Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.
A new study finds that high-growth companies flock to neighborhoods that are more mixed-use and transit-accessible, whether in urban centers or suburbia.
For all the talk about tech firms heading back downtown, Amazon chose two HQ2 locations more on the fringes of urban centers—Long Island City, Queens, New York (roughly three miles from Midtown Manhattan) and Crystal City, Virginia (about four miles from downtown D.C.) But these are not traditional suburbs by any stretch of the imagination. They are dense, have mixed uses, and are accessible by transit. The tendency for high-growth firms to locate in such places in both urban and suburban areas is the subject of a new study published in The Professional Geographer.
In the study, authors Emil Malizia, of the University of North Carolina at Chapel Hill, and Yasuyuki Motoyama, of the University of Kansas, argue that the debate over whether growing companies prefer cities or suburbs is oversimplified. Despite the recent shift of companies back to urban centers, more Americans continue to live and work in suburbs. And, for decades, suburban hubs like Silicon Valley and Route 128 outside of Boston were the preferred destination for the tech industry. The study examines the degree to which high-growth firms gravitate to more vibrant areas—defined as neighborhoods that are denser, more mixed-use, more transit-accessible, and more walkable—in both cities and suburbs.
Malizia and Motoyama identified firms based on Inc.’s yearly lists of the 5,000 fastest-growing privately-held firms, each taking in at least $2 million in revenue annually. Firms in the study qualified as “high-growth” because they grew by 20 percent each year for three years or had more than 72.8 percent compound growth over three years between 2007 and 2015. The study was not confined to particular industries, but those represented prominently in the sample included tech, advertising and marketing, business products and services, government services, and health.
The sample comprised roughly 6,000 high-growth firms across 30 selected U.S. metro areas (Malizia and Motoyama excluded New York and Los Angeles because those metros are so large that they might have skewed the results). They measured vibrancy according to characteristics such as density and compactness, diversity of land uses, walkability, and accessibility to transit, based on data from the EPA’s Smart Location Database (SLD).
The maps below show the locations of high-growth firms in four metros: Washington, D.C., Boston, Atlanta, and Phoenix.
Notice the cluster of firms in the center of the first map, of greater Washington, in and around downtown D.C. But dots also radiate outward along major highways into the Northern Virginia suburbs, especially Arlington, Alexandria, Falls Church, Tysons Corner, and Reston, and to the north in suburban Montgomery County, Maryland, around the National Institutes of Health in Bethesda up to Rockville and Gaithersburg.
Next, in the map of greater Boston, we again see a dense cluster of dots in Boston proper and in Cambridge (home to MIT and Harvard). Again, the dots radiate out into the western suburbs; then they arc north, along Interstate 95. Historically, high-tech firms in Massachusetts were located along the region’s Route 128, which runs concurrently with I-95 for some distance.
Now look at Atlanta. Its high-growth firms are spread out, extending well into the suburbs along major highways, as you might expect of a Sunbelt city. Yet there’s also a concentration of firms in more central urban neighborhoods, especially around Georgia Tech and downtown.
Finally, the map of Phoenix shows a pattern of dispersed dots and smaller clusters of high-growth firms, with less concentration in and around downtown.
Of the four metros in the study, Boston and Washington, D.C., were found to have the most vibrancy, and also the highest concentrations of high-growth firms in and around the urban center. Atlanta came out as a mixed bag. Phoenix has the lowest level of vibrancy, according to the study, and also has the most spread-out and sprawling pattern of high-growth firm location. That said, all four metros have large clusters of high-growth firms in suburban areas.
Importantly, the study found that vibrancy plays a key role in the location of high-growth firms in the suburbs as well as in and around the urban core. Growing companies do not just choose a location randomly or spread out anywhere along a highway corridor. Rather, they cluster and concentrate in the more vibrant parts of both urban and suburban areas.
Generally, high-growth firms are more likely to cluster in vibrant urban areas than in the suburbs. But those in the suburbs tend to locate in places that are significantly more vibrant than the suburban average. This is true even of suburban office parks: Those situated amid higher density, that offer more amenities and are better connected via transit, tend to contain more high-growth firms. As the authors put it, “high-growth firms cluster in employment centers that are more dense, diverse, walkable, and connected.”
The study adds to our understanding of the richness and complexity of metropolitan areas. America’s metros are not as simple as dense, amenity-rich downtown areas surrounded by faceless, car-oriented suburbs. They are patchworks of different kinds of urban and suburban communities, made up of urban cores, primary downtowns, secondary downtowns, denser inner suburbs, and all sorts of mixed, “in-between” places. Although vibrancy is highest in primary downtowns, secondary downtowns can also be quite vibrant. They are often home to key anchor institutions such as universities and hospitals and connected to the urban center via transit.
Instead of a simple breakpoint between dense cities and sprawling suburbs, our urban and suburban areas form a continuum, with vibrancy being the essential feature of their economic success.
CityLab editorial fellow Nicole Javorsky contributed research and editorial assistance to this article.