," partly as a result of SpaceX having most of its engineering operations in Orange County.

Some 128 aerospace, artificial intelligence and companies in other fields have been founded by former SpaceX employees — with 96 started in the last five years still in operation, according to the alumnifounders.com website run by a San Francisco tech executive.

Nearly half, or 63, were founded in Southern California, including 20 in aerospace. No other region comes close, including Silicon Valley or the Pacific Northwest, where Jeff Bezos’ Blue Origin rocket company is based in Kent, Wash.

Some companies just come to the region to be close to same talent pool and aerospace manufacturing base that first attracted SpaceX. Rocket Lab, which launches small satellites, was founded in New Zealand but moved to the region in 2013 and opened new headquarters in Long Beach in 2020.

... A forthcoming report by the Los Angeles Economic Development Corp. shows the county’s aerospace and defense industries added 11,000 jobs between 2022 and 2024. While those 58,700 plus total jobs are well below the historic peak, they had an average wage of $141,110 — more than twice the county average.

“A lot of folks have kind of made the assumption that the aerospace and defense industry has left the entire region,” said Stephen Cheung, chief executive of the organization. “What they didn’t see is a lot of the manufacturing was still here, and over the last 10 years, you’ve been seeing this transition into space commercialization, and now that’s stimulating a whole new ecosystem.”

Clustering and agglomeration economies:

-- "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector," 2021
-- "Federal government research hub development initiative," 2023
-- "Universities and ancillary economic development (versus the anti-research agenda of the Trump Administration)," 2025
-- "Next Phase of Clustering of Business away from the Midwest," 2022

The Trump Administration aims to destroy the US's competitive advantage in technology development and innovation.

-- "Trump is destroying 100 years of competitive advantage in 100 days," Washington Post
-- "Crippling America’s Innovation Economy" Project Syndicate
-- "Attacks on the U.S. Innovation Ecosystem Are an Attack on a Wellspring of American Prosperity," Center for American Progress
-- "Trump Is Killing American Innovation," Foreign Affairs

University-based innovation:

-- "UM research announces 3rd straight increase in inventions from university work," Crain's Detroit Business

The University of Michigan achieved another year of research commercialization records for fiscal year 2025, with 673 invention reports and 326 license and option agreements. The news comes as cuts to university research — both from the federal administration and state government — loom.

... UM also launched 31 startup companies in 2025, only the second time the university has done so since 2020.

-- "UC San Diego ranks top 10 in world for universities driving innovation," San Diego Union Tribune.

 -- Top Fifty Universities Powering Global Innovation, Clarivate

The paper includes: A comprehensive analysis and top 50 ranking of the universities leading in research-to-innovation impact. The key relationships between universities and leading innovators. Visualized pathways showing global knowledge flow patterns between university research and industrial inventions.

The success of urban neighborhoods versus Downtown as a laggard

A man crosses a bustling Dorchester Avenue in Fields Corner at midday. (Photo: Jesse Costa/WBUR/NPR.)

The Boston Globe has a bunch of articles ("Boston’s neighborhoods are thriving. Downtown, not so much," "Boston's residential neighborhoods are thriving while Downtown struggles") about how the city's neighborhoods and commercial districts are doing much better than Downtown Boston ("Why how Downtown Boston is recovering depends on which Downtown you're talking about")..  

That's because Downtowns haven't and may never recover from work from home (WFH) practices accelerated by the response to covid.  Mayors in plenty of cities and Trump wrt the federal workforce are calling for RTO--return to the office, to support occupied office space, Central Business District centric transit systems, and retail and restaurants.

-- "What is the competitive advantage for the post-covid city? Doubling down on place values" (2022)

WRT the latter, reports from Boston and Chicago find lunch business in the CBD is down as much as 50% pre-covid.  Most heavy rail transit systems are moving half of the number of people to CBDs compared to pre-covid times.  

There is massive vacancy in office space and commercial office building valuations are cratering ("One of Boston’s skyline-defining towers is on the auction block — and expected to sell at a big discount," Boston Globe, "Does assessor Fritz Kaegi appreciate the true horrors of downtown Chicago’s commercial real estate market?," Chicago Tribune), "The brutal reality of plunging office values is here," Crain's New York Business).

