Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Key Facts
Innovation
/
August 1, 2024
Private Equity’s Big Bet on Innovation Platforms
Jeremy Bamberg
Article
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Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
Regenerator’s Dilemma unpacks disruptive trends and the innovators shaping our neighborhoods and cities. Today we look into the pools of capital pouring into innovation-focused real estate.
What’s covered:
The cluster model and why it matters
Innovation platforms, and the key players
Major trends and an outlook to what's next for the sector
Innovation And Capital.
Here’s a meaty topic. Today, we’re diving into a major driver behind innovation campuses—the money.
Where there’s potential profit, expect different sources of capital to be nearby. Simply put, the smell of opportunity has attracted some of the biggest names in the business to this emerging asset class (especially private equity).
So here’s what we’ll cover: the model, the players pouring cash into it and what’s next for the sector.
For what it’s worth, I think the entrance of major investors is a net benefit for us all. It’s professionalizing the space. Of course, there are risks. And we’ll get to these.
But first, the model.
The Cluster Model.
No doubt the concept of like-minded companies clustering together is nothing new. But in recent years, the real estate industry has started to capitalize on innovation clusters worldwide. Literally.
Since the early 90’s major players like Alexandria Real Estate Equities, Inc. have pioneered the cluster model—a model focused on launching mega campuses around four critical pillars: location, innovation, talent, and capital.
This approach has come a long way in the past 30 years. Key investors in the space range from publicly traded real estate investment trusts (REITs), like Alexandria, to private equity investors. Even operating partners have skin in the game.
Today, the number one priority is scale. But this isn’t easy given that the cluster model is a highly specialized, operational business. Not a problem. The industry has an answer: investors, developers and campus operators are teaming up to accelerate the model.
They call this the platform approach.
The Rise of Innovation Platforms.
Despite it’s novelty, innovation platforms have proliferated over the past decade. If you’re a major private equity firm investing in real estate, you’ve got one.
So what’s a platform?
Private equity real estate (PERE) platforms buy, improve, and sell properties for profit around a specific target theme or investment thesis. Here’s some typical features:
Platforms usually last 8-12 years and involve a set period for raising money, investing, and selling assets.
Structured as close-ended funds, they aim for annual returns of 15-20% through rental income and property sales.
Platform managers typically receive a management fee and further incentive fees (promote) when raising the profitability of their portfolio.
Platforms aren’t exclusive by default and may not even use the term. They can be simple strategic JVs, or even relationships. For simplicity, I’ve grouped these together.
So why innovation platforms? Simple answer.
In recent years specialist, alternative asset classes like data centers, student housing, self-storage, assisted living, and other operationally intense segments have achieved outsized returns using the platform approach. Innovation-focused real estate, especially Life Sciences, is just another opportunity—it’s the new hot trend.
One North Quay, Kadans (Left); Victoria House, Pioneer Group & Project Newton, Mission St. (Right)
Description: a new specialist platform focused on the fast-growing life science and innovation sector in Asia Pacific. Announced August 1, 2024, the 50:50 JV is seeded by Lendlease’s 15% stake in the Lendlease Innovation Limited Partnership (LINO), a previous platform with Dutch Investors PGGM Investments.
Description: a specialist investor, developer and operator of science and innovation real estate. In a strategic JV with BGO, Mission Street is delivering over 1.5 million sq. ft. of lab and office space in key strategic UK locations.
Description: Europe’s leading vertically integrated platform curating innovation-focused ecosystems that increase the chance of business success, formed through the merger of BioCity Group and Knowledge Factory. A Trinity Investment Management company.
Other innovation-led strategies (though non-platforms):
British Land: A portfolio-wide strategic repositioning to innovation campuses (from offices) for the UK REIT. Following Meta’s £149 million lease surrender, the team is transforming 1 Triton Square into an innovation and science campus.
KKR: A strategy focused on “Office in Innovation Markets”, with 11m sq. ft. in markets that are experiencing above-trend secular growth driven by industry and demographic tailwinds.
Canary Wharf Group: A focus to reposition the district into a world-class life science hub, with the world’s “largest and most technologically advanced life sciences facility” set to open in 2026, in JV with Kadans. (Note: Brookfield are shareholders in CWG).
Revolution: Though a venture capital fund, the group has launched a real estate strategy to revitalize emerging cities and create innovation districts where it invests, with recent senior hires from Hines bolstering their development expertise.
Key Takeaways.
Alright, I think you get the point. Real estate focused on the innovation economy isn’t an emerging asset class—it’s a booming one.
The world’s biggest investors get this, and are pouring billions into the space. Over €20 billion just in the examples above. In response, developers and operators are repositioning their portfolios to fit into this trending asset class.
Let’s close with some major trends from the space:
Diversification: Major players are moving beyond Life Science. As macro trends blur the lines between tech and science, innovation platforms are launching locations targeting sectors like AI, DefenseTech and more. And mixing occupiers too.
Transatlantic Trend Migration: Investment trends (like operational real estate and innovation platforms) that succeed in the US are expanding to the UK, then Europe. Europe remains, therefore, a few years behind.
Emerging Managers: New managers who present an industry specialism and operational expertise are becoming more attractive to platform investors. Innovation-focused real estate is an example niche market for this.
GP Seeding: Instead of just co-investing, LPs are investing directly in GPs for better alignment and higher returns. Examples include GCM Grosvenor, Artemis Real Estate Partners, and others.
Future-focused Strategies: Investors are starting to question short-term private equity models in favor of long-term strategies. (More on this below)
So what’s next?
More is coming. The market is becoming increasingly saturated with innovation campuses. On one hand, that’s great, but if pushed forward by the incentives of private equity models there’s a major downside.
Final Thoughts.
There’s the major risk we face.
Private equity’s short-term focus often conflicts with local residents and the business community. Not to mention the incentive structure behind it pushes for short-term wins, not long-term success.
And this is at odds with the central mission behind innovation campuses. At least the ones I’ve been involved with across Europe with Factory.
So what’s the solution?
The values of capital matter. And this means innovation campuses require alignment between capital and project goals. In practice, this requires focusing on driving diversity, inclusivity, growth—all for the long term.
While this specific asset class may share similarities with others, real estate for the innovative economy carries special responsibilities. Many economies depend on it, and countries' futures hinge on its success. Let’s be real, an innovation campus has a bit of a different mission than a self-storage campus. Doesn’t it?
So we haven’t yet found the right balance between scaling the model and ensuring long-term benefits. But it’s something that a large group of us have dedicated our professional lives to. Myself included.
Let’s just make sure we get this one right.
Okay. Back to work.
[This article was originally published as a part of the Regenerator's Dilemma series.]
