Rethinking the Future of Economic Development in a Work-from-Home World
Rethinking the Future of Economic Development in a Work-from-Home World
COVID-19 has accelerated many trends – including the work-from-home movement that was already inching along pre-pandemic. As a result, and as we discussed recently, there will continue to be significant de-urbanization with out-migration from mega-cities like New York to second-tier cities like Nashville and even smaller communities like Boise.
This will cause urban and regional Economic Development officials to shift, or at least expand, their growth strategies in important ways.
Traditional Economic Development
For years, municipal economic development has been company-focused. It was centered solely around attracting new companies and helping small, local companies get bigger. Jobs would follow. Economic Development teams used tax credits, zoning, permitting, property tax abatements, workforce training, and other tools in their arsenals to help companies make the right decision.
Who can forget the drama of 2017 when Amazon received proposals from more than 200 cities in North America to be the site of its second headquarters?
This approach isn’t going away, but it will no longer be the sole focus of local economic development efforts.
A More Recent Perspective on Economic Development
Fast forward to December 2020 when Oracle announced it had changed its corporate headquarters from the Bay Area to Austin, where it already had a significant presence.
“Change” … not relocate. It’s not clear if any employees will be moving, and the company announced at the same time that work-from-home arrangements for the majority of its teams would be the norm for the foreseeable future.
The head of Austin’s Chamber of Commerce noted at the time that he didn’t learn about the “change” until it was announced by Oracle. The Governor noted that the state had provided no economic incentives.
Since Oracle’s employees already had shifted to a remote work environment, this is essentially a paper transaction … one with major tax-savings implications for the company.
Future Economic Development
No doubt there will be more Oracle and even Amazon scenarios in the future. Economic Development teams will continue to compete, and companies will continue to look for ideal situations and take advantage of the offers.
But there will be a new twist. Increasingly, the Economic Development teams will also compete for people – specifically work-from-home corporate employees, executives, and entrepreneurs.
Here’s how they’ll do it:
Investing in Digital Infrastructure
Instead of only investing in traditional infrastructures like roads, sewers, and industrial parks to attract businesses, development teams will also invest in public-private partnerships to develop IT infrastructure to support universal Cloud access, fiber, and 5G telecommunication for individuals. This will – or should – be a local government priority in any case, given what we learned about the disparate wireless technology access that put some students and families at a significant disadvantage during the pandemic.
Larger cities may already have extensive high-speed Internet availability, but their city planners will ensure there are no gaps. Smaller cities and rural areas will have further to go to compete in this area.
Investing in Schools
Work-from-home employees searching for a new home will also be sensitive to education opportunities for their children. School districts will step up their game to provide documentation of their high-quality education, especially in the STEM areas important to these employees. Private tutor networks will also become a hot issue in the future.
Investing in Lifestyle Amenities
A transplant exploring alternatives to New York or Los Angeles won’t necessarily expect to find the level of arts, cafes, fine dining, and other lifestyle-related features they’re used to. But these differentiators will certainly catch their attention as they look for a less expensive home city to work from. As cities compete for these individuals, they’ll create their own style of upscale dining, arts, entertainment, and cultural districts to help entice and retain them.
Keeping an Eye on the Cost of Living
Since the high cost of living in mega-cities is a big reason many work-from-home employees choose to relocate, cities and regions will evaluate one of the major living expenses they have some control over – the cost of housing. They’ll pay more attention than ever to zoning and permitting to ensure they have the right mix of houses at the right price points.
Recruiting VIPs – Executives
As implied above, not all work from home recruits are equal. Attracting top executives will be relatively more important since they’re likely to bring a bit of the corporate presence with them – possibly leadership teams, business functions like conferences, new hiring authority, and so on. Their relocation may trigger future corporate growth in that area as well. Oracle, for example, stated that although few if any employees would be asked to relocate to Austin, new corporate hires most likely will be based in that region.
That’s why recruiting these executives deserves a special focus. Cities may go so far as to try to build rapport with these executives on an individual basis and incentivize these individuals in the same ways they used to court them when they were doing site visits for a company relocation. Now when they come to visit, they’ll be checking out residential real estate, but they still may find concert tickets and lift passes waiting for them at their hotel.
The Other VIPs – Entrepreneurs
Chattanooga has used financial incentives to convince entrepreneurs to relocate to their city and build their businesses there. These so-called “soft landing programs” targeting people rather than existing companies will be an important part of many cities’ economic development strategies as well.
Creating a startup culture with a supportive ecosystem, mentor networks, accelerators, and access to funding are all essential ingredients for developing a hotbed of startup activity.
Collaborating with Vacation and Tourism Boards
Many of the features that make an urban area or region attractive to a tourist are the same things that will appeal to a corporate executive, an entrepreneur, or a work-from-home engineer. They include climate, recreation opportunities, and eclectic dining and entertainment opportunities. Thus, moving forward, tourism outreach will most likely include a “You may even want to live here…” message.
Local Team Effort
In order to accomplish all of this, we’ll see local economic development boards expand their programs, bringing in representatives from residential real estate, recreation, education, city planning, tourism, and other specialists. This will help ensure everyone with a stake in attracting these sought-after workers is pulling in the same direction to make their city or region the residential location of choice.
Economic Development groups are typically evaluated on how many jobs they bring to the city. A new metric will need to include their success in attracting key individuals as well.
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