This is a serious problem because local government revenue streams typically include great amounts of revenue from commercial property taxes.

By contrast neighborhoods still have people in them, and in dense neighborhoods like those of Boston and its inner ring suburbs, people walk places, do things, and patronize local business.

According to the Globe, vacancy rates are minimal in Boston's successful neighborhood districts.  Part of that is that while there might be fewer patrons overall, there are more than in the CBD, and neighborhood properties have much lower rental rates.  In Downtowns, property owners find it difficult to lower rents because of mortgage responsibilities, hence a lot of vacant storefronts.

Bristol's Clifton Village, number five in Knight Frank’s top 150 high streets © Robert Harding/Alamy

In this vein the Financial Times has a story "How bougie is your high street?," about the gentrification of commercial districts, mostly referring to neighborhood-centric ones.

A curated mix of chichi cafés, artisan bakers and premium gyms is changing the tenor of neighbourhoods in an era of clicking ‘add to basket’ 

... does the “Waitrose effect” identified nearly a decade ago by Lloyds Bank (how living close to the upmarket supermarket could add as much as 10 per cent to property prices), still up the kudos of an area?

“Yes,” says Tom Bill, Knight Frank’s head of UK residential research. “The quality of the local high street is one of the important factors for those looking for homes.” It’s why the estate agency undertook research to identify the top 150 premium high streets in the UK. “In the context of growing scrutiny around the composition and future of the high street, we wanted to analyse the most popular amenities that might increase the chances of people buying or staying in a particular location. That, of course, can become a virtuous circle for retail and residential markets.”

Pavilion Road, Chelsea, is a cobbled mews offering a village-like counterpoint 

to the grandeur of Sloane Square’s thoroughfare © Harry Mitchell

... It’s a sentiment that resonates internationally. The Rue Sainte-Catherine in Bordeaux, Europe’s longest shopping street, mixes international brands, uniquely French names and small independents in a soft-stone 18th-century backdrop that draws both local residents and visiting tourists — no one wants an identikit high street you can find back home. Coconut Grove, Miami’s oldest neighbourhood, is leafy and filled with cafés and small boutiques. Why trek to Collins Avenue when you have this on your doorstep? But if the mix is no longer about life’s essentials, and instead a new wave of chichi cafés, artisan bakers and fancy nail bars — are we right to ask, not how useful is your high street, but how bougie?

... “A high street sets the tone for a neighbourhood. We’re not saying there’s necessarily an uplift in property prices in the best areas, but home buyers are often choosing a way of life, and the ‘right’ blend of shops and facilities can add value, both for the character of the area and house prices.”

-- High Streets: Life beyond Retail?, 2024 House of Lords report, response

The idea of mixing a small number of premium chains with locally owned businesses was identified by Kennedy Smith, former head of the National Main Street Center, as an indicator of success, in part because consumers see the upscale shops as an endorsement of the neighborhood.

The one problem still, is selling convenience goods.  While these business districts often have home hardware stores and pharmacies--often chains--there aren't good options for well priced supermarket foods, at least in the US, because that industry isn't set up to operate at a small scale.  By contrast, there are supermarkets in UK districts, but definitely smaller than the typical US supermarket of 65,000 sf.

The large number of Marks & Spencer stores across the UK aren't department stores, but food halls, based on the conpany's tradition of knock your socks off prepared food offerings  in their London based flagship department store.

The other problem from "bougie" is that the price point trends upward.  The chi-chi cafes aren't pricing food comparable to the old time diner or other type of neighborhood-based restaurant.   ("A wealthy Calif. town is about to lose both of its dive bars Inbox," San Francisco Chronicle).  Etc.

“At the top end of the market, the high street is increasingly being curated,” says Michele Galli, chief executive of branding specialist The One Atelier. Bougie breeds bougie. “[People] want to step out of their doors and feel instantly immersed in a world that reflects their values in terms of wellness, craft and culture. Even in the era of delivery and convenience, physical quality of the streetscape still counts. It’s not just about access to services but a sense of place.”

The European districts share characteristics with those districts highlighted in Boston.  Tighter building stock in that buildings aren't spread out, walkable community, and a relatively dense population.  In the great book Cities in Full--and these numbers pre-date e-commerce--the author posits that you need 10,000 residents within a half mile to have a successful commercial district.

