Playing Up Their Strengths

Despite the misfiring of the global fiscal engine and the intermittent crashes and booms rumbling across the US economy, there's a discernible purring sound emanating from certain regions. These are places—like Greater Fort Lauderdale and Northern Kentucky and California's San Bernardino County—where economic development strategies have proven to possess enough gas to keep the car on the road.

In Manhattan's new Silicon Alleys, smaller and less-desirable spaces are being developed as technology incubators. And in older urban downtowns like Nashville's—where the stillness had sometimes seemed deafening in recent years—the cadence of pounding hammers and pedestrian footfall is picking up as big, fast-growing companies take advantage of targeted incentives and lowered rents.

What strategy works best in spurring economic activity in these uncertain times? The answers of course vary by region. But if there's a common thread, it would be that it's crucial to build a skilled and educated workforce.

From the Empire State to the Inland Empire, "education, education, education" is the new refrain. Whether this entails New York City Economic Development Corp.'s hookup with Cornell University and a technical institute in Israel to create an appliedsciences campus on Roosevelt Island, or the San Bernardino County agency's support for community college programs that train electricians and skilled crafts workers, specific job training in growing industries is identified as a critical practice.

In San Bernardino County, the country's largest and one-half (with Riverside County) of the Inland Empire, Economic Development Administrator Mary Jane Olhasso is direct about where the jobs won't be growing: "We're not going to bring back blue-collar, low-dollar manufacturing production in this county, this state or this country." Olhasso, who conducted face-to-face interviews with the heads of some of America's leading corporations for CoreNet's forward-looking "Corporate Real Estate 2020" study, says they were unanimous in making it clear there is no going back.

"Instead, what we're seeing today is a renaissance of the entrepreneurial business community," Olhasso says. "The reason so many states do trade missions to California is that this is where so many companies are born. These companies and new divisions of companies need workers with skills tailored to the evolving future." (Also see "The Incredible Shrinking Corporate Footprint," page 20.)

According to Olhasso, the county added 900 jobs and managed to retain another 849 in the first quarter of this year, virtually all of them skilled manufacturing positions. San Bernardino, long dead as an agricultural hub, offers a variety of attractions to industries on their way up: relatively low-priced industrial real estate (around $35 per square foot); newer buildings (most constructed in the 1990s); a huge indigenous workforce (800,000-plus employable adults); and a shipping pipeline to the burgeoning consumer markets of the Pacific Rim along with proximity to Southern California's densely populated consumer base. The county is also sensitive to individual talent.

"I know of a young man," she says, "an at-risk youth who first made contact with an occupational mentor through a middle school Learning Network program here in the county. He made it through two years of targeted occupational training at (public) Chaffey College and then into a six-month internship program our agency helps coordinate at California Steel. The company liked him so much that they're now paying for his additional training. They'll have an employee with skills tailored to what the company needs to grow and thrive, and he has not just a job, but a career."

Across the country in the nation's largest city, the same theme plays out, but differently. While most types of industry have shown scant growth in New York City over the past five years, the Bloomberg administration's push to build up a "New Tech City" by fertilizing start-ups has worked remarkably well: More than 1,000 tech fledglings have been formed in the city since 2007, according to a new report from Center for an Urban Future, a business-backed think tank. The report details how this has generated "thousands of wellpaying jobs in the five boroughs, attracted large amounts of capital from outside the city, pumped new life into the city's entrepreneurial economy and lured some of the world's smartest and most innovative people to New York."

The key is to keep investing in that human capital, according to development authorities. The NYC Economic Development Corp. certainly continue supporting programs aimed at increasing the availability of affordable and appropriate real estate for start-up companies, says director Seth Pinsky. The EDC has provided seed money for refurbishing and redesign of spaces to create "incubators" and workshare offices in Manhattan, where rent is highest. For instance, Rudin Management's "Hive@55" in Lower Manhattan has housed 63 startups since it launched in 2009, and Dogpatch Labs in Union Square, another seeded incubator, is currently home to 23 small companies.

There is also a new emphasis on the idea of educating people to be both innovators and entrepreneurs. One such program, offered through the city's Small Business Services agency, provides minority and women business owners with a "mini-MBA," teaching them how to position their companies for growth. Start-ups that are already flourishing, however, show voracious appetites for trained engineers who can devise and produce further innovations. As New Tech City grows and expands, so will that appetite, explains Pinsky.

So, next on the menu in New York is an applied-sciences university where engineers are also trained as entrepreneurs. Cornell University won a city-sponsored competition earlier this year to create a new campus for which the city is donating land and investing $100 million in infrastructure. The site, on Roosevelt Island, is currently occupied by a half-abandoned hospital.

In support of that effort, Google is lending space at its Manhattan offices for graduate students to start work in September while the hospital is demolished and construction work begins, probably in early 2014. The island campus is expected to open by 2017. An agreement is in place with Haifa, Israel-based Technion-Israel to create a high-tech research center at the university. The plan is to have business mentors work directly with students to patent their innovations and make start-up products available quickly to investors. The students will have a primary focus on developing software and hardware in those fields where New York is already a strong producer: medical technology, environmental and green energy.

In other areas of the country, the basic principle of building on existing successes and resources is also serving to regenerate innovation and growth. Take Nashville, for instance, where the workforce population is comparatively young (average age of 35) and the educational institutions plentiful (there are 21 four-year and post-graduate schools in the area, plus six community colleges and 11 vocational and technical schools). After the national wave of corporate consolidations and bank closings had taken its toll, not to mention the massive floods of 2010, Nashville's commercial market was weakened and some of its onetime showplace offices sat empty.

