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Emerging Industries, Emerging Locations
New technologies are pushing the development of new industry clusters. Here are some consultants' ideas about which locations might be on the fast track for growth.
Jennifer LeClaire  (Dec/Jan 08)
There is no lack of indexes, top 10 lists, or opinions about the best places for companies to do business. Some rankings are broken down according to attributes like work force, natural resources, cost of doing business, or industry. Others break down into categories like small cities, biggest movers, or best performing. There are enough rankings to make one's head spin.

With so many different categories declaring various cities, counties, and states "number one," the safest bet may be to base site selection decisions on criteria that have been observed for ages. But in an age where new industries are rapidly forming, the criteria may turn up in new places. Industries like life sciences, photonics, and digital media demand locations that support their specialized needs and provide proximity to end users of the products and services offered. Some of these industrial clusters are being formed off the beaten path.

"The desired criteria for site selection will probably never change. Work force is always going to be a key, for example," says Ed McCallum, senior principal of McCallum Sweeney Consulting, Inc., a site selection consultancy in Greenville, South Carolina. "But the places you find those desired criteria can and do change. The quality of infrastructure changes. The skill sets needed evolve, especially in a high-tech economy."

To McCallum's point, there are a handful of relatively new clusters emerging across the United States. Some are seldom mentioned. Others are widely mentioned but not well understood. All of them signal a new wave of innovation and potentially redefine some economic development landscapes of the future.

Alternative Fuels
Alternative fuel - or biofuel - clusters are beginning to emerge in strategic parts of the nation. Biofuels are made from plant materials, such as corn. President Bush has called for reducing U.S. gasoline use by up to 20 percent by 2017, mainly by increasing alternative fuel production, including ethanol. Ethanol production this year is estimated at 6.8 billion gallons and is expected to soar to 9 billion gallons next year, according to the Sioux Falls, S.D.-based American Coalition for Ethanol. The United States has 131 ethanol refineries, 10 of which are expanding, and 72 more are being built, according to the Renewable Fuels Association.

"We are seeing pockets of biofuel production across the country as people begin to think green," says Jonathan Sangster, senior managing director in the Atlanta offices of real estate services firm CB Richard Ellis. "The Upper Midwest and the Plain States are ideal for biofuel producers just because of the natural resources."

Center Ethanol Co. is building a $100 million ethanol manufacturing plant near Sauget, Illinois. Two biodiesel fuel operations are scheduled to go online in Granite City, Illinois, and two others already have been approved. Meanwhile, Tyson plans to build a $150 million alternative fuel plant in Louisiana. Many others are planned, though construction of new plants is beginning to slow as the supply catches up with the demand.

Photovoltaics
With the move toward green energy, photovoltaics is a wave of the future. Photovoltaics systems turn sunlight into electricity, but do so with the use of a specialized semiconductor diode. That's a different approach than traditional solar power, and it's one that's expected to take off over the next five to 10 years. Two billion households worldwide could realistically be powered by solar energy by 2025, according to a joint report from European Photovoltaic Industry Association (EPIA) and Greenpeace. And Piper Jaffray reports that the solar industry is expected to triple in the next three years, from about $13 billion to $40 billion in revenue.

"The cities that get the photovoltaic plants are destined to become clusters because the plants will attract suppliers, designers, research labs, installers and maintainers," says Don Schjeldahl, vice president and director of Austin Consulting, a site selection consultancy in Cleveland, Ohio. "The photovoltaic industry will take its route from the semiconductor industry because that's a core component of the solar modules."

Schjeldahl compares the opportunity to the automotive industry, with as many as 15 potential photovoltaic clusters in the United States. Today he points to four early contenders: Silicon Valley, California; Portland, Oregon; Albuquerque, New Mexico; and Boston, Massachusetts. The other 11 clusters, he predicts, will form around the market opportunities - i.e., states that have aggressive policies toward adopting photovoltaic systems. California will play an integral role, of course, but New Jersey, New York, and Washington are also in the running.

Digital Media

Digital media is a fast growth industry that taps both creative and technology skills. With Internet video hitting the mainstream, the industry promises to play a key role in the future of the entertainment economy. The annual growth rate of the digital media industry, which includes digital TV, mobile video, computer animation, Internet TV, and other digital formats, is 33 percent, according to Research and Markets. There are about a dozen recognized digital media clusters in the United States, but southern California and Orlando, Florida, are leading the pack.

For its part, Orlando is home to more than 1,200 digital media companies with 30,000 workers. The region's annual digital media revenue production totals a whopping $9 billion. The University of Central Florida offers a School of Film & Digital Media and a Florida Interactive Entertainment Academy. The Orlando metropolitan area is also home to Full Sail Real World Education, a specialty school offering degrees in digital media, computer animation, and film/video production. In all, more than 7,500 higher education students annually enroll in digital media programs throughout metro Orlando.

"Orlando has universities that are pioneering technologies, along with thought leaders and research leaders, and a bevy of successful digital media companies," says John Krug, vice president of Development Advisors, an economic development consultancy in Charlotte, North Carolina.

San Antonio has a similar, though less developed, digital media story to tell. The San Antonio Technology Accelerator Initiative announced the creation of a new digital media arts technology cluster in 2004. The cluster includes television and film production, computer graphics, animation, holograms, audio production, web design, and the gaming industry. More than 4,000 people work in the cluster.

Data Centers
With so much digital media and various other types of data, data centers are becoming a more important part of the world economy. Data centers house computer, data storage, and networking equipment. With the dwindling supply of data centers in Silicon Valley, clusters are gaining steam in other parts of the nation. AFCOM's Data Center Institute predicts that by 2010, more than half of all data centers will have to relocate to new facilities or outsource some applications.

"There's an opportunity for smaller communities to develop clusters because the criteria [don't] demand data centers be in a large city," says Danny Klinger, a project manager at AngelouEconomics, an economic development consultancy in Austin, Texas. He points to Quincy, Washington, as a prime example. There are a handful of data centers that have been built or are planned in a town with a population of only 5,000. Companies like Ask.com, Yahoo, Intuit, and Microsoft are opening up shop there. Cheap hydroelectric power - priced at about 1.8 cents per kilowatt - is part of the attraction.

"Large data centers are massive consumers of electricity and it costs them million of dollars to pay their utility bills," Klinger says. "Many times, rural communities have access to very cheap power. The other factor is land cost. A lot of data centers are sited on very large parcels of land and obviously land is cheaper in smaller towns and locations."



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