The Connection Between Vibrant Neighborhoods and Economic Growth

A new study of high-growth firms in Greater Washington, D.C., highlights the role of community in a thriving economy.

Image Elvert Barnes/Flickr
Downtown Silver Spring, Maryland. (Elvert Barnes/Flickr)

The past decade or so has seen the rise of a new formula for urban economic growth and development. While having a solid business climate that attracts companies and jobs remains important, it is also necessary to cultivate a vibrant, exciting community with a wide diversity of talent. This is true not only in cities and urban centers—which have been attracting young people thanks to what Alan Ehrenhalt dubs the “great inversion”—but in the suburbs as well. In fact, a recent study of 84 suburban areas found that vibrant, dense, mixed-use suburban areas performed better and were preferred over lower-density, auto-dependent office parks.

A new study published in the journal The Professional Geographer, by Emil Malizia at the University of North Carolina at Chapel Hill and Yasuyuki Motoyama at the Ewing Marion Kauffman Foundation, takes a closer look at this connection between community vibrancy and economic growth in urban and suburban neighborhoods—this time looking at Census tracts across the greater Washington, D.C. region. Greater D.C. is an appropriate place to examine this connection for two reasons. On the one hand, D.C. is one of the nation’s leading knowledge economies. On the other, D.C. has a wide range of urban and suburban communities, with vibrant urban districts such as its redeveloped downtown, Dupont Circle, and U Street Corridor; dense, mixed-use transit-oriented suburbs such as Bethesda, Arlington, Alexandria, and Reston; and more traditional suburbs and edge cities such as Fairfax and Silver Spring.

The study uses the Inc. 5000 index to examine the density of high-growth firms for a five-year period from 2007-2012. (Of the 556 high-growth firms included in the study, roughly a third are in government services, a quarter are in IT services, and 9 percent are in business products and services). The study then examines the location of these high-growth firms using a composite measure of community vibrancy based on 60-plus indicators of the so-called “five Ds” (density, land use diversity, urban design, distance to transit, and destination accessibility) from the Environmental Protection Agency’s Smart Location Database. This fine-grained neighborhood analysis gives us better insight into where firms locate within metros, and allows the authors to pinpoint the characteristics of the neighborhoods that matter most.

Vibrant neighborhoods are dense and compact, feature a diversity of land uses (i.e. office, retail, entertainment, and industrial spaces), are a short distance from transit, and have dense street intersections, among other characteristics. To parse out the role of community vibrancy, the study controls for the level of employment and resident workforce in each neighborhood or tract.

High-growth firms are incredibly clustered and concentrated across the D.C. region. Less than a fifth (17.4 percent) of the region’s neighborhoods have one or more high-growth firms and just 7.5 percent have two or more.

The map below, from the study, plots the location of these high-growth firms in red, with metro stations indicated by small green triangles. These firms are densely concentrated in and around downtown D.C.; Rosslyn and Arlington (specifically Ballston); Old Town Alexandria; downtown Bethesda and Silver Spring, Maryland; and Reston Town Center.

Ultimately, the study’s statistical analysis finds a close connection between the density of high-growth firms and vibrant neighborhoods, which holds even after controlling for overall employment and resident workforce. These vibrant centers are not only located in urban downtowns, but extend across suburban transit hubs and redevelopment areas as well. In other words, high-growth firms cluster in both urban centers and suburban areas that are dense, diverse, walkable, vibrant, and served by transit. And of course, a smaller percentage extend out into more conventional suburbs.

As the authors point out, the study’s findings move us beyond the overly simplistic dichotomy of dense, diverse cities and decentralized, car-dependent suburbs to “a more complex picture” of metros made up of “nodes of vibrancy.” Simply put, it is the vibrancy of a neighborhood—not whether it’s urban or suburban—that attracts high-growth firms and helps bolster a high-growth regional economy.

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