Players shift, but Twin Cities still best for businessDallas, Columbus move into top 10 in MarketWatch study of metro regions
By Russ Britt, MarketWatch
Last update: 10:45 a.m. EST Dec. 2, 2008LOS ANGELES (MarketWatch) -- Minneapolis-St. Paul, far and away, remains where it's at for business.
For the second year in a row, the Twin Cities region stayed at the top of MarketWatch's list of best metro areas for business, based on results from a variety of sources. While a number of other players shifted around in the standings, and a couple fell out of the top 10, Minneapolis-St. Paul lost a little bit in the scoring. But the area still outdistanced its closest competitor, Boston, by more than 20 points.
Last year, the Twin Cities was at the top of MarketWatch's list in the first annual survey of where companies tend to gravitate and create the most jobs. It appears little has changed for the region, as the concentration of companies has stayed strong, and job growth continues while unemployment remains relatively low.
Best & Worst U.S. Cities for Business
Twin Cities on top
Minneapolis-St. Paul, far and away, remains where it’s at for business. For the second year in a row, the Twin Cities region stayed at the top of MarketWatch’s list of best metro areas for business.
• Slideshow: Views of the Top 10
• The bottom 10: That sinking feeling
• Methodology: How the ranking works
• Which cities climbed, which fell
• What is it about the Twin Cities?
The Twin Cities area has a baker's dozen of public and private firms with sales of more than $10 billion, up from 12 a year ago. But the region also is friendly to small business, as it garnered the top ranking among all metro areas in that category.
How is it possible for a frigid northern outpost to attract the talent it needs to support the region's massive business community? It's not always easy, locals concede.
"Why is it hard to get people here? Because they expect snow to be blowing in July," said Douglas Baker, chairman and chief executive at Ecolab Inc. (ECLEcolab Inc
ECL) , based in St. Paul.
It typically takes 60 to 90 days to close the deal with a potential executive, according to Tom Valerius, vice president of recruitment services for Minneapolis-based UnitedHealth Group Inc. (UNHunitedhealth group inc com
UNH) , the country's biggest health insurer.
"You sell them on the job, and then you sell them on the Twin Cities," Valerius said. "Usually, at the end of the day, the big sell is on the spouse, more than the executive."
The area has managed to attract enough talent to support those two firms, as well as such legacy companies as industrial conglomerate 3M Co. (MMM3m co com
MMM) , food heavyweight General Mills Inc. (GISGeneral Mills, Inc
GIS) , insurer Travelers Cos. (TRVtravelers companies inc com
TRV) and financial powerhouse U.S. Bancorp. (USBus bancorp del com new
The Twin Cities are also home to retail giants Target Corp. (TGTtarget corp com
TGT) and Best Buy Co. (BBYBest Buy Co., Inc
BBY) , medical-device makers Medtronic Inc. (MDTMedtronic, Inc
MDT) and St. Jude Medical (STJst jude med inc com
STJ) , and big private firms Cargill and CHS. Cargill has replaced Kansas chemical maker Koch Industries at the very top of Forbes' rankings of the nation's biggest private firms.
There are a few vulnerable companies in the region, to be sure; Northwest Airlines (NWANWA
NWA) is one. But the Twin Cities ticked up slightly in the rankings of concentration of Russell 2000 companies, so the region seems prepared to handle whatever economic onslaught may be on tap.
Many of the region's companies are home-grown and have thrived in the environment. UnitedHealth, for example, was started in 1974 and now boasts $80 billion in annual sales.
Other companies have deeper roots, such as Traveler's in St. Paul, which got its start in 1853. It's been sustained in part by a highly ranked school system and the network of higher-education providers in the region.
"It's a very educated workforce," said Andy Bessette, Traveler's chief administrative officer. "The people here, the school systems, are very good."
In the MarketWatch rankings, Minneapolis-St. Paul ended up with 324 points overall, down five points from the 329 it notched last year. It was in the top 10 in five of the eight categories studied, and it was just one spot out of the top 10 in concentration of Russell 2000 companies.
