The real estate industry must adapt to the complex needs of innovative firms, according to Technology, Real Estate, and the Innovation Economy ,a new report published by the Urban Land Institute in collaboration with Oslo Metropolitan Area (OMA) in Norway.
The report explores how the innovation economy creates a new normal for the real estate industry by disrupting patterns of supply and demand for workplaces, buildings, urban districts, and cities. It recommends that the real estate sector adopt a “service provider” mind-set, allow flexibility in its business models, and actively help tenants expand through collaborating with and supporting occupiers.
Cowritten by Greg Clark, ULI Europe senior fellow, and Tim Moonen, director of intelligence at the Business of Cities Ltd., the report discusses the recent emergence of innovation districts and clusters in cities.
This shift to urban areas has given innovators proximity to financial markets and investors, access to talent, and high concentrations of customers. It has also brought about a new set of real estate requirements, including customizable workspaces, flexible contract terms, and office design that encourages creative collaboration. These new requirements are no longer solely the demands of innovators: the influence of innovation is stretching to traditional sectors and tenants, rapidly transforming the real estate landscape.
“Real estate needs to revolutionize its modus operandi if it is to effectively service and profit from the innovation economy. It can no longer rely just on bricks and mortar; these changing patterns add up to a fundamental change to the business model for real estate,” the report states.
“The innovation economy is real estate’s new reality. It is here to stay. How well and how quickly investors, owners, designers, and developers now adapt will become either a competitive advantage or disadvantage, both for themselves and for innovation systems in the world’s cities in which they operate.”
According to the report, the real estate industry must adapt to these new standards of the innovation economy in four key ways:
- Adopt a “service provider” mind-set. Real estate must become a service industry rather than an asset industry. Real estate operators must offer services such as funding, coaching, networking, and providing supplies or they will risk losing out to their competitors.
- Be prepared for continuous adaptation, feedback, and complexity. Real estate providers must develop new business models that allow for tailor-made solutions related to access, location, workplace, building layout, and rental terms.
- Align interests and build transparency between owners and occupiers. Landlords should become collaborating partners with tenants. To achieve this, real estate providers could work with tenants to build a compelling story around a development or even become a venture capital partner with a direct stake in the success of occupiers’ businesses.
- Provide hands-on stewardship to address the broader framework of innovation. The real estate industry should manage the balance between big companies and startups and explore opportunities to provide accommodation or social infrastructure. The industry must also engage with the innovation ecosystem to address gaps in skills, capital, affordability, or density.
The report is informed by 12 case studies on buildings and districts in Europe and North America and by the lessons shared at a ULI workshop hosted by the Oslo Metropolitan Area this past May.
The case studies included are the Edge, Amsterdam; VU Campus, Amsterdam; 22@Barcelona, Barcelona; The:Square3, Berlin; SoundCloud, Berlin; Tech City, London; Media Park, the Netherlands; Cornell Tech Applied Sciences Campus, New York City; Oslo Cancer Cluster Innovation Park, Oslo; Mesh Norway, Oslo; SUP46, Stockholm; and MaRS Discovery District, Toronto. To download a full copy of the report, visit europe.uli.org.
