Tuesday, August 20th, 2013

Trends in American High-Rise Construction by David Holmes

[ David Holmes did a research project on high-rise construction in the last decade. There are some interesting and surely controversy-provoking stats in there, so I’m glad to be able to share his writeup here – Aaron. ]

Skyscrapers and skylines have long played a role in the perception of major U.S. cities.   The decision by an individual developer or company to “build high” is driven only in part by corporate office space needs or by local market demand for apartments, condominiums, or hotel rooms with a view.  The construction of high rise buildings is also influenced by ambition, ego, and other non-economic factors.

Skyscrapers play a unique role in the urban landscape, serving as a source of civic pride for local residents (for whom the buildings can serve a physical embodiment of the economic vitality of their chosen home city), as a symbol of power and economic might for their developers, owners, or occupants, and as a visible manifestation of human ingenuity and engineering prowess.

Since 2000, the development of high rise buildings in the U.S. has been influenced by a series of economic and other events.   These have included:

  • the 2001-02 recession;
  • the 9/11/2001 terrorist attacks – which added a new element of risk for owners and occupants of the highest towers, as well as led to an increased perception of some major U.S. urban areas as being potential targets weapons of mass destruction;
  • the significant rise in oil prices beginning in 2000, and further escalating during 2003-2008;
  • Hurricane Katrina in 2005 – which increased the potential long-term risk associated with high rise developments in cities on the Gulf and Atlantic Coasts;
  • the real estate boom of the early to mid-2000s – which resulted in an unprecedented wave of construction of residential towers in many major U.S. cities, followed by the real estate market collapse beginning in 2006, and later the financial crisis of 2007-08 and Great Recession;
  • the slow recovery in both real estate and the U.S. economy that has been in progress since 2009

As these events were unfolding, the construction of high-rise buildings outside of the U.S. accelerated, and the status of the U.S. as a center for high rise building construction continued to diminish.  Evidence for the global increase in the construction of high-rise buildings includes the completion of 58 of the 78 one-thousand-foot or taller skyscrapers that currently exist in the world having occurred since 2000.  Evidence for the diminished status of the U.S. as a center for construction of high rise buildings includes the completion of 54 of the 58 recently constructed 1,000-foot or taller  buildings in countries outside of the U.S. – with the most noteworthy of these likely being the 163-story, 2,717-foot tall Burj Khalifa completed in Dubai in 2010.

As a frequent visitor to both Chicago and Miami, I was aware of the boom in high-rise construction that occurred in at least these U.S. cities since 2000.  However, I was curious as to the actual extent of high-rise construction that occurred not only in these cities, but in other major U.S. cities this century, and what insights this might provide into the patterns of urban development occurring in different major U.S. urban areas.  This article presents the findings of an investigation I performed to find answers to these questions, based on a review  construction data for high-rise (18-story or taller) buildings completed in 67 major U.S. cities during 2000-13.

Methodology

The approach I used to perform this study was to make use of the building construction database available on the Skycraperpage.com website.  The database at this website includes data for nearly 1,300 U.S. cities and a comprehensive listing of nearly all buildings either 12 or more stories or greater than 115 feet in height, as well as select listings for shorter but otherwise noteworthy buildings.  The data for each building typically includes the number of floors, years of construction and completion, current building uses, as well as many other types of information.   I restricted my analysis to buildings that are 18 or more stories in height, partly to facilitate an analysis of New York City (for which information on over 5,800 buildings is included in the database) but also in recognition that buildings with a lesser number of stories have limited impact on the skylines of most major cities.

I included in my analysis data for the 50 largest U.S. cities, as well as 17 additional cities representing the principal cities of one of the 50 largest U.S. metropolitan areas.  The city and metropolitan area rankings were based on populations as reported by the 2010 census.  I included the 17 additional cities in recognition that cities such as St. Louis and Pittsburgh may no longer rank in the top 50 U.S. cities by population, but remain the principal cities of major metropolitan areas as well as cities with large central business districts that have been historical centers for construction of high-rise buildings.  For each of the 67 cities, I tabulated the number of buildings having a specific number of floors (ranging from 18 to 108) for various construction completion dates including the periods pre-1960, 1960-69, 1970-79, 1980-89, 1990-99, and each individual year from 2000 through 2013.  As of June 2013 (when I performed the analysis), a total of 5,398 buildings 18 or more stories in height were present in these 67 cities, including exactly 1,000 completed since 2000.

