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2017 Regional Report: The Northeast

There are signs of an economic resurgence in many states —along with hurdles on the horizon.
MARYLAND / Under Armour will move into the Port Covington development.

There’s a mixed bag of activity and development happening in the diverse economies of the Northeast. Traditional manufacturing continues to lead in rural parts of the region while innovation and tech are growing to dominate in urban areas.

Connecticut is seeing a resurgence of its manufacturing industry. In Massachusetts, GE recently moved its headquarters to Boston in search of innovation. In Maryland, Under Armor is constructing one of the biggest urban economic development projects in the country in Baltimore. In Vermont, the microbrew industry is on its way to generating nearly a half billion in economic activity. And in Pennsylvania, the natural gas boom is sending ripple effects throughout the state’s economy.

Despite the progress, challenges remain. Cities are experiencing high cost of living increases that are starting to deter investment, and in rural states, aging populations and migrations are leaving behind a critical shortage of talent.


Delaware is striving to pull its economy from slow growth through innovation, entrepreneurship and public-private initiatives. The Federal Reserve Bank of Philadelphia recently ranked the state 41st in economic growth, yet Bob Perkins, executive director of the Delaware Business Roundtable, says there’s “a nascent set of entrepreneurial assets” in the form of tech-oriented ecosystems growing in Wilmington and Newark.

Factory Berlin, Europe’s largest startup campus, announced Wilmington will be the site of its first U.S. location. Delaware’s small size coupled with recent changes in government have also been opening the door to what Perkins describes as a “public-private partnership governance model” for the state’s economic development authority. “Delaware is very small, and so we are nimble. We are quick. And we are looking to renew that kind of effort to be able to resolve some of these problems,” says Perkins.

The University of Delaware recently received a $250 million grant from the Department of Commerce and other entities to house the National Institute for Innovation in Manufacturing Biopharmaceuticals.
State officials say it could help spur biopharmaceutical manufacturing in the state. JPMorgan Chase also recently opened its Global Technology Hub in Wilmington, something Perkins says is giving the state a “substantial foothold in the financial services sector.”


In late-December, the Obama administration announced the Advanced Regenerative Manufacturing Institute in Manchester as the country’s 12th manufacturing hub. Nearly $300 million in public-private investment from leading manufacturers and universities will help researchers develop cells, tissues and organs to restore function to U.S. veterans. Jeffrey Rose, commissioner of the New Hampshire Department of Economic Development, says there’s a “strong culture of innovation,” and The Wall Street Journal recently referred to the Manchester Mill Yard as the “Silicon Valley of the East.” “Where you once had some of the very first mills of the industrial revolution, today is a hub of great examples of high-tech R&D and education collaboration,” says Rose.

The state has also seen recent expansion and investment from a number of manufacturers, such as NSA Industries and Danish pharmaceutical company Novo Nordisk. While New Hampshire is ranked as the seventh best business tax environment by the U.S. Tax Foundation, Rose says it is struggling with an aging workforce and skills gap. This past summer, the New Hampshire Manufacturing Sector Partnership was founded to work with businesses to develop customized workforce solutions. “It’s one of our top priorities and we’re actively addressing that through an emphasis on retraining, on retaining and on recruiting,” says Rose.


The Brookings Institution noted in a recent report that Rhode Island’s economy has been in “drift” for several decades, and that the state needs to leverage its assets and ingenuity to reverse its “substantial decline.” In December 2016, some of Rhode Island’s most powerful CEOs answered the call by forming Partnership for Rhode Island. Julie Duffy, a spokesperson for Hasbro, whose president and CEO Brian Goldner is part of the coalition, says the group will focus on long-term competitiveness and business attraction, as well as tackle some of the “systemic challenges that have historically held back our state’s economic growth.”

Stefan Pryor, Rhode Island secretary of commerce, says the state is seeing strong growth in tech as its major centers are only a short trip away from Boston and Cambridge. This summer, GE announced it would open a GE Digital information technology center in Providence to develop new software applications for high-performance computing.

“We are part of the innovation ecosystem in this portion of New England, and can draw upon talent, expertise and energy in this broader region,” says Pryor. Pryor says the state is offering more than a dozen incentives, such as an innovation tax credit, a 4 percent manufacturing investment tax credit, a 10 percent high performance manufacturing investment tax credit and the Rebuild Rhode Island Tax Credit.
“These tools [and incentives] have only been operational for about a year now but in that time, we’ve done over a dozen jobs deals and over 20 real estate deals. We’re on a roll,” says Pryor.


GE announced in early 2016 that it would move its headquarters to Boston from Fairfield, Connecticut. While Massachusetts officials sweetened the deal with incentives of up to $145 million, the move was also a part of GE’s larger initiative to reinvent the company through innovation. GE CEO Jeff Immelt told investors in February that he hoped Boston’s culture of innovation would keep the company in “the world of ideas, so that we remain contemporary and paranoid.”

GE will bring with it 800 jobs, but its biggest impact could be in driving other investments. The company said it plans to become part of the city’s innovation ecosystem and has already invested in
local tech companies such as Rethink Robotics and Hourly Nerd.

