The Most Successful Small Cities in America

In recent years, stagnating wages and soaring home prices, among other things, have been taking the shine off some big cities, sending people to look for more affordable and sustainable places to live and work. In 2018, for instance, a survey by Chicago-based public relations company Edelman found that 46 percent of San Francisco Bay Area residents planned on leaving California.

The big city exodus is providing an opening for small cities looking to attract talent and modernize their economies. From tech to tourism, some smaller metros are providing to new residents big city-style living at a fraction of the cost.

What cities are doing so most effectively? The Milken Institute’s 2018 Best-Performing Cities Report ranked the best small cities in America for job and wage growth, as well as other performance indicators. Here are the 18 cities that topped the list, and what you need to know about them.

18. Mankato-North Mankato, Minnesota

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Population: 98,750

Unemployment rate: 2.4 percent

Notable industry: Health care

Mankato’s selling point for visitors: An abundance of natural beauty and recreation options, from paved trails to a scenic river valley. But residents and businesses are likely attracted to the relatively low cost of living, with median property values around $159,000.

The low cost isn’t just a sell for residents, but for companies who want to bring their conventions to town, with options ranging from 6,500-capacity Verizon Center to smaller more economical venues. While tourism is a major industry, the largest employer is a marketing solutions company, Taylor Corporation.

17. Bellingham, Washington

Forest View Bellingham Washington Fairhaven Neighborhood

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Population: 85,388

Unemployment rate: 4.5 percent

Notable industries: Tourism and education

Located in the northernmost part of Washington state, near the Canadian border, Bellingham is all about natural beauty and green practices. Over the years, it has earned accolades for being a top summer destination, a popular college town, one of the cleanest cities in the country and one of the safest places to cycle in America. It’s no surprise that tourism is a major economic anchor, with many jobs in retail, arts and entertainment. However, St. Joseph Hospital is the largest employer. The scenic beauty and diverse employment opportunities do come at a price: The median value of a home in Bellingham is $426,900.

16. Wenatchee, Washington

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Population: 33,544

Unemployment rate: 5.1 percent

Notable industry: Agriculture

Agriculture and forestry are the main industries in this north-central Washington metro, where the median household income is around $45,000. Like many small cities on the list, attractive home prices matched with beautiful natural surroundings are the selling points for Wenatchee.

It’s on the east side of Cascade Mountain Range and hosts several annual cultural festivals. Wenatchee also has a big retail footprint; some of its biggest employers are Walmart, Lowe’s and Home Depot.

15. Charlottesville, Virginia

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Population: 46,487

Unemployment rate: 2.5 percent

Notable industries: Education and tourism

Charlottesville’s colonial past has been a reason to celebrate and criticize this central Virginia metro, home to one of the most respected universities in the country. Still, with its scenic beauty and a vibrant social scene, Charlottesville frequently tops many lists both as a tourist destination and for its livability.

Most jobs are in education or the government, with universities, federal agencies and local agencies topping the list of employers. It’s also populated with breweries; there are at least seven within city limits. In 2018, local businesses partnered to form the Ale Trail.

14. Hilton Head Island-Bluffton-Beaufort, South Carolina

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Population: 202,502

Unemployment rate: 3 percent

Notable industry: Tourism

Most jobs in this beachy metro in the southernmost region of South Carolina are in real estate, retail, health care and tourism. The median household income in Hilton Head Island is around $70,000, with the median home value in a hot market pegged at $437,200.

13. Sebastian-Vero Beach, Florida

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Population: 145,342

Unemployment rate: 4.3 percent

Notable industry: Tourism

Sebastian-Vero Beach on Florida’s eastern coast isn’t one of the most popular beach communities in the Sunshine State. Still, it has built an upscale community with clean residential areas, some resorts and a small but lively downtown.

Citrus agriculture is a major producer of jobs for the area, as are fishing, tourism and manufacturing. One of this metro’s challenges is income inequality. A recent report found that Sebastian-Vero Beach ranks No. 4 in having the largest gap between high-income and median-income residents.

