Hot Spots: A Field Guide to Your Local Economy
You don't need sophisticated research to tell how entrepreneurial your community is. just walk the streets
Wig shops are the kiss of death.
If you savor strange cities and enjoy looking for signs of vitality or opportunity, you doubtless have your own ways of telling a promising place from one whose biggest brag is a two-tenths-of-a-penny tax cut.
You may look for intriguing, idiosyncratic bookstores or cobbler shops with old men in them who really understand how to take apart and fix good boots. With experience in reading the landscape, you may have become sophisticated enough to spot such ominous economic indicators as the aforementioned wig shops. An abundance of those is the classic sign that a shopping district is about to collapse.
You have no business, however, considering yourself a savvy city cruiser if all you can do is tell the difference between Trenton, N.J., and San Francisco. After all, those are old industrial-age downtowns. They are familiar. We've been building those for 150 years or more. Those are settled -- if not ossified -- environs, not raw new frontiers.
That's why you won't find the bulk of small-business start-ups in old downtowns. We are now going through the biggest revolution in seven generations in how we are building the cities that are the cornerstones, the capstones, and, sometimes, the millstones of our civilization.
Every growing urban area, worldwide, is growing like Los Angeles, with multiple urban cores that I call edge cities. Edge cities, like King of Prussia, in the Philadelphia area, or Silicon Valley, south of San Francisco, now greatly outnumber the old downtowns. Edge cities are not suburbs. They are huge, and they are their own new "urbs." At 9 o'clock in the morning, far more people are heading into edge cities to go to work than are leaving them to go to work elsewhere.
Edge cities represent the third wave of moving our lives into information-age environs. The first wave was suburbanization, especially after World War II, when we moved our homes out past the 19th-century definition of "city." The second wave, in the 1960s and 1970s, was the "malling of America," when we moved the provisioning of our worldly goods out to where we lived.
Now we've moved what has been the central purpose of cities for 8,000 years -- the creation of wealth -- out to a new frontier. By that all-important measure -- jobs -- there are 181 edge cities in the United States -- each of them bigger than Nashville or Memphis. Because edge cities are so new -- 30 years ago they were only cow pastures or traditional bedroom suburbs -- we're still figuring out what distinguishes good ones from bad ones. This article, therefore, is Inc.'s guide to recognizing the winners and losers in edge cities in the 1990s -- expressed both as rules of thumb and statistical analyses from the Edge City Database, the first database specifically designed to analyze where people work, developed by the Edge City Group.
Edge cities are nothing if not dedicated attempts to clear away obstacles to growth. Thus, the easiest measures of success are dollar-denominated ones recognized by the market. They include affordability, accessibility, mobility, and "nice."
Affordability means that cops and teachers have a place to live reasonably nearby. That's a problem for edge cities like Silicon Valley, the South Coast Metroplex of Orange County, Calif., and many in the Washington, D.C., New York City, and Boston areas. Some of the earliest edge cities -- like Greenwich and Stamford, Conn. -- were built by people who thought an economy revolved solely around chief executive officers. Such places are loaded with lavish executive housing and impressive country clubs.
Don't let the fancy homes and clubs beguile you, however, into thinking that those edge cities are healthy. Every one of the CEO positions is supported by 20 or more people in lesser but no less important positions: they fix the Xerox machines, mind the kids, serve the meals, park the cars, sell the fax machines. There is no way to grow a business -- much less bring in a new business from outside -- if such workers can't find a place to live.
When you compare all 226 major urban cores in the United States -- the 181 edge cities and the 45 downtowns -- as our database does, you discover that some stellar locations are tough places to grow a business that needs grunts. In the Hauppauge area of Long Island, N.Y., for example, more than 70% of home rentals are at least $750 a month. That's tough on a working person's pay.
There are other very desirable edge cities with a larger range of housing options. The leafy and attractive Overlake- area edge city near Seattle, for example, has median home values below $200,000, as does the Reston/Herndon, Va., area of Washington, D.C. The typical home in the edge city of Plano, Tex., is below $150,000. In the Schaumburg, Ill., area, the figure is below $140,000. That's why those places are thriving.