You see this in urban neighborhoods in the East, Middle Atlantic, and Midwest, where secondary business districts in cities had great form.  Usually anchored by regional department stores--which have closed or consolidated into Macy's--many of these districts, like Germantown Philadelphia are somewhat decrepit but with great bones.

Downtown Royal Oak, Michigan.

Certainly in automobile-centric suburbia this doesn't exist.  However, extent older towns like Royal Oak Michigan or Phoenixville, Pennsylvania outside of Philadelphia provide such an option even if people mostly drive  Certain districts in Montgomery County, like Bethesda, although they've long since lost the original town architectural antecedents (Bethesda Row case study, Urban Land Institute), function similarly.

Shopping centers have managers and headquarters personnel working on issues of retail recruitment with an eye to the mix.  

In 1964, the retail owners in Downtown Corning, New York figured this out and hired its first "manager."  It took 14 years, but the Main Street commercial district revitalization program was created by the National Trust for Historic Preservation to bring residents, institutions, the local government, property owners, and retailers together to improve the commercial district through management, and the addition of volunteers.

Later, people were reaching out to the National Trust for Historic Preservation for help in saving historic buildings in town business districts that became empty because of chaining up of retail, consolidation, a move to a much larger physical footprint, the next generation of national chains, like Walmart, and a shifting of retail to suburban shopping malls.  

The Trust figured out that the issue wasn't so much preservation and "saving the buildings," as it was rebuilding the micro-economy of the commercial district.  Hence a multi-faceted program for revitalization that was less focused on preservation--although still present--and more on business and district economic success.

In England, where many properties in independent commercial districts are owned by the equivalent of real estate investment trusts, they have the same idea, but more from the realm of corporate realty:

“We’re the stage managers. The retailers and restaurateurs are the performers who put on the show,“ says Hugh Seaborn, Cadogan’s chief executive. “Our goal is to provide public and private spaces that give exceptional experiences and encourage community connections, exactly what is lost in online transactions.” 

In the US, this doesn't work as well.  REITs are more focused on return from simple investments, so they shy away from traditional commercial district properties in favor of single use properties run by chains.  Companies specialize say in the real estate of pharmacies or quick service restaurants. 

-- "Problematic outcomes as real estate investment trusts buy more "high street" retail real estate" (2015)
-- "Further evidence of DC being an international/national real estate market," (2018)

Separately, I've mentioned how Edens, originally a Carolinas-based shopping center owner, was able to pivot to curated retail, when it bought property in DC's wholesale food market, Union Market("Two years in, Union Market thrives," Post, "Vendor's Game: Meet the Chef Behind Union Market," Washington City Paper).

This is still a rare occurrence, outside of traditional commercial shopping centers--malls, lifestyle centers, and strip shopping centers.  Although the lifestyle center is based on the old model of a mixed use town center.

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This piece is about a couple of local commercial districts in DC and Salt Lake, both micro.  By contrast Salt Lake's 9th and 9th District ("Visiting Salt Lake," Washington Post) is more like the successful ones discussed above, albeit smaller.

-- "Thinking about the opportunities for success with neighborhood commercial districts: comparing Manor Park in DC to 15th and 15th in Salt Lake" (2021)

Universities and ancillary economic development (versus the anti-research agenda of the Trump Administration)

The other day I was caught by an article, "A Battery That Lasts 50% Longer Is Finally in Production"in the Wall Street Journal about a solid state battery company that has been spun off from research at the University of Maryland.  

Past writings lament that such spin offs seem to be rare in DC especially ("Naturally occurring innovation districts | Technology districts and the tech sector" [2014} and "Better leveraging higher education institutions in cities and counties: Greensboro; Spokane; Mesa; Phoenix; Montgomery County, Maryland; Washington, DC," [2016]), but also from the UM ("Revisiting past blog entries: College Park as a college town and economic development | PG County and Amazon" [2018]).  

I'm not sure about Virginia, which has the Center for Innovative Technology in Loudoun County, but also majorly benefits from military spending ("The East-West Divide | DC area regional economic development: anchors and where they are placed matter + airports | But military spending matters the most," [2021]). NIH in MontgomeryCounty has been successful with spin offs (The NIH Plan for Accelerating Technology Transfer and Commercialization of Federal Research in Support of High Growth Businesses), even as other agencies like NIST aren't quite so fecund.

