More than 150 years after the California Gold Rush, Americans are again heading west, only this time they’re in search of a high quality of life and high-paying jobs. Businesses are flocking to meet the talent, and many Western states are among the country’s fastest-growing economies.
Some of the world’s largest data centers are being built in Nevada. In California, auto manufacturing is surging on the promise of clean technologies. Colorado has established itself as a global hub for cybersecurity, while Utah has carved out its own tech scene in the “Silicon Slopes.” Even in more rural states like Wyoming and Montana, there’s growing enthusiasm for entrepreneurship and tech development.
Distribution and Data Center Growth in the Desert
Nevada has seen a number of big tech investments, particularly in the Reno area. In January, Tesla Motors started production of lithium-ion battery cells at its $5 billion Gigafactory. While it’s less than 30% completed, it is projected to eventually encompass 10 million square feet and become the largest factory in the world. Apple just announced a $1 billion expansion of its data center in the Reno Technology Park, and Switch SuperNAP is constructing what will be the world’s
largest data center.
Jared Smith, COO of the Las Vegas Global Economic Alliance, says there has been “growth and diversification like we’ve never seen” in the southern part of the state. While Las Vegas “doesn’t run from hospitality,” he says, it’s trying to leverage its global reputation to make it known as a great place to do business as well. LVGEA reports strong growth in manufacturing and logistics as companies seek to take advantage of the city’s fast access to West Coast ports. Amazon is building an 813,000-square-foot fulfillment center in North Las Vegas, while sports apparel retailer Fanatics is building a 400,000-square-foot distribution center south of I-15.
“Because of the excellent publicity we receive in tourism [and entertainment], economic diversification can go unnoted, but we’ve seen a lot of growth in manufacturing and logistics,” Smith says.
One challenge the state faces is education. The Quality Counts report, which ranks states on student performance, school financing and other qualities of K-12 public schools, put Nevada dead last in 2016. WalletHub also ranked it one of the least-educated states based on attainment. John Guedry, CEO of Bank of Nevada and founder of the Business + Education (BE) Engaged Summit to improve education, said it’s growing issue.
Surging Tech Growth in the Silicon Slopes
Despite being known for its national parks and open desert, Utah is considered one of the most urban states, according to the U.S. Census Bureau, with more than 90% of the population living in urban areas. Like other Western states, access to the outdoors and quality of life are significant assets in recruiting and retaining talent. A study by the Gardner Policy Institute at the University of Utah found that the state generated more than 109,000 jobs and $9 billion in economic activity in 2015. Medical device manufacturer Biomerics announced in April that it would spend $38.5 million to construct a new corporate headquarters in Salt Lake City, and earlier this year the state announced its Talent Ready Utah initiative to help fill 40,000 high-skill jobs over the next four years.
Val Hale, executive director of the Utah Governor’s Office of Economic Development, says that while Utah used to be “an extraction and agriculture state,” it has quickly propelled itself into the tech and aerospace sectors. “Silicon Slopes,” an area that encompasses Salt Lake City, Provo and Park City, is a hotbed of tech entrepreneurship.
The Milken Institute named the University of Utah as a top school for the commercialization of technology, and a number of locally grown startups, including Pluralsight, Qualtrics, Domo and InsideSales, have been valued at more than $1 billion each.
“We led the nation last year in technology growth with a prolific growth rate that was over 6%. We have a lot of companies that are opening, while others are coming here to branch out and expand,” Hale says. Yet Utah must manage its growth. The Census Bureau pegged it as the fastest-growing state, with a population growth rate of 2%. “Our population crossed 3 million in 2016 and it will double in the next 30 years. We live in the desert, which can pose some challenges, and we also need more talent and workers,” Hale says.
A Capital for Cybersecurity
Cybersecurity is one of Colorado’s fastest-growing industries. Stephanie Copeland, executive director of the Colorado Office of Economic Development and International Trade, says there are more than 100 purely cybersecurity-based companies in the state employing more than 85,000 people. Last year, Colorado Springs became the home of the newly established National Cybersecurity Center, which provides collaborative cybersecurity response services to the nation through training, education and research.
