Thriving in America: Megaregions, Megatrends and Small Business Growth

Megaregions are emerging as pivotal geographical entities that shape the competitiveness of the United States in the 21st century. These areas contain interlocking economic systems, shared natural resources and ecosystems, and common transportation systems that link population centers. More importantly, 11 megaregions account for over 80% of the US population and 90% of its economy. In an environment of geoeconomic uncertainty targeting US megaregion expansion may create significant opportunities for small business growth. Adopting this geographical unit as a reference also reframes many businesses’ TAM, SAM, and SOM. The United States contains nine of the world’s 29 largest megaregions. BosWash (US Northeastern Corridor) ranks #1 with an economic output exceeding India and Germany (Europe’s largest economy). In this article, we explore the development of US megaregions, their significance, and their evolution within the US. We discuss four key megatrends impacting megaregions in the coming decades. Also, we offer some market entry and expansion advice for global and domestic small and medium-sized businesses (SMBs). Lastly, we present a few must-have solutions for SMBs, such as Deel (workforce management), Alliance Virtual Office (workplace infrastructure), and Boast(R&D intelligence), as companies seek to secure competitive advantages within the US markets. 

Megaregions are vast geographical areas that comprise multiple MSAs and their connecting regions. While there is no universally accepted definition, they are generally characterized by high population density, extensive transportation networks, and economic interdependence. Megaregions are not bound by state or political boundaries but rather defined by the flow of goods, services, people, and information. Some well-known examples of megaregions in the United States include the Northeast Megaregion (BosWash), which includes cities like Boston, New York, Philadelphia, and Washington, D.C., and the Texas Megaregion (Texas Triangle), encompassing Dallas, Fortworth, Austin, San Antonio, and Houston-Galveston. In total, there are 11 US megaregions in part due to the depth and breadth of the US $27 trillion economy, and its 335 million population. For the foreseeable future, US megaregions will continue to power global growth despite ongoing structural changes across the American economy and the emergence of megacity growth centers in Asia and Africa.

The concept of megaregion originated in the early 1900s through the concept of conurbation, a term coined by French geographer Jean Gootman. This was a term applied to observations of the Boston to New York corridor which eventually was termed BosWash, the first such megalopolis in the modern era. Although definitions vary, researchers have sought to delineate megaregions through various models including satellite imagery, patent registration, innovation, economic output (> $300 billion), and commuter patterns.

Source: Visual Capitalist (2019)

Other megaregions in the US include:

• Piedmont Atlantic Megaregion: An area of the Southeastern United States that includes the MSAs of Atlanta, Birmingham, Charlotte, Memphis, the Research Triangle, and Greensboro Winston-Salem Highpoint. The Piedmont Atlantic Megaregion covers an area of 630,000 km2, larger than the country of France.
• Florida Megaregion: An area covering the Southern part of Florida
• Gulf Coast Megaregion: MSAs such as Matamoros-Brownsville and Reynosa-McAllen straddle the US-Mexico Border through to the Pensolca-Navarre and Fort Walton areas in the Florida Panhandle.
• Great Lakes Megaregion: Includes the MSAs of Minnapolis-St. Paul, St Louis, and Kansas City with some researchers including Ottowa, Montreal, and Quebec City.
• Front Range Megaregion: This area starts at the Colorado-Wyoming area and incorporates New Mexico’s MSAs of Albuquerque and Santa Fe.
• Arizona Sun Corridor Megaregion: Phoenix MSA Tucson MSA with the urban areas extending into Mexico reaching the communities of Heroica, Nogales, Agua Prieta
• Southern California Megaregion: LACMA, the Las Vegas Valley area, and Tijuana, Mexico.
• Northern California Megaregion: The Great San Francisco Bay area, the Monterey Bay area, Sacramento, and Northern San Joaquin Valley
• Cascadia Megaregion: A region stretching from Portland, Oregon into Vancouver B.C.

BosWash is the world’s largest megaregion with a population of over 50 million and and GDP of over $4 trillion.

Bloomberg City Lab

Megaregions are more than just a cluster of cities; they represent interconnected economic, social, and cultural ecosystems. These regions often have unique identities and specialized industries. For example, the Silicon Valley-San Francisco megaregion is renowned for its technological innovation, while the Great Lakes Megaregion is known for manufacturing and transportation.

For small and medium businesses, understanding megaregions creates a unique market perspective that can drive commercial strategies. For example, choices to compete in international versus domestic markets may ignore significant opportunities present in the US. Understanding cities and capturing markets with a deeper dive is essential to staying competitive. There are several reasons to adopt megaregions as a geographical reference unit when building a commercial market strategy.