In "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector" (2019), I made the point that there are some blockbuster universities doing spinoffs, but maybe we don't know the right set of characteristics to distribute this effect more widely.  

Then again, I haven't researched the topic deeply.  For example the IEEE Spectrum article, "The Birth of the University as Innovation Incubator," which is an excerpt from the book Every American an Innovator:  How Innovation Became a Way of Life).

Work by Saxenian (Regional Advantage: Culture and Competition in Silicon Valley and Route 128 ) compare the different ecosystems of Greater Boston to the Silicon Valley, calling the formal top-down, but affiliated with universities, and the latter ground up.

-- "The Rise of Academic Incubators," Gensler
-- "How do incubators and accelerators support start-ups?,"  Universities UK
-- University Innovation Incubator Network

In the New York Times article "Red-State Universities Will Get Hit by Trump’s Cuts, Too," Richard Florida makes these points:

If the United States wants to compete with other countries for manufacturing jobs, our best strategy is to leverage our exceptional university research capabilities to rebuild our manufacturing base.

Universities have long played pivotal roles in building world-class high-tech economies: Stanford University helped make Silicon Valley what it is today by fostering technological excellence in electrical engineering, establishing the Stanford Research Park and educating the founders of startups like Hewlett-Packard. Individuals from universities like M.I.T. and Harvard played central roles in transforming Boston from a center of textile and boot and shoe manufacturing to a health-sciences hub by starting the world’s first modern venture capital fund to commercialize academic research.

Carnegie Mellon University helped revitalize Pittsburgh through targeted investments in computer science, artificial intelligence and robotics, coupled with strategic initiatives to bolster local entrepreneurship. The University of Texas at Austin mobilized local business and political leaders to transform Austin into a leading high-tech region. In all of these cases, universities led efforts to reposition their regional economies toward high-tech sectors such as computers, software, biotechnology and robotics.

... Our solutions must address today’s reality, not yesterday’s economy. Addressing this gap by fusing academic innovation with industrial production is even more important today, as new technologies transform old industries. Cars, for example, are evolving from internal combustion engines toward hybrid and electric, along with self-driving technologies and connected computing.

... Today, the economic role of universities is more critical than ever. As globalization and corporate consolidation stripped older industrial cities of their homegrown corporate headquarters, universities were often left as the primary engines of innovation and economic growth. To capitalize on their rising importance as economic anchors, the Biden administration made substantial investments in place-based industrial policy — aimed at revitalizing struggling regions.

Instead, the Trump Administration is doing all it can to diminish universities especially their research function.  Florida makes the point that red state universities produce spinoffs too.  

E.g. In Missouri, many universities focus on agritech research, Texas on all likes, including the world's leader cancer research center, embedded in a center with more than 50+ related institutions.  And there is the Research Triangle in North Carolina.

Seemingly believing that pointy headed professors doing research are only in blue states, like Harvard, is a serious mis-interpretation of reality. 

Ironically it's as if the Trump Administration is using the book Rise of the Creative Class as a primer for what to oppose, rather than a guide to community improvement and opportunities for social and capital investment.

======

Interestingly, I saw a piece featuring the Secretary of the Department of Enegy, stating the national labs (like Fermi and Livermore) faced no threats from the Administration.  What makes them different from NIH, the National Science Foundation or university-based research.  Although federal labs, both the independent ones, and those that are part of federal agencies, have seen layoffs and cutbacks too.

-- "U.S. Scientists Warn That Trump’s Cuts Will Set Off a Brain Drain As the United States cuts budgets and restricts immigration, Chin," New York Times

Relearning and retaining (or not) old lessons: Urban economics, agglomeration economies, and adaptive reuse of "a large stock of old buildings"

charlie responded to the recent entry, "Learning what not to do from the New England Patriots football team," saying I wasn't saying anything really new.  True.  But it seems that people have a hard time learning or retaining previous knowledge, so sadly these kinds of points need to be constantly repeated.

Separately, in response to the previous entry, "Federal government research hub development initiative," charlie included links to two important articles, "The ‘bump factor’ returns to Kendall Square: Random meetings in the compact hub help to fuel the local biotech cluster," from the Boston Globe and "The duo turning old Milan into a snapshot of contemporary design," from the Financial Times, which reiterate some of the arguments of the entry.

