I study cities. Last year, I visited 57 of them while logging almost 200,000 miles. This year, I’ve already made four trips to Nashville and will make second trips to Indianapolis and Kansas City shortly. Why do I keep going back to these cities? While they aren’t the usual economic powerhouses — like New York, San Francisco, Los Angeles and Washington — they are the next in line, with surging economic growth and impressive revitalization. In a world where talent and yield are scarce, these secondary cities are increasingly popular among investors. In a survey by the real estate services company CBRE this year, for example, Orlando outranked New York in appeal by real estate investors.
I never considered Kansas City to be anywhere close to an institutional-grade investment market until I visited it late last year. I was so impressed with its new light-rail system, the billions of dollars it is putting into its airport and the growth of its Power & Light District (developed by Baltimore’s Cordish Cos.) that I recommended it to a Canadian pension fund investment adviser. To my surprise, Kansas City was already on their radar screen as part of an “emerging-market” strategy in the United States.
It isn’t just talent, cost, yield or some version of “hip” that is driving capital and young professionals to such secondary markets. The primary catalyst for their emergence as institutional-grade investment markets is the merger of their city and county governments over the past few decades.
Baltimore needs to follow these cities’ lead with a massive reset and a merger of its city and county governments to create the structural foundation for long-term revival. The public services efficiencies are important, but mitigating reasons for urban flight — largely schools, taxes and crime — are paramount. Over the past several decades, the citizens of Nashville, Indianapolis and Kansas City had less incentive to leave, and now new citizens are coming back into the urban core.
It’s clear that city/county mergers are initially expensive; it takes decades to see material positive economic impact, and Baltimore will be no different. There is simply no quick, cheap or short-term fix. I am in the unique position of advising the world’s largest commercial real estate investors daily and being one of the most active guest lecturers on the college circuit. As such, I know how talent and money think and where they want to go, and I know Baltimore. To get game-changing flows of talented people and money to the city, anything short of a radical and visionary change will fail.
Is Baltimore worth saving? You’re damn right it is. My family history in Baltimore goes back more than 100 years. I’m currently raising my family here, and I sit on the board of directors of a terrific inner-city school — the Baltimore Leadership School for Young Women, which is a beacon of power and pride for our city. Baltimore’s children deserve a brighter future.
When comparing Baltimore with every other global business location or investment option, the city has a lot to offer. I look at three basic factors when I judge any city: talent, foreign money and infrastructure. Baltimore ranked as the 11th best city in America for tech talent in a recent CBRE survey. It sits within the Northeast Corridor from Boston to Washington, and it has a great transportation network including BWI Airport, I-95, I-70 and the Port of Baltimore. The problem is that the institutional and foreign money required to revitalize a city is not coming to Baltimore in anything but a trickle — and some is leaving. The most recent example is the Canadian owner of the rundown Pimlico Race Course trying to move the Preakness Stakes to a new Maryland racetrack outside of Baltimore. Furthermore, while tech talent is created in Baltimore, it generally doesn’t stay here. A companion CBRE talent study found that Baltimore is a significant “brain-drain” city (talented graduates leaving).
Baltimore needs to hit the reset button to stem the incentives for flight of its people and businesses. While talent and money are mobile, a city isn’t. The merger of Baltimore city and county is the type of visionary change we need. Hoping for a miracle like another Under Armor being formed or attracting a major corporate relocation is the triumph of hope over experience. The push factors simply overwhelm the pull factors in Baltimore today and radical change is required.
Spencer Levy (Twitter: @SpencerGLevy) is chairman of real estate services company CBRE’s Americas Research division and the company’s senior economic adviser.