Accessibility means that you can get to and from your edge city easily. Cities throughout history have risen or fallen on the quality of their ports. Not only are high-quality air connections crucial for reaching customers, they are increasingly the means of delivery by just-in-time air freight. Almost all edge cities have easy connections to key metropolitan areas like Tokyo, London, New York City, or Los Angeles.
Mobility is the degree to which you can get around within your edge city. The bellwether is simple: if it's possible to routinely schedule breakfast meetings, your place does not have serious traffic problems -- no matter how much the locals whine. Atlanta? Phoenix? Their traffic jams are not serious compared with those of the Los Angeles Basin or the New York City region. As many as 10% of the commuters in the outermost edge cities of those areas commute more than 90 minutes one way, leading the nation in that category. (The average American worker commutes 22.4 minutes.)
The number one outward-commuting urban core in America is the edge city of Silver Spring, Md. More than 45% of its residents endure a significant drive because the jobs near their homes are not appropriate for them. That defeats the whole point of an edge city. For the Washington, D.C., region, more troubling is that 9 out of the nation's top 10 edge cities in this particular measure of unpleasantness are in nearby Maryland and Virginia. Throughout the '80s and early '90s, the Washington, D.C., region led the nation in white-collar job growth. Recently, that region dropped below the national average. I believe there is a connection.
The fourth measure of an edge city is the "nice" factor. Edge cities were invented by and for the American middle class -- the most well traveled and highly educated population the world has ever known. The middle class knows the difference between a good place and a bad one.
What will drive the market until at least 2010 will be the race to provide edge cities with hard-to-quantify aspects that they now usually lack, but that are important to cities that people cherish -- stuff like "civilization," "identity," "community," "soul." Those are the gauges that separate old Rome from, say, old East Berlin.
The umbrella issue is quality of life. To take a trivial example as an indicator of places with a lively social life, we did Edge City Database computer runs on the number of watering holes for every 10,000 employees in each of America's urban cores. Forget it. Of the top 10 watering-hole locations, 9 turned out to be in Texas.
We've also done Dun & Bradstreet runs on ethnic restaurants, only to discover with some incredulity that restaurant critics have not yet discovered edge cities like Rosslyn-Ballston, Va., where immigrants have launched Afghanistani, Thai, Salvadoran, and otherwise fragrant, intriguing, and tasty eateries.
Some other rules of thumb have emerged:
Worry about the future of places that rely on government tenants. Government workers in places like downtown Atlanta or the Security Boulevard area of Baltimore seem to live out of brown paper bags; they create little demand for lively shops and restaurants surrounding their offices. Also, government is not a growth industry.
Take antigrowth movements as positive indicators. Look at the people who successfully repulsed Walt Disney's plan for a theme park near the Manassas National Battlefield. What you observe is an attractive target market -- affluent and educated people concerned about quality of life. If they care that much about the place they're in, it must have something remarkable going for it.
Look for places that have made significant civic investment in art museums, streetscapes, public transportation, and parks. To thrive long term, a place has to have people who care about it -- stakeholders who have affection for it, who think of it as theirs -- like the Uptown/Central Avenue area of Phoenix or the Rice University/Texas Medical Center area of Houston. The earmark of such concern is charming and lasting nonprofit investment, like the famously glitzy, $73-million, 3,000-seat, completely privately financed Performing Arts Center in Costa Mesa, near Irvine, in Orange County, Calif.
Pay attention to strong public-private partnerships. Edge cities rarely have mayors and city councils. But they have frequently created "establishments" or "councils of the gods," full of CEOs who thrash out the burning issues of the day. A prime example is the Buckhead Coalition, in Buckhead, near Atlanta, or the Houston Uptown Association, in the Galleria area. If there is no such formal or informal council of the powerful -- which inexplicably appears to be the case in, for example, the Denver Tech Center edge city -- how does anything significant get done?