Susan Houston, executive director of MassEcon, says biotech company Kanyos Bio and LEGO Education North America also moved to the city in the past year. While Massachusetts’ GDP continues to grow at a rate faster than the national average, The Greater Boston Housing Report Card said housing is a major challenge and that more affordable options are necessary to maintain a workforce to support continued
growth. “Within the greater Boston area, housing costs do present a big challenge. It’s something our legislature is trying to address,” says Houston.


NEW YORK / The Brooklyn Army Terminal houses a new advanced manufacturing facility.

Born of a 10-point action plan announced in November 2015 by New York City Mayor Bill de Blasio, Futureworks aims to help anchor manufacturing companies in the city. Laura Croushore, vice president of Smart & Sustainable Cities at New York City and manager of FutureWorks, says it was created to unify the momentum in the advanced manufacturing scene and bolster it with resources from an economic
development agency. FutureWorks partnered with Techshop, a membership-based provider of equipment and training for manufactured technology, to provide a 20,000-square-foot facility of advanced manufacturing space in the Brooklyn Army Terminal.

In addition to ensuring competitiveness, FutureWorks aims to help manufacturers optimize production with new technology. The program includes workshops in the areas of digital, robotics, additive manufacturing and advanced materials, as well as holding summits on building advanced manufacturing communities. She says that New York City has always been a “hardware-centric startup capital” and
there’s a strong foundation for innovative products. A clustering effect is already taking hold in the Brooklyn Tech Triangle that includes the Army Terminal, Industrial City and Brooklyn Navy Yard.

“We’re really well-positioned for advanced manufacturing products, which typically align with high-value, low volume production and highly customized goods,” says Croushore.


Over the past five years, the rising price of natural gas and activity at the Marcellus Shale development has significantly impacted Pennsylvania’s economy. The U.S. Energy Information Administration reports that the state is now the second-largest natural gas producer after Texas. In the summer of 2016, Royal Dutch Shell announced a $4 billion investment in an ethane cracker facility outside of Pittsburgh, the first plant of its kind in the Northeast. Governor Tom Wolf said in a press release that it will help revitalize the manufacturing industry and serve as “the centerpiece in the region for the creation of new markets for polyethylene.”

Gene Barr, CEO of the Pennsylvania Chamber of Business and Industry, says that while natural gas has been a “big driver,” the state is continuing to see investment in other sectors. A recent report by the Biotechnology Innovation Organization found that the while the number of pharmaceutical companies in the state has fallen, the number of research and testing laboratories is increasing. A few European firms have also located to the state. Zenith Technologies and Adapt Pharma of Ireland moved their U.S. headquarters to the state in recent years. One challenge the state faces is its 9.99 percent corporate
tax structure, the second highest in the nation after Iowa, according to the Tax Foundation.


Connecticut is seeing strong growth in manufacturing. Catherine Smith, commissioner of the Connecticut Department of Economic and Community Development, reports that three large organizations, Electric Boat, Pratt & Whitney and Sikorsky, have all announced major expansions in the state in the past 18 months. Pratt & Whitney alone will hire an additional 8,000 people in the state to meet a $1 trillion backlog of work.

Smith points to a number of recent initiatives, including investment in technical schools and manufacturing facilities. State government also recently created a manufacturing innovation fund that will offer financial support for apprenticeships, internships and training. “Manufacturing has re-blossomed here. Over a 25-year period the state probably lost 100,000 manufacturing jobs but we’ve seen that turn around in the past five years,” says Smith.

Connecticut still struggles with some of the nation’s highest energy costs. The 50 State Index of Energy Regulation also ranks its regulatory economic efficiency as 47th in the nation. Smith says the state has been working hard over the past few years to help companies reduce their costs through efficiency and solar initiatives. Connecticut’s new Energy on the Line program offers up to $50,000 in grant money for green energy upgrades. “While we might have higher costs, the productive and knowledge of the workers make up the difference,” says Smith.


Two years ago, Vermont became one of the only states in the country to complete a statewide comprehensive economic development strategy (CEDS). Constructed with funding from the U.S. Economic Development Authority and public and private stakeholders, Vermont 2020 identified 12 target sectors to grow in the economy and laid out high-level strategies to make financing accessible, educate the workforce and nurture a culture of innovation.

Jamie Stewart, executive director of the Addison County Economic Development Corporation, says new niche industries are arising. According to the Brewers Association, Vermont’s wholesale beer industry is now worth $300 million annually. The University of Vermont has even launched a Business of Beer program in 2015 to help prepare people for the industry. “The microbrew industry isn’t growing in Vermont, it’s exploding. We have the largest number of breweries per capita in the country at this point,” says Stewart.

Tech is also doing well. The largest private sector employer is IBM, and homegrown was recently acquired by Atlanta-based Cox Automotive for $4 billion. One issue that continues to challenge the state is its aging workforce. A report by the Vermont Futures Project says 10,000 more people are leaving the workforce than entering it. Bill Shouldice, CEO of Vermont Teddy Bear and chair of the Vermont Chamber Foundation, said the findings are “alarming” and that economic development keeps “coming back to workforce supply gap.”