12. Prescott, Arizona

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Population: 41,468

Unemployment rate: 4.9 percent

Notable industry: Tourism

Steeped in history and culture, even with a population of just over 40,000, this metro in the central part of the state boasts a vibrant, tourist-friendly downtown. Prescott’s economy revolves around its large retirement community, with jobs concentrated in tourism and health care.

While the average home price isn’t as low as others on this list, at just over $350,000, it’s still an ideal place for people looking for a slower paced lifestyle or a place to grow a small business. Its proximity to Sedona also attracts a huge arts community.

11. Daphne-Fairhope-Foley, Alabama

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Population: 199,510

Unemployment rate: 3.6 percent

Notable industries: Real estate and retail

Daphne-Fairhope-Foley, located on the state’s Gulf Coast, is a top performer in the one-year job growth category. According to city officials, small businesses have been driving growth, adding high-skilled technical and engineering jobs.

The population of the metro has been growing steadily over a decade, but its population still sits at just a little under 200,000. The city has been praised recently for its eco-friendly strategies to keep its beaches clean.

10. Logan, Utah

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Population: 49,957

Unemployment rate: 2.6 percent

Notable industry: Education and health care

Utah State University is the central player in Logan, with education and health care making up 12 percent of employment in the area. The school is expanding its campus with a $1 million barn intended to develop a skilled labor force in veterinary medicine.

Housing prices are attractive here, and the city’s median household income is $52,974. High quality of life is a big selling point for Logan, which is surrounded by an abundance of natural beauty and attractions in the northern reaches of the state.

9. Albany, Oregon

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Population: 52,007

Unemployment rate: 4.3 percent

Notable industry: Manufacturing

Albany has seen a one-year high tech GDP growth that’s catapulted this metro up 177 places on the list. Most of the jobs in Albany are in manufacturing, agriculture, fishing and public administration.

According to the Milken report, 30 percent of its manufacturing sector is employed in metal production. The city in northwest Oregon is also growing its logistics capabilities, with a $400,000 investment that would see an old paper mill converted into a logistics facility. It has also been attracting tech companies, such as Albany-based Agility Robotics which, according to the Milken report, recently raised $8 million to develop biped robots.

8. Athens-Clarke County, Georgia

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Population: 122,292

Unemployment rate: 3.8 percent

Notable industry: Education

This metro’s highly educated population is the driving force in its economic growth. The University of Georgia has a staff of more than 10,000, creating fertile ground for innovation in the area. For example, the Milken Institute report found that a company borne out of the university has netted a $5.3 million investment for R&D into drugs for neurological disorders.

However, with median household income for the metro still under $50,000, one of the biggest challenges for Athens-Clarke county is retaining its younger population and not losing it to nearby Atlanta.

7. Medford, Oregon

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Population: 79,246

Unemployment rate: 4.6 percent

Notable industry: Commodities

Medford continues to evolve its economic capacity in commodities, going from timber products to wine, and now cannabis, according to the report. As a result, this southwestern Oregon city has seen short-term job growth skyrocket, rising 80 spots in the report. According to Trulia, the median cost of a house in Medford is $270,000, a fraction of the cost of many major city centers.

No surprise, demand is outpacing supply with the number of single-family home permits increasing by 96.7 percent over five years, the Milken Institute report found. Much of this metro’s growth is spurred by its growing community of retirees, many of whom are attracted to the area for the cost of living and robust health care options. One of its major hospitals is due for an expansion, a project that could bring in millions.

6. San Rafael, California

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Population: 59,180

Unemployment rate: 2.3 percent

Notable industry: Tech

San Rafael is part of a cluster of communities that make up the San Francisco Bay Area, attracting residents and businesses associated with the region — biotech, computer science and health care. That’s both a strength and a weakness. The metro has recently been trying to make big leaps into renewable energy, as well as other clean energy industries.