One limitation for my analysis is that the construction completion dates were not listed for 225 of the buildings (or approximately 4.2% of the total).  However, nearly all of the undated buildings are likely to be older building, constructed prior to 2000 for which historical construction data are not readily available, that are not relevant to my primary focus on buildings constructed since 2000.   One further limitation is that the data are of unknown completeness and accuracy.  As a long-time resident of the Milwaukee area, I was able to review the data in detail for the City of Milwaukee, and did not note any errors or omissions in the buildings listed, their construction dates, or listed building heights.  Although I cannot vouch for the completeness and accuracy of the data for other cities, the skyscraperpage.com database has reportedly been available on-line for 15 years, providing ample opportunity for errors and omissions to be noted by on-line “champions” of various major cities, and corrected through the crowdsourcing process that includes input from greater than 40,000 registered members.   Therefore, I believe the data are accurate enough for my intended purpose of evaluating the relative performance of the major U.S. cities in terms of the completion of high-rise buildings this century, as well as to provide insights regarding differences in recent development patterns in these cities as expressed in the form of high-rise buildings.

To gain further insight into the dynamics driving construction of high rise buildings in different major U.S. cities and metropolitan areas, I also calculated two ratios: (a) the number of high-rise (18-story or taller) buildings constructed during 2000-13 per 100,000 metropolitan area residents, and (b) the number of high-rise (18-story or taller) buildings constructed during 2000-13 per 100,000 person increase in metropolitan area population from 2000-10.   The first ratio was calculated based on a presumption that that the number of high-rise office and residential towers is likely more closely correlated with the size of metropolitan areas than the size of the principal cities.  The second ratio was calculated based on the presumption that metropolitan areas experiencing significant population growth since 2000 should see a certain amount of new construction driven solely in response to population growth and increased market demand for new housing (one form of which would be new high-rise residential buildings), and market demand for additional commercial space that should be associated with the increases in the number of jobs and local business activity that typically drive or accompany significant population growth (a portion of which could be met through the construction of new high rise office buildings).

Rankings of Major U.S. Cities Based on the Number of High Rise Buildings Completed Since 2000

The data for the highest ranked cities based on the total number of new high rise buildings constructed as well as the ratios of the number new high rise buildings per 100,000 metropolitan area residents and per 100,000 increase in metropolitan area population, are presented below together with discussions of key observations related to each ranking method.  Table 1 presents the top 25 ranked cities based on the number of buildings with 18 or more stories completed since 2000 for the top 25 ranked cities.  The table also includes data on the current total number of high-rise buildings in these cities and their associated rankings.


Table 1. Top 25 U.S. Cities for High-Rise Buildings Constructed 2000-13

City

Total New High Rise Building Completed (2000-13)

Rank

Total High Rise Buildings (as of 2013)

 Rank

New York

281

1

2,151

1

Chicago

149

2

701

2

Miami

74

3

130

7

Atlanta

50

T4

134

6

Las Vegas

50

T4

96

11

Houston

38

6

174

3

San Diego

35

7

67

15

Seattle

30

8

100

10

Dallas

22

T9

116

9

San Francisco

22

T9

149

4

Boston

21

11

89

12

Arlington

17

12

47

19

Portland

14

T13

41

T21

Austin

14

T13

27

T32

Los Angeles

13

15

127

8

Philadelphia

12

T16

135

5

Charlotte

12

T16

31

29

Tampa

11

T18

28

T30

Denver

11

T18

69

14

Orlando

11

T18

27

T32

Milwaukee

10

21

40

23

Minneapolis

9

22

76

13

Baltimore

8

23

51

18

Phoenix

7

T24

34

T26

San Jose

7

T24

10

T50

High rise = 18 stories or greater.  Totals are as of June 2013.


One surprise for me was the very large number of high rise buildings completed in New York City since 2000.   I was surprised because none of the post-9/11 news stories I recall reading noted the extraordinary boom in high rise construction that apparently occurred in New York City since 2000 (at least 98% of which was unrelated to construction occurring at the site of the former World Trade Center).  The high rise construction boom was robust both in the number of buildings completed (281) and in the number of buildings having 40 or more stories (53).   I also hadn’t fully appreciated the historical dominance of New York City in terms of high rise buildings in the U.S., with the current total of 2,151 buildings nearly equal to the combined total of 2,499 for the next 24 highest ranked U.S. cities.

The boom in high-rise construction in Chicago was even greater than that for New York City on a per capita basis, and was also expressed both in the number of buildings constructed (149) and in the number of buildings having 40 or more stories (42).  These included residential towers of 71, 86, and 98 stories completed in 2009-10.  Together, Chicago and New York City account for 430 of the 1,000 high-rise buildings completed this century in the 67 major U.S. cities evaluated.

