Buffalo and Rochester, the two biggest cities in the state of New York after New York City, both have an industrial history to be proud of. At the end of 19th century, Buffalo established itself as an important transport and steel-producing hub and was among the largest cities in the US. Reminders of Buffalo’s riches are visible all over the city in the form of its exuberant art deco architecture and many spacious mansions.

At the same time when wealthy Buffalo industrialists were moving to their new homes, over in Rochester, 100 kilometres to the east, visionary entrepreneur George Eastman was working on revolutionising the world of photography. Eastman Kodak, established in 1888, was the first to introduce a mass-market camera, and quickly became Rochester's biggest employer.

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Gradual decline

The collapse of the steel industry and a change in shipping routes saw Buffalo’s fortunes decline, and by 2000 the city’s population had shrunk by half from its peak of more than 500,000 in 1950. In Rochester, Kodak struggled to maintain ground in the age of digital photography and cut its local employment by one-20th from its 1980s peak of 60,400.

The cities’ pasts, no matter how rich, count for little when it comes to attracting investment. And while the state of New York is one of the most popular destinations for investments in the US, New York City accounted for more than 75% of all projects launched in the state between 2003 and 2012, according to data from greenfield investment monitor fDi Markets. But where heritage falls short, incentives can come in handy.

For that reason, in October, state governor Andrew Cuomo launched Start-UP NY, a programme aiming at boosting the economies of the struggling parts of the state by offering generous incentives. Companies participating in Start-UP NY can benefit from generous income tax exemptions for their employees and 10-year tax holidays, provided they are willing to move or expand within the designated areas located in the state, mostly outside New York City.

Buffalo's charge

Start-UP NY is not Mr Cuomo’s first attempt to kick-start economic development upstate. At the beginning of 2012 he pledged $1bn to making Buffalo more attractive for investors. Among the initiatives outlined by Buffalo Billion, an ambitious investment development plan created as a result of Mr Cuomo’s pledge, are ramping up the city's tourism sector and its workforce training programme.

One of Buffalo Billion's targets is to make the city and its surrounding area one of the fastest-growing health and life sciences hubs in the US. The sector already employs 74,000 people (some 20% of the city's workforce), many of whom work at the Buffalo Niagara Medical Campus (BNMC), a business park located in central Buffalo.

“When we started in 2002 we had nothing. Now we house 40 companies and our annual operating budget is close to $10m,” Matthew K Enstice, president and CEO of BNMC, tells fDi Magazine as he walks through the campus pointing out the newest developments, including the site for the medical school and state-of-the-art Gates Vascular Institute, constructed at a cost of $291m.

Apart from BNMC, Buffalo has another blue-chip cluster in the making. In late 2013, Mr Cuomo announced the creation of the Buffalo High-Tech Manufacturing Innovation Hub at RiverBend research campus. The first two tenants of the campus are Soraa, an LED lighting system producer, and Silevo, which makes solar panels. Both companies will move to Buffalo from California and are expected to jointly invest about $1.5bn, while the state government pledged to spend $225m as part of the Buffalo Billion programme.

Rochester's revival

Rochester can also boast an impressive innovation campus. With a number of buildings freed up when Kodak downsized, it is only natural that Rochester’s main innovation hub is located around the company’s headquarters. But Eastman Business Park, a 485-hectare industrial park located between central Rochester and Lake Ontario, has much more in store for investors than monuments to Kodak’s former glory, according to park director Mike Alt.

“You can set up a lab here and contract with Kodak to get your work done. We have about $50m-worth of development tools, and on top of that, more than 100 years of technical knowledge that we can offer,” says Mr Alt. He adds that given Kodak’s expertise, the park should be especially appealing to companies focusing on biomaterials, energy storage and functional films.

Mr Alt’s pitch seems to be working: the park now has more than 40 resident companies, and 2013 brought a string of new tenants including Naturally Scientific US, a company specialising in high-value plant and vegetable oils, and NOHMs Technologies, a nanoscale battery manufacturer. Naturally Scientific is expected to create 170 jobs by 2018, and the NOHMs manufacturing facility will employ 100 people by 2017.

The benefits of diversification

Three decades ago, about 60% of all employment in Rochester was provided by four companies: Kodak, eye-health product supplier Bausch & Lomb, office product supplier Xerox and Gleason Corporation, a machine tool builder. Now, instead of mega-projects and employee numbers counted in thousands, highly specialised companies such as NOHMs and Naturally Scientific hire hundreds. According to Mark Peterson, president and CEO of regional economic development body Greater Rochester Enterprise, this makes the local economy vibrant and more crisis-proof.

“Some companies may have only 100 employees, but they have successful business models and we have a very diversified economy,” says Mr Peterson. “Rochester was built on innovation and with the big companies providing employment here we got a bit away from it. We rediscovered it and we have a several industrial sectors that are growing really well here.”

Like Buffalo, Rochester is going through transformation and is rethinking how it can appeal to investors. In the past three decades both cities have seen their economies shaken, but rediscovering their strengths, backed with generous state support, has given hope that in the near future New York City will not be the state’s only centre of economic activity.