Innovation Districts – An idea whose time has come

What is now seven years ago, while working at Centre for Cities thinktank Centre for London, I spent around a year reading, writing and talking about Innovation Districts. At the time, the concept that had not really entered the UK urban governance/placemaking/higher education lexicon, which remained dominated by LEPs, the triple helix model, and for the lucky few cities with the right concentration of occupiers, the Business Improvement District.

I cannot take any intellectual credit for accurately observing the shift that was taking place of the spatial geography of innovation, and for conceptualising it so neatly – that lies with Bruce Katz and Julie Wagner of the Brooking Institution. For those who missed it first time round, Katz summarised the Innovation District paradigm as follows: geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. They are also physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail.

Further research by Katz and colleagues highlights the role of Innovation Districts, and their leaders, in revitalising urban cores, with anchor institutes including teaching hospitals and universities playing a pivotal role in stimulating employment and growth. In more suburban locations, specifically the sprawling science parks and urban campuses of the past 50 years, the Innovation District paradigm has been a prompt for conversations about diversification, differentiation, and densification.

The Innovation District concept quickly gained traction in the UK, initially in London - its success perhaps laying in the fact that its framework is lose enough to cover a range of urban development and governance models. And at a time when many, including the property sector, were very much in thrall to ballooning tech sector and its appetite for office space, co-opting anything ‘innovation’ related soon became a popular place-branding tool. It’s perhaps for this reason, and primarily due to moving jobs, that after a year or so of panels and study tours, my attention was taken elsewhere.

Reconnecting with the topic over the past few months, including a recent morning spent at Arup with group of policymakers, investors, and city and university leaders, there’s a strong case to be made that Innovation Districts model is more salient to our cities and economic geographies than ever before. Below, I set out why.

Innovation and the Rise of Hybrid Working

Throughout and following the lockdown period, a diverse mix of land uses and occupiers proved a hedge against the worst of pandemic-related impacts. Density and diversity – the shared characteristics of more successful post-pandemic urban locations are equally core to innovation districts. The type of activity associated with Innovation Districts is often more difficult to carry out remotely – from advance manufacturing to life science research – further strengthening the ability of existing districts to recover from the pandemic, alongside the presence of existing networks of individuals, businesses and institutions. That some districts have a single landlord, or major occupiers with sufficient governance and skin in the game to act like a one, investing in placemaking and place activation has made it easier to entice workers and visitors back.

The changing make-up of Central Business Districts/Downtowns

The characteristics that underpinned the resilience of existing Innovation Districts - in particular a diversity and density of uses, are increasingly reflected in strategies aimed at boosting locations (and portfolio values) post-Covid.

Pre-Covid, the Central Business Districts (CBDs) landscape had little room for the Innovation District paradigm, quite simply because few CBDs worried overly about vacant space, competition for occupiers, and revitalisation. Even where activity like life science could at least get a look in terms of commercial values, the building specifications and operational requirements that came with urban science labs presented unwanted and unnecessary risk. Today, even the most successful CBDs can no longer rely on the financial and technology sectors to drive the demand and rents baked into business models at either asset or district level, and so are looking to uses that are best described as somewhere between alternative and adjacent.

Across many UK cities, universities are taking up office space in central locations, proving themselves more reliable sources of demand than conventional occupiers. Canary Wharf Group have embarked on an ambitious pivot from financial district to life sciences hub. Last month, Enrico Moretti posited the creation of a downtown university in San Francisco. (Hybrid studying does not appear to have the staying power of hybrid working – perhaps due to an underestimation of the role of the push factor (living at home with parents) in locational decision-making. In many instances, the introduction of Higher Education into previous commercial areas is about more than just finding someone to pay rent. In the UK in particular, universities are increasingly under pressure – often political - to demonstrate ‘value add’, both to their surrounding communities and to the economy more broadly. The emphasis that the innovation district model places on physical visibility and connectivity, alongside networks and collaborations is proving a popular way for universities to address this challenge of accountability and impact.

That Innovation Districts are not solely comprised of typical commercial buildings let to typical commercial tenants also makes them a relatively more appealing asset to many investors, offering a chance to reduce exposure to conventional commercial tenants in favour of life sciences, health or higher education assets. Diversification is particularly important in market downturns, with Innovation District assets like student housing, hotels and medical facilities proving less exposed to the vicissitudes of market cycles. As the Innovation District model has matured, and where such assets have proved more resilient post-Covid, investor awareness has grown – and is likely to continue to do so. The recent deal for made by the UK with the EU to rejoin the Horizon science research programme provides further reason for investor confidence in research-driven activity.

Innovation Districts and Levelling Up

Putting aside misgivings about the Levelling Up agenda, one positive result is the renewed focus on the relationship between place and economic growth in mainstream political and policy discourse. Asking city regions and local authorities speak to their nearest universities, hospital trusts, and employers should reap benefits beyond the submission of a Levelling Up application. Anyone who’s ever tried to meet with university senior leadership knows that simply get the right people to the table is an achievement of its own. Many universities and authorities continue to collaborate, focusing on shared investment priorities and projects that extend beyond the likely political expiry date of Levelling Up.

The evolution of Investment Zones (IZs) gives further reason for cautious optimism – highlighting the role of universities, the private sector and government working together at a IZ level to set clear priorities, with the related funding and fiscal levers then working to drive these outcomes. Private sector capital has a role to play in addressing gaps in financing – the announcement that the UK’s largest pension funds have committed to investing at least five per cent of their assets into start-ups and VC firms could provide reason for optimism in investment in both the physical and economic assets needed to drive innovation.

The Evolving Expectations of Innovation Districts

Increased occupier and investor focus on ESG has seen recent Innovation Districts research and best practice focus on inclusive innovation. At its broadest, this means developers, landlords and their occupiers considering the impact that their spaces have on both on the environment, surrounding communities, economies and ecosystems. This pressure comes from multiple angles. Occupiers, perhaps driven by the concerns of younger employees, are keen to avoid being ‘complicit’ in gentrification. Many Local Authorities demand more of businesses and institutions who chose to call their boroughs home, and the developers who create the spaces for them to be there, using planning mechanisms and political power to encourage initiatives ranging from social impact leases to localised employment and training schemes.

This increased emphasis on ESG is perhaps felt more keenly by developers, operators and tenants of innovation districts than other locations or uses. Innovation Districts are often located in or adjacent to areas of high deprivation - communities with poor health outcomes, limited access to employment and low-quality built environment. With these inequalities laid bare by the pandemic, it is hard for to a university, research institute, or indeed developer to ignore these conditions while claiming to create new communities focused on wellbeing, quality of life and education.

Innovation Districts do not provide an easy answer to these challenges – but the characteristics set out above – from economic resilience to clear governance and sense of shared mission means they are both more obligated and in a better position to do. As with all forms of built environment organisation, from corporate towns to science parks and CBDS to suburban extensions, Innovation Districts are maturing in a specific set of political, social and economic contexts. It is for leaders, public and private sector investors and policy makers to recognise and respond to these influences, realising the potential benefits, for cities and communities and for national, regional and local economies.

  • Director of Place & Development Strategy