The boom in high-rise construction in Miami (which includes completion of at least 74 high-rise buildings since 2000) has been widely recognized, partly as a consequence of the frequent appearance of the Miami skyline on various TV shows and movies.  It should be noted that the data for Miami perhaps to a greater degree than any other principal city do not fully reflect the magnitude of high rise construction that occurred in the metropolitan area as a whole, as dozens of high-rise residential buildings were completed since 2000 in other cities in the Miami metropolitan area (such as Miami Beach, North Miami Beach, Sunny Isles Beach, etc.).

The relative performance of Los Angeles and San Diego was also interesting to me.   Nearly three times as many high-rise buildings have been completed in San Diego since 2000 as in Los Angeles, even though the population of the Los Angeles metropolitan area is more than four times greater than that of the San Diego metropolitan area, and in spite of both cities being southern California coastal cities that are major tourist destinations.

One additional surprise for me was how few high rise buildings were completed since 2000 in the other 42 major U.S. cities evaluated but not included on Table 1.   A combined total of 72 high-rise buildings were completed in these 42 cities since 2000.  This is2 fewer than the 74 buildings completed in the City of Miami alone during this period.  The individual totals for these other 42 cities are summarized on Table 2.


Table 2. Summary of High-Rise Construction in Other U.S. Cities (2000-13)

Total # of High Rise Buildings Constructed 2000-13

U.S. Cities

5

Nashville-Davidson, Sacramento, St. Petersburg

4

Jacksonville, Long Beach, St. Louis, Salt Lake City

3

Indianapolis, Norfolk, Oakland, Pittsburgh, Raleigh, San Antonio, Virginia Beach

2

Cleveland, Columbus, Fort Worth, Hartford, New Orleans, Omaha, Providence

1

Cincinnati, Detroit, Kansas City, Louisville/Jefferson Co., Oklahoma City, Richmond

0

Albuquerque, Birmingham, Buffalo, Colorado Springs, El Paso, Fresno, Memphis, Mesa, Newark, Riverside, St. Paul, Tucson, Tulsa, Washington D.C., Wichita


The lack of high rise construction in several of the “rust belt” cities included on Table 2 is probably not too surprising given widely reported population declines and economic contractions in several of these cities.  Washington D.C.’s lack of high-rise construction represents a special case, in that the Height of Buildings Act of 1910 limits building heights to the width of the adjoining street plus 20 feet (resulting in a maximum allowable height of 160 feet).   I was surprised by the relative lack of recent high rise building construction in cities such as Columbus, Fort Worth, Indianapolis, Kansas City, Oklahoma City, San Antonio, St. Paul, and Tucson.  All of these cities have a favorable reputation in terms of economic growth, quality of life, etc.   All of these cities are located in metropolitan areas with population growth rates during 2000-10 that exceeded 10% (and in the case of San Antonio, exceeded 25%).  The lack of high-rise construction in these cities during a period that included perhaps the greatest boom in high-rise residential construction in U.S. history potentially does not bode well for major enhancements to these cities skylines over the next several decades.  Although my analysis was focused on the total number of new high-rise buildings constructed, it is probably important to acknowledge that quantity does not necessarily equal quality.  The most compelling example of this may be Oklahoma City, where the single high-rise building constructed this century was the 52-story 850-foot tall Devon Energy headquarters – which is both attractive building in its design and execution, and noteworthy nationally in being the tallest building completed in the U.S. in 2012.

One interesting aspect of high-rise construction during the period 2000-13 is the apparent lack of a boom in the construction of high-rise office buildings in the major U.S. cities that are centers for the oil and gas industry (such as New Orleans, Tulsa, and Oklahoma City) in response to the significant rise in oil prices that has occurred this century (with oil prices increasing from an annual average of $11.91 in 1998 to $91.48 in 2008).   The lack of high-rise office building construction in these cities is in marked contrast with booms that occurred in nearly all of these cities during the energy crisis and period of escalating or high oil prices from approximately 1974 through 1985.  For example, in New Orleans, 28 high rise buildings were constructed during the 1970s and 1980s, including one residential tower, 10 hotels, and 17 office buildings.  Only two new high rise buildings have been constructed since 1989 (one hotel and one residential building).   Similarly, 14 high rise buildings were constructed in Tulsa during the period 1970-1986 (10 of which were office buildings including major towers of 52 and 60 stories), but only one high-rise building (an 18 story office tower) has been completed during the past 26 years.  Oklahoma City had 7 high rise buildings constructed during the period 1971-1984, but only one (the Devon Energy headquarters) during the past 29 years.  Denver had 45 high rise buildings constructed during the 1970s and 1980s, but only 11 since 1990 (and nearly all of these are residential high rises rather than corporate headquarters which dominated the previous energy-business related building boom).

