2018 Regional Report: The Northeast

northeastWhile the northeast trails other regions in GDP growth, there are notable bright spots. Massachusetts continues to grow as a hub of disruptive innovation. Life sciences companies are flocking to New Jersey to tap its talent pool, and in Vermont, the clean energy sector offers new opportunities.

Across the region, urban hubs are cultivating thriving tech sectors. Of the 20 possible locations Amazon identified for its new HQ2 location, seven were in the Northeast.

DELAWARE: NEW PATHS TO ECONOMIC DEVELOPMENT

Delaware recently restructured and divided its economic development office into the non-profit Delaware Prosperity Partnership and state-run Delaware Division of Small Business Development and Tourism. The new structure ensures every company interested in the state “gets direct and personalized assistance” regardless of their market share, says division director Cerron Cade.

Notable deals in 2017 included DuPont’s merger with Dow Chemical in September. Sallie Mae, which moved its headquarters from Washington, D.C., to Newark, Delaware, in 2011, announced an expansion with nearly 300 new positions. And in April, Del Monte Fruit announced a new distribution center in Newark.

Yet, the Diamond State still struggles with anonymity, which Cade says requires it to “work harder at promotion.” One strategy has been highlighting the state’s proximity to major cities such as New York, Washington, Baltimore and Philadelphia. “We’re a small state, but companies can get the best of both worlds. We like to say that if you left first thing in the morning from Delaware, you could probably have breakfast in one of three large cities and be home for lunch,” Cade says.

PENNSYLVANIA: BUILDING THE NEXT GENERATION WORKFORCE

The Keystone State has been cultivating the next generation of workforce through the Workforce and Economic Development Network of Pennsylvania (WEDnetPA), which has been training incumbent workers on new technologies. The state also increased apprenticeship programs and outreach in K-12 programs, says Dennis Davin, secretary of the Pennsylvania Department of Community and Economic Development.

“Part of it is ensuring there’s exposure to manufacturing jobs, that younger people know there are tremendous opportunities out there,” Davin says. “Apprenticeship programs can help train the next generation of workers.”

New projects are already putting people to work. Pipe joining manufacturer Victaulic announced in January a state-of-the-art, 400,000-square-foot manufacturing facility in the Lehigh Valley. Silgan Containers, a food packaging manufacturer, also announced an expansion in Upper Macungie Township. And President Trump visited H&K Equipment in Coraopolis to highlight how the tax bill will help manufacturers.

Pennsylvania has been promoting its shale reserves as companies that acquire land in the state also own the rights to the natural gas resources below those facilities. “It’s a big advantage. Some companies can save millions per year in energy costs,” Davin says.

NEW HAMPSHIRE: COURTING MILLENNIALS

New Hampshire has the third-oldest population in the country, according to 2016 data from the Census Bureau’s American Community Survey. Yet, that’s finally starting to change, says Taylor Caswell, commissioner of the New Hampshire Department of Business and Economic Affairs. Younger workers who migrated to the Northeast but are seeking a lifestyle outside of the major cities are starting to eye New Hampshire, spurring a “new vibrancy,” Caswell says.

The state’s economy has outperformed the rest of New England, boosted by strategies around workforce development, tax rate reductions, regulatory reform and statewide collaboration. Allegro MicroSystems, a manufacturer of semiconductors, recently announced an expansion at its facility in Manchester. And in May, Québec-based manufacturer Deflex Composite broke ground on its first U.S. facility in Berlin.

Attracting those younger workers and cultivating talent will be key to maintaining the momentum. Last summer, Gov. Chris Sununu founded the Millennial Advisory Council to promote initiatives to attract additional younger workers. “We have good companies here, and they want to expand. We just need more people,” Caswell says.

MAINE: NEW OPPORTUNITIES FOR NATURAL RESOURCES

Peter DelGreco, CEO of Maine & Co., says cross-laminated timber, a new technology that combines planks, is a new opportunity for Maine to make up some losses from the declining paper industry.

“You’re seeing new ideas starting to bubble [as developers are] looking for opportunities to repurpose this really abundant and viable natural resource,” DelGreco says.

The University of Maine System received a $500,000 grant from the U.S. Economic  Development Administration last year to create the Maine Mass Timber Commercialization Center. Acquisition of 300,000 acres of Maine’s North Woods may fuel development of a CLT plant.

Other recent developments include Portland-based biopharma Vets First Choice’s receipt of a $223 million investment, and e-commerce company Wayfair’s opening of two back-office operations that will eventually employ 1,000 workers. “With the election coming up, I think you’ll see a lot of new ideas to spark economic growth,” DelGreco says.