The Twin Cities were in the middle of the pack of 50 metro areas studied -- those with roughly 1 million in population or more -- in population growth and job growth. It lost a little ground in the unemployment average but still ranked high.
The rest of the top 10:
2. Boston -- 302 points: Beantown was ranked fourth a year ago but moved up by 19 points due to better rankings in concentration of Fortune 1000 and S&P 500 companies, as well as small businesses. Boston also climbed the ranks in the jobless category but remained in the bottom 10 in population growth.
Among the local companies that boosted its rankings: PerkinElmer Inc. (PKIPerkinElmer Inc
PKI) made it into the Fortune 1000, along with Beacon Roofing Supply Inc. (BECNbeacon roofing supply inc com
BECN) . And different metrics on jobless rates aided its rankings.
Like Minneapolis-St. Paul, Boston benefits from a workforce that's often been trained at the area's dozens upon dozens of higher-learning institutions, including the venerable Harvard University and the highly regarded Massachusetts Institute of Technology, as well as Boston University, the city's No. 4 employer.
That's helped the Hub City create a wide diversity of companies in health care, finance, higher education, high tech and tourism.
"It really is the skilled workforce that drives these industries," said Tim Sweeney, director of public policy at the Greater Boston Chamber of Commerce. "Having that balance [of firms] has really helped us to sustain the economy."
3. Denver -- 297 points: Denver got a better score this year but fell to third place from last year's second ranking as Boston shot up the charts in several categories.
Denver maintained most of the scores it achieved a year ago, losing a few points in some categories but making that up elsewhere. Three local firms were added to the Forbes list of top private companies, including financial firm First Data Corp., building-materials company Pro-Build Holdings, and resource manager MWH. This was the main reason the region's score was up from the 291 it posted a year ago.
4. Washington -- 282 points: The nation's capital was one of several cities to benefit from an expanded check of small-business data in the survey. Washington moved up 11 places in that category as MarketWatch ranked cities on four separate small-business parameters provided by the Department of Commerce.
Washington gained 21 points in the study, moving it from seventh place to fourth.
Two area firms, Pepco Holdings Inc. (POMpepco holdings inc com
POM) and Washington Post Co. (WPOThe Washington Post Company
WPO) , were added to the S&P 500, moving the District of Columbia seven spaces higher in the rankings -- an illustration of how the addition or loss of one or two companies can have a marked effect on rankings.
And, at least for now, Washington doesn't seem to be having trouble creating jobs, according to Steve Moore, a marketing manager for the Washington, D.C., Economic Partnership. The area has produced 11,000 jobs this year, nearly 5,000 more than it expected. The area's unemployment numbers are up, as well.
Moore said more companies seem to be gravitating to D.C. and northern Virginia. He remembered a recent mixer for small software developers. "Two-thousand people showed up," he said.
Employers like the region because of its highly educated workforce. Nearly one in two workers has a college degree, and 22% have advanced degrees, reported Matt Erskine, executive director of the Greater Washington Initiative. "It's the best-educated workforce in the nation," he said.
5. Richmond, Va. -- 275 points: This region has benefitted from a migration toward Virginia, as well as residual effects of proximity to Washington, though it may end up slipping somewhat in future rankings now that one of its largest companies, Circuit City Stores Inc. (CCTYQCircuit City Stores, Inc.- Circuit City Group
CCTYQ) , has fallen into bankruptcy.
Richmond lost 13 points in the rankings from last year and thus slipped from third place to fifth. Circuit City's ejection from the S&P 500 contributed to that slippage. Richmond also lost ground in concentration of Russell 2000 companies. But the area remained at the top of the list in the concentration of Fortune 1000 companies.
6. Charlotte, N.C. -- 268 points: This North Carolina city lost just four points, but that was enough to knock it down a notch in the rankings. Charlotte moved up in the small-business category but slipped in the unemployment rankings by nine spots.