Rankings of Major U.S. Cities Based on the Number of High Rise Buildings per 100,000 Metropolitan Area Residents

In order to better understand the relative performance of U.S. cities in terms of high-rise construction, I “normalized” the results based on population by calculating the number of new high-rise buildings per 100,000 metropolitan areas residents.  Higher ratios indicate a greater ”intensity” of high rise construction relative to the population of a metropolitan area.  The results for the 15 highest ranked major U.S. cities based on this ratio are summarized below.


Table 3. Top 15 Cities Based on Number of New High Rise Buildings (2000-13) per 100,000 Metropolitan Area Residents (2010)

City

Metro Area Population (2010)

Total # of New High Rise Buildings Completed in City (2000-13)

Rank

High Rise Buildings Completed (2000-13) per 100,000 Metro  Residents (2010)

Rank

Las Vegas

1,951,269

50

T4

2.56

1

Chicago

9,461,105

149

2

1.57

2

New York

18,897,109

281

1

1.49

3

Miami

5,564,635

74

3

1.33

4

San Diego

3,095,313

35

7

1.13

5

Atlanta

5,268,860

50

T4

0.949

6

Seattle

3,439,809

30

8

0.872

7

Austin

1,716,289

14

T13

0.816

8

Charlotte

1,758,038

12

T16

0.683

9

Milwaukee

1,555,908

10

21

0.643

10

Houston

5,946,800

38

6

0.639

11

Portland

2,226,009

14

T13

0.629

12

Orlando

2,134,411

11

T18

0.515

13

San Francisco

4,335,391

22

T9

0.507

14

Boston

4,552,402

21

11

0.461

15


Las Vegas ranks the highest based on this measure, which is likely attributable to its status as a major tourist destination having a greater number of hotel rooms than any other city in the U.S. (more than 152,000 as of 2012), with significant numbers of these rooms located in in high rise hotels constructed since 2000.  These hotels reportedly include 25 of the 50 largest hotels in the world based on the number of rooms.

The next two highest ranked cities by this measure are Chicago and New York City, with ratios of 1.57 and 1.49 recent high rise buildings completed per 100,000 metropolitan area residents.   Both cities are very similar in being: (a) historical centers for high-rise construction in the U.S., (b) major business centers, and (c) major tourist destinations.

Although Miami ranks 4th based on this ratio, I suspect that it might challenge Las Vegas for the top spot if the number of high rise buildings constructed in the metropolitan area as a whole was used for the calculation rather than just those high rises constructed within the city proper.

In general, three categories of cities appear to rank highly by this measure: (a) the two traditional centers of high rise construction – Chicago and New York City, (b) other major business centers (having greater relative numbers of major corporations and corporate headquarter buildings), and (c) major tourist destinations (with greater relative numbers of major hotels and high-end residential developments targeting retirees or seasonal residents).  Because New York City and Chicago represent all three categories, it makes sense that they rank very highly on this measure.  Similarly, Miami is both a major business center and a major tourist destination and should therefore be expected to have a disproportionately large number of high rise buildings relative to its metropolitan area population.   The four cities ranked in the top 15 that don’t necessarily fit into one or more of these categories are Austin, Charlotte, Milwaukee, and Portland.   I suspect that high rise development in these cities is being driven by their status as significant regional business centers, as well as cities with high quality downtown or near downtown urban environments.   Overall, I believe that the ratios on Table 2 offer the best rankings of major U.S. based on the “intensity” of high-rise construction this century relative to other cities.

Rankings of Major U.S. Cities Based on the Number of High Rise Buildings per 100,000 Person Increase in Metropolitan Area Population

The final analysis I performed was to evaluate the intensity of high-rise construction relative to the growth in metropolitan area population, recognizing that increases in population (and the associated increases in jobs and local business activity) should serve as a driver for new residential and office construction – some of which should occur in the form of new high-rise buildings.  Therefore, I calculated the ratio of the number of high-rise (18-story or taller) buildings constructed since 2000 per 100,000 person increase in metropolitan area population from 2000 to 2010.   Table 4 summarizes the results for the 15 highest ranked U.S. cities based on this ratio.


