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How universities are building innovation districts in cities

By partnering with the private sector, universities are moving away from the staid university parks of the past

October 01, 2019

At a June 2019 ribbon-cutting ceremony, Drexel University in Philadelphia unveiled Drexel Square, a new 1.3-acre public park. The grand opening marked the first completed project within Schuylkill Yards, a $3.5 billion master-planned development in the University City neighborhood. Over the next 20 years, Drexel will work with the city and its private development partner, Brandywine Realty Trust, to transform the area into a bustling innovation district.

Projects like Schuylkill Yards, in which universities partner with cities and developers to create innovation districts, are taking off across the country. These “live, work, play, learn” communities are thriving in cities where research universities intersect with health care systems, cultural institutions, and companies.

With these innovation districts, universities are moving away from the staid university parks of the past, and that’s by design. At Schuylkill Yards, for example, Brandywine will be building residential, office, retail and life science space on university-owned land with a long-term ground lease, creating a larger sense of community and belonging.

 “Schuylkill Yards will activate a gateway linking Drexel and the city in a whole new way,” says Herman Bulls, founder of the Public Institutions group at JLL and currently Vice Chairman, Americas for JLL. “Innovation districts represent a fantastic opportunity for universities to synergize their unique position in the community by working with both the city and private sector.”

A blossoming trend

The trend is countrywide. In Boston, an innovation district on the waterfront tapped into the resources at nearby Massachusetts Institute of Technology (MIT) to change the landscape of a city already known for a robust community of academic institutions. Cottonwood was the private partner on the Boston waterfront property, helping the university execute a strong master plan. The district makes space free for a year to teams and companies that have graduates from MIT. 

In Seattle, the University of Washington recently had its updated master plan approved by the city. The new plan allows for an additional 3 million square feet of development on its 70-acre west campus, 1 million of which is dedicated to the development of an innovation district that will blend tenancy between UW research and other public and private research entities. The development will occur through P3 structures that don’t require any UW capital. One of the district’s first buildings is the Center for Advanced Materials and Clean Energy Technologies (CAMCET), a cleantech innovation hub.

Georgia Tech partnered with Portman Holdings and Next Tier HD to finance, design, and construct the Technology Square innovation center in Atlanta. It now has the highest density of startups, corporate innovators, and academic researchers in the southeast, attracting corporate partners like Boeing and Panasonic.

Benefits for the universities

For universities, these innovation districts can help provide an alternative revenue source and a powerful recruiting tool.

State universities, in particular, are seeing less funding for operational costs coming from the government than in the past, meaning the burden gets shifted towards tuition and research grants. Partnering on an innovation district with the private sector brings in critical investment in infrastructure. In turn, that infrastructure and the sense of community help to attract and support students, which brings in more grants, Bulls says.

The deal structure like the one at Schuylkill Yards means the university has a guaranteed source of revenue — rent paid by the developer through long-term ground leases. That turns otherwise underutilized real estate assets into real sources of revenue.

“Universities are generally land rich and cash poor,” says Bulls. “With these districts, they’re looking to diversify their revenue and spend the money they have more effectively.”

Benefits to cities and companies

As demographic shifts sweep the workforce — with millennials and members of Generation Z entering the corporate world — companies that set up shop in innovation districts have the next wave of workforce talent at their fingertips.

Developers like Brandywine Realty Trust, Sasaki, and Cottonwood derive their own unique benefit: less risk.

“It’s in developers’ interest to partner with a university, which provides land and occupancy thereby reducing risk, with at least a portion of a project pre-leased,” says Bulls.

Innovation districts are also sometimes designated as Business Improvement Districts, which means that developers and companies can see tax incentives for investment.

Cities, too, see economic growth as students and faculty flock to take advantage of the jobs and cultural opportunities innovation districts afford, Bulls says. As corporations set down roots, cities benefit from the incoming tax base.

“Ultimately, these districts help the community thrive, which is a win-win for all parties,” Bulls says.

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