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Area Development - Site Selection, Facility Planning and Workforce Development

Frontline: New Tech Havens Bloom as Digitization Transforms U.S. Economy

The fluidity of digital innovation - and its lack of dependence on a traditional industrial infrastructure - means that tech havens are blooming in newer magnets where tech-savvy workers are prevalent, ranging from Ann Arbor, Michigan to Richmond, Virginia.

Q2 2016
The prevalence of a tech-savvy workforce is beginning to take precedence over nearly every other factor — including low taxes and even the business climate — for many companies making site-selection decisions in a U.S. economy that is being transformed by digitization and where employers simply must corral enough millennials who can help them keep up. In fact, half of corporate real estate executives rated talent availability as the leading consideration in moves and expansions, according to a survey of 229 executives by real-estate services firm CBRE Group in March.
Southeastern Michigan is gaining as a result of how traditional automakers are wrestling with Silicon Valley heavyweights such as Google and Apple to control the crucial “self-driving” dimension of the industry’s future
This is certainly fuel for the economies of long-time digital outposts such as Silicon Valley, Boston, and Austin, Texas. But the fluidity of digital innovation and its lack of dependence on a traditional industrial infrastructure mean that tech havens also are blooming in newer magnets ranging from Ann Arbor, Mich., to Richmond, Va.

Case in Point
So, for instance, Greater Boston is luring companies these days almost solely on the strength of its human capital, because high-tax Massachusetts generally has been anathema to many CEOs. The state ranked only No. 25 in the Tax Foundation’s 2016 State Business Tax Climate Index and an abysmal No. 45 in the Chief Executive 2016 Best & Worst States for Business. But it finished No. 1 in the Beacon Hill Institute’s State Competitiveness Index released in 2015.

Now, that index happens to be compiled locally. But General Electric CEO Jeffrey Immelt is one who will testify to the appeal of Boston because of the millennial digital talents who live there. GE is attempting to recast itself as a modern amalgam of tech and fabrication and move away from old perceptions that it’s a traditional industrial company — even though it’s making the same stuff it did before.

In fact, Immelt made the stunning decision to move GE’s headquarters from high-tax Connecticut to high-tax Massachusetts almost solely because of this factor. And in that way, “Everybody is becoming a ‘software company’,” said Apu Gupta, CEO of Curalate, an e-commerce software outfit based in Philadelphia. “Everyone will be fighting over talent.”

Off the Beaten Path
This is one reason for startups to look for pools of digital expertise in cities that are off the beaten path. For example, Andrew Rose chose Richmond, Va., to base his online insurance-shopping startup, Compare.com, over a handful of major cities including Chicago, Dallas, and Los Angeles. “In Richmond,” Rose said, “we can get great talent at a cheaper cost and give them an exceptionally good work-life balance.”
Greater Boston is luring companies these days almost solely on the strength of its human capital, because high-tax Massachusetts generally has been anathema to many CEOs.
Southeastern Michigan is emerging as a digital-worker magnet as well. Being home to the Detroit Three automakers — with their thousands of engineers and scientists — helps. The region also is gaining as a result of how traditional automakers are wrestling with Silicon Valley heavyweights such as Google and Apple to control the crucial “self-driving” dimension of the industry’s future.

Thus, for instance, Toyota recently named Ann Arbor, Mich., home of the University of Michigan, as one of its three global test sites for connected-car research; Cambridge, Mass., and Silicon Valley are the other. Ford just announced an initiative that could cost it $1 billion to revamp all its headquarters operations in Dearborn, Mich., to become tech- and millennial-friendly. And a number of carmakers are working with the state of Michigan and other interests to turn an old airport into the world’s biggest and most advanced real-world test site for autonomous-driving technology.

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