Innovation districts connected to universities in California are showing strong performance in the real estate market, according to a recent JLL report cited by Globe Street. These areas, which include Stanford Research Park, UCLA Innovation Park, UC San Diego’s Science Research Park, and San Diego State’s Mission Valley Innovation District, are outperforming other submarkets in terms of rent growth and occupancy rates.
Office properties within these university-linked clusters have an average rent premium of 10 percent compared to other areas. Their vacancy rates are also 220 basis points lower than the national average. In older innovation districts, office asking rents can be 36 percent higher than the U.S. average. When compared to surrounding metro areas, offices in these districts fetch a 26 percent premium and have nearly 300 basis points lower vacancy than nearby submarkets.
Retail spaces are also benefiting from this trend. Mixed-use developments that combine student-friendly amenities with research facilities see increased activity and higher performance. Retail rents in innovation districts are reported to be 28 percent higher than those in neighboring areas due to high foot traffic from students, researchers, and local residents.
The concept of university-anchored innovation districts began gaining traction in the mid-20th century. Stanford Research Park was established in 1951 and has since become central to Silicon Valley’s research and development sector. However, it often takes many years for such districts to reach their current status.
“Fostering the growth of such economic development engines takes time,” Emily Crutcher, senior vice president for JLL’s government and education division, told Globe Street. “University-anchored innovation districts may take decades to cultivate and grow, which requires committed university leadership across multiple administrations; the support of local, state and federal agencies; partnerships with corporations; exposure to [venture capital] networks; programs with local community colleges and more.”
