By Archana Pyati

Although the rate of new business creation in the U.S is in fact declining, entrepreneurs and the social, economic and technological infrastructure they require continue to be a driver of real estate and urban planning decisions. This trend is especially evident in cities that have transitioned from manufacturing-based economies to those driven by knowledge-creation, technological and scientific innovation, and professional services.

So concluded an expert panel devoted to entrepreneurial communities and their evolving real estate needs at the ULI Carolinas’ Second Annual Meeting, held February 9 and 10 in Charleston, South Carolina.

The panel consisted of Jonathan Robinson, Senior Program Officer of Entrepreneurship at the Ewing Marion Kauffman Foundation, based in Kansas City; Ted Zoller, Director of the Center for Entrepreneurial Studies at the Kenan-Flagler Business School at University of North Carolina, Chapel Hill; and Thomas Osha, Managing Director, Innovation and Economic Development, at Baltimore-based Wexford Science and Technology, a division of BioMed Realty Company.

Entrepreneurship Today: a Mixed Prognosis

Robinson shared findings from the Kauffman Foundation’s latest research, which offers mixed views on the state of entrepreneurship in America. While city and state governments are developing entire economic development strategies around entrepreneurship and courses on entrepreneurship are flourishing at colleges and universities, the new firm survival rate has been falling slowly since the 1990’s. There is little or no data measuring the outcomes of all of the new focus on entrepreneurship education, Robinson said.

Accorrding to the Kauffman Foundation, the rate at which new businesses are being created is slowing as well: in 2006, there were 375,000 startups for roughly 550,000 adults in their prime working age; in 2012, that rate was 270,000 startups for every 440,000 prime working age adults. High-growth firms are also less dynamic than they have been historically, the report says.

“Don’t mistake entrepreneurial participation and celebration as a positive,” Robinson warned. “A lot of it is noise. Even the really good stuff [is] experiential learning. It’s young people dipping their toes in the entrepreneurial waters. They’re not necessarily creating the companies that matter, the companies that yield great economic dividends…through job creation, wage and economic mobility.”

The Kauffman Foundation’s report also examined the impact of two influential demographic groups on entrepreneurship: Millennials and Baby Boomers. Raised around technology since birth and better educated than any previous generation, Millennials are saddled with student debt and were the hardest-hit victims of the Great Recession of 2008. Their delayed exposure to the workplace and lack of experience in young companies means they’re less likely to spin off their own companies. “Fewer younger companies means fewer chances for Millennials to experience entrepreneurship,” Robinson said.

Responsible for the computing revolution and other major tech innovations from the last quarter century, Baby Boomers also face an uncertain future as entrepreneurs.  Like Millennials, they can’t afford to start their own firms, and the frequency with which Boomers create high-growth, high-impact companies has also diminished, the report says.

Innovation Districts: Densely Networked, Tied to Anchor Institutions, and Housed in Community Landmarks

Zoller and Osha held more optimistic views of entrepreneurship and its implications for real estate investment as both work closely with budding entrepreneurs seeking capital investment and the perfect physical environments to pursue their dreams. They each pointed to examples of successful innovation districts that thrive in amenity-rich, densely-networked environments while receiving the support of strong anchor institutions like major research universities. Often, these districts are housed in repurposed landmarks that preserve a community’s history.

Zoller pointed to the example of American Tobacco, a multi-use campus whose major tenants include American Underground, an incubator for startups, digital and otherwise; the Durham Bulls baseball team; and the Durham Performing Arts Center. The campus is made up of repurposed factories from the American Tobacco Company, one-time producer of Lucky Strike cigarettes and Bull Durham tobacco.  The American Tobacco campus offers new hope to the city of Durham, previously considered the “Detroit of the South” and now a “vibrant city on the upswing,” according to Zoller.

Zoller offered five key ingredients for creating a strong innovation district like American Tobacco:

• Offer a dense interconnected network of like-minded firms to foster the cross-pollination of ideas, collaboration, and serendipitous interactions;
• Engage serial entrepreneurs to act as mentors and advisors to help emerging businesses;
• Foster a “founder’s culture,” or a culture that values discovery and enterprise;
• Find what is unique about your community and capitalize on community assets;
• Create a supportive eco-system with strong relationships to universities, business accelerators, and other anchor institutions

Osha took the idea of an innovation district one step further by using the term “knowledge community” to describe a broader, more regional economic approach that leverages relationships between local entrepreneurs, well-capitalized major companies, capital providers, and strong research universities.  Osha argued that universities have been woefully underutilized in providing infrastructure and support to start-ups; local businesses networks, too, haven’t fully tapped this symbiotic relationship either.  The seamless flow of ideas between innovation districts and universities could power entire regional economies to recruit and retain talent and stay competitive.

Like Zoller, Osha said that it’s critical that these partners exist within close physical proximity to each other. “It’s very important that this eco-system is very tight and has tentacles out to the rest of the community.”

Where does real estate factor into the creation of “knowledge communities?” By creating a sense of place, Osha explained. “It’s not about any one piece of real estate, but about how they all work together.”

Archana Pyati is Impact Writer on the Strategic Communications team at ULI global headquarters in Washington, DC. Please contact her at [email protected] with your story ideas.