Location, Location, Location
“Location, location, location.” The timeless adage of real estate value. And unquestionably accurate when describing land whenever the future interstate exchange location is announced, or for homes in the best school districts, or offices with the most toney addresses. But does the old rule still hold true in all things and at all times? In particular, within the sub-genre of real estate that is research and innovation places, is location the preeminent value trait? This is a very important issue in determining not only the optimal location considerations for establishing new research buildings or districts, but also to both make decisions on subsequent expansions/investments and to calibrate expectations for what research/innovation facilities might reasonably accomplish. The question is very important, and the answer is totally clear: No, Yes, Maybe.
No, location is overrated in this area. Unlike their traditional-industry counterparts, research and innovation buildings don’t rely on prominence or high traffic counts to perform. The value of being an occupant in a research building is not in the impressiveness of the address, nor the views from an upper floor corner office, nor from how quickly you can drive (or walk) to your home, the airport, or a nice restaurant district. Rather, like an old TV game show, in this type of real estate in particular, the real value is what’s behind Door #2…and Door #3 and Door #4, etc. In other words, the main value-add comes from the people occupying the office suites that are next door, down the hall, upstairs, and downstairs. It’s in who rides the elevator next to us, whom we run into in the lobby, and who all may be sitting at the table next door at lunch in the cool new restaurant. Most real estate is valued based on what it is beside; i.e.,location is vital. Innovation real estate is valued based on what is inside. Ergo, forget location.
But, er...yes, location matters greatly for discovery. However romantic the image of the idea-tortured inventor toiling away in the late-night isolation of their garage, or a gaslight-lit basement laboratory in an old university building, modern innovation is increasingly a team sport. As such, accessibility and proximity are key. However, the access and proximity that matter are not to roads or rivers or rec centers, but to other brilliant, inquiring, and curious minds. The more the merrier. The more diverse the better. And just what proximity and what degree of access are needed? A lot! Like gravitational forces that diminish exponentially with distance, the stimulatory value of any particular research district neighbor drops as separation distances increase. And the applicable units of measurement in the equation are not miles, but blocks, or even meters. Collisions, or encounters with others, are to innovative thought as generations are to Darwinian evolution. It may take thousands to produce the one beneficial mutation, but eventually, it will happen. Therefore, a research operation located upstairs above the campus village of pubs and pizza places will most likely outperform one in the shiniest, toniest, suburban office building surrounded by an ocean of “convenient” parking. So, yes, location is key.
Well, maybe. Where a research park is located matters, but what matters more is that there is a strong sense of “there” wherever “there” is. What we’re looking for is real estate that fosters a sense of intra-occupant connection. A tribalism. A sense of shared citizenship. While encounters/collisions are the innovation workhorse, what matters are frequency, duration, and “quality.” Quality comes from trust, from kinship, from commonality. And so we want real estate with a strong enough sense of location to ultimately foster a sense of belonging to its community members. That could derive from being an Emerald City sitting alone, high on a hill, or it can come from a speakeasy feel in the back alley where only members know the secret door knock. It just depends. Nevertheless, location is important as long as the community members inside feel connected to it. It’s a delicate balance.
To perform at their best, most buildings need to be developed in locations that match their purpose. Industrial spaces need to have good access to rail and highway. Homes are typically more desirable when they’re around good schools and shopping. Offices usually operate best when workers can get to and fro for commutes, meetings, and meals easily. Bucking those natural laws of “location, location, location” is ill-advised for developers. But, in the special case of real estate where the chief purpose, the main value, the primary output is the new ideas generated there, the rules of the game are slightly changed. Figuring out how the outside shapes the inside is still very important. But what is happening, who is there, and how they feel about each other on the inside of the development is infinitely more important than the zip code.
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