Source: America 2050 – Regional Planning Association (2008)

Understanding megaregions is crucial because they drive a significant portion of the U.S. economy. These interconnected areas account for 90% of the country’s economic output. They also represent significant investments in innovation and employment opportunities. For instance, the BosWash megaregion with its estimated $4.4 trillion GDP contributes approximately 15% of the nation’s Gross Domestic Product (GDP). For small businesses, building a market entry strategy around a megaregion framework in many cases offers more opportunities than a narrowly defined market perspective. For example, a small business expanding throughout the BosWash megaregion may find more opportunities for growth than expanding internationally or remaining in a narrowly defined geographical unit e.g. city, state, or MSA. Similarly, an international company from Europe, Asia, or Latin America may benefit from expansion into a particular US megaregion versus remaining in their home market. We note that there are many domestic and international pursuing a similar approach. However, we believe these initiatives are not built around a megaregion model.

Megaregions are hubs of transportation and infrastructure development. They include extensive road networks, airports, seaports, and public transportation systems. Efficient infrastructure within megaregions facilitates the movement of people, goods, and services, making it vital for the functioning of the broader U.S. economy. For instance, the Texas Triangle, comprising Dallas, Houston, and San Antonio, is home to a vast network of highways and intermodal transportation hubs, facilitating the efficient flow of goods across the region. This is also the case of cities in the Piedmont and Great Lakes megaregions where many of these cities rank among the largest trucking and freight markets in the US.

Megaregions often face challenges related to urban planning and environmental sustainability. Given the structure of these areas, urban planners must address issues such as transportation congestion, housing shortages, and environmental impact. The effective planning of megaregions is essential to ensure that growth is sustainable and resilient, benefiting not only large corporations but also SMBs and local communities. Megaregions typically cross multiple county and state boundaries but lack the governance models to address effectively urban planning challenges as these remain the purview of states. Attempts have been made to structure multijurisdictional planning initiatives with little success. Nevertheless, across various regions, we expect urban challenges to be more pronounced as demographic shifts occur, social challenges emerge and once vibrant industries diminish. We expect megaregions in the Western US, Gulf Coast, and Florida to experience challenges but create significant small business growth opportunities in the coming decades.

Megaregions foster innovation and knowledge exchange through the presence of research institutions, universities, and technology clusters. These regions serve as hotbeds for innovation, attracting talent, entrepreneurs, and startups. As such, businesses can tap into the knowledge-sharing networks and leverage them for growth and development. The NoCal and BosWash megaregions remain world-renowned centers of innovation in the US. In particular, a recent innovation benchmarking study was conducted comparing the 50 US states against 71 states in Europe and 132 states in Latin America. Three factors were analyzed which included orientation to knowledge work, adaption to globalization, and capacity to innovate. In both studies, California and Massachusetts ranked #1 for innovation. 

The United States remains a global leader in R&D spending with 30.7% of global R&D spending in 2020. According to the Congressional Research Service, in 2020 over $700 billion was spent on R&D across three key areas:   

• Basic Research: (15.2% of total spending)  Experimental research or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view.
• Applied Research (19.7% of total spending): Original investigation undertaken to acquire new knowledge; directed primarily, however toward a specific, practical aim or objective.
• Development (65.1% of total spending): Systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge which is directed to producing new products or processes.    

The United States is currently undergoing regional population shifts due to changing demographics. Retirees and those in search of a better quality of life continue to relocate to megaregions primarily Florida, the Arizona Sun Corridor, the Texas Triangle, and Piedmont Atlantic. According to the US Census Bureau, the top five states for experiencing net migration were Florida (622,476), Texas (475,252), North Carolina (211,867), Arizona (182,362), and South Carolina (165,948). Those that suffered net population lost included California(−871,127) New York(−664,921), Illinois(−282,048), Massachusetts(−110,866), and New Jersey(−107,749).

Economic activities within megaregions tend to cluster around specific industries. For example, the San Francisco-Silicon Valley Megaregion is a global hub for technology and innovation, hosting numerous tech giants and startups. Meanwhile, the Midwest Megaregion has a rich history of manufacturing and transportation-related industries. Additionally, sectors such as high-tech manufacturing, healthcare, tourism, energy, agriculture, defense, etc can be found powering various megaregions: Texas Triangle (energy, high-tech manufacturing) Florida (tourism) California (defense).