Through an initiative led by the Chamber of Commerce Partnership, a fledgling incubator space, with 18 small offices, was established last year; the partnership also helped rustle up seed money and focus local political efforts on taking advantage of business-incentive programs to seek relocations. Mayor Karl Dean waved a big welcome mat in front of companies that wanted to populate offices with young college graduates who could revive a 24-7, live-work-play culture Downtown—an area where existing restaurants, shops and entertainment venues needed an infusion of customers. When San Francisco-based ServiceSource opened its first small sales office in town four years ago, Dean commented that it was "right in our sweet spot."

Tennessee's Republican Gov. Bill Haslam and Democratic mayor Dean joined in courting the company and others like it, personally extending the possibility of a taxincentive package. Now, ServiceSource—an outsource revenue service manager for such technology giants as Microsoft and Adobe, and numerous healthcare companies—employs 700 people in Downtown Nashville, most of them recent college graduates recruited from the region. A few months ago, the company signed its fifth expansion lease at a formerly empty bank office tower, filling more than 100,000 square feet, with options to double that.

Similarly, economic development authorities in Northern Kentucky and Ft. Lauderdale have managed to lure companies by promoting the "livability" of their areas, along with incentives and extensions to their education pipelines. Karen Finan, as SVP of the Northern Kentucky Tri-County Economic Development Corp., covers a market that lies within the Greater Cincinnati metropolitan area. She says she always tries to mention the new $53-million home of the College of Informatics at Northern Kentucky University "in the first sentence" when talking with business prospects. In the next breath, she is wont to bring up the outdoorsy appeal of the famous Bourbon Trail, the newer Back Woods Wine Trail and the Boone County Arboretum, all within close proximity of urban centers.

"There's vibrant community redevelopment along the riverfront," says Finan. "That's what keeps us going. Some people look at Cincinnati and don't consider the very connected relationship with our region, but if you drive five minutes out of the urban sprawl, you find an amazing array of real estate and environments."

Up to now, the Kentucky region's economy has been dominated by advanced manufacturing; mainly, companies that produce technical components for the automotive and aeronautical industries. Last year, two of the biggest deals were expansions by Linamar, a manufacturer of engine components and parts for Ford, Chrysler, Toyota and Navistar, and ZF Steering Systems, which makes steering and suspension components for passenger cars and SUVs. But Finan says her region has jumped aggressively into the hunt for high-tech companies.

Last year, Tri-Ed dedicated "our efforts to getting our business community aligned with our education institutions to assess education needs of the future," she says. "Every type of business today is motivated to make use of the most skilled technicians and the most efficient technologies in order to keep a competitive edge."

In Covington, a cluster of life-science companies is being formed with seed money from a new grant program funded by the Duke Energy Foundation. Duke awarded $100,000 to BioLogic, a lifescience "accelerator" company, to set up a site for start-ups. As part of its effort, BioLogic will establish a network of mentors to assist start-ups with business strategy, a la New York's mini-MBA and applied-sciences university efforts.

Down in South Florida, there's less earnestness, perhaps, about promoting educational and training resources for the business workforce and a more concerted emphasis on the advantages offered by climate—both weather and tax. Bob Swindell, CEO of the Greater Ft. Lauderdale Alliance, says that is because imagemaking is crucial to economic development for the region.

Some significant moves to Broward County did occur even during the worst of the national economic doldrums. For example, Emerson Electronics made a strategic decision to consolidate its Latin America headquarters a couple of years ago, and recently held the official opening for its handsome new facility in Sunrise, FL.

"However, a marketing survey we did during the economic malaise told us we didn't have strong name recognition," says Swindell. "We had a great, fun brand that people would think of if they wanted to go scuba-diving, but not necessarily to locate their business. Our economic council members opted to invest heavily in marketing and promotion of the region over the last 12 months."

A $1.5-million national media campaign was unfurled, hyping the fact that, first and foremost, the region has low taxes and the state has no income tax. The alliance's business-development web page sets the tone with a cover photo looking straight down a palmtreed strip of beach, the ocean on one side and a city street on the other. "Life. Less Taxing," reads the slogan.

Perhaps the most talked-about TV ad ("It put us on the map with the relocation scouts," says Swindell) touted Ft. Lauderdale as the economic Gateway to the World and played up its airport and seaport access along with climate and lifestyle. Its crescendo moment, though, occurs when Wayne Huizenga, chairman of Huizenga Holdings, stands front-and-center on a bridge overlooking a sparkly, bustling port to remind people that Floridians don't pay income taxes. Clad in a bespoke suit and a warm smile, he adds cheerfully, "Hey, it's not what you make, it's what you keep."

Swindell says this approach was directly responsible for generating a flurry of inquiries about corporate relocations in the past six months and contributed to several recent moves by companies to expand their presence in Broward County. Last month, the Alliance chairman, Broward College president J. David Armstrong Jr., announced that 13 relocations and expansions had occurred in the six-month period ending in March.

Among these moves was Saveology Inc.'s investment of $2.4 million to renovate and expand its headquarters in Margate, keeping 550 jobs and adding another 700. Saveology, a company that markets cable and other tech services, capitalized on the "fun brand" aspect of Greater Ft. Lauderdale, too. Its new headquarters features a monkey habitat, koi pond, putting green and basketball court. Another firm, American Medical Depot, expanded in Miramar, adding 50 jobs, retaining 97 and making a $5-million investment.

"There were a total of 780 new jobs that came in, 943 jobs that stayed and more than $9 million in capital investment," says Swindell. "That's almost unprecedented in our region, and obviously a real accomplishment with the whole economy still lagging and every area competing as hard as they ever have to grow."