Does Industrial Preservation Promote Industrial Activity?

In the face of escalating property values, city officials have often targeted industrial districts in centrally located areas to support higher-yielding real estate development. Unfortunately, the strategy has eventually increased industrial displacement and eroded middle-class manufacturing jobs.

Effectiveness of Industrial Preservation Policies

As a response, several major cities have been proactively implementing industrial preservation policies to induce and retain urban industrial activities. Are these policies effective in mitigating industrial employment losses? Can planners use such policies as an economic development planning tool?

"Do Industrial Preservation Policies Protect and Promote Urban Industrial Activity?" in the Journal of the American Planning Association (Vol. 86, No. 4) measures the effectiveness of industrial preservation policies by looking at New York City's Industrial Business Zone program (IBZ).

The program includes several policies that are applied to designated geographic areas to attract and retain industrial uses by offering tax credits and support services to businesses. To measure the effects of this policy, authors Jenna Davis and Henry Renski compare the differences in urban industrial activities in IBZ census blocks against comparable census blocks that did not receive IBZ designation between 2005 and 2012.

Figure 1: IBZ census blocks and comparison census blocks in New York City.

IBZ Impact Analysis Results

The authors looked at the IBZ program's impact on four measures of urban industrial activity:

1. industrial business registrations
2. industrial employment
3. industrial building permits
4. industrial land use

The findings show that although the IBZ had a significant impact on retaining industrial land, it did not have a statistically meaningful impact in attracting new industrial business, promoting industrial employment growth, and fostering industrial building permit activity in the area.

Table 3, 4, 5, & 6: IBZ census blocks vs. comparison group based on four measures of industrial activity (industrial business registration, industrial employment, industrial building permit, and industrial land).

Industrial Business Registrations

In terms of industrial business registrations, both IBZ and comparison census blocks followed the city-wide trends and grew at a similar rate (95 percent in IBZs and 114 percent in the comparison group). The findings indicated that the number of registrations in IBZ blocks was not statistically different from registrations in comparable blocks, which means that the IBZ program had a weak effect on attracting new industrial businesses.

Industrial Employment

Although industrial employment in IBZ blocks declined at approximately half of the rate as in the comparison group (11 percent in IBZs and 20 percent in the comparison group), the difference was not statistically significant. The authors argue that the IBZ's ineffectiveness was caused by not including IBZ boundaries in the zoning code, enabling development agencies to rezone it to nonindustrial development that fueled competition for space between industrial and nonindustrial users.

Building Permits

The number of building permits in IBZ blocks increased by 16 percent compared with the 1 percent growth in the comparison group as the industrial businesses in IBZ blocks made greater physical investments due to greater real estate certainty. However, as the difference was not statistically significant, the finding suggests that the IBZ program did not have a meaningful impact on promoting greater industrial building permit activity.

Industrial Land Decline

The research found that industrial land declined by only 5 percent in IBZ census blocks, one-third of the declining rate of 15 percent in comparison blocks. This result suggests that the IBZ program had a significant effect on preventing industrial land losses although the declining trend indicates that the IBZ program does not necessarily help to attract new industrial uses.

In conclusion, the article shows that the IBZ program works well as a mere land use planning tool to retain the existing industrial land rather than an economic development tool that can spur the growth of industrial activities.

Because the IBZ's financial incentives do not guarantee economic development outcomes, planners must include regulatory components in it, such as inscribing IBZ into the zoning code and aligning the IBZ policies with the positive economic development goals.

Top image: Industrial zone with New York City in the background. Getty Images photo.