The Rise of the "Creative Class"

How the Rise of the "Creative Class" Impacts the Market: Global Economic Trends YOU Need to Know About.

In the last decade, there have been scores of studies into the intricacies of what socio-qualities create and sustain economic vibrancy in regional communities. Leading economist Richard Florida achieved nationwide acclaim with his conclusion that the cities that are growing and thriving are the cities that support their so-called “creative classes.”

The creative class is the new, trendy term given to the subset of a comprised of artists, entrepreneurs and small business owners. Creative class members tend to seek out “dream” jobs, rather than settling in a career that pays the bills. They enjoy participating in cultural activities, such as concerts, theater and festivals. They create businesses, such as marketing and graphic design studios, and are the free agents that set up office in locally-owned coffee shops.

While many people view the creative class as a segment of the population that lives on the periphery of economic growth in their warehouse apartments, socio-economic analysis such as Florida have concluded that the size and strength of this class directly correlates to the vibrancy of a region’s economy.

The real question is: Why is the creative class so important to economic strength when the big businesses are the drivers of true economic development? Doesn’t it make it tough to predict where the next big real estate boom will be if it is not dependant upon big-business? The answer is somewhat simple: member of the creative class are the litmus test population for an entire region. They are the people who will migrate to and from cities based on their degree of cultural and entertainment fulfillment within a given city. They are nomads, in search of a vibrant community in which they will eventually lay roots. They do not migrate for jobs, but rather, they migrate in search of fun.

Florida came by this striking discovery about a decade ago when he was a professor at a prominent East Coast university. He asked his students what they were planning to do after graduation. His students announced that they were moving to cities such as Austin, TX, Charlotte, NC, and San Francisco, CA. He then asked them what they were going to do once they were there. None of the students had jobs, yet they were moving to the cities where they believed there was fun and opportunity.

Florida writes in his newest book Flight of the Creative Class, that this segment of the population is “Highly mobile, [and] willing to relocate for the best social, cultural, and economic opportunities. The creative class, 38 million strong in the U.S., produces a disproportionate share of wealth, accounting for nearly half of all wages and salaries earned - as much as the manufacturing and service sectors combined.”

What does the creative class mean for real estate? It means that you should invest in cities that are growing. Markets that the creative class has already infiltrated may have reached saturation. However, cities across the U.S. are beginning to foster the lifestyles young creatives so as to attract them to their region. Thus, investment in these up-and-coming regions will surely yield a return for both long-term and short-term investments.

To find the regions that are growing, simply open any free-agent business magazine, such as Fast Company or Inc. These magazines are bedside reading for the creative small business owners, artists and entrepreneurs that Florida tracks. You can also visit Florida’s Web site, www.creativeclass.org for a complete listing of U.S. cities and their ranking on the Florida index of creativity.