Economic Development #1: The Question

Observations on the trend of new companies choosing to locate within a city.

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While established businesses race to relocate outside major metropolitan areas, an entrepreneurial renaissance is under way in that most unfashionable of places: downtown. Our own unscientific survey suggests the phenomenon is nationwide. Moreover, it seems to be concentrated in those very cities that are often written off as bad for business -- New York, Philadelphia, Boston, Detroit, L.A., and Washington, D.C.

One family-business owner told us recently he'd chosen a working-class residential neighborhood in Baltimore as his company's site because rents were 50% to 65% cheaper than in the suburbs, there was less traffic congestion than in the trendy suburban locations, and access to the airport was better. "And, of course, there's the quality-of-life issue," he added as we walked to lunch.

While cheap real estate is a factor, some companies locate in the city for strategic reasons. "All our competitors are out in the suburbs," says the marketing director of a Washington, D.C., copying company. "So we chose to be in Georgetown to be close to our customers. It's actually more expensive, but it's turned out to be a real competitive advantage."

This trend, if it continues, could be the best thing that's happened to our cities in years. The question is, Why aren't economic-development officials out on the streets, looking for ways to encourage other local entrepreneurs to head downtown?