The city faces the prospect of further ranking declines as it is heavily reliant on financial-services companies, including Wachovia Corp. (WBWachovia Corp
BAC) , the biggest outfits in the region.
7. Columbus, Ohio -- 263 points: This state capital is one of two cities new to the top 10 this year, rising from 14th place a year ago with a 26-point gain.
The home of Ohio State University, Limited Brands (LTDlimited brands inc com
BIG) also benefited from a broader survey of small-business figures. The city moved up 10 slots in that category.
And the addition of two financial firms, Diamond Hill Investment Group (DHILdiamond hill investment grou com new PROS) , to the Russell 2000 index helped Columbus surge 11 spots in that category.
The region has managed to avoid the Rust Belt troubles that hit other Ohio cities like Cleveland, said Steve Mangum, the interim dean of Ohio State's business school. Columbus has built an entire economy around the university -- the country's biggest by enrollment -- using its research and educational might to fuel various types of industry.
The university also is a cornerstone of Columbus residents' down time, bringing art and culture to the region, as well, of course, as the beloved Buckeyes football team.
Locals like the intimate nature of the city.
"It has a small-town feel to it, but it's the [30th] largest city in the country," Mangum said. "There's something about the spirit of this place."
8 (tie). Nashville -- 262 points: Tennessee's capital had an even tougher break than Charlotte, as it slipped just one point but lost two spots on the charts. Nashville gained eight spots in the small-business category but lost nine in job growth.
Then it made marginal gains in various other categories but lost eight spots in the unemployment check.
So instead of a tie for seventh with Columbus, Nashville's in a tie for eighth with ...
8 (tie). Dallas -- 262 points: "The Big D" is the other newcomer among the top 10, moving up five spots and gaining 22 points. This central Texas city didn't yield any of its rankings and made modest gains in a number of categories, including its rosters of S&P 500 and Russell 2000 companies, its small-business climate and the unemployment picture.
After the savings and loan debacle of the 1980s and the telecom bust in the late 1990s and early 2000s, the city's economy was forced to diversify, according to Jim Murdoch, economics professor at the University of Texas at Dallas. Since then, he said, Dallas has had the capacity to add companies at a clip faster than most regions because the region is fairly well spread out. "That allows us to do a lot of things other places can't do because of gridlock."
The region has had a run of good luck, as well: A critical natural-gas discovery is helping the oil-rich region to diversify its energy resources.
Further, a General Motors (GMGeneral Motors Corporation
GM) plant in suburban Arlington was the only one left open by the company recently to make Cadillac models and luxury sport-utility vehicles. How long that plant will last with GM's current troubles is questionable, though.
"They closed all the other plants that were making those vehicles," Murdoch said. "That was a pure luck kind of thing."
10. San Francisco -- 260 points: The City by the Bay joins Minneapolis-St. Paul as the only members of the top 10 to retain same overall ranks from 2007 to 2008.
San Francisco actually gained 13 points from a year ago, thanks mostly to a marked improvement in unemployment standings. But other cities made even larger gains, thus leaving the Bay Area in the same spot.
Dropped from top 10: New York and Birmingham, Ala.: The biggest U.S. city and one of the least populous metropolitan areas in the study dropped out due to various reasons.
New York gained eight points but fell prey to other regions' more dramatic advances. The city moved up 15 spots in the unemployment rankings and eight spots in job growth. But it lost ground in other categories, particularly on the small-business measure.
The Big Apple ended up just outside the top 10 in 11th place, down from eighth a year ago. It scored 257 points this year.
Birmingham, meanwhile, fell 10 spots, from ninth to 19th, and lost 22 points to end up with a score of 226. The city remains in the top spot for concentration of Forbes private companies, but it lost significant ground by shedding one Russell 2000 firm and two Fortune 1000 companies.
Russ Britt is the Los Angeles bureau chief for MarketWatch.
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