Kendall Square’s New Rules

4/23/13Follow @rowe

With the events surrounding the Boston Marathon bombing last week, I have found it difficult to think about much else. Xconomy had previously invited me to write about the upcoming transformation MIT is bringing to Kendall Square. When it came time to sit down and write this piece, my first reaction was to pass. But my second reaction was: why? Hey, this is the kind of stuff we should be focused on: strengthening our community and finding ways to do a better job innovating solutions to the world’s problems.

So it was very exciting for me earlier this month when the Cambridge City Council voted to approve a landmark set of rules that govern how Kendall Square will grow in the future. These rules will have far-reaching consequences for Kendall Square, but also will serve as a blueprint for other tech clusters around the world. It is not a surprise that the Wall Street Journal saw fit to cover these changes: the world is watching.

For readers not familiar with the area, Kendall Square sits at the epicenter of the Massachusetts innovation economy. Massachusetts boasts a lot of venture capital investment—more than California on a per capita basis. So it is saying a lot when you hear that fully a third of that is invested in the small town of Cambridge. And most of that in invested in this little neighborhood of Cambridge called Kendall Square. Kendall Square is undoubtedly the highest-density cluster of innovation on the planet. (Yes, California has more VC investment overall, but nowhere as dense as the blocks around MIT.)

The new rules were proposed to the city by MIT. What did they ask for? Some of the elements are pretty standard. A part of this was simply a university requesting permission to build office towers on a part of its campus where it had asphalt parking lots.

Another more significant change reflects the changing psychology of the modern research institution. Historically MIT’s “front door” has always been 77 Mass Ave: a building facing… more of MIT itself. MIT was, and to some is, an island—as is the case with many of the world’s leading research institutions. But MIT is also famous for its thirst for applying its inventions. In the past decades, the area around MIT, much of it once parking lots, has become synonymous with the notion of an “innovation cluster.”

Large numbers of rapidly growing tech, life sciences, and energy companies now crowd tightly around the school. The result is an emerging model for how to do innovation right: creating density and intensity of commercial activity around a scientific institution. Has this worked? Here’s one measure: a BCG study showed that MIT has nearly five times the concentration of startups around it as Stanford does.

Underscoring the importance of the symbiosis of research university and innovation cluster, MIT plans now to build a new, 21st century “front door” at the Kendall Square subway station, facing the center of Kendall Square.

When property owners ask for the right to build bigger buildings, there is traditionally a negotiation that takes place with the surrounding community in which the community’s needs are considered, and various accommodations are made. Perhaps a park is built, or a jobs-training program is created. Reading the list of the accommodations that are negotiated in a given project is a means of peering into the soul of a community at a particular point in time. It says something about our values as a community.

So what was in MIT’s list? There are indeed park-building and job-training programs contained therein. Importantly, local retail got a nod, with a commitment to have substantial amounts of retail space along with a rule that at least half of that may only be leased to local, non-chain operators. This reflects a growing sense that innovation clusters must be “livable” and that an important part of being livable is being hip, creative, and local.

Housing also got a major nod, with the creation of hundreds of new housing units, including some of the trendy new “micro-housing” that is seen as a market-based cure for the climbing cost of housing. Housing and retail go together. They are the building blocks of creating life and energy in a neighborhood.

Modern, sustainable transportation—better walking, biking and public transit options—and green buildings are also widely seen as key elements for drawing innovators to an area. So, not surprisingly, the petition requires all the new buildings will meet the LEED Gold standard. And MIT committed to work to resolve an old logjam that has prevented the creation of a bike path along a tantalizingly well-placed railway right of way that runs through Kendall Square: the old Grand Junction Railroad.

Notwithstanding all of the above great things, what has really made this new set of Kendall Square rules front-page reading is the requirement to set aside a meaningful portion of the new space for startups—a provision widely seen as a first in the nation.

Zoning law has long enshrined the notion of setting aside space for certain categories of use that are important to a community, such as housing and retail. What this zoning does, for the first time, is to explicitly embrace startup space as one of those categories which must be planned for and protected to ensure the healthy overall neighborhood. This provision implicitly acknowledges the innovation lifecycle: an invention or discovery occurs, often at a major university; a small startup spins out, often led by a graduate student with a professor lending a hand; that startup locates as close as possible to the university with a team splitting their time between school and the new project; eventually angel investors and VCs get involved, injecting financial resources that allow the startup to grow and mature; eventually a few of these become an Akamai, Biogen, or Google. These winners create thousands of high-paying jobs and solve problems to the betterment of all.