Source: KPMG

Transportation networks in megaregions are continually evolving to accommodate growing populations and economic activity. Investment in high-speed rail, airports, ports, and highways is common, as these regions must address congestion and facilitate the movement of goods and people. More recently, in 2021 the US Congress passed the $1.2 trillion Infrastructure Investment and Jobs Act. The legislation allocates significant spending for roads and bridges ($326 billion), Passenger and freight rail ($63 billion), and Port and Waterways ($17 billion).

One of the challenges accompanying megaregion development is the increasing demand for housing. Megaregions across the US Sunbelt (SoCal, Arizona Sun Corridor, Texas Triangle, and Flordia) continue to experience strong demand for housing benefiting from current migratory patterns continue. However, several factors will impact housing and real estate in these areas including inflation and interest rates, evolving workforce trends, regulatory challenges, and geopolitical risks.

The evolution and development of megaregions areas will be influenced significantly by several megatrends. Below, we list four key megatrends to watch in the coming decades.

• Aging Demographics: In 2019, Millennials(1982-2000) overtook Baby Boomers(1946-1964) as the US’ largest generation. However, Boomers remain a formidable demographic with a population of 73 million. More importantly, by 2030 all Boomers will be 65 years or older. These are powerful trends that will influence migratory patterns and spending across various markets. Currently valued at $456 billion, the market is expected to grow as services emerge to provide care to Boomers, enabling them to live healthy and productive lives. Additionally, these demographic trends and migratory patterns will also favor various megaregions, specifically Florida, the Arizona Sun-Corridor, and the Texas Triangle.     
• Environment & Climate: The recent US passage of the Inflation Reduction Act, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act provides significant funding for various initiatives to address climate and environmental challenges. More importantly, analysts expect US investment in climate tech to exceed $500 billion in current and nascent technologies. Expected investment will continue to drive the growth of green jobs and the green economy as companies seek to scale climate tech. Key sectors to benefit include wind and solar energy, agriculture, and transportation. Megaregions to benefit include SoCal NoCal, and BosWash.
• Geoeconomic Realignment: Understanding the market potential of megaregions provides a useful hedge against uncertain geoeconomic challenges. Post-pandemic, current debates surrounding economic fragmentation/re-globalization, along with the emergence of BRICS and the challenge to the US, suggest a geopolitical realignment underway. Although we expect the BRICS challenge to go nowhere, continued and increasing geopolitical risks have forced many companies to restructure their supply chains. Nearshoring and reshoring will provide significant opportunities for growth across several US megaregions, including the Texas Triangle, Arizona Sun Corridor, Gulf Coast, and Upper Midwest.
• Artificial Intelligence: It is estimated that 30% of hours worked across the US economy can be automated by AI, according to the McKinsey Global Institute. The rise of Chat GPT and the proliferation of AI solutions from healthcare to content creation and administrative tasks suggest that AI’s impact will continue to reshape the workforce of the future. According to the forecast, the AI market is expected to grow from $95 billion in 2021 to nearly $2 trillion by 2030. Bos-Wash and NoCal megaregions have been innovation hubs for AI development and growth and will remain so for the foreseeable future.

In the United States, over 33 million small businesses exist accounting for 99.9% of all US businesses. Additionally, small businesses represented 63% of new jobs created between 1995 to 2021. The importance of these SMBs cannot be underestimated as American entrepreneurship remains at an all-time high. Globally there are over 500 million entrepreneurs. However, many of these businesses operate within a narrowly defined geography. Zooming out to understand US megaregions provides opportunities to scale for both international and domestic players.

• Access to a Diverse Talent Pool: Megaregions attract a highly diverse and skilled workforce due to the abundance of job opportunities in various industries. In an era of AI, jobs such as healthcare, STEM, etc, will continue to thrive. SMBs with access to a broad talent pool, making it easier to find employees with the necessary skills and expertise to scale across these geographies. 

• Knowledge Exchange and Innovation: Megaregions are centers of innovation and knowledge exchange. SMBs can tap into the extensive network of research institutions, universities, and technology clusters to stay at the forefront of their respective industries. Collaboration with local universities and research centers can lead to breakthroughs and advancements that benefit SMBs and the broader economy. Standford, Harvard, MIT, Cornell, and University of Pennsylvania academic institutions driving innovation and responsible for the largest number of unicorns.