Like other parts of the Bay Area, housing prices continue to go up with demand and lack of housing inventory. However, some local businesses are getting political support. For example, the city council just lifted a ban and now allow for non-medical cannabis businesses to operate in the city, with local politicians saying they want to get behind entrepreneurs who live in the community.

5. Coeur D’Alene, Idaho

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Population: 48,618

Unemployment rate: 3.3 percent

Notable industry: Tourism

This metro’s beautiful name matches its beautiful landscape — a lake, trails and plenty of greenery. For the first time, this city in northwest Idaho has entered the Milken Institute’s top 10. Its booming hospitality and tourism industry, coupled with a low cost of living, has become an attractive combination for retirees.

According to the report, the number of housing permits increased more than 70 percent from 2014-2017, with population growth to match. Another development that could attract more businesses: The FCC recently awarded local business Intermix to build broadband internet infrastructure to connect rural areas in the region. With a new innovation co-working space, entrepreneurs young and old are trying to turn home-grown ideas into projects that could compete with some of the country’s bigger tech centers.

4. Elkhart-Goshen, Indiana

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Population: 52,662

Unemployment rate: 3.1 percent

Notable industry: RV manufacturing

This northern Indiana metro has been a rising star, with wage and job growth on the steady climb over five years. According to the Milken Institute report, “its one-year high-tech GDP increased in rank by 90 places.” However, its economic growth is mainly anchored by the RV manufacturing industry. The metro’s largest RV manufacturer, Thor Industries, employs more than 13,000 people.

Housing construction has been on the rise in the metro to meet the demands of a growing population. While this means more jobs in the construction industry, many companies have been having trouble filling the demand. This may prove to be another sector of growth for the metro, which is expecting hundreds of millions in new investment for infrastructure projects.

3. Gainesville, Georgia

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Population: 37,291

Unemployment rate: 3.3 percent

Notable industry: Manufacturing

A bedroom community to Atlanta, Gainesville owes its ranking to its robust and growing manufacturing sector. Its low-cost living and proximity to a major city center has attracted international investment from around the world — from Elastron, a Turkish manufacturing company, to Japan-based manufacturer Kubota.

The influx of new companies has been a boon for the metro’s technical college, Lanier Technical College, which recently moved to a new $130 million facility. Population continues to grow in Gainesville as the manufacturing industry expands, its growth spilling into the housing and health care sectors. For those eyeing a move to the metro but not for manufacturing, three IRS-designated opportunity zones have been created in the region.

2. St. George, Utah

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Population: 79,995

Unemployment rate: 3.3 percent

Notable Industry: Tourism

With such similar profiles, it’s not a surprise that St. George comes a close second to the No. 1 city the report. Low-cost housing, a sizeable retiree community, robust health care and tourism industries are big draws for this metro.

Recent investments have centered on serving the metro’s seniors, and recent developments have included a retirement home, a mixed-use apartment building and an expansion of the Dixie Regional Medical Center.

St. George has attracted startups looking for a sustainable place to grow their companies. PrinterLogic, one of the fastest growing startups in the U.S., according to the report, is located next to the Dixie Applied Technology College. Whether you’re a senior, a student or a startup entrepreneur, St. George’s prized offering has nothing to do with industry — Zion National Park is right next door.

1. Bend-Redmond, Oregon

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Population: 87,000

Unemployment rate: 3.6 percent

Notable industry: Tourism

For the third year in a row, this central Oregon city has been the top performer in the Milken report’s small city category, besting the field in five-year job and wage growth.

According to the report, the city features a large retiree population and non-wage income makes up 60 percent of personal income. A hospital, St. Charles Medical Centre, is the city’s largest employer. But, while the aging population is central to Bend-Redmond’s economy, the city also attracts tech entrepreneurs. Dutchie, an e-commerce cannabis retailer, and Ruffwear, an online retailer for pet gear, recently moved to town.

The report says the city’s high-tech GDP grew 4.1 percent from 2016-2017, fueled by support from Oregon State University-Cascades, which opened an innovation lab in 2018. The report cites one liability: Many of Bend-Redmond’s employees are low-wage workers.