At a macro level, the US economy is still growing slowly. There are a few good signs of improvement, as we’re into the ninth year from 2008’s recession. But one bright spot are cities – and interestingly, not all large ones. And, if it’s a “smart” city planning well, it will likely create even more advantages – and opportunities for companies — in coming years.
Some positive macro points to track as we’re into the autumn and last quarter of 2017:
- U.S. household debt has continued to shrink – since 2008, many Americans reduced their borrowing, which is now showing up as more disposable income and recovering consumer spending,
- Rising home and stock prices are also a plus, which is making the ratio of consumers’ debt payments to their disposable income much lower than before 2008,
- Manufacturing employment is up, and
- New job growth remains steady, if somewhat tepid — along with stagnant wage growth – but still at a continuing positive trend and slowly making a tighter labor market, which will hopefully be good for wage growth.
But where oh where is real growth happening? Cities. Austin, Charlotte and Denver are three good examples of mid-sized cities growing rapidly.
Austin TX’s economy grew at a 5% clip last year – more than twice of the national average. Population growth too was significant: a 16% boost in population between 2010–2015, with the highest growth in the suburbs. What’s driving the surge? Professional and business services – not oil and gas as in many places in Texas. A large part of the growth is tied to employment in bigger companies moving in, including Apple, Facebook, Google and Amazon. A hidden benefit: young people. In the Central Texas region, there are over 400,000 college and university students, which is a rarity in the U.S. Plus, as one observer put it: “beer is cold, music is good, and the enchiladas are tasty” – a great combination!
Charlotte NC is another example of a booming city, with population growth of 15.1% between 2010–2015. Its economy is also growing faster than the rest of the state, growing between 3–4% per year for the same period. Again, what’s behind this growth? Historically, Charlotte has been a financial services center, with Bank of America’s and Wachovia’s headquarters. But since 2008, more companies have been moving their headquarters there, including Sealed Air and MetLife (in part due to lower corporate taxes). What surveys suggest for Charlotte is a reasonable cost of living, strong job growth, and a high quality of life, including weather.
Denver CO (and most of the front range area, from Colorado Springs to Boulder) is coming out of 3+% growth rates since 2008, with a 2017 forecast to be in the 2.4% range. Imagine living somewhere where it is estimated that up to 8,000 new people arrive every day? Construction, tourism and health care are the leading sectors. Rising home prices, such as in Boulder CO, are worrying some, but new tech start-ups throughout the Denver area are exciting to many millennials. Again, a high quality of life is cited by most Denver surveys.
What are some common themes? Dispersion and concentration are two key characteristics for all three of these growing cities. In today’s world of interconnectivity, from airplanes to the internet, more companies and jobs are allowing more flexibility — and dispersed — work forces. Goods and services are now available almost anywhere (e.g. Amazon effect), which again, are allowing more living location options. And, with an existing core or growing set of attractive amenities, from the outdoors (Denver), good music (Austin) and more urbane living and options (like Charlotte), smaller to mid-sized cities and “edge cities,” as the author and demographer Joel Garreau coined, will only continue to out-pace other U.S. cities in the future.
Where do “smart” cities fit in? The growth of smart city initiatives, at a basic level, is all about investments in infrastructure, technology and social capital to make more sustainable economic development and a higher quality of life. Cisco, for example, is building improved communication (ICT) networks for smarter cities. Each of the three cities above have some smart city initiatives underway, from Charlotte’s early energy efficiency efforts with Duke Power and 5G cell nodes for transportation improvements to Denver’s recent smart transportation grant from the Department of Transportation (DOT) to Austin winning one of five Smart City Council Challenge grants in 2016. From a future growth potential, more smart city initiatives should spur faster economic growth. But a key future question lingers: at what point does faster growth offset a higher quality of life as we’re seeing now in the Bay Area’s rapid growth?
For companies searching for growth, I’m finding many of my clients are not fully exploring current fast growing cities, let alone smart city initiatives. It’s not just new product or services opportunities, but what new partnerships or innovative platforms are possible? From our experience with innovation and new collaborative initiatives, there are exciting growth opportunities still untapped with cities.