VERMONT: CAPITALIZING ON CLEAN ENERGY

Vermont is quietly becoming a leader in renewable energy. The state’s clean energy sector grew by nearly 30 percent over the past five years and employs one in every 16 Vermonters, says Olivia Anderson, executive director of Renewable Energy Vermont. The Union of Concerned Scientists ranks the state second in the nation for clean energy momentum. “We have a comprehensive plan that commits to 90 percent renewable energy by 2050,” Anderson says.

Two of Vermont’s utilities, Burlington Electric Department and Washington Electric Co-op, qualify as 100 percent renewable. In addition to offering sustainable and cost-effective energy solutions for businesses, this affords the opportunity to export that technology across the country. Three energy storage manufacturers, Dynapower, Northern Reliability and Northern Power Systems, are gaining national attention for their technologies. Waterbury-based Sun-Common recently developed a solar parking lot canopy, and AllEarth Renewables of Williston announced an innovative solar tracker to keep panels following the sun.

“From manufacturing to engineering and installation, we have many sectors working collaboratively in the clean energy community, and the state commitment gives security to these companies and investors,” Anderson says.

MARYLAND: THE CYBER CAPITAL

Maryland continues to expand its reputation as a leading center for cybersecurity, says Mike Gill, secretary of the Maryland Department of Commerce. At Fort Meade alone, there are more than 62,000 employees working in the industry for such companies as Cisco and Tenable.

The hub is also spinning off private startups. Startup studio Data Tribe set up a base in Fulton in July 2016 to bring Silicon Valley expertise to new companies emerging from cybersecurity, Big Data and analytics labs in the Washington, D.C., beltway. “There’s a lot of investment of capital by the government and private industry,” Gill says.

And there’s continued growth in biotech and life sciences, with more than 1,000 sector companies holding a presence in Baltimore, including GSK, AstraZeneca and Medlmmune, Gill says. To maintain momentum, Gov. Larry Hogan introduced Excel Maryland, a comprehensive, statewide, collaborative economic development strategy to develop new ways to accelerate growth in the cybersecurity and life sciences industries.

“The moment we stop doing the things that have put us in this position to capitalize on these industries, it could be a problem. We’re not lucky. This didn’t happen by accident. We can’t rest on our laurels,” Gill says.

RHODE ISLAND: INNOVATION IN THE OCEAN STATE

Government, businesses and academia are joining forces to grow the new Providence Innovation & Design District. The 191,000-square-foot Wexford Innovation Center broke ground in the district last year and has already secured tenants such as the Johnson & Johnson Health Technology Center and the Cambridge Innovation Center.

It’s a big development for a state that struggled to emerge from the Great Recession, says Stefan Pryor, Rhode Island secretary of commerce. A 2016 report by the Brookings Institution noted that despite the large number of educational institutions, the state hasn’t realized its potential for commercializing knowledge. But that’s changing.

“Over the course of roughly two years, 22 companies have landed or expanded or announced their intent to come to Rhode Island,” Pryor says.

Another possible game-changer is CVS Health’s plan to buy Aetna. Should the deal be approved, it would become the country’s third-largest company. As of mid-January, Aetna had put off a plan to move its headquarters from Connecticut to New York City. CVS already employs 8,000 people in the state and will retain its headquarters in Woonsocket, but there is speculation that Aetna could also move some resources to Rhode Island.

Now, the main challenge is getting all stakeholders on board, building enthusiasm and pushing the state to reach its full potential. “Despite the presence of these universities and committed companies, Rhode Island has not, in the past, demonstrated the kind of  economic growth this state is capable of,” Pryor says. “These developments could change that.”

MASSACHUSETTS: THE PLACE FOR DISRUPTION

At a time when companies are disrupting their business models to find new opportunities, Massachusetts is becoming the place to do it. GE broke ground on its new headquarters in the Seaport District in Boston in May, largely motivated by the strong talent pool. Former GE CEO and Chairman Jeff Immelt told investors in 2016 that the city’s culture of innovation would put the company in “a world of ideas, so that we remain contemporary and paranoid.”

“We’re at the forefront of technological conversions, and we provide that very unique environment for companies to be able to break out of their silos,” says Susan Houston, executive director of MassEcon.

Toyota announced in May 2017 that it is working on a number of autonomous vehicle projects with MIT, and cloud services provider Akamai Technologies announced a new headquarters in Cambridge’s Kendall Square in January. “There’s a combination of disciplines in a compact geographical area that all of these leading companies need to call on,” Houston says.