Table 4.  Top 15 Cities Based on the Number of New High Rise Buildings (2000-13) per 100,000 Person Increase in Metropolitan Area Population (2000-10)

City

Metro Area Population Change (2000-10)

Total # of New High Rise Buildings Completed in City (2000-13)

Rank

High Rise Buildings Completed (2000-13) per 100,000 Increase in Metro Area Population (2000-10)

Rank

New York

574,107

281

1

48.95

1

Chicago

362,789

149

2

41.07

2

Milwaukee

55,167

10

21

18.13

3

Miami

557,071

74

3

13.28

4

Boston

161,058

21

11

13.04

5

San Diego

281,480

35

7

12.43

6

Providence

17,855

2

T40

11.20

7

San Francisco

211,651

22

T9

10.39

8

Las Vegas

575,504

50

T4

8.69

9

Seattle

395,931

30

8

7.58

10

San Jose

101,092

7

T24

6.92

11

Baltimore

157,495

8

23

5.08

12

Atlanta

1,020,879

50

T4

4.90

13

Portland

298,128

14

T13

4.70

14

Philadelphia

278,196

12

T16

4.31

15


New York City and Chicago are again ranked highest among major U.S. cities, and by a significant margin.  Milwaukee and Providence have the greatest increase in their rankings based on this ratio versus their rankings based on the absolute number of high rise buildings constructed.  They are also the two smallest metropolitan areas represented in the top 15.  The significance of this ratio is probably a good topic for debate, as only a small percentage of the population resides or works in high rise buildings.  Slow growth cities score well based on this ratio.

Summary of Key Findings

In summary, the most significant or most surprising findings for me included:

  • The dominance of New York City and Chicago which accounted for 430 of the 1,000 total new high rise buildings completed this century in the 67 major U.S. cities evaluated.
  • The apparent lack of any negative impact from the 9/11 terrorist attacks on the boom in high rise construction that occurred in New York City, as well as Chicago.
  • The magnitude of the high-rise construction boom in Miami, as well as the apparent lack of impact from Hurricane Katrina in dampening the enthusiasm for constructing new high rise buildings in oceanfront locations that are likely most at risk from future major hurricanes.
  • The surprising lack of recent high-rise construction in a majority of the cities evaluated, with the combined total of only 72 new high-rise buildings in 42 cities (2 fewer than were constructed in in the City of Miami alone).
  • The higher than anticipated performance by several cities, in particular Milwaukee, which ranked 21st, 10th, and 3rd by the three measures, in spite of its current status as only the 39th largest metropolitan area in the U.S. (and a city not frequently recognized for its skyline).

The apparent absence of recent high rise office construction in the major U.S. cities that are centers for the oil and gas industry, in response to the recent period of high oil prices, which is in marked contrast with booms in the construction of high-rise office buildings that occurred in nearly all of these cities during the 1974 to 1985 energy crisis and period of escalating or high oil prices.

Thursday, December 20th, 2012

Milwaukee’s Relationship with the Chicago Mega-City Revisited by David Holmes

[ I am going to take a break until early 2013. See you folks in the New Year. In the meantime, I’ll leave you with this piece by David Holmes that follows up on my “Don’t Fly Too Close to the Sun” piece. He makes some of the same points I did at the conference, as well as some new ones I found interesting. Bye for now! – Aaron. ]

I was intrigued by Aaron’s recent post “Don’t Fly Too Close to the Sun Piece” which focused on the relationship between Milwaukee and Chicago and the notion of whether “proximity to Chicago or another mega-city represents an unambiguous good,” or – as posited by Aaron – may actually be more of a curse than a blessing, and something that drains vitality instead of increasing it. This is a topic that interests me both from the perspective of a long-time resident of Milwaukee and as a long-time fan of the City of Chicago. There are likely unique combinations of factors to consider in this type of evaluation for every city pair – including the distance between the cities, the presence or absence of high speed and/or low cost transit options between the cities, and the relative size. Although I did not comment on Aaron’s post at the time of publication, I thought it would be useful to consider some specific examples of ways in which Chicago enhances or decreases Milwaukee’s economic vitality as both the article and many of the comments on Milwaukee-Chicago and other city pairs, seemed to lack specific examples of both positive and negative impacts.

I will begin by presenting several examples of ways in which Chicago’s proximity appears to negatively impact Milwaukee’s economic vitality. I will then consider the impact of Chicago’s proximity on professional services, which Aaron evaluated in his recent series of articles on Chicago as a potential key growth area for Chicago’s economic future. Finally, I will conclude with examples of ways in which I believe Chicago’s proximity adds to Milwaukee’s economic vitality and/or quality of life.