At the same time, statements in both articles illustrate the point of the leadership entry, that foundational understandings in urban economics, specifically the concept of agglomeration economies, and the value of old buildings in supporting the development of new businesses, seem to get lost, or that people would rather come up with new terms, without acknowledging the original learning.

Graphic: The benefits of agglomeration: Centre for Cities, "The impact of agglomeration on the economy." 

Like "bump factor" instead of the term "agglomeration economies."

Agglomeration economies and the biotech cluster in Cambridge Massachusetts.The Globe article explains why I am such a proponent of face to face, cluster development and agglomeration economies. From the article:

The vaunted “bump factor” is thriving again in this biosciences hub after a pandemic that limited human contact and forced many to retreat to their home offices. The factor has adjusted to the new hybrid work world — bumping mostly happens Tuesday through Thursday. But the ease with which drug developers and financiers can run into each other remains a competitive advantage for the neighborhood dubbed “the most innovative square mile on planet Earth.”' 

”It’s our secret sauce,” said Kendalle Burlin O’Connell, chief executive of the Massachusetts Biotechnology Council. The potential to generate new ideas and partnerships through chance encounters is unmatched by less compact and more car-reliant rival clusters like California’s Bay Area or North Carolina’s Research Triangle, say Kendall Square boosters. Even in Boston’s Seaport district, fast emerging as a satellite biotech hub, the buildings are too isolated and the blocks too large to support a healthy bump factor. 

... After three years of relative isolation, many are hungry for connection. Some gatherings are larger now than in pre-pandemic times. Attendance at Thursday night programs and networking events at Venture Care have drawn an average of 419 people this fall, up from353 in 2019.

... But close encounters during the rest of the week were a selling point in the successful campaign to lure the Advanced Research Projects Agency for Health, a new federal research agency known as ARPA-H, to Cambridge, said O’Connell, the MassBio CEO.

You can make work work well with Zoom if you are committed to collaboration with the right people and the right tools.  But you lose out on the ability to generate external serendipitous connections. 

I remember when the multimedia Internet was first launched so to speak, and I was on a marketing e-list where the new field of e-commerce and Internet based marketing was the primary topic. 

The founder of the list was big on the creation of "Internet Malls" modeled on real malls. I argued with him that unlike IRL, there was no reason for people on the Internet mall to shop "adjacencies."  In a mall you walk past other stores so your top of mind awareness is pricked.  But on the Internet, you go straight to your destination without being pricked with other sites (unless you use Google search or once you do a search within Amazon, etc.).

But in work, those adjacencies may be essential in sparking new ideas, relationships, funding deals, etc. 

Think of Katalin Kariko at the copy machine where she met Drew Fleischman.  If she hadn't met Fleischman and gotten some financial support through his connections at Penn, maybe she would have left, and not developed further the mRNA technologies that went into the covid vaccine.

The lesson is that in these districts especially the smaller ones, you need to work to build the systems, events, restaurants, etc., that help spark serendipitous encounters. Although the Boston (Cambridge) people really should understand urban economics better. I guess Ed Glaeser isn't doing his job.

Old buildings/new buildings and arts and design as consumption versus production: Milan.  I have been writing about this topic for many years.  

The FT article discusses a group in Milan, Alcova, sparked by Milan's annual Design Week, that does "installations" in abandoned buildings and structures, making a seemingly interesting point about reuse of old buildings for the arts versus new arts centers.  About how Alcova is unique.  They aren't.  But I guess a key lesson of the last few decades of urban revitalization has been lost.

In reality, what they think of as new is very old, something Jane Jacobs wrote about in Death and Life of Great American Cities, published in 1961!, about the value of cities maintaining a large stock of old buildings to support innovation, because (before the modernized finance system which refinances everything so costs go up) old buildings are paid off and have low rents, and startups need low rents.

Note that over the past 30 years, in Dublin (a vacated bus terminal in Temple Bar), Helsinki (Cabelfactory), and Marseille (La Friche), among others, arts based revitalization has been stoked by the redevelopment of what had been white elephant buildings.

Midtown Exchange, Minneapolis.

