A Bankrupt City
The realities of present-day Detroit are grim and well-known. The city has been in free fall for decades. As Detroit’s manufacturing economy crumbled and many of its residents moved to the suburbs or left the region altogether, its population declined 25 percent in the last decade alone and 60 percent since 1950. With fewer than 714,000 inhabitants, Detroit’s population is now at its lowest level since 1910.
The city’s sheer size of 139 square miles has exacerbated the effects of this population decline. What remains of the city speaks of its past grandeur, contrasting almost painfully with its present condition. Manhattan, San Francisco, and Boston could all fit within Detroit together, with 20 square miles to spare. The city has become a land of empty places and ungoverned spaces: 36 percent of the city’s residential lots are vacant or contain abandoned homes, the response time for high-priority emergency calls is 58 minutes, and almost half of the city’s streetlights don’t function. Detroit has the second-highest rate of violent crime among U.S. cities with more than 100,000 people. Facing the worst job decentralization in the country, 61 percent of working Detroiters take jobs outside the city’s borders.
In July 2013, the city became the largest municipality in U.S. history to file for Chapter 9 bankruptcy.
But another story has been emerging around Detroit’s Downtown and Midtown.
The physical transformation of Downtown began with investments in amenities including new stadiums and riverfront renewal. But the economic transformation was catalyzed by an idiosyncratic urban advocate, Dan Gilbert, the founder of the mortgage-lending firm Quicken Loans. In 2007 Gilbert, who grew up in the Detroit suburb of Southfield, saw potential in the affordable land and historic buildings and moved his firm’s headquarters from suburban Farmington Hills to Downtown Detroit. Since then, he has brought more than 7,000 employees Downtown and purchased more than twenty-two buildings and two parking garages in the neighborhood. Gilbert’s confidence has sparked decisions by other companies, large and small, to expand their Downtown presence, from the headquarters of homegrown software-engineering firm Digerati and advertising agency Lowe Campbell Ewald to the local offices of global tech companies like Twitter and Uber.
Just north of Downtown, Midtown Detroit is also growing. Over the past decade, Midtown Detroit Inc. and a dedicated network of institutional partners have helped drive $1.8 billion in public and private investment in many of the area’s most important anchor institutions. The area is home to Wayne State University, the Detroit Medical Center, the Henry Ford Health System, and two campuses of the College for Creative Studies (CCS). All told, these four “eds and meds” institutions, which employ more than 26,000 people, have made hundreds of millions of dollars in investments in Midtown in recent years. Young tech and creative industry firms are joining this growing area, like small-batch manufacturer Shinola, which is co-located with a CCS campus.
These two areas make up about 3 percent of the city’s land mass and 3 percent of its residents but 37 percent of Detroit’s total jobs and 11 percent of its businesses. These concentrated, economically robust regions are poised to help propel the revitalization of Detroit.
Expanding the Foundation
Gilbert’s initial investment has fueled the growth of a digital cluster—led by larger firms such as Quicken Loans and Compuware—in the core of the city. From 2009 to 2011, jobs in the central business district (CBD) grew by 5 percent, while they declined 6 percent in the city as a whole. Demand for housing has followed the jobs. From 2000 to 2010, the number of households in the CBD increased by 26 percent to nearly 3,400, and today its residential offerings—mostly apartments and condos in mid- and high-rise buildings—are 97 percent occupied.
While the Downtown strategy was led by corporate relocations and small start-ups, the Midtown revival has been led by the expansions of the anchor institutions and Midtown Detroit Inc.’s slow-and-steady restoration of the urban fabric. More than two dozen businesses have opened or expanded operations in Midtown since 2012. As in Downtown Detroit, demand for Midtown living is strong: apartments are currently 95 percent occupied.
Since the Industrial Revolution, the location preferences of innovative firms and institutions—and their workers—have shifted alongside economic and demographic changes.
