Tech's Place in Urban Growth: Innovation Districts Play an Important Role in Developing City Spaces

The numbers clearly show that American cities are experiencing a renaissance as more millennials choose to remain in an urban setting instead of flocking to the suburbs like their grandparents did.

But there’s a growing trend that says the key to creating a flourishing urban environment is bringing together high-tech businesses that can jump start a sluggish economic recovery with a place, and spaces, for people to live and play.

The latest U.S. Census data show that in 2013 there were nearly 270 million people living in urban areas, or about 2.3 million more than the previous year.

And once they arrive there, people are staying put. Three quarters of America’s metropolitan areas maintained or grew their population between 2012 and 2013, census figures show, reversing the decades-old trend of suburban flight.

For the revitalization efforts to take hold, innovation districts must play a role argues Bruce Katz, director of the Metropolitan Policy Program at Brookings Institution.

Innovation districts reflect smart growth principles such as transit-oriented neighborhoods and mixed-use development. But not all smart growth redevelopment initiatives are innovation districts, said Katz, author of “The Rise of Innovation Districts: A New Geography of Innovation in America.” For a redevelopment effort to be considered an innovation district, though, it must have at its core a high-tech or STEM-related (science, technology, engineering and math) economy.

“I think what is really important to understand here is this is not just about demographic preferences,” Katz said in an interview with On Common Ground. “This is about the location practices of large firms and entrepreneurs who realize that innovation in the United States is increasingly going to be open innovation. And as you move to an open innovation model where companies are really interacting, you begin to see the demand for very different kinds of places.”

St. Louis, Mo., has a burgeoning innovation district known as the Cortex Innovation Community.

It sprang from a recognition from academicians at Washington University in St. Louis, University of Missouri-St. Louis, Saint Louis University, as well as executives at BJC HealthCare and the Missouri Botanical Garden, that downtown St. Louis should better capture — and cash in — on its research dollars and collective brain trust.

They joined efforts in 2002 and invested $29 million to launch Cortex. Funds were used for strategic land acquisition within the zone and staff to advance a master plan. The targeted area is former industrial land adjacent to three of the five founding institutions. Once a forgotten section of town, the area now is abuzz with activity. In September, the U.S. Department of Transportation announced it was awarding a $10.3-million grant in federal transportation funds to help build a MetroLink stop.

When completed, Cortex Innovation Community could represent $2.1 billion in investments, have 3.7 million square feet and create 13,000 jobs, about 77 percent of them in the technology field. Dennis Lower, president and chief executive officer of Cortex Innovation Community, said about 25 percent of the goal has been met to date. There are about 75 businesses and entrepreneurial startups at Cortex today.

While it’s thriving today, Cortex Research Community did have some growing pains along the way. The founders and the city made solid decisions with the urban location. “They did a lot right,” Lower said, but added that the master plan was fashioned more like a suburban business park which stymied growth at Cortex.

Lower worked with the Cortex board of directors to reposition the district when he was hired as the president and chief executive officer in 2010 and started focusing on the advantages of the urban environment. Lower worked with other partners to develop workshops and seminars between the universities, students, entrepreneurs, business accelerators and venture capitalists. He worked with the innovation district partners and carefully planned, “spontaneous” social networking opportunities and happy hours that encouraged openness between businesses and their employees.

“It’s all part of our strategy of engagement to create a value proposition to say “you know what? I need to be here,’” Lower said. “If that’s not in place, it’s hard to develop an urban research district. It has to be more than the sum of its parts.”

Lower also forged ahead with a mixed-use, high-density master plan. A 3.5-acre linear park called the Cortex Commons is in the works and streets are required to be bicycle and pedestrian friendly.

When Cortex announced its first building in 2004, not one developer was interested in building out the space. Ultimately, Washington University guaranteed the building and several university labs became anchor tenants to balance the spec space offered to technology tenants.

Fast forward, 10 years later. Several developers, Lower said, responded to a request for a proposal to build residential units as part of the Cortex mixed-use master plan.