Historic preservation as an urban revitalization strategy is all about adaptive reuse of old buildings to support new uses.  There are thousands of examples across the country.  

One is the reuse of the Sprague Electric campus in North Adams Massachusetts for the Massachusetts Museum of Contemporary Arts.  

Another is the adaptation of old Sears combination catalog distribution centers and department stores in cities like Minneapolis and Memphis as multiuse mixed use facilities.  

In Los Angeles they are trying to figure this out with the old Sears in Boyle Heights.  Baltimore did this with a Montgomery Ward catalog distribution center and store.  Etc.

Until more recently, with the boom of new construction (now slackened in the post-covid business environment), historic preservation was the most successful urban revitalization strategy around.  Good books on this are Cities Back from the Edge, The Living Downtown, and Changing Places.  

I think the real difference is between money and not money, bootstraps versus top down, and arts as production versus arts as consumption (presenting arts performances to static audiences). 

For example, recently opened large arts centers, The Shed in the Hudson Yards and the Perelman at Ground Zero in NYC, and the originally named Factory based on Manchester music history, now called Aviva Studios after a donor are all new from the ground up.  They cost hundreds of millions of dollars to build. And they are focused on arts as presentation and consumption.

Those can be hard to fund continually, although NYC is a different situation entirely. I know the Kimmel Center in Philadelphia has ongoing funding issues.  Reviving the Cabelfactory or La Friche cost almost nothing by comparison.

Arts production versus consumption is what John Montgomery discusses in his original paper on the subject, now 20 years old. Cultural Quarters as Mechanisms for Urban Regeneration. Part 1: Conceptualising Cultural Quarters is discussed in my original "Arts, culture districts and revitalization" entry in 2009, but the entry has been updated a bunch of times.  

It's the difference too between a building and a multi building arts district/cultural quarter/innovation district.  Also, the new from the ground up arts centers are about consumption, not production. 

Characteristics of cultural quarters
From Montgomery (2003).  Slightly revised and reordered 

1. Cultural venues at a variety of scales, including small and medium. 
2. Availability of workspaces for artists and low-cost cultural producers. 
3. Small-firm economic development in the cultural sectors. 
4. Managed workspaces for office and studio users. 
5. Location of arts development agencies and companies. 
6. Arts and media training and education. 
7. Art in the environment (public art, arts incorporated into buildings, etc.)
8. Community arts development initiatives. 
9. Stable arts funding. 
10. Identity, image development, branding and marketing support. 
11. Complementary day-time uses. 
12. Complementary evening uses.

From the FT article: 

Where many cities think cultural infrastructure means financing new architecture, Grima and Ciuffi propose a new paradigm: working, through temporary interventions, with what already exists, offering a blueprint that administrations can follow. “If we really want to talk about sustainability in the design field and respect for the environment, the first step an architect must take, paradoxically, is not to build,” says Grima, adding that his profession has historically “been very animated by the impetus to do new things”. 

... Alcova was founded at a pivotal moment in the history of Milan, after the 2015 Expo, when big brands began to come to the Design Week in larger numbers. “This made it more difficult for young people to find space,” Grima recalls. “It seemed a shame to us, because everyone comes to Milan to see the future of design. We said to ourselves, ‘There is an opportunity here of doing something new.’”

The article also discusses how with the rise in success of Milan's Design Week, small firms are being crowded out by large firms and their ability to add underutilized buildings and structures to the mix maintains the ability of small firms to participate because of the way they offer participation to small firms only.

That only reiterates the point made by Jacobs. 

Federal government research hub development initiative

I didn't know NASA originally planned for a big electronics hub in Boston's Kendall Square, as MIT's Draper Laboratory was an original developer of various electronics systems for the Apollo space program.  The hub opened, but was closed three years later ("‘Cambridge, we have a problem’: The true story of NASA’s center in Kendall Square," Boston Globe).  

A new building for the Volpe Center.

One of the deaccessioned buildings was transferred to the US Department of Transportation for the development of a transportation research center now known as the Volpe National Transportation Systems Center ("New Volpe Transportation Center opens as part of $750 million deal between MIT and feds," Globe).

It's hard to say if the NASA center had stayed would it have fostered the development of spinoff businesses, because after the Apollo program, NASA's space program has shrunk.  But the Volpe Center hasn't fostered spinoff businesses either.  