“The combination of the highly skilled technical workforce with the backdrop of the military that exists in the state has created this confluence of a rich environment for cybersecurity development,” Copeland says.
Colorado has also seen strong growth in other sectors. In December, BP moved its Lower 48 division headquarters from Houston to Denver, calling its operations in the Rocky Mountains “an important energy hub of the future.” Amazon announced in January that it was planning a one million-square-foot fulfillment center in Aurora, and Smucker’s announced a $340 million manufacturing facility in Longmont. Google has also been expanding its presence in Boulder, where it has doubled its workforce since 2015.
J.J. Ament, CEO of the Metro Denver Economic Development Corp., says that while Denver used to be known as “an energy town,” it has developed a reputation around technology. Tech firms Gusto, Partners Group and OnDeck Capital have opened offices in the past two years. The state also continues to be viewed nationally as a lab experiment for legalized recreational marijuana. According to the Colorado Department of Revenue, the industry sold $1.3 billion in medical and recreational marijuana in 2016, generating close to $200 million in tax revenues. Copeland says that despite all the publicity it’s generating, the new industry hasn’t been “earth shattering” in moving the state’s economy one way or another.
The influx of workers to the metro area is creating a significant demand for housing, yet Copeland says local regulations have created a “disincentive to build condos” and an incentive to built apartments. The Homeownership Opportunity Alliance says condo construction in Denver has fallen from 20% of all new housing construction in 2005 to only percent today.
Locally Headquartered Companies Fueling Growth in Boise
While Idaho’s economy has always been heavily rooted in agriculture and food, strong growth in those sectors has been planting seeds for further development. Through acquisitions and mergers, Boise-based Albertsons has grown from fewer than 200 stores to more than 2,300 locations and $60 billion in annual sales in only five years. Last year, Albertsons announced an expansion and 300 more jobs at its Boise headquarters and expressed its intent to go public. The Financial Times reported in April that the company was considering a bid to buy Whole Foods.
Other companies headquartered in the area, including SuperSaver Foods, WinCo., Simplot and Heartland Recreational Vehicles, have also seen robust growth that Clark Krause, executive director of the Boise Valley Economic Partnership, says is driving the local economy. “Many of these companies have had extraordinary growth, and that has fueled strong organic development in the Boise metro area,” Krause says.
Krause says the economy is quite different than it was 10 years ago when the area was hit hard by the recession and subprime mortgage crisis. He notes the city is one of the fastest-growing construction markets in the country. Over the past several years, Boise has invested more than $1 billion in public and private projects such as the new Simplot headquarters, City Center Plaza and JUMP (Jack’s Urban Meeting Place, a nonprofit community center). The Associated General Contractors reports that between September 2015 and September 2016, construction employment rose 25%, the highest in the nation. “There are cranes everywhere, with lots of wonderful projects coming out of the ground,” Krause says.
One challenge Idaho faces is keeping up with growth in its capital city. Boise has been ranked as one of the 20 fastest-growing cities in the country. “All of us as community leaders are very much in tune that we need to grow the city in a healthy way and not wait until it has horrendous chokes that become a problem,” Krause says.
Rural areas have also been trying to diversify their economies. Doug Manning, economic development director for the city of Burley, says while the agriculture and food industry continues to thrive in the Mini-Cassia region, growth is “spinning into other sectors.” Last year, Dow Chemical announced it would build a 60,000-square-foot manufacturing facility in Burley.
Moving Beyond Energy
Due to energy dependence and plummeting oil prices, Wyoming’s economy has had a bumpy ride of late. The Bloomberg Economic Evaluation of States Index ranked Wyoming dead last in terms of employment, mortgage delinquency, personal income, home prices and the stock of local companies.
