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Yes, businesses like to move to the outskirts, especially industrial ones. But that's the thing, they're on the outskirts of the city limit. They're not a separate town outside of the city limit.

Businesses and residents will always want to be part of the city to benefit from its infrastructure. With it being more notable for a place like Baldur's Gate that literally has a gate that can and does seal off access to the city proper.

If I remember correctly, Rivington is part of Baldur's Gate by the time we visit it in Baldur's Gate 3. But like Upper and Lower City have different laws, so does Rivington. It maybe less secure than within the walls, but better than the wilderness. A caravan from down south without business in Baldur's Gate can save a lot of gold by not passing Wyrm's Crossing, but taking a riverboat to Elturgard. Or maybe they sell some of their produce to a local business before moving on which will then further process it for sale on city proper. Then you have a huge garrison of mercenaries who maybe don't want to party where they have to work the next day, so there's another source of income for a town across the bridge. It's also not allowed to bring large animals into the Gate, so there's yet another huge business opportunity. So even if Rivington still was its own entity, it still absolutely makes sense where it is.

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I get that there will always be people setting up outside the city, to profit from the traffic despite their inability to enter it. But this doesn't usually turn into a full on town.

At least in Europe, that's the history of many major cities' districts. Paris used to be an island in a river. Many of its modern-day core arrondissements and later banlieues started off as such gate towns.

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The only real hurdle for maps is travelling fatigue. That's the core of map design challenges.

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The caveat to this is the amount of resources it takes to incorporate scales with map size. Keeping players engaged with the game while travelling is the key.

Yes, if your ideal map is done well, it's going to work for more gamer types, of course, including myself who would probably enjoy it since, being done so well, it suits the narrative flow. But I said nothing about graphics. The dilemma if to spend so much time travelling but picking up encounters and side quests on the way, or just teleporting and missing all the opportunities of the road is the same in tabletop. Some players also get discouraged or overwhelmed by large maps or too many options, losing sight of the main quest. Encounter fatigue is also a thing. It's supposed to be a day's travel from Wyrm's Lookout to Baldur's Gate alone. Maybe you just want to finally get there and there's yet another group of goblins asking to get a clubbing with the same three lines they've been using since you started the game. I've auto-travelled into a number of traps and ambushes, so this will also have to be balanced between gamer expectations. BG3 relied on different maps/areas to move the story along, so that would also be a major change. I wonder how large or complex BG3 would have got, if we'd had horseback/carriage/dragon travel, a jump-and-run river crossing on a crumbling bridge with attackers and maybe even combat in a different engine between acts instead of loading screens. Your ideas are solid, but the question is if they can be applied to a seamless map with a great game flow without excluding gamers on older systems or lack of chair glue.