In 2019, Amazon announced the location of its second global headquarters: HQ2. It would be split between Crystal City, Virginia, and Long Island City, New York: both walkable, urban neighborhoods, one in Metro DC, the other in Metro New York City. New York later withdrew its approval, so Virginia ended up with the big prize. Almost 240 cities bid for the headquarters, offering as much as $8 billion in economic incentives, but in the end, it all came down to one criterion: the ability to attract and retain highly trained workers.
Both Metro DC and NYC have highly educated populations, access to international airports and functioning mass transit systems. Moreover, they both have the kind of walkable, mixed-use environments that attract young, talented workers.
While the economic environment has changed dramatically since the search for HQ2, the lessons learned for the cities that weren’t chosen and for the countless others that could never compete for the likes of an Amazon still apply. As downtowns rebuild local economies in the wake of COVID-19, it will be tempting to chase big businesses and look for one significant fix. But the lesson for cities, especially smaller cities and towns hoping to attract top talent, is that instead of chasing the next Amazon, they should focus on building a great place.
There is nothing wrong with pursuing an economic development homerun, but most cities will never succeed in attracting the equivalent of an Amazon headquarters. What’s more, the strategy of throwing money at big business is unrealistic for most cities and towns. So, what will work?
We believe the Main Street Approach, which leverages a community’s historic assets and unique sense of place to generate jobs and businesses, is the way forward. Over the past 25 years, the Main Street Approach to revitalization has a record of creating new jobs and businesses across the country, while also rehabilitating historic buildings and revitalizing thousands of commercial corridors. Since its inception, Main Street communities have seen $85 billion in new investment, rehabilitated 295,000 buildings, and created 672,333 net new jobs. What’s more, every $1 of public money invested in Main Street communities has leveraged over $30 of private investment. This is economic development as if return on investment mattered.
The Power of Small
Despite its enormous record of success, Main Street programs receive relatively little public funding or acknowledgment from policy makers and traditional economic development professionals. One reason the Main Street Approach hasn’t received more attention is because it has, for the most part, involved modest projects in smaller cities and towns. And many local officials think the traditional economic development approach of recruiting businesses and “chasing elephants” is the best.
Main Street demonstrates the power of small. Small steps, small businesses and small developments can add up to big impact. Building small is sometimes harder, more time consuming and less flashy than building the one big thing, but it is also more realistic, more cost effective and more durable than putting all your eggs into one or two baskets.
In fact, most new jobs grow out of existing businesses and are created by small businesses. In April 2020, the Small Business Administration reported that small firms accounted for 9.3 million net new private-sector jobs from 2005-2019, or 64% of the total. They also say that middle market companies (those with revenues of less than $1 billion) produce 3 out of 5 jobs in high growth industries.
The Main Street approach is also about creating better places. This is important because the link between quality of place and the ability to attract and retain residents and talent is becoming increasingly clear. Mick Cornett, the four-term mayor of Oklahoma City says that “economic development is really the result of creating places where people want to be.”
It’s also important to recognize that the big business subsidy approach often pits one community against another. Businesses often threaten to leave after the subsidies run out; and if you give a big subsidy to one company, other companies will likely demand the same. Ultimately, taxpayers will end up subsidizing huge global corporations and communities will have few options if the market shifts or the company flounders.
On the other hand, the Main Street approach of working to create a great place builds lasting assets that will pay dividends long after the initial investment. This approach helps existing businesses, and taxpayers end up investing in themselves.
The Power of Historic Assets
Main Street is an asset-based approach to economic development, and oftentimes a community’s greatest asset is its historic building stock. Main Street leverages the value of historic buildings, ensuring that they are kept in use contributing to a community’s future. So, what is the value of historic buildings?
First, historic buildings physically connect us to the past. They tell us who we are and where we came from. Saving historic buildings is about saving the heart of a community.
Sentimentality aside, historic preservation is also a critical tool for revitalization. Dozens of studies have documented that preservation is good for the economy, with positive effects on jobs, property values, tourism, affordable housing and environmental sustainability.
What’s more, while renovation and redevelopment are not new, today’s market is embracing older space with new fervor. In 2016, for example, the Urban Land Institute reported in its annual Emerging Trends in Real Estate Report that “office space in rehabilitated industrial buildings (like former textile mills or warehouses) is now commanding rents above new Class A product.”
Invest in Place
In today’s economy, considering that people can choose to live or work almost anywhere, creating a great place will be key to economic competitiveness in recovery and beyond. Next time your locality considers budgeting to spend millions to attract a global corporation, ask your leaders to consider devoting a small percentage of this amount to an economic development program with a track record of success and real return on investment. After all, for most communities, hitting an economic development homerun is a lot harder than hitting a bunch of singles that can add up to even more.
Portions of this article originally appeared in the Kansas Government Journal and the Virginia Municipal League’s Virginia Town & City.
Ed McMahon is Chair of the National Main Street Center Board of Directors and a Senior Fellow for Sustainable Development and Charles E. Fraser Chair for Sustainable Development and Environmental Policy at the Urban Land Institute. He is recognized nationally as a leading authority on topics such as the links between health and the built environment, sustainable development, land conservation, smart growth, and historic preservation.”