Ways in Which Chicago Drains Vitality from Milwaukee

1. Competition for High End Specialty Retailers and Restaurants. The first specific example of a way in which Chicago drains economic vitality from Milwaukee is in the competition for certain types of high end retailers or restaurant chains that have a national presence, but one that is limited to perhaps 30 or 40 locations. When I travel to other Midwestern cities that are more geographically isolated or more dominant in their geographic region (such as Kansas City or Indianapolis) I am usually surprised by the number of high end specialty stores or restaurants that have a presence in those cities but none in Milwaukee. Chicago’s proximity is almost certainly a major factor in this dynamic, and a perception (rightly or wrongly) that either the business can’t sustain two locations in SE Wisconsin/NE Illinois, that residents in Milwaukee could be served by a Chicago location. A good recent example was the announcement approximately two weeks ago that: (a) Nordstrom is planning to open a store in Milwaukee in 2013, and (b) Milwaukee is the largest city in the U.S. that does not currently have a Nordstrom store. Chicago is almost certainly a major factor in Milwaukee’s status as the last metropolitan area of its size to get a Nordstrom store.

In researching this point, I came across a research article titled “Can We Have a High-End Retail Department Store? How to Tell if Your Region is Ready” which presented a formula for predicting the number of high end department stores (defined as Macy’s Bloomingdales, Nordstrom, Neiman Marcus, and Saks) that could be supported in a metropolitan area based on its population, land area, and the percentage of households with at least $150,000 of income per year. Although the article did not present the findings for Milwaukee, I followed the researcher’s definition of high end department stores, and reviewed the current number of locations for these five stores that are in Chicago, Milwaukee, and several peer Midwestern metropolitan areas, using data available at www.mystore411.com. The findings generally confirmed my impression that Milwaukee is underserved by high end department stores – with 38 of these stores being located in the Chicago metropolitan area, 8 in both Kansas City and Columbus, 6 in Indianapolis, but only 2 in Milwaukee. Although the research study did not consider proximity of a metropolitan area to a neighboring larger metropolitan area, I think it likely that this is a factor, and one in which Chicago’s proximity negatively impacts Milwaukee.

2. Competition for Federal Offices Another example where I believe Milwaukee loses out economically due to its proximity to Chicago is in serving as a location for regional federal offices. I know this from personal experience in developing business plans for pursuing federal work, and discovering that in terms of regional facilities (versus those that are present in nearly every major city such as postal service, federal courts, social security offices, etc.), Milwaukee is pretty much limited to a Forestry Service Regional Office and a Veterans Administration Regional Headquarters. Although I don’t have any detailed data to back me up, I did review the locations of regional offices for five agencies, including the IRS, U.S. Army Corps of Engineers (USACE), U.S. EPA, Small Business Administration (SBA), and the Federal Reserve Bank (FRB), and determined that Chicago has regional offices for 4 of these 5 agencies (the USACE, U.S.EPA, FRB, and SBA). Among peer cities, Kansas City has regional offices for all five agencies, followed by Minneapolis/St. Paul (with regional offices for three agencies); and Cincinnati, Memphis, and St. Louis (each having two regional offices for these agencies).

What this means economically varies from agency to agency, but for Kansas City, the office for the IRS regional service center reportedly occupies an 11-story building with 900 employees (based on data from Emporis). In addition to direct economic benefits to cities that host a greater number of regional federal offices, there are likely significant indirect benefits as well, as consulting firms are more likely to establish locations in cities that host federal regional offices, as there are benefits to engineering firms from being in the same cities as USACE regional offices, benefits to accounting firms from being near IRS regional offices, benefits to financial firms being near FRB regional branch offices, etc. Although there may be other major cities in the Midwest that are also losing out in the competition for regional federal offices, I believe that Chicago’s proximity puts Milwaukee at a particular disadvantage, and my impression is that on a per capita basis, Milwaukee has fewer federal offices than almost any of its peer cities.

3. Ranking as a Metropolitan Area A third example of a possible negative impact from Chicago’s proximity on Milwaukee’s economic vitality occurred to me as I was researching the example presented above on the competition for high end retailers. In trying to confirm that the Indianapolis and Kansas City metropolitan areas are in fact comparable in size to Milwaukee, I noticed that both are ranked ahead of Milwaukee – with Kansas City currently ranked as the 29th largest metropolitan area (with 2,052,676 residents) and Indianapolis ranked as the 35th largest metropolitan area (with 1,778,568 residents) versus the Milwaukee-Waukesha-West Allis MSA’s ranking as the 39th largest metropolitan area (with 1,562,216 residents). This size difference could provide an explanation as to why Milwaukee would be chosen after these cities as a regional location for certain businesses.