Consider the sight of tower cranes a cause for slack-jawed amazement. As recently as two years ago, North American edge cities were so overbuilt that the 10 million square feet of new office buildings going up in Mexico City exceeded all 226 U.S. markets combined. Today U.S. commercial real estate is reviving, but there are still bargains to be found: real estate is changing hands at prices below original cost. That's why new construction -- as in the Platinum Triangle area of Cobb County, in the Atlanta region -- remains an intriguing market anomaly.
Look for imaginative retrofit. If you see down-at-the-heels shopping centers being gutted and rehabilitated for new use, pay attention. Rehabilitation may represent an edge city moving into the fourth wave -- the search for civilization and soul. Some of those retrofits involve moving way upscale, housing Hermes and Tiffany's, as Tysons Corner, Va., is doing. Some gut jobs now house new play centers for children. Others are becoming arts centers. And then there are the seedy shopping strips that are being made over into hopping night-club and virtual-reality strips, as in the Richmond Avenue area of Houston. (I love the Yucatan Liquor Stand.) A crucial sign: the parking lots. If you see them being jackhammered to be replaced by expensive, structured parking decks to free up land for new building, that is way hot demand.
Look for wealthy minorities. One of the vestiges of racism is that most people still don't realize that the top third of all African Americans in this country make more money and have more education than the average white person does and that almost all of those African Americans live in predominantly edge-city environments that are usually 70% to 90% white, where their market needs are not met. Did you know that the Lanham/ Landover edge city in Maryland, outside D.C., which has a highly affluent, educated African American majority, shows a higher growth rate than Plano, Tex., and still doesn't have a first-rate restaurant or bookstore?
Keep your eye on enterprises with a proven track record in spotting great edge-city locations. Borders Bookstores, recently bought out by K-mart, recognizes that edge cities are full of people with advanced degrees who yearn for huge, full-service bookstores with couches and coffee bars. Other significant players that research and find quality locations include Ritz-Carlton, Embassy Suites, and Nordstrom.
Be wary of places that are full of clichÉs. If you're looking at a community that thinks that a new Bennigan's or TGI Friday's is the epitome of chic, run -- do not walk. The next thing you'll hear is bragging about food courts. Ask people where they go for their morning coffee. If the answer is McDonald's drive-thru, be concerned. Find a place where coffee shops that sell expensive, flavored coffee -- like Starbucks -- are opening on every corner, for example, the Newport Beach area of Orange County, Calif., or even downtown Washington, D.C.
Throughout history, people have built cities to meet their needs. The turn of the third millennium is no different. The edge cities we are building today will evolve to meet our needs. How we build them will describe our values in, literally, the most concrete way possible.* * *
Joel Garreau, author of Edge City: Life on the New Frontier (Doubleday/Anchor, 1991), is a principal of the Edge City Group. The Edge City Database is distributed by Strategic Mapping Inc., in association with Dun & Bradstreet, 800-866-2255.
THE HOTTEST EDGE CITIES ARE KID-FRIENDLY
The baby boom has aged, and not surprisingly, 1991 was the crest of an echo boom during which more babies were born in the United States than in any year since the previous peak -- in the heralded 1957. If you're looking for hot edge cities, look for places that make life easy for moms and dads. This is bad news for old downtowns. It is great news for places with first-rate school systems. According to the Edge City Database, the top 10 urban cores, as measured by the percentage of residents who are married, with kids under 18, include the following:
1. North Coast, Calif. (San Diego area)
2. Schaumberg Area, Ill. (Chicago area)
3. East-West Tollway/Naperville, Ill. (Chicago area)
4. I-15 North/Escondido, Calif. (San Diego area)
5. Edens Area, Ill. (Chicago area)
6. Princeton/Route 1, N.J. (New York City area)
7. I-80/287, N.J. (New York City area)
8. Columbia, Md. (Washington, D.C., area)
9. King of Prussia/Route 202, Pa. (Philadelphia area)
10. I-287/78, N.J. (New York City area)
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