OTOH, Boston has blossomed as a center for biotechnology.  See "Casebook illustration of agglomeration economies: Kendall Square and biotech."

For some insight into how different research operations have  significantly different rates and capacities for the development of spinoff businesses, see "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector." 

Also see writings on innovation districts and quarters more generally.

Federal scientific and technology research.  Michael Lewis has a good book, The Fifth Risk, on the investment by the federal government in the development of science and technology, like weather prediction systems and the work of federal laboratories.  Decades ago, I worked for a group focused on chemistry research and development, and a number of federal government labs sponsored by the Department of Energy were members.  

USDA has a number of research labs.  The Department of Commerce has National Institute of Standards and Technology in Montgomery County, and the Department of Health and Human Services has the National Institutes of Health in Montgomery County and the CDC in Atlanta.  The Department of Transportation supports research centers across the country as well.  The National Science Foundation funds research of all types, etc.  Medical research is funded by a number of agencies and some cities have become biotech centers as a result.  NASA funds research labs too, like at Caltech and the Goddard Research Center, also in Montgomery County.

The Department of Defense's Advanced Research Projects Agency is famous for its support of the development of various technologies, including what became "the Internet."  DARPA has spawned ARPA-H, focused on health.  The Department of Defense as a customer of technology firms has also spurred economic development.

Federal laboratories too have different success rates for spurring the development and adoption of new technologies and business opportunities.  Overall, the military has the most spinoffs ("The East-West Divide | DC area regional economic development: anchors and where they are placed matter + airports | But military spending matters the most.")

New federal research hub seeding efforts.  Recognizing the benefits of federally-funded and initiated research to the economic development of the nation, the Biden Administration is funding the development of research hubs across the nation ("31 communities tapped as innovation hub finalists," Route 50).  From the article:

In a move aimed at expanding the tech sector’s economic development engine to more parts of the country, the Biden administration on Monday named 31 communities as innovation hubs that will work to advance a range of technologies, including autonomous systems, quantum computing, biomedicine and green energy. 

With tens of millions in federal funding, the selected consortiums—made up of state and local governments, educational institutions, businesses and community groups in 32 states and Puerto Rico—now have an opportunity to turn themselves into global players in advanced technology. 

“We're doing this from coast to coast, in the heartland, red states and blue states, small towns, cities of all sizes,” President Joe Biden said at a press conference.

The funding for the hubs comes from last year’s $54.2 billion CHIPS Act. Most of that capital went toward subsidies to encourage companies to increase the production of U.S.-manufactured semiconductors. The legislation also called for spending $10 billion to create 20 Regional Innovation and Technology Hubs over the next five years that would research, develop and commercialize a wide range of advanced technologies. The 31 proposals will compete in the coming years to be named one of hubs. 

However, because Congress has only formally approved spending the first $500 million of the money, only a few of the innovation hub proposals are sure to get funding in the next year. 

Already there are winners and losers ("Michigan doesn't make cut for list of new federal tech hubs," Detroit Free Press, "Minnesota's newly designated med-tech hub eligible for millions in federal funding ," Minneapolis Star-Tribune, "Baltimore selected as federal tech hub for artificial intelligence and biotechnology," Baltimore Sun).

This is important to do, and spreading around the largesse is good.  But it's hard to successfully develop spinoff technologies and businesses, it's a very long process, and it's easier when you have something to start with already, as the Pfizer/Ann Arbor entry makes clear.

Pittsburgh is a great example.  Richard Florida's book The Rise of the Creative Class is partly about the then "failure" of Pittsburgh to retain start up businesses as they grew and developed, because the ecosystem to support such businesses as they grew just wasn't there.  

But over time that ecosystem developed ("Carnegie Mellon, Region, To Share Benefits of $62.7M Build Back Better Grant," CMU press release, "Pittsburgh’s tech clusters: Oakland, Lawrenceville, Strip District … and O’Hara," Pittsburgh Business Journal), just as the venture capital base in Michigan developed to the point where it could support the development of biotechnology businesses in Ann Arbor, and now Pittsburgh is much more competitive in developing and retaining startups.

