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The Core City in the New Economy

The Future of the Center: The Core City in the New Economy

Joel Kotkin

A joint report of

The Olson Company
Reason Public Policy Institute
Davenport Institute


After decades of decline, the urban center is showing signs of a surprising resurgence. Once thought to be doomed in an era of increasing sprawl and decentralization, city cores around the nation are attracting new investment, business, and residents at a healthy clip.

Yet these positive trends do not suggest that we are about to witness the return across the nation of the mid-century downtown or the bustling central-city commercial and manufacturing districts. Even under the best of circumstances, center cities are unlikely to ever emerge as the geographically dominant centers of their metropolitan regions as they were in the industrial era. Instead, the new urban core resembles more that of the renaissance city—relatively smaller, and built around classical urban functions such as the arts, cross-cultural trade, and highly specialized small-scale production.

Symbolically, the new center city is not so much defined by the high-rise corporate headquarters as by the revived warehouse or former manufacturing district, where older buildings have been brought back to full use as offices for information and fashion-related businesses. Its economy is not so much dominated by the presence of a few looming giants, as by scores of smaller, often highly networked firms.

The new role of center cities—including both downtown central business districts and adjacent "close in" industrial and warehouse areas—in metropolitan geography stems from both geographic and demographic trends. No longer the lure to the vast majority of middle-class families, the cities have been revived by the emergence of what may be called the new urbanites. These are predominately drawn from two groups: immigrants from other countries and a growing cadre of native-born migrants, largely young, single, educated, and childless.

These new urbanites are drawn to the center city for both economic and cultural reasons. As in the past, immigrants cluster in urban areas in order to create zones of familiarity with of their compatriots. They also both work in, and often also own, businesses that require highly concentrated clusters of related firms, in industries from food processing to apparel and furniture.

The other group—the largely childless and educated—is attracted to the city core's cultural resources, architectural sense of place, and to the concentration of single, nonattached people. They also tend to work in many of the burgeoning "knowledge value" industries, such as new media, graphic arts, advertising, and software development.

Although most often written about in reference to a traditional center city such as Manhattan and Lakeside, Chicago, this urban revival actually extends to other, more dispersed places as well. Downtown development is growing both in smaller, suburban communities and in subregional centers, particularly in the large, dispersed metropolitan regions such as Los Angeles and Houston. In this sense even the definition of "central cities" must be re-appraised to include many central points that are not within the historic boundaries of the central business district; they can be also found in smaller, more dispersed urban centers, including some, such as Pasadena in Los Angeles County, that also serve their own well defined hinterland.

The city center is in a period of profound and dramatic change, evolving into something that reflects the broader dynamics of the digital era and shifting demographic trends.

Ultimately, the revival of the urban core, whether in the traditional city or the more dispersed model common to the sunbelt agglomerations, stems from a search for a sense of place and history amidst a society in which the barriers of time and space are under constant assault. As centers of arts and culture, repositories of our past history and architecture, the core—whether in small town or city or Gotham—retains a powerful tug of the consciousness of Americans. It reminds us not only who we are but also what we have been.

Yet, the future of the center city is far from assured. Any future downturn in the economy could undermine this trend, just as occurred in the late 1980s and early 1990s, unless steps are taken to maintain the viability of these places. First order is for cities to understand their new role in the emerging metropolitan geography and economy.

Economic, political, and social leaders need to recognize the importance of dispersed, small-scale industries and firms; they must allow for the natural market-driven evolution of neighborhoods and commercial districts resulting from shifts in the technological, demographic, and economic environment. Attempts—through subsidy or federal policy—to bring the urban core back to its mid-century status through government fiat are likely to fail, as they have in the past, since they will be driven by political concerns, as opposed to responding to new economic, technological, and demographic realities. Instead the core's revival depends on adjusting to the great opportunities that lie before it in the information economy of the 21st century.