Growth in biotech is also surging. Medical device company Insulet broke ground on a $100 million facility in Acton in August, and Alexion Pharmaceuticals announced plans to move its headquarters from Connecticut to Boston’s Seaport District by 2018. In October, MilliporeSigma opened its new Burlington life science center to serve as a regional hub for scientific advancement and customer collaboration.

CONNECTICUT: RESURGENCE IN MANUFACTURING

After years of decline in manufacturing activity, companies such as Electric Boat, Pratt & Whitney and Sikorsky are sparking a resurgence in the sector, says Catherine Smith, commissioner at the Connecticut Department of Economic and Community Development. In 2017, the number of manufacturing jobs in the state increased for the first time in seven years.

Five years ago, Connecticut laid the groundwork with notable investments in its community colleges. It has since doubled the number of graduates in STEM fields. The state also created the Manufacturing Innovation Fund, which offers matching funds for federal grants for job training and assistance with business development and technical needs. To date, approximately 900 companies have taken advantage of the program.

“We wanted to make the investments alongside these companies to make sure they could actually compete, and we think it’s working,” Smith says.

One challenge Connecticut faces is the perception of its business climate, Smith says. The state ranked #46 in Chief Executive’s 2017 Best & Worst States, with CEO survey respondents citing high taxation and regulation.

“The business climate is actually pretty good but the perception isn’t, and we need to keep working on it,” she says.

NEW JERSEY: MOMENTUM IN BIOPHARMA AND LIFE SCIENCES

The Garden State continues to reign as a top hub in the life sciences and biopharma industry, says Michelle Brown, CEO of Choose NJ.

Brown attributes that to the state’s high educational attainment rate and strong transportation connections to the rest of the Northeast. New Jersey is home to more than 12 of the top 22 R&D companies and 3,000 life sciences companies that employ 120,000 people.

“It’s probably the best place in the country to come and commercialize a [life sciences] business….It’s a talent very few locations have, but we have it here, and we’re trying to get the word out,” Brown says.

In August, Novartis received FDA approval to treat patients with Kymriah, a medicine it will manufacture at its facility in Morris Plains. UK-based Mallinckrodt opened a campus in Bedminster in October 2017 with 500 employees to provide support for the company’s hospital therapies and autoimmune and rare disease businesses. And Allergan is consolidating the operations of many of the companies it has acquired over the last few years at its new headquarters in Madison.

NEW YORK: REBUILDING THE EMPIRE

The federal Bureau of Economic Analysis reported that New York had one of the lowest GDPs in the nation in Q2 2017. Its GDP of 1.2 percent was well below the national average of 2.8 percent and ranked it #45.

In late December, New York Gov. Andrew Cuomo announced more than $750 million in economic and community development funding as part of a strategy to jumpstart the economy. Funds will go toward more than 1,000 projects in the state and “are critical to building the foundations for New York’s future and ensuring that our economic momentum continues,” said Cuomo.

New York still lands big investments in many sectors, notably in information, real estate and professional services. Master-Card announced in late November it would expand its operations in Manhattan with a212,000-square-foot center and nearly 500 new jobs by 2024. Ed McLaughlin, president of operations and technology for Master-Card, called it “an exceptional gateway fortalent, innovation and collaboration.”

Strategic Financial Solutions, Discovery Communications and EY are all also expanding operations in the state.

WASHINGTON, D.C.: A NEW CAPITAL FOR TECH STARTUPS

Venture capitalists invested more than $1.55 billion in D.C. tech startups in 2017. One of the biggest deals last year was Mapbox, a mapping and location platform for developers, which announced $164 million in Series C funding in October. Aledade, a value-based healthcare tech firm, also raised more than $60 million.

Washington, D.C. was one of seven Northeast locations that Amazon identified for its HQ2 project. Some analysts speculate the city has a strong chance, noting that Jeff Bezos owns a major media company based in the region and purchased a house there in October 2016. Northern Virginia is also home to the country’s largest concentration of cloud computing infrastructure.

Mayor Muriel Bowser released a five-year D.C. Economic Strategy Report in 2017 and noted that the city must do more to embrace innovation, inclusiveness and resilience. The goals are to grow the private sector 20 percent by the end of 2021 and to cultivate more economic prosperity by creating more jobs and lowering unemployment levels. “Washington, D.C. is no longer a one-company government town; we are a leader in innovation and tech, brimming with top talent and endless opportunity,” said Bowser in a statement.

 

PARTNER CENTER