REAL ESTATE NEWS

Innovation districts are a new trend that employers are using to attract workers who have become accustomed to remote since the pandemic.

That does not mean face-to-face work is dead – but traditional office spaces might be a tough appeal today. Sure the travel and the cost might be a pain for employees heading to work – but that's where innovation districts are coming in now to lure workers in by providing amenities in offices or close nearby.

This setting is especially appealing to younger Americans including millennials and Gen Z, according to Erik F. Williams, partner and real estate department vice chair at Saul Ewing LLP.

"I've watched sort of the evolution of the office market, and the live-work-play model," he told GlobeSt, while adding younger generations want to live in suburban markets with workplace innovation districts.

"It's intentionally designed like this, you can recreate sort of the environment of dense urban living in a suburban market, where you have apartment bars and restaurants, laboratories, offices, all co-located in a single district," Williams said.

"I think that's very desirable to the younger generation, they want to live in these places where they're living in a dense environment with peers, and with a place to socialize. Maybe their job is right there as well. It's become a very attractive way of living."

While a recent survey from Cushman & Wakefield showed that engagement among employees returning to offices dipped by 26 percentage points, 63 percent of Gen Zers have wanted to come back to office work. Generally, they feel that they are missing out on face-to-face learning opportunities. So that tells you a more attractive environment around them could work.

Based on what Williams has seen, higher education firms have been particularly prevalent in developing innovation districts.

"Here in Philly, I've worked on a couple of different innovation districts, we have the University of Pennsylvania, which has developed innovative technologies to fight cancer through immunotherapies.

"You see a lot of companies that are in that space developing immunotherapies as part of the process for developing those technologies."

Along with Philadelphia, Williams said he's been working with companies in the Midwest including Ohio, and the central part of the state, which has a "strong and growing biotech industry."

Some other states that have seen success with innovation districts include Florida, Georgia, and Texas, according to the real estate advisor.

Plus, Williams noted chip development and ancillary computer technologies, are developed around those appealing areas as well.

But generally, he said: "When you have a group of similar companies aggregated in one space that also attracts the funding, [it] is an important part of the startup ecosystem."

But just because a company is around an innovation district – that does not guarantee success. Williams, who assists clients with commercial real estate transactions, said the strategy could fail if firms aren't intentional about who they are trying to attract.

"When you don't have a good sort of governing principle to organize around or a good sense of who your stakeholders are, the companies that you can attract, it becomes difficult to attract them," he stated.

But a particular geographic location probably won't be a weighing factor of failure. It's more about what's in the area in terms of amenities combined with residential life, and how companies are leveraging innovation and putting it into their business model, according to Williams.

Recently, Williams has been seeing that there is more of a focus to expand amenities beyond just bars restaurants, and where to go for lunch and dinner. For example, public art is growing. Another big one is experiential entertainment, which includes adult arcade and axe throwing.

Going forward, Williams thinks that the trend of innovation districts will continue for the "foreseeable future" thanks to the appeal from the younger generations.

Source: GlobeSt/ALM