on Sep 01, 2020
Can Urban Manufacturing Make Cities More Resilient?
Written by Sulin Carling, with Carl Hooks
Special thanks to Kevin Clyne and Meredith Nissenbaum
Manufacturing in the Time of COVID
The U.S. is dependent on goods that come from all corners of the world. As a result, this spring American cities were left scrambling when demand for critical medical supplies surged beyond what supply chains could handle. In response, local manufacturers innovated, in varying degrees of coordination with local and state government, to manufacture face shields, disposable gowns, hand sanitizer, nasal swabs, and more. Many of these efforts required expensive retooling, hasty matchmaking between manufacturers, and extensive searches for suppliers. “Success” has been relatively inefficient, costly, and difficult to scale. Even after many months, shortages of critical supplies remain.
With the increasing threat of climate disasters, supply chain disruptions are expected to become more frequent. There has been much discussion of potential limitations on the United States’ ability to scale production of a vaccine within the country.
Could bringing manufacturing back into our cities increase national resiliency while creating new economic opportunities for low-income communities of color disproportionately impacted by the pandemic? We believe the answer is yes, though urban manufacturing is and likely will remain smaller and more specialized than sub- and ex-urban manufacturing. It would be fruitful to think about regional manufacturing ecosystems that could reinforce supply chains and create economic opportunity. A deeper look at the manufacturing landscape in the New York City metro region demonstrates why.
Economics of Urban Manufacturing: New York City Region Case Study
Of the 459,000 manufacturing jobs located in the New York metro, 84% are located outside New York City. Of all subregions, Inner New Jersey – comprising the eight New Jersey counties closest to the city – contains the largest share of these jobs: 163,600 (36%). (Source: Emsi, NYC Department of City Planning.)
The average Inner New Jersey manufacturer employs twice as many people as the average New York City manufacturer (31 vs. 14) and pays less than half the rent on a per-square-foot basis ($10/SF vs. $21/SF). (Source: Emsi, CoStar.) While locating in a city offers proximity to talent and consumers, operations in aging buildings are often less efficient and more costly than in the suburbs.
As manufacturers scale, the benefits of affordable, modern facilities found in the suburbs outweigh the advantages of a central location. Inner New Jersey manufacturers range from mass producers of low-cost commodities to scaled-up advanced manufacturing firms. Manufacturers in New York City generally produce high-margin, small-batch, niche products, including food, woodworking, fashion, and high-tech products. Large “legacy” manufacturers that purchased land when prices were much lower are outliers.
Some have argued that NYC should embrace land use policies and incentives to counteract market forces that make NYC unaffordable for lower-margin manufacturers that offer good-paying, low-barrier jobs. The City should maintain land use policies that retain land for industrial uses, experiment with land use tools that facilitate industrial mixed-use space where feasible, and support provision of below-market space in City-owned properties like the Brooklyn Army Terminal or by non-profits like the Greenpoint Manufacturing and Design Center. On the other hand, the cost of more broadly counterbalancing market forces – through sweeping land use restrictions in a city with limited land area or broadly subsidizing the private market – is so great, that our limited tax dollars are better served by training workers for the types of more specialized manufacturing jobs locating in cities today and reinforcing regional transit connections to jobs outside the city.
In this market context, specialized urban manufacturers are likely to lead in creation of new technologies, while, in an emergency, large suburban factories can execute at scale. Further, with lower operating costs, the latter are better positioned to produce simple goods such as gowns and face masks at a lower cost.
The chart below illustrates the relationship between size, rent, and location for eight manufacturing firms:
Note: Businesses are representative of large and/or growing manufacturing sectors in the NYC metro. Estimated rents are based on asking rents in business’ buildings within the past five years or 2020 submarket rents. Analysis does not include “legacy” NYC businesses that may own properties or have older, lower-cost leases. (Sources: Costar, news reports.)
Leveraging Manufacturing for Urban Resilience and Economic Recovery
COVID gives us the opportunity to rethink how we can leverage regional manufacturing capability to increase both resiliency and economic opportunity. Given what we know about how market forces shape manufacturing in urban and suburban locations, the public sector should:
- Support high-tech manufacturing that benefits from locating in cities and can innovate rapidly in a crisis. Innovation happens in dense, mixed-use environments powered by collaboration across sectors and companies, which will only become more important for post-COVID recovery. The Brooklyn Navy Yard’s Newlab partnered with 10XBeta, a product design and engineering firm, to design a cost-effective ventilator in just one month, leveraging a network of innovators and investment by the City of New York. Municipalities should leverage (or acquire) public properties to offer affordable space to select manufacturers, and should support innovation districts such as Cortex in St. Louis, the South Main Innovation District in Houston, and Tech Square in Atlanta, to encourage co-location of large and small innovative manufacturing businesses in flexible spaces with business supports such as incubators and technical assistance. The public sector can facilitate these initiatives, in partnership with universities and private developers, through provision of land, capital investment, tax increment financing, funds for programming, seed funding for businesses, and/or land use approvals.
- Establish a regional manufacturing network that can be mobilized during a crisis based on a regional market assessment. Cities, counties, regional planning groups, and states should collaborate to identify the manufacturing assets most crucial in a crisis. They should conduct a regional inventory of manufacturers and suppliers to understand their capabilities, equipment, and space, and analyze market dynamics that drive where manufacturers choose to locate. This can inform policies that maintain and grow manufacturing capabilities, including land use policies that retain land for industrial uses, provision of affordable industrial space, economic incentives, and creation of a manufacturing business registry. Done on a regional scale, this can leverage smaller, innovative companies in urban areas and suburban manufacturers with greater production capacity. In a crisis, the public sector can call upon this network, facilitate new partnerships, and support retooling.
- Fund workforce development training for low-income urban and suburban communities to address a legacy of inequitable access to manufacturing and tech jobs. Despite a national nostalgia for manufacturing jobs as a post-War route to the middle class, these opportunities were largely reserved for White Americans. Black manufacturing workers were relegated to the most menial and dangerous tasks, often as temp workers. Today, manufacturing in New York and Inner New Jersey remains majority White – although with a significant Hispanic presence. Our NYC Tech Opportunity Gap Study, conducted with Cognizant and Civic Hall, showed that tech, an increasingly important component of manufacturing, has an abysmal diversity record. Any public sector support for manufacturing firms should be paired with investments in workforce development organizations that are uniquely positioned to support post-COVID economic recovery in low-income communities of color, as well as incentives to rethink hiring practices to address underrepresentation.
- Map regional supply chains to create redundancies, step in to redirect existing supplies when needed, and coordinate procurement in an emergency. Manufacturing locally is not the only tool to prevent supply shortages in a crisis; reinforcing supply chains is also key. Jurisdictions within a region should chart sources of essential goods such as medicine and food and address vulnerabilities, such as overreliance on a single transportation route or supplier. The public sector can also create regional partnerships to coordinate purchasing supplies rather than compete for them.
We cannot know what supply shortages the next crisis might bring. But as climate change accelerates and vulnerable populations become increasingly exposed, we must embrace a multi-pronged approach that supports regional manufacturing capabilities – with the associated economic benefits – while also shoring up our supply chains to make us all more resilient.