The Local Economy - Property in the Knowledge Based Economy

The links between location theory, local economic development, local clusters and property in the new economy are investigated. The authors draw upon both planning and economics literature to investigate the drivers of local economic development. People increasingly attribute value to a healthy environment and a healthy society as well as economic growth narrowly defined, and so sustainability is a key issue in local economic development. Both economics and planning literature emphasise the role of external economies of scale in the new economy, exhibited as clusters. The implications of the new economy for the property industry are briefly considered before the connections between location theory and planning theory are more fully investigated. The observed trend towards counterurbanisation and the critical factors underpinning cluster development are then discussed. The paper shows that several approaches in the planning and economics literature conclude that external economies are vital drivers of success in the new economy and are reflected in cluster development. To provide profitable locations the property industry must be cognisant of industryÌs desire to cluster in locations that contribute value added to the production function. But local economic development based upon successful clusters will not necessarily be sustainable. Left alone, the property industry can achieve higher profits by building upon industryÌs expressed preference for counterurbanisation. Policy implications indicate that government must be aware of the infrastructure needs underpinning cluster development and encourage such development in locations that contribute to sustainable local economic development.