Spotting the Next Innovation District 

How to stay ahead in tech’s race for space in Boston 

Where will the local tech community grow next? The idea that Boston would ever be a first-choice destination for startups seemed both aspirational and dubious a few years ago, but now…

Seemingly overnight Boston has become the new startup capital of the state’s tech community, with entrepreneurs moving here for the same reasons many newcomers do: It’s a compact, busy city with convenient public transportation, good restaurants, and lots of people like themselves 

Most local tech industry observers say that the large scale development of Boston’s Innovation District — as well as the involvement of key partners like MassChallenge — kicked it all off. The Innovation District often uses the rhetoric of creating a home for innovation in Boston. The story is far more complicated. The birth of the Innovation District seems almost accidental — after development plans stalled during the last recession, a glut of space with cheap rents made it possible to attract startups from established clusters in Kendall Square. The city actively tried to poach larger companies from Cambridge, and simultaneously launched a successful neighborhood rebranding. More importantly, $8B of long-term state and federal investment money kicked in. The Innovation District is now home to deep-pockets companies as well as a new slew of restaurants, coffee shops, and luxury housing vaguely marketed towards innovators.

OK, so how much without the view?

The irony of it all is that the demand created by the Innovation District means that many innovators without sufficient funds — including early stage startup newcomers as well as the artists who once worked in the Innovation District’s warehouses — cannot afford to live or work there.

In a very short amount of time, commercial rents in the innovation district now match those in Back Bay. Of course, the investments in South Boston’s Seaport were never about providing a permanent home for early-stage startups. But the marketing has proven so successful in crafting public perception, a heedless discussion of “where to build the next Innovation District” comes up whenever we talk about how to grow Boston’s role in tech. The question is meaningless: as we have seen, making a home for early-stage startups was more a means than an end in the district’s development. Putting aside the Innovation District hype, the problem of finding future opportunities for growth is better posed: “where can a critical mass of startups find cheap rent”. Posed in this way, we see the Next Innovation District doesn’t remain in one place in Boston for too long these days.

Boston’s Next Innovation District:
Downtown Crossing

There’s little of the Innovation District hype, but the fundamental forces that led to the Innovation District are at work in Downtown Crossing. The process has several distinct stages:

  1. Trailblazing: Relatively cheap Class B or C spaces in centrally located neighborhoods are noticed by tech trailblazers coming from nearby clusters.
  2. Seeding the cluster: Accelerators, incubators arrive. Developers and real estate boosters know that tech will draw attention to their neighborhood, so both public and private incentives are common.
  3. Growth: A cluster of startups form. Word gets out. Media takes notice. Rents rise with demand.
  4. Displacement: Startups leave as rents go up — redevelopment creates pressure on rents.
  5. Dissolving the cluster: Leases will expire, accelerators will find a better deal elsewhere, and leave as well.

With the process already underway, the only question for Downtown Crossing now seems to be how quick the pace of turnover and development will be. (Alternatively, if you suspect a tech bubble, how long it will be until the next downturn slows down or pauses the churn.)

Positive public reaction to the Next Innovation District in any neighborhood in Boston may last only as only long as concerns over displacement and tech-driven gentrification can be discounted. Though tech is just one contributor to the pressure of population movement back into the city, given the rapid shift into the city, the public perception of tech’s influence is often greatly amplified. Looking at current trends, long-established, mixed income neighborhoods like Chinatown feel justifiably threatened, and the North End is looking closely at North Station developments as well.

So how can we continue to host early-stage startups in compact, crowded Boston? Our current solution — fueled by temporarily underpriced rent from an economic downturn and fanned by hype—won’t be sustainable forever. If early stage startups leave Boston, the buzz around Boston will die out.

Boston’s policy and economic leaders have begun to take notice of this dilemma. Recognizing the tech economy as a contributor to both uneven economic development and the digital divide, Mayor Walsh has expressed his view that startups could take root in areas like Roxbury, Hyde Park, or Mattapan. By and large, leaders in the Boston tech world have reacted with polite skepticism. Perhaps these neighborhoods are still too far out, or perhaps there are too few large empty structures and commercial centers already slated for large-scale development . Given the rapid changes in San Francisco neighborhoods, we may count ourselves lucky that Boston isn’t under quite the same pressure from tech newcomers, and that developers don’t have quite the same level of enthusiasm about investments in Roxbury, Hyde Park, Mattapan…or Dorchester for that matter. East Boston, on the other hand, checks off many of the boxes: Next Innovation District boosters have taken notice.

Though underserved neighborhoods are rightly concerned about displacement, we shouldn’t buy in to a false choice between investment and keeping neighborhoods intact. Doing so discounts one fact: innovators and potential innovators of all demographics already live and work in Boston’s neighborhoods. The question is not whether neighborhoods can be home to innovators, but how to grow critical mass in the neighborhoods in a sustainable way. Some of the requirements for the critical mass may be the same (cheap rent, internet access), but the process for creating a neighborhood-hosted innovation space will probably look more like community organizing than real estate development.

Allston and Roxbury are currently the places to watch in thinking about alternatives to our Innovation District model. Allston may follow Kendall Square more than the Innovation District, as Harvard will be a major force for tech growth. Recognizing the large population of young techies in Allston, developers seem ready to test the idea that you can build innovation spaces into new residential construction as well. Roxbury seems to be trying to change the focus entirely to creating tech industry-neighborhood partnerships. CDCs such as NuestraCDC, and private efforts such as SmarterInTheCity are leading the charge. Carrying the trend forward, at some point soon in Boston, encouraging neighborhoods to grow or host their own critical mass of innovators in a citywide network of underutilized and/or inexpensive space may look to be the most sustainable approach for ecosystem growth within the city itself. Mayor Walsh may be signaling to the tech ecosystem that he is preparing for Boston’s future by investing in connectivity in underserved areas.

In years to come, if you find yourself in a early-stage startup, your personal Innovation District may be taking root in Boston’s neighborhoods. But for this to happen, Boston must find a way to align innovators’ interests, commercial interests, and neighborhood interests as well. Boston’s tech community should take up Walsh’s challenge as a way to test multiple approaches for growing the ecosystem and for long-term sustainability.

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