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New Life for Downtowns as Innovation Districts

Struggling downtowns can embrace a new role as knowledge centers of a changed economy.

Fulton Labs building
Fulton Labs
Editor's Note: This article appears in Governing's Summer 2024 magazine. You can subscribe here.

In certain sectors, working from home, either part time or full time, has become a structural feature of the post-pandemic economy. As a result, cities need to move fast to diversify their downtowns. To do this, they can’t just rely on the office-and-entertainment strategies of the past two decades. Instead, they should return to their historic role as centers of enterprise and innovation.

Many cities have begun to focus on maximizing the conversion of office space for residential purposes. That move is essential, but cities must go further and link downtown revival with the mega-trends and unprecedented federal spending that are reshaping the broader U.S. economy. A new economic order is being created in the United States, driven by the reshoring of production, the decarbonization of the economy, and transformative federal and state investments around climate, defense, manufacturing and infrastructure.

This new geography is metropolitan in scope, given the land, energy and logistics demands of many industrial facilities. Still, downtowns can play a fundamental role in this economic restructuring, given that this new order demands continuous innovation in technology and financial products, as well as market processes and institutions.

Downtowns are not, of course, going to suddenly house super-sized semiconductor facilities. But they could, among other things, become platforms for the innovative parts of universities, health-care facilities and major industrial companies; advanced research centers of excellence and laboratories; startups and scale-ups in sectors such as defense tech, clean tech, med tech and fintech; and help guide the transition to climate-friendly buildings, renewable energy and the modern grid.

Some of this is starting to happen. In Newark, N.J., a hard-tech incubator known as HAX attracts pre-seed startups that focus on emerging clean tech, robotics, neurotech and bio manufacturing, reinvigorating a historic department store as the hub of a new entrepreneurial ecosystem. In Chicago, Fulton Labs in the West Loop has become a magnet for bioscience companies and research labs. In Syracuse, N.Y., HII, the nation’s largest military shipbuilder, has opened a new engineering facility in a former department store. In Dayton, Ohio, Infinity Labs, a fast-growing firm in the advanced air mobility sector, has taken space in the historic Dayton Arcade. Even in San Francisco, the epicenter of the “urban doom loop,” a surge in generative AI startups is leading the early rebound of the commercial real estate sector.

As downtowns become new innovation hubs, federal and state infrastructure investments could also be marshalled to enable mixed-used innovation campuses by decking over or reconfiguring freeways and rail yards and leveraging underutilized publicly owned parcels around transit and rail stations. This too is underway. In New Haven, Conn., the remake of Route 34 is enabling the build-out of Downtown Crossing, a rapidly growing innovation district powered by Yale University’s cutting-edge research in life sciences. In Philadelphia, the planned reconstruction of 30th Street Station will further fuel the growth of the gene-and-cell therapy hub anchored by Drexel University, the University of Pennsylvania, leading hospitals and companies like Spark Therapeutics.

Federal leadership will be key to scaling these organic efforts. In the late 1970s, President Jimmy Carter signed an executive order favoring downtown office space for federal agencies. A 2024 version could direct the Department of Defense to use vacant downtown office space to house defense-related R&D and technology firms, as well as defense personnel themselves.

To paraphrase Mark Twain, the death of America’s downtowns is greatly exaggerated, if cities can fully embrace the possibilities of the new economic order.

Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
Founding director of the Nowak Metro Finance Lab at Drexel University
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