JLL Real Estate recently published a report outlining how characteristics associated with innovation offer resiliency for major metro real estate markets.
The report looks at innovation’s impact on real estate markets and measures innovation and talent across the following indicators:
- FDI investment in high-tech industries.
- Attraction of Venture Capital.
- R&D expenditure.
- International patent applications.
- Quality of higher education provision.
- Education level of the population.
- Demographics: 20 to 40-year-olds.
- Employment in high-tech industries.
The report states that those indicators account for approximately three-quarters of commercial real estate investment globally.
Major metros have a noted office rental change that ranges from 2%-6% annually.
From the Creative Class to Commercial Real Estate
Richard Florida’s book The Rise of the Creative Class was one of the first perspectives to outline key characteristics associated with the workforce of creative industries.
Creatives seek urban density, human connections, and physical spaces, whether via public spaces or real estate, that support creative work.
We now see a correlation between the price of real estate and the amount of innovation-based activity occurring in cities. Researchers look at the correlation between investment and the price of real estate, which could be encouraging news for smaller to mid-size cities. In smaller cities, the commercial real-estate is underwater. They need substantial re-investment, but can’t justify simply renovating to provide class-A office space.
Investments in tech can both kickstart a local innovation hub as well as revitalize core commercial real estate markets.