The economy, according to U.S. economists and labor analysts, the country could be heading toward “the biggest jobs-related crisis since the Great Depression.” This time around, however, simple and massive job creation might not be a viable solution.
According to the U.S. Bureau of Labor Statistics (BLS), nearly half (47%) of “all existing jobs will eventually be eliminated by automation and artificial intelligence.” To put it bluntly, the jobs lost during the Great Recession to other countries and simple economic forces aren’t coming back, so the country had better prepare. In fact, Ball State University’s Center for Business and Economic Research estimates that 85% of the manufacturing jobs commonly believed to have been lost to overseas employers between 2000 and 2010 were actually lost to something far more irreversible than low pay rates and less labor regulation: technology.
Although there are plenty of doomsday-sayers out there warning that this latest evolution of the labor market heralds such dire events as the end of the United States, worldwide recession, and the Apocalypse, the bureaucracy is, for once, making itself useful in a looming crisis. We’re not referring to the current administration, either, not because we stand for or against President Trump’s jobs policies, but because the real, relevant work going on in the United States to shore up our economy and our jobs market is being done on a different plane in a way that is highly relevant to real estate investors. We are referring to the creation, development, expansion and, above all, promotion, of the “high-tech corridor.”
As it becomes increasingly apparent that the economy cannot rely on manufacturing jobs, cannot rely on “bringing jobs back” from elsewhere and cannot rely on artificial stimulus forever, just about every municipal government, large or small, is focusing on establishing itself as a “high-tech” park, hub or, for the most ambitious, corridor. A high-tech corridor or, depending on the size of the community, a high-tech park or hub, when successfully developed, brings great things to the local real estate market and the broader economy, including:
A strong jobs market
High-tech jobs have a jobs-multiplier number around nine, with some actually going as high as 12 to 15. A jobs multiplier number is the number of jobs that the act of creating one job in a particular sector creates in total. So, for example, the creation of one aerospace engineer position at Honeywell International Inc.’s aeronautical division at its Phoenix facility will ultimately create the need for multiple other jobs in the Phoenix area.
That engineer will likely move into a nice neighborhood and require landscaping care. She or he will probably need pool maintenance since the home will probably have a private pool, and the extended family will also need child care, entertainment, options for eating out and day-to-day services like hairstyling. For all those things to happen, local businesses will end up expanding their footprint and creating more jobs as a result of that engineering position.
Infrastructure that is a magnet for federal funding and PR-friendly
High-tech developments need high-tech methods of access, meaning, in most cases, light rail and rapid transit options. To put it bluntly, the federal government (and most state legislatures as well) are very “friendly” to transit-related projects, especially when those projects involve light rail (trams or trolleys that travel along tracks installed on existing roadways) or heavy rail (subways or other trains that can carry high volumes of passengers and have their own dedicated tracks). Because these transit options are environmentally friendly, enable users to avoid driving to work and tend to support community growth in areas where cars are less affordable and accessible, federal and state governments often have dedicated subsidies for these types of projects. Thus, a high-tech hub of any sort is a good magnet for forgivable loans or grants for developers or the city supporting the project.
New developments in affordable housing
One of the most notable hallmarks of a high-tech development tends to be associated mixed-use development that is intended to house, entertain and otherwise cater to high-tech employees who wish to live close to their place of work. With more and more Millennials entering this business sector, walkable mixed-use developments that offer residential options, dining, entertainment, child care and retail space are becoming an inherent addition to any high-tech development. Mixed-use housing tends to be more affordable than traditional single-family residences and, as a result, is more accessible to homeowners.
Expansion of both the rental and residential markets
While trendy mixed-use developments will attract a number of residents, there will also be high-tech employees who wish to own or rent a single-family residence to call their own. Furthermore, remember all those jobs that aerospace engineer’s job created? Many of those new employees will end up either “upgrading” from a multifamily rental residence to a single-family rental or to homeownership, and a number of them will also likely move into the area from elsewhere, attracted by the growing jobs market. In every case, those individuals will need places to live, and many will want a traditional setting in which to raise their families.
Real estate appreciation
Real estate tends to appreciate when three things happen: the job market grows, local population enlarges and public planning and policy result in community expansion. This is particularly noticeable if a community is attempting a high-tech corridor, which, by definition, extends along a physical stretch of land that usually has been undeveloped prior to the planned corridor. In these cases, a real estate investor with a little bit of patience who is willing to read the “fine print” on community planning and department of transportation files can often spot areas where currently vacant and undeveloped land could soon be worth a great deal either to new employers hoping to build on the high-tech corridor or to the state or city as they install the infrastructure necessary to bring those businesses into the area.
While just about every town, city and metropolitan area in the country purports to be “high-tech central” these days, some of these developments have certainly fared better than others. For example, fewer than 10 years ago, Cincinnati, Ohio’s Over The Rhine (OTR) neighborhood was struggling as the city implemented “emergency demolitions” and politician after politician made promises and then wasted time and federal funds rather than actually improving the area. Today, however, the OTR development is a model of a successful high-tech transition: It boasts a streetcar for easy access, and the area has plenty of fully leased residential and commercial space. Property values that have skyrocketed since the mid-2000s. Austin, Texas, has accomplished similarly impressive feats on a much, much larger scale. The hometown of Dell has managed to expand tech-related employment by more than 40% since 2001 and attract a number of West Coast giants like IBM, Hewlett-Packard and Intel. Austin not only attracts the big players in the tech game but startups as well, to create a dynamic tech community. No state taxes, relatively affordable housing, fantastic municipal support from the local Chamber of Commerce and a thriving base of creative local talent serve to keep Austin at the forefront of the tech conversation.
Finally, the Phoenix-Tucson Corridor, which is expected to completely fill in the space between Phoenix and Tucson, Arizona, within the next 10 to 15 years, stands not only as a successful and still-expanding high-tech corridor, but also as a great example of what reading state department of transportation documents in conjunction with local foreclosure trends can tell you about the future of an area. Several years ago, the Arizona Department of Transportation (ADOT) released extensive documentation about how transit options ranging from buses to heavy rail could be extended into a number of small towns off I-10, the highway that now serves as the backbone of the corridor. Shortly thereafter, lenders began foreclosing on delinquent properties in the area at an accelerated pace, which is usually an indication that they believe the positive movement is pending in an area. Now, the corridor is thriving and home to myriad tech companies bolstering both cities’ economies. Furthermore, local developers and community organizations are seriously exploring the viability of intercity rail connecting Phoenix and Tucson, likely a further indication that growth in the area will continue to experience support in coming years.
Also of note for real estate investors is Florida’s High Tech Corridor (FHTC), which is at a much earlier stage of development. FHTC spans 23 counties across the state of Florida and is intended to encourage development along the major highways and interstates that connect them. The corridor’s council has worked hard to negotiate myriad matched-funding grants, entrepreneurial support and research-and-development funding for universities that work with the council (and in many cases spend education and research funding to develop new facilities physically on or near the corridor) and for other STEM (science, technology, engineering, math) corporations as well. With large areas of the interior of the state still relatively undeveloped compared to areas like Miami-Dade, Orange and Pinellas counties, investors should watch sparsely populated areas around the highways of the FHTC for signs that the state is planning transit expansion, that local banks are getting ready to sell off REO properties, or that corporations or research institutions are preparing to build facilities in a given area. Because FHTC is in an earlier stage than many other established high-tech developments — but shows all the signs of being well-supported by both public and private entities — there is still a lot of potential in the area if an investor is willing to monitor the market and do a little research.