John Means, a partner at McKinsey & Company; Evan Regan-Levine, executive vice president of JBG SMITH Properties; and Ben Safran, a McKinsey & Company associate partner, speaking at the 2022 ULI Spring Meeting in San Diego.

Developers that want to build momentum and lure users, especially for big projects, need to think beyond the walls of their buildings and instead create places that become nodes for innovation, panelists said at the 2022 ULI Spring Meeting in San Diego.

Economic clusters—places anchored by companies or institutions that attract other businesses and residents—are key to such placemaking, said John Means, a partner at McKinsey & Company, who moderated the panel, titled “Moving from Building Structures to Developing Economies.” Successful innovation nodes support local economic growth as well as developer profitability, he said.

But knowledge-economy companies demand access to talent—their number-one factor in choosing a location, he said—and high-level connectivity. That connectivity relies on advanced technological infrastructure, which in turn may call for community-wide upgrades, not just building wiring.

Especially in the wake of the COVID-19 pandemic, demand for office space is not organic, said Evan Regan-Levine, executive vice president of JBG SMITH Properties. “What demand is coming needs to be induced,” he said. His firm is the developer of National Landing, the Northern Virginia mega-development that was the focus of much of the panel discussion.

A strong anchor is key to a successful cluster, the panelists said, and National Landing has one of the highest-profile tech anchors possible. The neighborhood will be the site of Amazon’s planned HQ2, a multibuilding second headquarters that eventually will employ more than 25,000 people. Also at the site will be the new Innovation Campus for Virginia Tech, thousands of residential units, plus much more office, retail, and open space. This is in addition to over 6 million square feet (557,000 sq m) of existing office space JBG SMITH owns there.

Amazon chose National Landing in 2018 after a highly publicized national search for its second headquarters, which was seen by some as the biggest economic development prize around. The Virginia package included not only tax incentives, but also the Virginia Tech presence, a way to enhance what was already regarded as a strong talent pool.

“Real estate was the last piece of the story” in attracting Amazon, Regan-Levine said. From the start, his firm worked with economic development agencies and local governments to prepare the bid. They addressed talent, technology, and infrastructure “before we ever got to talk about real estate,” he said.

Amazon will be the anchor, but successful buildout of National Landing requires attracting other tenants to the cluster, especially smaller, growing tech firms. JBG SMITH is investing in some elements that might seems unusual in real estate development, said panelist Ben Safran, a McKinsey & Company associate partner. Those include its partnership with the university in developing the new campus and its emphasis on digital infrastructure.

Virginia Tech filled a gap in the bid presented to Amazon, Regan-Levine said; Northern Virginia did not have a university with a technology focus.

As for the technology, when JBG SMITH spoke with the kinds of companies that might be attracted to the neighborhood, they heard “second only to talent, we care about connectivity,” he said. The company decided to approach digital infrastructure as critical, like water or power. The company invested about $60 million in fiber and 5G connectivity. “We are treating it like a real estate asset,” he said.