Twin Cities stuck on high-tech B team

For whatever reason, Minneapolis-St. Paul can't quite seem to crack the high-tech starting lineup. A new survey from Jones Lang LaSalle (JLL), the Chicago-based investment management firm, used a range of indicators to rate the nation's top 12 high-tech markets, plus 14 emerging markets. Of those top 26, the Twin Cities ranked 20th.

That puts us solidly on the second string. The report describes the metro area as an emerging player with a highly educated workforce that generates a lot of patents. But, because we draw so little venture capital we fail to commercialize our ideas locally and, as a result, fail to grow high-tech jobs as rapidly as our competitors.

It's not just peer cities like Denver, Seattle and Portland that are eating our lunch, according to the report. Smaller markets like Raleigh-Durham, Indianapolis and Salt Lake City, while lagging far behind us in high-tech employment, are growing tech jobs at a much faster rate.

This is a familiar story that's also a tad misleading. Our venture capital numbers are relatively low because many of our ideas come from big firms like 3M and Medtronic that tend to finance their own research and development. Likewise, the big companies that dominate our market may be able to manage jobs in ways that retard our job growth to some degree.

Still, the JLL report hit the mark on the most important point: Minnesota came very late to marketing game. We failed to understand one of the most important shifts of the information age: High-tech companies and high-tech talent can choose their locations, and the nation's metro areas are vigorously competing for high-tech clusters because the ripple effects on local economies are so great.

Ann Marie Woessner-Collins, a national site selection expert at JLL, said she's impressed by local efforts that are finally in place, but noted that Greater MSP, the metro's marketing force, is barely two years old. "Changing the mind-set of how to recruit businesses and the need for changing the past Minnesota approach takes time," she said.

Andrew Wittenborg, director of outreach at the Minnesota High Tech Association, said he thinks the metro is doing somewhat better than the report showed. "Especially with the University of Minnesota and Greater MSP now engaged, I think we're on our way to being much more competitive," he said.

"Other states have been much more aggressive," said Chris Rohrer, managing director at JLL's Minneapolis office. He mentioned New York's recent establishment of tax-free zones around state university and community college campuses and New Jersey's package of incentives for business that locate around rail transit stations.

The Twin Cities may need similar incentives. Trouble is, high-tech firms are much faster on their feet than are state legislatures. As Rohrer said, "They can't wait for legislative sessions once a year to create incentive packages; they just go elsewhere."

Metropolitan areas covet high-tech clusters because they greatly multiply their local economic benefit. The JLL report notes that every high-tech job generates five additional jobs and that the overall effect is to hypersimulate local real estate demand.

The effect is even greater in downtowns and other compact urban locations, which, according to the report, are becoming the most sought-after sites for high-tech jobs, presumably because employees prefer urban environments to the suburban campuses of the kind that sprung up in Silicon Valley a generation ago. The hottest new markets are San Francisco and Manhattan, even through rents are two and three times higher than those in most other markets, including the Twin Cities.

Amazon is the latest giant to select an urban setting. It has begun work on the first of three corporate headquarters towers that will bring 12,000 employees to a booming warehouse district on the north edge of downtown Seattle.

Twitter and Dropbox recently selected San Francisco, while Tumblr and Etsy chose New York. With 9.1 million square feet of high-tech office space under construction, New York is generating plenty of real estate impact, along with Boston (4 million square feet) and San Francisco (2.6 million).

By all rights, Minneapolis-St. Paul should be in line for a greater share of high-tech growth. Its educated workforce, low rents and appealing quality of life should draw more attention than it's getting. The JLL report mentions Minneapolis' North Loop as a potentially hot area. Climbing into the top 12 should be a goal for the Twin Cities.

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