On the upside, there have been strong efforts to diversify the state’s economy beyond energy. Last year, Gov. Matt Mead announced the ENDOW (Economically Needed
Diversity Options for Wyoming), a 20-year strategic plan to coordinate economic diversification efforts across the state. Mead said in a press release the goal is to “build on recent success in establishing technology as a fourth leg of Wyoming’s economic strength… to build on the efforts that add value to coal, minerals and natural resources… to build on our success in growing a manufacturing industry.”
Local efforts are already producing results. The New Growth Alliance, which includes Campbell, Sheridan and Johnson counties in the northeastern part of the state, is aiming to diversify with tech. New Growth Alliance CEO David Simonsen says the region has been expanding its community college system; Sheridan College is nearing completion of a renovation and expansion of its Technical Education Center to produce more skilled tradespeople.
Simonsen recently helped recruit a company to the region by introducing himself to a CEO at a conference. New Growth Alliance brought the CEO to the state, presented its value proposition and offered a training program to support the workforce. “I was the only person in a room of about 200 economic developers that went up and talked to him after a presentation.… The relationship has grown and we’re in the process of getting the company into Buffalo, [Wyoming],” Simonsen said.
One of the biggest challenges to Wyoming’s economic diversification efforts is that dependence on the energy sector can make it hard to recruit workers. “The fact that they pay very well when they’re operating full-bore makes it tough to compete. It’s difficult to draw people from away from those jobs into other sectors,” Simonsen says.
Growing Through Grass-roots Entrepreneurship
Montana is one of the dozen states that isn’t home to a Fortune 500 headquarters, but its mid-market and startup scene is bustling. Bridger Mahlum, government relations director for the Montana Chamber of Commerce, says the state has seen a surge in entrepreneurship in recent years. Roughly 10% of Montana’s adult population owns their own business, and a recent report by the Ewing Mario Kauffman Foundation says Missoula has the ninth-highest business startup rate per capita among 394 metro areas.
Some big businesses are expanding: In 2015, Boeing opened a 55,000-square-foot expansion at its Helena manufacturing facility. Mahlum adds that there has been
significant growth in small manufacturing—local manufacturers Spika Design & Manufacturing and Wood’s Powr-Grip are among those that have expanded in recent years—and a report commissioned by the Montana Manufacturing Extension Center at Montana State University shows positive developments in manufacturer retention and recruitment. The Montana High Tech Business Alliance estimates there are more than 540 high-tech and manufacturing companies operating in the state. “We’re seeing a lot of growth for small to medium-sized manufacturing that are either making their own product or doing a lot of subcontracting for some of the bigger companies,” Mahlum says.
There has also been notable growth in the craft brewing industry, Mahlum says. A report by the Bureau of Business and Economic Research at the University of Montana said the industry has grown by 87% since 2010 and provides more than 1,000 jobs with $33 billion in personal income.
One challenge is cultivating Montana’s homegrown businesses into larger employers. Yet, while Montana a long history of graduates leaving the state for elsewhere, Mahlum says “new business opportunities are making it more of a career place for young people.”
The Premiere State for STEM Work
According to the U.S. Department of Commerce, Washington’s GDP grew by 3.1% in 2016, the third-highest growth rate in the nation. Jamie Rossman, senior economic analyst at the Washington Department of Commerce, says the state’s economic success is being driven by a highly educated population. Personal finance website WalletHub recently called Seattle the best area for STEM professionals, with the second-highest percentage of the workforce employed in STEM professions and 98 STEM openings per 1,000 residents.
While Boeing moved its headquarters to Chicago in 2001, Rossman notes Washington is still home to 80,000 of the company’s 100,000 jobs nationwide. Amazon is also expanding its footprint in Seattle and recently filed permits to build another 17-story office tower. The company now employs more than 40,000 people in the state.
“We are Boeing. We are Microsoft. We’re Amazon. We’ve got some good growth in many areas. We have the strongest tech cluster outside of Silicon Valley… and at the same time it’s still relatively affordable to live [here],” Rossman says.
