When Innovation Meets Real Estate

In the global race for technology and talent, many cities have endeavored to attract high-tech companies by building large-scale innovation districts and developments like Bostons Seaport District or New Yorks Hudson Yards . And yet, even the most successful cities have not fully harnessed the use of technology in their development efforts. In major cities like New York, zoning laws and transportation, combined with high construction costs, pose numerous obstacles to expanding innovation across neighborhoods. Meanwhile, smaller cities struggle to accommodate high-tech startups, which often flock to areas with the widest and most diverse pools of talent.

Recently at the NYU Schack Institute of Real Estate Urban Lab , we convened a panel of experts for a conversation on how to effectively integrate technology into urban real estate development. The following are five key insights from the discussion, aimed at cities looking to grow their innovation economies. [Full report available here. ]

Expand access to high-speed networks.

High-speed networks are a necessity for any building or urban development project. Its no longer a luxury for people to be connected through their phones and the internet, says Brian Platt , the Chief Innovation Officer for Jersey City. Without broadband, a development is unlikely to attract the kind of innovation and entrepreneurial talent that contributes to economy. Many cities, including Austin, Atlanta, and Louisville, have already realized this strategy by investing in Google Fiber , a high-speed internet, TV, and phone service. In November, Louisville Mayor Greg Fischer wrote a column touting the benefits of this partnership. Thanks to the presence of Google Fiber, he wrote, more skilled young professionals, who view fast internet speeds as a must, will consider Louisville as a new home. This young talent, he added, could soon make Louisville more attractive to businesses in tech, engineering, healthcare and other growing sectors.

Improve opportunities for service and blue-collar workers.

While many city planners worry about the impact of innovation districts on affordability, others view it as an opportunity for more inclusive growth. In the case of Industry City a 35-acre innovation ecosystem in Sunset Parkthe development has spurred job creation across multiple neighborhoods in Southwest Brooklyn. In April 2016, Industry City unveiled The Innovation Lab , an employment center that provides job training and placement for local residents, including those in the industrial and manufacturing sectors. Today, the project is on track to create 20,000 new jobs by 2025.mic growth. Developments without high-speed networks also have a tendency to alienate tenants that cannot afford to pay a premium for connectivity. According to Industry Citys CEO, Andrew Kimball , the development is already capturing folks who need access to jobs and have the highest barriers to obtaining them. By providing meaningful opportunities for service and blue-collar workers, innovation districts can help solve the very divides with which they are often associated.

Engage the private sector.

While developers and innovation districts are key drivers of a citys high-tech economy, their success often depends on partnerships with local private institutions. To attract the top talent, you need to engage the private sector, says Kate Bicknell , a Senior Vice President at Forest City Ratner . Indeed, this is the very strategy behind one of Bicknells largest development projects, the Cornell Tech Campus , located on New Yorks Roosevelt Island. By forming partnerships between private sector tech companies and nearby academic institutions like Cornell University and Technion-Israel Institute of Technology, the Cornell Tech Campus is on its way to jumpstarting New Yorks innovation economy.

Lead with a small business strategy.

Although many innovation districts have gained national or international prominence thanks to the arrival of major companies like General Electric or Time Inc., failure to engage local talent could prohibit growth and expansion down the line. When considering how to expand Industry City, for instance, Kimball says his strategy was simple: Invest in small businesses or scalable startups and provide them with amenities that support their growth. These amenities may come in the form of creative incubators and maker spaces, which create common areas for employees and businesses to mingle and collaborate. Developments might also consider connecting companies with local hiring resources and job training programs in order to strengthen their talent base.

Prioritize real estate, access, and zoning.

By far one of the biggest hurdles to developing an innovation district is zoning. Cities that want to encourage new development must ensure that zoning regulations facilitate rather than restrictthe spread of innovation. Zoning is one of [New York Citys] best tools, says Regina Myer, CEO of the Downtown Brooklyn Alliance , adding that the key to reforming a citys zoning codes is to align them with modern technology. By allowing small businesses to easily learn regulations and research open zoning areas, cities can eliminate barriers to entry for startups and high-tech companies.

Another obstacle to innovation is the cost of construction in major cities like New York and San Francisco. Just as expensive construction often inhibits development, so too can innovation reduce costs and make space for new businesses. One way for developers to reduce spending is through modular constructiona process wherein a building is constructed off-site in nearly half the time. According to Bicknell, Forest City Ratner has cracked the code in terms of high-rise, modular construction in New York Citydespite the setbacks it endured with its 32-story tower at the Brooklyn Navy Yard.

The role of innovation in real estate is uncharted territory. As cities and developers experiment with new strategies for accommodating high-tech companies, they have also been forced to confront challenges of access and affordability. While the recipe for a successful innovation district depends on the strength and resources of a local economy, it also depends on a citys ability to engage local actors. By recognizing the needs of a local community and using technology to meet these needs, cities can transform into more innovative places to live, work, and create.