From the PBJ:

Pittsburgh has emerged as a center of technology research and development, particularly with respect to the autonomy industry, but the region’s strength in the field of life sciences and medical technology is equally impressive. 

The University of Pittsburgh is one of the top five in National Institutes of Health funding and the region is ripe with talent and an ecosystem of successful public and privately held companies in the field. 

Just as robotics firms have clustered in certain locations, so too have leading companies in the biotech and related medical technology industries. Oakland, Lawrenceville and the Strip District are well known hot beds of innovation activity, but there’s another that's sometimes overlooked: O’Hara Township.

Not only is O’Hara Township where RIDC’s first development project resides — RIDC O’Hara — it’s one of the first planned light industrial parks in the country, and it’s seen the launch of multiple prominent tech startups. And after more than 60 years, it continues to be home to a thriving life sciences cluster, including companies involved in cutting edge research and the production of life saving products. 

Among O’Hara’s attributes, which have been attractive to tech and life science companies alike, include: 

• Proximity to the universities in Oakland and other tech companies in Lawrenceville and the Strip District, which are only a few minutes’ drive away. 
• Free parking and considerably lower costs for space than in the denser city neighborhoods. 
• Easy access to the Pennsylvania Turnpike, making it a commuting destination for a large portion of the region’s workforce. 

Boston is another example, anchored by MIT and Harvard.

As I wrote in the Ann Arbor article, some universities are better than others at spinoff business and technology development, and it is worth figuring out those characteristics and conditions, in order to foster more speedy success elsewhere.

... the reality is that there are six to seven universities that seem to spin off successful start ups at a scale far beyond the rest:

• MIT and Harvard in Boston
• Stanford University in Palo Alto/Silicon Valley
• University of California San Diego
• University of California San Francisco
• maybe the University of Washington in Seattle (Microsoft located there because that's where its founders lived before leaving for college, Amazon started up in Seattle because of the entrepreneurial culture created by Microsoft, and over time UW has gotten more involved in that ecosystem)
• University of Texas Austin contributed to the development of an IT cluster in Texas, but key events like the creation of Texas Instruments had little to do with Austin ("The launch and evolution of a technology‐based economy: The case of Austin Texas," Growth and Change, 50:2, 2019).

There are probably some I've missed.

OTOH, there is also the story of Kariko Katalin at the University of Pennsylvania.  She was dissed by administrators for decades but persevered, developing the mRNA technologies that led to the successful development of covid vaccines.  She just won the Nobel Prize in Medicine, after a career of hardship ("A Penn official once told Katalin Karikó she was ‘not of faculty quality.’ Her work there just won a Nobel Prize.," Philadelphia Inquirer).

Clusters can be relative.  I used to believe that only the leading clusters had advantages, that secondary locations had no chance.

Now I don't believe that. There is a place for secondary or peripheral locations. They won't be Cambridge, but they can still be significant centers with opportunities for growth, especially locally.

But you really have to work it:

-- "Naturally occurring innovation districts | Technology districts and the tech sector," 2014
-- "Better leveraging higher education institutions in cities and counties: Greensboro; Spokane; Mesa; Phoenix; Montgomery County, Maryland; Washington, DC," 2016

(Reprinted.)  Learning from Europe: Knowledge locations in cities.  In 2013, I wrote about Helsinki, "Helsinki as an example of creative industries driving urban revitalization programs," for the Europe in Baltimore project conducted by the Washington Chapter of the European Union National Institutes of Culture.

Design is a key element of Helsinki's identity and economy.  And while writing the article, I learned a lot which has influenced my thinking ever since, about cultural planning, cultural production, systematic planning of new districts, specifically Arabianranta, where the Aalto University is now located, assigning cultural planners to districts, libraries, and more.

An article on Arabianranta, 

"Developing creative quarters in cities: policy lessons from 'Art and design city' Arabianranta, Helsinki," Van Tuijl, Carvalho, and Van Haaren, Urban Research & Practice 6(2):211-218 · June 2013

introduced me to a new line of thinking about "creative quarters," which we might call Arts Districts 2.0.

The research was part of a larger project which resulted in the book Creating Knowledge Locations in Cities: Innovation and Integration Challenges.  (This is a pdf of the book.)

Note that Brookings Institution has a similar program, Innovation Districts, but I like the writings from Europe better.