THE RETURN OF INDUSTRY TO AMERICA’S CITIES

In the U.S., it’s not the level of industrial activity that’s changing, it’s the mix … and Industry 2.0 will be in the city. Here’s what every urban mayor should know about the next 10 years.

 

CHART: Philadelphia’s wholesale industrial cluster by location, number of jobs and business function. Source: Interface Studio and ICIC. 
 

Industry 2.0. ICIC’s cluster analysis helps city officials assess which industries can make the most of their city’s asset base.  Industrial activity in the U.S. isn’t evaporating; it’s morphing into new sectors as legacy industries decline.  In fact, total industrial employment has been stable for three decades and is expected to remain nearly constant at about 33 million jobs through 2016.

Looking forward five years, employment in manufacturing and related industries is expected to decline by 16%.  However, in a sharp contrast to the prevailing narrative, other industrial categories are projected to grow 8% over the same period.  

Clusters such as construction and warehousing are expected to grow by double digits, while transportation and logistics will expand by a staggering 35%. 

Large industrial land tracts available at the right time. ICIC projects that over one billion square feet of industrial space will become vacant in the next 10 years. At the same time growing industries will require an almost identical one billion square feet.  

Cities are the natural location for much of the growth ahead.  Logistics, for example, requires access to transportation infrastructure and significant population, both of which are readily available in urban settings. America’s largest cities are home to a quarter of the nation’s deepwater ports, a third of existing inter-modal facilities and two-thirds of the nation’s 50 busiest airports.

Other industries, such advanced manufacturing, are projected to grow 15% in the next five years and require a diverse, educated work force and low-cost, flexible space in which to incubate new ideas and produce prototypes. With high concentrations of available workers, along with educational and medical institutions, cities remain the ideal location for such activities.

In short, we can build the new industrial economy in the footprint of the old one. The site characteristics of heavy industry are assets that can be leveraged by the industrial economy of the future.  

The environmental case for cities.  Continuing to expand industry in suburban areas sidesteps the need to clean up urban brownfields and increases the distance between firms and infrastructure assets and workers.  Repurposing existing urban industrial zones puts growing replacement industries where legacy losses are greatest, while reducing development, supply-chain, distribution and carbon costs. 

These are all lasting strategic advantages.  With them comes economic equity in the form of job opportunities for inner city residents, many of whom were left behind by the most recent economic expansion: Between 1998 and 2008, the 100 largest inner cities added only approximately 120,000 jobs, while their surrounding regions added over 6.6 million jobs.

Looking towards the future, cities are where the markets and industrial and intellectual assets will be located. They are the hubs on which the our economy turns. If the economic story of the past 20 years is how globalization and technology transcended geography, in the future age of cities, the economic story will be written in three words: location, location, location.




CHART:  Total U.S. industrial employment has been stable for three decades, although the mix of jobs is changing. Similarly, the legacy industrial space being vacated over the next 10 years is almost exactly what will be required for the industries that are growing. Source: ICIC analysis.