However, Milwaukee’s ranking below Indianapolis and Kansas City is arguably more of a statistical artifact than reality, and due to Chicago’s proximity and the manner in which the U.S. Office of Management and Budget choses to split the two metropolitan areas. Indianapolis and Kansas City, which are more geographically isolated than Milwaukee, have MSAs that extend over approximately 3,200 and 8,000 square miles, respectively, whereas the Milwaukee-Waukesha-West Allis MSA is defined as a much more compact 1,500 square mile area. If Chicago was not located in as close proximity to Milwaukee, Racine and Kenosha Counties would almost certainly be included as part of the Milwaukee MSA. Adding the 361,000 residents in Racine County (defined as a separate metropolitan area) and Kenosha County (defined as part of the Chicago MSA) would result in a Milwaukee metropolitan population of 1,920,000 residents in a land area of 2,100 square miles – in theory, a market greater in population than Indianapolis and only 5% smaller than Kansas City, in a far more compact land area than either MSA.

Competition for Service Businesses

A fourth potential negative influence of Chicago on Milwaukee’s economic vitality that I considered (but rejected) is the competition for serving as a location for professional service firms. I considered this factor partly in response to Aaron’s recent series of articles on Chicago, which noted Chicago’s status as the Midwestern center for professional services such as management consulting, technology consulting, business process outsourcing and legal services. In theory, large firms with greater resources based in Chicago might out compete smaller firms based in Milwaukee. While I am not familiar with all categories of professional services, for law and engineering firms with which I am familiar, Chicago’s proximity and large pool of major firms appears to have no negative impact on the vitality of similar firms based in Milwaukee. This is probably most surprising with law firms, given that Chicago not only has 17 of the top 250 largest law firms in the U.S., but has an even more impressive 5 of the top 13 firms (based on data at Internet Legal Research Group). Milwaukee has 5 of the top 250 firms (including Foley and Lardner at No. 29), which not only compares favorably with Chicago on a per capita basis, but compares even more favorably with cities such as Charlotte (with 2 of the top 250 firms), Cincinnati (3 firms), Columbus (2 firms), Indianapolis (3 firms), Kansas City (4 firms), and even Houston (5 firms). None of these cities has a firm ranked as highly as Foley and Lardner at 29. The main point is that in spite of the incredible concentration of major law firms in Chicago, there is no evidence that this has negatively impacted Milwaukee’s vitality as a center for legal services. The fact that this is the case is significant for Milwaukee’s downtown, as nearly every major office building proposed or constructed in the last decade in the downtown had one of these major law firms as its anchor tenant.

Examples of Ways in Which Chicago Increases Vitality

Having considered some of the ways in which Chicago’s proximity drains vitality from Milwaukee, following are several examples of significant ways in which I believe Chicago increases Milwaukee’s economic vitality and/or the quality of life for residents of Milwaukee:

1. Enhanced Travel Connectivity. It takes 60 minutes to drive from downtown Milwaukee to O’Hare International Airport. For all intents and purposes, residents of Milwaukee have two airports – one (General Mitchell International Airport) that is 10 minutes from downtown, and the other (O’Hare) that is 60 minutes from downtown. Which airport is used for a particular flight is a choice made by Milwaukee residents on a flight by flight basis, based on the most favorable combination of price, availability of direct flights, and/or preferred departure or arrival times. Quite often, General Mitchell International Airport is the choice because similar flights from the same airlines are actually cheaper than from O’Hare (a competitive pricing factor that is almost certainly due to the Chicago’s proximity and the presence of O’Hare as an alternative airport for Milwaukee residents). Even excluding Midway Airport from the discussion (which is appropriate as Midway is not convenient for routine use by residents of Milwaukee), Milwaukee residents through the combination of General Mitchell International Airport and O’Hare have better air travel options than residents of almost any other major metro area in the U.S. (New York City, Chicago, and perhaps Atlanta, being possible exceptions). Another benefit related to air travel that Milwaukee residents take for granted is the convenience for visits by friends from other countries. Chicago will almost always be one of the lower cost U.S. travel options for foreign travelers.