There already is a “good mix of housing options” within blocks of the Cortex Innovation Community, Lower said, but he wants to include residential projects in the district “to keep activity in the district day and night.” And with the new MetroLink stop, it will be easier for residents to live car-free.

Open technology is a key feature in innovation districts. There is perhaps no better poster child for open technology than Tesla Motors — which manufactures highway capable electric vehicles. Its chief executive officer, Elon Musk, announced in a blog post this June that it would open source its technology. The company’s manufacturing plant, located in Fremont, Calif., and a $900-million BART extension are anchoring an 879-acre district that, when complete, could have 4,000 housing units and 12,000 jobs.

The Cambridge Innovation Center in the Kendall Square area is today’s “iconic innovation district,” Katz wrote in his report. Created in 1999 and located in a Massachusetts Institute of Technology building, the area is connected by transit to Harvard and Mass General. What was once an industrial district has been rein-vented into innovation districts where clusters of life sciences, pharmaceutical and information technology companies locate.

Housing, though, is an issue in Kendall Square and a 2013 report compiled by the Cambridge Community Development Department notes that the “high costs of housing is a major concern, and more housing is needed generally.” The report said housing was “one of the foremost challenges to achieving a well-rounded urban environment.” The same report also notes that innovation space for startups also is in great demand given the growing popularity of the area. “The issue is how to ensure its affordability.”

Not only are innovation districts helping reshape down-towns they are attracting investment capital better than their suburban counterparts, some claim. University professor and best-selling author Richard Florida argues in a series of articles published in CityLab that venture capital is shifting away from suburban areas and into urban ones. Florida — author of “The Rise of the Creative Class” — analyzed Dow Jones data by zip code which showed that predominantly urban zip codes accounted for 85.7 percent of the investments in the Greater San Francisco Bay area.

In another analysis Florida used data provided by the National Venture Capital Association and examined deals and investments by area codes. In that study, Florida found that the San Francisco/Oakland area had over-taken Silicon Valley for the number of deals in 2012 as well as investment dollars. Florida claims that startups in the San Francisco/Oakland area in 2012 had 744 agreements with capital investors and saw $6.9 billion in investments compared to just under $4 billion in investments on 415 deals in Silicon Valley.

The long-standing model that capital investors direct money to the suburbs, Florida wrote, is giving way to ‘urban tech.’

Four hours west of downtown St. Louis is downtown Kansas City. Upward of $5.5 billion in public and private investment in recent years has been funneled into downtown Kansas City which has been heralded by the New York Times as a hotspot for millennials, or the 34 and under set.

In September 2013, Sprint announced it was opening an accelerator in downtown Kansas City in the Crossroads District, just south of downtown. The new Sprint Accelerator building is an open-concept design, enabling startups to collaborate and network. It provides its community members with round-the-clock, open-area workspace and connection to high-speed internet access along with private storage space. It also houses the Sprint Mobile Health Accelerator program powered by Techstars, which works with startup companies in the e-health and mobile health care field.

The Accelerator worked with 10 firms in the second quarter of 2014, seven of which sought and hired staff after the three-month mentoring session, and has made a similar commitment for 2015.

Kevin McGinnis, vice president development and operations of Pinsight Media+ at Sprint, actively is searching for new entrepreneurs who might benefit from the Sprint Mobile Health Accelerator in 2015.

When McGinnis was recruiting entrepreneurs for the 2014 class he said he often was asked why the initiative was launched in downtown Kansas City. “There were a lot of questions about what’s here,” McGinnis said.

Between the success of the first graduating class and the New York Times story, McGinnis said he isn’t finding himself having to defend the location or to explain the attraction to downtown Kansas City anymore.

“The message is getting out,” he said, saying the area is the corporate headquarters for several large companies other than Sprint, including H&R Block, Hallmark and Garmin. Downtown Kansas City “is starting to draw more attention.”

Christine Jordan Sexton is a Tallahassee-based freelance reporter who has done correspondent work for the Associated Press, the New York Times, Florida Medical Business and a variety of trade magazines, including Florida Lawyer and National Underwriter.