The Urban Land Institute has posted an interview with 6 members of their Transit-Oriented Development Council, who have much to say about the future of real estate:
What are the prospects for transit-oriented development [TOD] in the next couple of years?
Chris Leinberger: The future of real estate is intimately intertwined with TOD and walkable urban development in general. What used to be a niche market is now the market. For at least the next generation, the bulk of real estate development will be higher-density, walkable urban places, and much of it will be served by rail transit. There is significant pent-up demand for walkable urban, ideally rail transit–oriented development. In a good year, we only add 2 percent to the built environment, so the pent-up demand will be there for another 30 years at least.
Steve Wilson: A disproportionate amount of future development will be transit oriented—fueled by investor interest in TOD, which is at an all-time high. There is certainly a movement back to the urban area. Some of that is related to demographic changes, because members of the gen-Y cohort generally want to live, work, and play in the same neighborhood. Further, TODs are socially, environmentally, and economically responsible. In California, I paid $4.50 a gallon this morning, and too often I’ve been stuck in traffic on the freeway going nowhere. AvalonBay’s TODs around BART [Bay Area Rapid Transit] stations in the [San Francisco] Bay Area have found residents are willing to pay a premium to live at those locations rather than face longer commutes. Somewhere between 30 and 40 percent of our residents at TOD communities use BART on a consistent basis.
John Hempelmann: TOD is happening with increasing speed all over the United States, and it’s even happening in places that are famous for being auto-centric, such as Los Angeles and Phoenix. Everywhere in the United States—from Seattle, Portland, San Francisco, and Los Angeles on the West Coast, to Denver, Phoenix, Dallas, Fort Worth, and Austin in the middle of America, to Atlanta and Charlotte in the South—there is a lot of new investment being made in transit and in TOD. We have long had TOD in cities like New York, Boston, and Chicago, we just did not call it TOD. In our newer TOD environments, such as Washington, D.C., the Metro is a relatively new environment for high-capacity transit. The region is rapidly expanding its heavy-rail lines, which are under construction now in northern Virginia out to Dulles Airport. They already have some of the best “new” TOD in the world on the D.C. Metro line.
Neal Sleeper: It’s something of a mixed bag. There are many developers who like the idea of transit-oriented development and feel that transit adds to the marketability and financeability of their projects. The flip side is that the most effective TOD tends to be mixed use—some combination of retail, multifamily housing, office, or hotel. Unfortunately, in this market, many lenders seem to have a preference for single-use deals. The mixed-use aspect often makes financing more difficult.
John Cigna: The prospects are good in terms of a desire to build walkable urban communities. In cities that have existing transit, the desire to build around rail stops is great. There are studies out now that show that rents around a TOD are significantly higher than elsewhere. And generation X and generation Y want to live in urban settings, where TOD exists. So development will follow demand. The problem is that local, state, and federal governments don’t have the money to build new light-rail lines and stations. That’s the huge disconnect. They can provide tax breaks, which are valuable, but most rail lines cross multiple municipalities. Getting municipalities to work together is difficult, and they still come up short when it comes to funding.
Do lenders recognize proximity to transit as a benefit?
Is there a role for bus rapid transit?