"It's going to take 20 to 30 years to catch up with pent-up demand."
If real estate developers don't want to miss out on the next big thing, they should focus on “walkable urban places,” or “WalkUPs,” according to a new report from LOCUS, a coalition of real estate investors that's part of Smart Growth America. LOCUS found that rents for commercial spaces in walkable districts inside otherwise car-dependent suburbs command a 74 percent premium over non-walkable areas. The researchers argue that this is symptomatic of an ongoing societal shift.
“The last time we saw a structural change like this was back in the ’40s and ’50s,” said Christopher Leinberger, one of the authors of the report. “It’s going to take 20 to 30 years to catch up with pent-up demand.”
The study, conducted in conjunction with George Washington University’s Center for Real Estate & Urban Analysis, ranks the top 30 U.S. metro areas for their “current levels of walkable urbanism” as well as projecting their future rankings. It found 558 “WalkUPS” in those areas, defining them as regionally significant places that are major employment centers. They are economically outsize in their significance: In the top 30 metros, WalkUPS take up just 1 percent of the available acreage, but account for as much as 50 percent of the office, hotel, apartment, and retail square footage.
The top six metros, ranked as having “high walkable urbanism,” were:
- Washington, D.C.
- New York
- San Francisco
Washington’s somewhat surprising ranking ahead of New York was the result of its having walkable retail and office districts balanced between the central city and the suburbs, with more than half of its WalkUPs in the suburbs. For cities such as Chicago, Leinberger says that “urbanizing its suburbs” would be a winning strategy. The report advocates that same approach for New York, noting that it failed to make number one on the list because its walkable development is so heavily concentrated in the central city.
At the bottom of the rankings, from most walkable to least, were Dallas, Las Vegas, San Antonio, Tampa, Phoenix, and Orlando.
The researchers projected that when it comes to the potential for future walkable development, Miami, Atlanta, Detroit, and Denver are in the top nine, and they see Los Angeles as making some serious moves forward as well, thanks in part to its heavy ongoing investment in mass transit.
In a conference call, Leinberger and others noted that walkable urban developments are not as easy to execute as the “formula product” that characterizes drivable suburban development, in part because of NIMBYism but also because of more complex permitting and review processes in urban locations.
They also acknowledged that the same high prices that make walkable urban developments more attractive to developers mean that affordable housing is an increasingly urgent concern in thriving areas. One solution, said Leinberger, is to change regulations to allow rental of auxiliary housing units where that is not currently permitted.
His other advice? “We need to build more stuff.”