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3 ways transit-oriented developments are reshaping our downtowns

Dec 27, 2016

downtown-741314-edited.jpgDowntowns all over the U.S. are undergoing a development shift thanks to millennials, baby boomers and a general change in the way people view renting vs. owning.

Many of the dense urban cores in the country’s most popular downtowns and metropolitan statistical areas (MSAs) have become so popular and congested that it is no longer possible for all the residents, workers and visitors to park near their destinations. Not that many would want to drive in some of these cities anyway—the traffic surrounding the most congested cores (such as Midtown Manhattan, SoMa in San Francisco and Downtown Los Angeles) is so bad it can add hours to a roundtrip commute.

Transportation can be a huge hurdle when development accelerates in a city where the appropriate infrastructure to handle it is not already in place. In response, many cities and developers have teamed up to form public-private partnerships that foster developments with easy access to public transportation options, such as train and metro stations, as well as tram, trolley and bus stops. Bike- and pedestrian-friendly pathways are also of prime importance in these land-locked cores. Fewer cars and other forms of motorized transportation mean lower energy expenditures and a decrease in greenhouse gas emissions, another benefit of transit-oriented development (TOD).

Brokers who work in and around these metros should keep an eye on the three major TOD-inspired trends that are sure to affect an area’s commercial real estate market.

1. Affordable housing is making a comeback.

The same public-private partnerships that have sprung from TOD opportunities are also very keen on affordable housing options. This makes a lot of sense. Many downtowns have become so popular that the area’s workers can no longer afford to live within a reasonable distance of their jobs.

The whole purpose of transit-oriented development is defeated if those most vital to the success of an area cannot access it. Expect to see new affordable housing communities on the outer rim of these downtowns, as well as a fraction of market-rate housing developments devoted to lower income dwellings.

2. Multifamily, office and retail is moving in, industrial is moving out.

Many downtowns do have the public transportation infrastructure in place to support the live-work-play lifestyle that these metros afford, and people and businesses are noticing.

Solid employment and residential foundations have given retailers, restaurants and entertainment venues the confidence to continue expanding in the most densely populated areas. Even tenants once relegated to suburban office parks or strip centers, such as urgent cares, gyms, and large anchor tenants like Target or Whole Foods have found a way to adapt their product type to these urban spaces.

While this is great news for most commercial real estate owners, operators and developers, it is not great news for the industrial sector. Warehouses and old distribution spaces near some of the country’s largest thoroughfares are now being snatched up and converted to other uses, pushing the industrial supply farther into secondary and tertiary markets.

3. Everything is going up, up, up.

Mixed-use is no stranger to downtown areas. The savviest developers, however, are taking these projects far beyond high-rise residential atop ground-floor retail. The major anchor tenants are converting their store footprints to now accommodate three levels in some cases. It is also not uncommon to see a tower split between residential units, a hotel and office suites.

Maximizing the use of every square inch is vital when the rents are this high and the space is that hard to come by. Packing more uses into one building also helps control the flow of traffic, with public transportation planners able to determine the most populated areas and, therefore, the most strategic places for a new line or a new station.

As you can see, developers are utilizing their creativity to continue construction in some of the nation’s busiest downtowns. Brokers should take a page out of their books and follow suit, looking for opportunities where others remain uninspired. Try asking “Why couldn’t this work here?” instead of “Why would you want to reuse this space?” Or make an effort to scope out the next hottest neighborhoods based on travel patterns and the natural migration of jobs and residents.

Downtowns can be hubs of creativity for so many reasons. Put your own keen eye to good use, and play matchmaker where you can in these urban playing fields.

Download: 52 Commercial Real Estate Data Services

The Apto Team

Written by The Apto Team

Apto, the commercial real estate software company, is the #1 CRM and deal management platform for commercial real estate brokers, with more paid users than any other service. Apto was built by and for brokers to help them manage contacts, properties, listings and deals from anywhere, on any device. Apto customers include thousands of independent brokers around the world, as well as multinational brokerages CBRE, JLL, NKF, Cushman & Wakefield and others. Headquartered in Denver, Apto is one of the fastest-growing private companies in the U.S., as ranked by Inc. magazine three years in a row.

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