• Access to Markets: Megaregions have large and diverse consumer markets. SMBs operating within these regions can easily access a substantial customer base, which can be critical for their growth. Megaregions are undergoing different development paths as those in the Sunbelt are experiencing growth driven by migratory patterns. Conversely, megaregions such as BosWash and Great Lakes continue to experience quality of life and economic decline as once-important industries diminish. Nevertheless, both areas continue to offer promising opportunities for growth. Proximity to a densely populated area allows SMBs to better understand consumer preferences, adapt their products or services, and establish a loyal customer base.

Taking advantage of the opportunities present in US megaregions requires SMBs to be equipped with solutions to address a host of challenges, including workforce management, physical infrastructure, etc. To keep pace with growth, these are the must-have solutions for SMBs as they seek to expand across megaregions.  

Deel remains the global leader in all-in-one HR solutions with an extensive suite of solutions to address almost every aspect of a company’s workforce needs.  Solutions provided by Deel are well-suited to organizations seeking to scale with support offered in over 150 countries. Core solutions for US megaregion expansion include:

Deel’s US PEO and Payroll provide businesses with streamlined processes and benefits for efficient workforce management. With Deel’s enhanced suite of PEO (Professional Employer Organization), US payroll, and benefits administration—businesses can finally enjoy the value of having one unified HR platform to seamlessly onboard, pay, and compliantly manage teams wherever they’re based. PEO and US payroll solutions significantly reduce duplicative, costly work and consolidate tech stacks. 

Key advantages of Deel PEO and Payroll Services:  

• Compliantly pay your team in minutes with registration support in all 50 states including tax filing and administration and benefits management.  
• Ensure benefits compliance with federal, state, and local law, COBRA administration, and ACA compliance.   
• Take advantage of Deel’s in-house labor experts,1.25min first response time, tight security, and data protection.   

Deel’s PEO solutions offer tremendous value to small and growing businesses.  From automating nationwide employee onboarding to reducing HR and benefits administration costs while providing Fortune 500-caliber benefits and enhancing compliance on a single platform supported by a dedicated team of experts, our PEO service empowers any business. 

For domestic companies seeking to tap into a wider pool of talent or international companies seeking to enter the US markets, Deel offers its US Contractor solutions. The United States treats independent contractors differently than full-time employees. As such regulatory risk is high. Key advantages of the US Contractor program include:   

• Quickly onboard independent contractors in the US within minutes.  
• Fund Payroll with one-click  
• Ensure compliance with US regulations and avoid misclassification.  

Deel HR allows companies to manage all things HR for the entire workforce in one centralized platform. Key capabilities of Deel HR include 

• Onboarding & Offboarding: Background checks, APP provisioning, equipment and workspaces, localized contracts, etc 
• People Management: Manage expenses, documents, people director, vacation, etc.  
• Reporting and Analytics: Headcount reports payroll reports, org charts, and growth  

Deel HR is free for companies with less than 200 employees.  

Megaregions will continue to thrive in America, driven partly by a continued focus on innovation. More specifically, over 87% of the $708 billion in R&D spending is done by businesses. For many startups, Boast automates access to billions in R&D tax credits and innovation incentives so companies can fuel their growth while preserving equity and avoiding red tape. Boast helps entrepreneurs recover a portion of their product development costs to be reinvested back in the business. In the current VC funding environment, these credits benefit many startups resulting in hundreds of thousands of dollars in cash flow improvement. Tech, life science, and manufacturing are key sectors benefiting from Boast’s R&D tax credit solutions.  

The ability to rapidly expand across megaregions partly depends on quickly establishing a presence in core markets. Alliance Virtual Offices provides both virtual offices, fixed offices, and coworking spaces, to support companies and teams. Key benefits include flexibility, reduced costs, and market access across all US megaregions. Media, trucking & logistics, construction & general contractors represent industries benefiting from Alliance Virtual Offices.

Finally, megaregions are dynamic and interconnected areas that will shape the economic future of the United States as the US society transforms. As these regions continue to grow and evolve, it becomes increasingly important for businesses, particularly SMBs, to understand their dynamics and leverage their opportunities. In an era of geoeconomic uncertainty and increasing geopolitical risk, the US presents opportunities for both international and domestic SMBs to scale. Access to a diverse talent pool, infrastructure advantages, R&D leadership, significant public and private sector investment, and proximity to vast consumer markets allow megaregions to serve as a catalyst for small business growth. As megaregions continue to thrive, SMBs must position themselves strategically within these dynamic ecosystems to harness their potential for growth and value creation.

For more information on megaregions and to discuss ideas for your company contact our team. For information on our partners Deel, Alliance Virtual Offices and Boast follow the links below

• Deel
• Boast
• Alliance Virtual Offices

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