Specifically, the proposal requires that 5 percent of all new office space be set aside as “innovation space,” defined as small (avg. 200 sq. ft.) spaces that are rented on a month-to-month basis, with half of the space serving as shared-space (kitchens, co-working areas). In short, it defines what CIC, Dogpatch Labs, TechStars, Intrepid Labs, Redstar, and Lab Central (amongst others) are doing, and says, “you have got to maintain a fair amount of this kind of use.” The zoning law goes on to establish floor-area-ratio incentives that encourage developers to take this 5 percent up to 20 percent (one-fifth of all the new space). With a credible user of such space in hand, it is likely that developers would use these incentives, bringing the potential amount of innovation space created in Kendall Square over the next decade up as high as one million square feet. This is huge.

This is unbelievably good news for startups. This provision was born of the concern that with the success of Kendall Square, global corporations might otherwise squeeze the startups out, given their ability both to pay more, and landlords’ understandable preference for deep-credit tenants over non-credit tenants. The end result of that path could be a kind of “hollowing out” of this important innovation engine in Massachusetts, with startups pushed to the periphery, losing the advantages of the links they have to the universities and the power of a dense cluster in itself.

This new zoning sets Kendall Square on a path the end of which is hard to see, but which is very bright, very innovative, and very startupy. If you believe these are tools for change in a society that needs that badly, then you should rejoice with me. It is hard to overstate the importance of this change to the future of Kendall.

One of the most interesting aspects of this is what made it possible. Around the world, cities like Cambridge have historically had a strong anti-development bias. Why should townfolk want big, new buildings creating traffic, noise, construction hassles, and the like? Most don’t. And many Cantabrigians did turn out to public meetings to say those things. Yet many other speakers at the City Council’s meetings turned out to talk about the importance of innovation and entrepreneurship. They spoke about how these endeavors are critical to our prosperity in these days of intense competition with other regions, how they bring jobs to residents all across the state, and how the fruits of the labors of our innovators and entrepreneurs are solutions to important problems facing the planet. What is super-exciting to me is that our political leaders, with their historic vote, accepted these arguments. This is a major win for innovation, and represents a kind of sea change in how the community sees the role of innovation in society.

A second and important insight here is more tactical, but one that other communities wanting to do this should heed: one reason the surrounding community supported an expansion of Kendall is that Kendall has become a good neighbor. How so? One big example: over the past decade, despite millions of new square feet of new buildings being built here, traffic to and from Kendall Square through the surrounding neighborhoods actually dropped. As a Boston Globe article reporting on this said, that statistic is so startling that you’d think it was a mistake. In fact, we are walking more, biking more, and taking the T more. Today over half of those at the facility I run, Cambridge Innovation Center, take public transit to get to work, and only about a quarter drive.

In another example, we are transforming street life here. Everyone who visits talks about how dramatically Kendall has changed in the past few years from a drab, dusty, empty, corporate wasteland to a place people go out at night; a place you take your kids to go ice skating and paddle boarding; a place where you now see families walking down the street with strollers.

We should not underestimate the degree to which our becoming a better neighbor influenced the greater Cambridge community’s willingness to step up for more of what we do here. This was a great pat on the back for Kendall, and points the way for other communities.

My only significant concern going forward is that with all of this growth, Kendall is outgrowing the public transportation infrastructure that runs through it. We are at or near capacity already at peak hours. This could be a boon for Cambridge, as it pushes more Kendall Square workers to live also in Cambridge, but it also threatens to put more cars on the road. The insufficiency of Massachusetts public transit is a well-recognized issue, and hopefully our legislature will see the wisdom of investing in better connecting its job-creating core with the rest of the state.

Kudos for getting this done go to too many people to mention in a business publication, but in sum I will say that this was a great case where strong partnerships of local interests—neighborhood leaders, city staff, city political leaders, and our university—are together producing a terrific outcome.

Xconomist Tim Rowe is Founder and CEO of Cambridge Innovation Center. Follow @rowe

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  • @energycleantech Sahir Surmeli

    Thanks for the summary, Tim. Great to see innovation recognized as an important part of our culture that enriches the local comunity. Also – hats off for the requriements for local retail.

  • MITDGreenb

    Well done… and well-written… Tim!

  • reality check

    I think is sucks. The politicians get money behind closed doors while we get more traffic, pollution, flooding, loss of wildlife habitat, noise, headaches, and a bunch of potential terrorists. Great work building without the proper infrastructure.

  • reality check

    Tim, in 10 years time I went from living on a quiet peaceful street to living in a traffic congested, noise and pollution infested hell hole. Can you tell me what is being done to offset the complete destruction of my quality of life? Very little is the correct answer. I am not able to be outside my home on Third Street for three hours each day due to the traffic backups and pollution. Kendall Square looks pretty but creates something that smells like shit. Excuse my vulgarity, but this is what Kendall Square means to me.

  • Common Sense

    Put your start up elsewhere and you will be able to attract employees for less money and if you have a good product, you will succeed just as well as you can in Cambridge. For those who have commuted into that mess, a chance to work elsewhere is quite welcome. The idea of spending and hour an a half to drive 20 miles is nauseating. Well written, but you really didn’t provide anything to say why a cash strapped startup should spend the money to be in Cambridge.