2. Enhanced Entertainment and Recreational Amenities/Opportunities. It is nice to be located adjacent to a city that has some of the best museums and cultural institutions in the US. Although there is some inconvenience in driving 90 minutes to downtown Chicago, there is the option to take Amtrak, or even Metra ($5 from Kenosha). I’ve thought about this when visiting geographically isolated cities with great (and often deserved) reputations such as Denver, Salt Lake City, Phoenix, Seattle, etc. I would even add some sizeable (>5 million resident) metro areas to the list such Miami, Dallas, and Atlanta. The cultural attractions in these cities do not match those present in Chicago, such as the Museum of Science and Industry, the Field Museum of Natural History, or the Chicago Art Institute. For friends and family travelling from other countries, a trip to Milwaukee means they get a trip Chicago thrown in for free. It also means that these visitors will never run out of interesting places to explore available through the combined attractions in Milwaukee and Chicago. For visitors to other even fairly large metro areas in the U.S., the entertainment options for out-of-town visitors will typically be exhausted within a week or less. Not so in Milwaukee, thanks to Chicago. This is a quality of life factor more than an economic vitality factor, but one that should be a consideration in businesses trying to recruit employees from other major metropolitan areas to Milwaukee. Although I think Milwaukee has a pretty large and attractive set of amenities on its own, due to the proximity of Chicago and the amenities available in our mega-city’s “southern” downtown, residents in Milwaukee have access to amenities that are matched by few cities in the world, and this has economic value in the increasing competition for highly skilled and mobile workers.

3. Enhanced Business Expansion Opportunities. For businesses based in Milwaukee, having a metro area with 9.5 million residents an hour away is a significant plus. For entrepreneurs based in Milwaukee, Chicago presents an exceptional opportunity for expansion, as the cities are close enough together that it is possible for someone living in the Milwaukee area to oversee branch offices or locations in both the Milwaukee and Chicago metropolitan areas. Although one could argue that businesses in Milwaukee have additional competition from businesses in Chicago, this type of analysis varies greatly from business to business with no consistent rule. For major businesses located in Milwaukee, if they need access to some very specialized consulting expertise, if it isn’t available from firms based in Milwaukee, it will almost certainly be available from one or more firms based in Chicago, providing a very deep business support talent pool and a competitive advantage for firms based in Milwaukee relative to those based in more geographically isolated cities.

4. Enhanced Global Mindset. This is a little more subtle advantage, and a quality of life enhancement versus an economic vitality enhancement. Even if I don’t go to Chicago for several months, I like having Chicago nearby. I’m conscious of it. It is definitely one of the reasons I like living in Milwaukee, even if it is impossible to precisely quantify this aspect. In my mind, I always know that I have all of Chicago’s assets readily available to me, whenever I might feel inclined to “imbibe” (but without the hassle of actually having to live in Chicago, as well as not having to live in a state that is currently ranked 49th or 50th in most financial health measures). When I travel (and I suspect this is the case for most people) I almost always measure the city I am visiting in my mind to my hometown of Milwaukee. Whenever I visit some nice, but geographically isolated metropolitan area, the quality of life in that city is frequently downgraded in my mind as I can imagine how quickly the interest of living in that city would wear off once I exhausted the list of unique attractions in those cities. Chicago is a component of how I measure Milwaukee against those cities, as all of its attractions are in fact readily accessible to residents of Milwaukee. I suspect there are many other cities where a similar dynamic plays out – such as for residents of Baltimore including the attractions and opportunities available in Washington DC in their similar assessments.

5. Increased Groundedness. This is a subtle point and one that occurred to me only recently. Milwaukee is a city that definitely does not have an inflated view of itself. I think part of this is the result of its proximity to Chicago, and knowing that by a hundred different measures, Milwaukee does not match Chicago. If there were fifty new 50-story skyscrapers constructed in downtown Milwaukee over the next 100 years, I am pretty sure that our skyline would still fall short of Chicago’s. I think there is a tendency of other somewhat “successful” cities (Charlotte and Indianapolis come to mind) to always be chasing some grand ambition. Although there are definitely positive aspects to ambition, there can also be a tendency to pursue goals that really aren’t important, as well as a greater reluctance to realistically address obvious shortcomings. Milwaukee, through its proximity to Chicago, is relieved of this aspirational burden, and can simply go about its business in a quiet, but usually highly effective way.

David Holmes is an environmental consultant focused on brownfield redevelopment issues. He is also a co-author of a book on the history of the Chinese community of Milwaukee: “Chinese Milwaukee” (published by Arcadia Publishing in 2008).

The Urban State of Mind: Meditations on the City is the first Urbanophile e-book, featuring provocative essays on the key issues facing our cities, including innovation, talent attraction and brain drain, global soft power, sustainability, economic development, and localism. Included are 28 carefully curated essays out of nearly 1,200 posts in the first seven years of the Urbanophile, plus 9 original pieces. It's great for anyone who cares about our cities.

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Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.

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