Industrial Districts (Late 19th and Early 20th Centuries)
In the nineteenth and early twentieth centuries, in Manchester, England; Torino, Italy; Germany’s Ruhr Valley; and America’s industrial Midwest, mature economies built industrialized districts, characterized by a high concentration of large-scale industrial enterprises commonly engaging in similar or complementary work, enmeshed in the urban fabric. (Shown: Sheffield, England)
Science & Research Parks (Mid to Late 20th Century)
During the last half of the twentieth century, in Raleigh-Durham, Silicon Valley, and suburban Washington, Boston and Philadelphia, the United States saw the creation of science and research parks, characterized by spatially isolated corporate campuses, accessible only by car, that put little emphasis on the quality of place or on integrating work, housing, and recreation. These physical forms were products of their times and their distinctive mix of demographic preferences, cultural norms, and economic imperatives. (Shown: RTI International Campus, Research Triangle Park, North Carolina, photo courtesy of RTI International)
Innovation Districts (21st Century)
Detroit, emerging districts in Barcelona, Boston, and Philadelphia and the urbanization of the Research Triangle in Raleigh-Durham all suggest a new form for our networked, collaborative era. At their best, they provide both the physical and the social infrastructure for collaboration and networking, including public spaces, flex space for collaboration, residences that also place a premium on shared-work and socializing spaces, social activities and networks, technical support, and mentoring programs. (Shown: Innovation District, Boston, Massachusetts, image courtesy of BGI/Neoscape/KPF/Dion)
Downtown and Midtown could be the country’s next innovation district—a relatively new term just beginning to gain currency among political, business, and civic leaders. It describes a concentration of innovative institutions and resources that together create a more-than-the-sum-of-their-parts effect. They have the raw materials to foster clusters and create new opportunities for residents of the city and the region: a density of innovative institutions and companies, including hospitals, universities, and research centers; clusters of tech and creative firms; and resources for entrepreneurs and new businesses, including affordable workspace and venture capital.
Decades of research has shown that innovative industries are concentrated in regional clusters, geographic concentrations of interconnected firms and supporting or coordinating organizations. Think Silicon Valley or Route 128 in Massachusetts, with their thick networks of professors, researchers, entrepreneurs, venture capitalists, intellectual property attorneys, and engineers who learn from one another, trade ideas, hop among companies, and create new enterprises.
The growing economic base and the clusters of innovative institutions in Downtown and Midtown are creating jobs, drawing in residents, and generating tax revenue for a city that is greatly in need of all three. But Midtown and Downtown have the potential to do even more for the city and the wider Detroit region.
Jobs in the high-tech sector have a profoundly positive effect on the economy—what experts call a multiplier effect. As the urban economist Enrico Moretti has found, over the long term, each new high-tech job in a metropolitan area leads to about five additional jobs. According to Moretti, “from the point of view of a city [economy], an innovation job is more than a job.”
Moreover, recent studies have shown that the most innovative industries are driven to collaborate and share knowledge more intensely, and proximity has a powerful positive impact on their ability to do so.
Economists Stuart Rosenthal and William Strange find that intellectual “spillovers”—what one company or person learns from another company or person—drop off dramatically with distance. At a distance of just over a mile, the power of intellectual ferment to create another new firm or even another new job drops to one-tenth or less of what it is closer in, they write, because “information spillovers that require frequent contact between workers may dissipate over a short distance as walking to a meeting place becomes difficult or as random encounters become rare.”
The Next Steps
Absent an economic revival, Detroit’s fiscal problems—fueled by too little economic activity to generate an adequate tax base—will be recurring and inescapable. The innovation district can be an important generator of new businesses, products, export opportunities, and jobs.
Because the local government is wrapped up in the long, complex, and painful bankruptcy process, networks of business, civic, philanthropic, university, and community leaders have to take on the task of building the innovation district. It requires myriad elements, including a ready workforce, transit links, investments in buildings and physical infrastructures, and a willingness on the part of institutions to share their innovations and intellectual capital. No one entity or individual can provide all these things. In Detroit, networks are doing this heavy lifting.
The city’s networks have thus far had successes in literally rebuilding Midtown and Downtown and encouraging people and innovative businesses to locate in these neighborhoods. The next steps for these networks include connecting more Detroit residents to jobs in Midtown and Downtown, whether they be in traditional service sectors, emerging manufacturing companies, or other innovation clusters.
According to one study, existing Downtown firms have the capacity to offer 11,500 additional tech-related and other jobs over the next several years, a number that doesn’t take into account opportunities created by new companies that stakeholders hope to grow in the area.
Detroit’s networks will need to continue to do the hard work of drawing in or providing more public, private, and civic investment to continue the market momentum in Downtown and Midtown, and supplying the subsidies that are, for the time being, necessary to make real estate deals feasible there (the suburbs needed subsidies, too, in their early days).
- Cities, including hard-hit places like Detroit, have geography working in their favor. They are frequently home to dense concentrations of the people and institutions that are crucial for innovation. And increasingly, people want to live and work close to friends, collaborators, and peers in vibrant neighborhoods with lots of activity.
- Even though ideas travel widely through cyberspace, there is no substitute for face-to-face interactions and unplanned encounters that lead to great new ideas.
- Detroit’s intense civic engagement, networked leadership, and reevaluation of assets make it a model for other cities and metropolitan areas.
This story is adapted from The Metropolitan Revolution book and iPad app by Bruce Katz and Jennifer Bradley. Story presented by the Brookings Metropolitan Policy Program. iPad app, including the graphics and videos in this story, produced by Melcher Media and designed and developed by Crush+Lovely.
Learn more about The Metropolitan Revolution at http://www.metrorevolution.org