Ricardo Noguera, economic development director for the city of Tacoma, says more tech firms have been expanding their workforce to the Puget Sound area due to escalating real estate values in the San Francisco Bay area. California tech company Infoblox recently announced it was expanding its Tacoma office, saying it offered strong value in cost of living and could draw on talent from Seattle.
According to Zillow, a median-priced home near Infoblox’s Santa Clara headquarters is more than $1 million, compared to the median price of $250,000 in Tacoma. Noguera also notes that the retention rate of tech workers is much higher in the region, up to four years in Tacoma, compared to an average of nine months in Silicon Valley. “We’re seeing a number of tech startups starting to take shape in our city, and more investment. The cost of living and ability to grow the company and maintain the workforce are big factors,” Noguera says.
Rapid Growth and Expansion in Apparel Manufacturing
The Beaver State has had one of the healthiest economies in the nation for the past few years with growth in multiple sectors. Chris Harder, director of Business Oregon, says tech and software development are growing rapidly, driven by the presence of Intel and a robust entrepreneurial community.
Oregon remains “the Silicon Valley for the outdoor and apparel industry,” he adds, and is home to such companies as Columbia Sportswear, Nike and Adidas North America. Amazon recently announced plans to construct a ninth data center in Umatilla County.
The manufacturing sector is being driven by the Oregon Manufacturing Innovation Center, which opened in Scappoose in January as a partnership between state government, higher education and industries. Modeled after the Advanced Manufacturing Research Centre in Sheffield, England, the OMIC will promote research and development and training in the industry. “We’re bringing together all of these groups, economic developers, government, universities, and firms… and its goal is to help companies do R&D, create better products,” Harder explains.
Michael Gurton, an analyst at Prosper Portland, says Portland has been experiencing rapid post-recession growth, with most of its large employers continuing to expand. As with a number of other West Coast cities, he says there has been strong in-migration and a big talent pool. Last year, Nike announced a $380 million expansion of its headquarters in Beaverton; Under Armour is also expanding its 109,000-square-foot campus in Portland.
Yet Gurton says Portland is increasingly challenged with affordability, homelessness and inequality. He says the city is making a number of investments through the housing bureau and trying to leverage economic development to bring more benefit to underserved communities. “And the city, from the mayor down to us, is trying to meet that challenge head-on and change how we do economic development to be more inclusive and focus on those who haven’t experienced this post-recession boom,” Gurton says.
A Return of Auto Manufacturing
There has been a resurgence in American auto manufacturing, and nowhere is that more apparent than in California. The state’s automotive manufacturing sector has grown by 22% since 2011, driven by direct access to the Pacific Rim and one of the country’s top talent pools. Brook Taylor, deputy director of Governor’s Office of Business and Economic Development (GO-Biz), says growth is partly being fueled by the California Competes Tax credit program, which has been in place since 2014 and offers $240 million in annual incentives.
“California is leading the next phase of automotive development, and it’s being spurred directly by a government program that is propelling these companies to make investments here,” Taylor says.
It’s a big change from where California was a decade ago. In the mid-2000s, the auto industry started divesting from the state, closing a number of plants. In 2010, Toyota and General Motors abandoned their joint operations at the New United Motors Manufacturing Facility in Fremont, which was then taken over by Tesla.
Taylor says the market started to truly turn around in 2011 when Tesla established its headquarters and made the base of its manufacturing operations in Palo Alto. Since then, legacy car companies such as Ford, Honda, Mazda and GM have returned and made large investments in their new technology divisions. “A lot of this was the result of a push toward electric vehicles and zero-emission vehicles, and now it’s a push toward autonomous vehicles,” Taylor says.
The activity is branching out beyond consumer automobiles to buses and service vehicles, Taylor adds. Chinese company BYD, which opened a factory in Lancaster in 2013 to construct electric buses, is working on a second phase expansion that will add thousands of additional square feet and more jobs.
Despite the growth, California has its challenges. The state has been noted for its high costs and what some call a “business unfriendly” environment. Yet Taylor points to the state’s economic success and says any higher costs can often be offset by incentives and access to top talent and the Asian market via West Coast ports.
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