Baltimore is home to one of the largest urban economic development projects underway in the country. Plans were unveiled in January 2016 to construct Port Covington, a $5.5 billion waterfront development that will serve as the new headquarters for Under Armour and will feature offices and manufacturing space. Construction is slated for the end of 2017 and, once completed, will reportedly create more than 26,000 jobs and have a $4.3 billion annual economic impact.

William Cole, president and CEO of the Baltimore Development Corporation, said the city leveraged the largest tax increment financing (TIF) initiative in the country to date to offer $660 million public infrastructure improvements. Cole says while the deal will help “fuel Baltimore’s renaissance,” the city has also been gaining ground as a hot place for millennials. “In the past five years, we’ve become an attractive place for millennials, not just because of Under Armour, but for world-class institutions like John Hopkins and University of Maryland,” says Cole.

In November, Exelon Corporation also opened a 20-story building in the heart of the city. Morgan Stanley recently announced that it is consolidating most of its back-office operations in Baltimore, adding 800 jobs.

However, the city still struggles with perception, says Cole. “We still fight perceptions around public safety and business-friendly climate. But every business that comes here finds it far better than it imagined.”


The Brookings Institution found that between 2009 and 2014 Washington, D.C., grew more slowly than almost every major American metro area and needs to diversify its economy to rely less on federally fueled growth. Progress is already being made.

Keith Sellars, CEO of the Washington D.C. Economic Partnership, says many companies are “doubling down” on the region. In 2015, the district granted healthcare consulting and technology company Advisory Board a $60 million tax abatement package to remain in the city and move its headquarters to Mount Vernon Square. Blackboard, one of D.C.’s most successful startups, also decided to stay in the district this year after being courted by several cities.

While it’s still known as the federal hub, the city is seeing a growing culture of innovation fueled by tech-oriented millennials, says Sellars. WeWork, a global co-working space being used by both startups and companies like Microsoft and GE, has expanded its local presence from 2,000 desks to 8,000 desks in only a year. “People think, ‘Oh, it’s just the federal city,’ but really don’t know that it’s a good place to start a company,” says Stellars.

D.C. continues to struggle with one of the highest costs of living in the country. A recent study by SmartAsset found that a household needs to earn at least $119,000 annually to afford a two-bedroom apartment. Mayor Muriel Bowser has allotted $100 million per year for affordable housing. “The high cost of living certainly remains a challenge, but salaries are high and can often balance it out. D.C. remains a highly desirable place to live,” says Sellars.


While New Jersey’s thriving pharmaceutical industry took a hit in recent years due to consolidation, the biosciences industry has more than taken up the slack. Debbie Hart, CEO of BioNJ, a trade association for the state’s biotechnology industry, says that the sector has grown to 400 companies that have had a $36 billion impact since 2012. She says companies are attracted to its world-class research institutions, central location and talent.

Irish specialty pharmaceutical organization Mallinckrodt recently announced an $80 million investment to consolidate operations in Bedminster. Allergen also turned down a relocation to Landsdale, Pennsylvania, and recommitted to the state for its talent pool and $58 million in incentives. Allergen consolidated four locations and moved to a new headquarters in Madison, a move that CEO Paul Bisaro says was not only motivated by strategy but because “everyone loves New Jersey so much, so nobody is willing to go.”

“We have amazing talent from the legacy of big pharma and it has really attracted a lot of the companies to the area to relocate or expand,” says Hart. Because it can take nearly 15 years and $2 billion for a drug to go to market, one big challenge is a shortage of venture capital. Hart says they attempt to offset this with an incentive that allows companies to sell their net operating losses for cash. “We literally do anything we can to attract money here through incentives, making introductions to companies and connecting them,” said Hart.


MAINE / Will the port of Portland become a gateway to the Arctic?

Multiple studies have pegged Maine’s economy as one of the nation’s worst performing in recent years. But if warming sea levels and a melting Arctic ice cap open up new shipping routes, it could be a future key player in trade with Europe. Port activity in Portland has grown by 20 percent annually since Icelandic shipping company Eimskip established operations there in 2013. In September, the first cruise ship traveled through the Northwest Passage and in October, the Arctic Council met in Portland and highlighted Maine’s potential as the “gateway to the Arctic.”

A study by the University of Reading in the U.K. found shipping goods between Asia and the East Coast via the Northwest Passage could save four days in transit time. While it could be a decade before the route can regularly support oceanic vessels, WISERTrade data reports Maine exports to Scandinavia and Russia topped $1.3 billion in 2015, up 57 percent from two years ago. U.S. Senator Angus King said at the October conference that while direct routes to Europe could be years away, “we are a logical place for ships to stop that are delivering goods to the Eastern U.S.”

As Maine eyes opportunities in the Arctic, it’s still trying to grow its manufacturing sector. Aerospace manufacturer Pratt & Whitney recently invested $150 million for an expansion at its facility in North Berwick. Yet, population loss and shortage of workers is a growing problem. U.S. Census Bureau data shows Maine has the oldest median age in the nation, and its population grew by only 2,000 in 2015.


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