Richard K. Greene, Senior Associate, Investment Consulting Associates (Apr/May 09)
Transit-oriented development projects abound throughout the United States - from small towns like Port Angeles, Washington; and Petersburg, Virginia; to major urban centers like Charlotte, North Carolina; and the Bay Area of California. All seek to ease and speed the flow of people along defined corridors. Why do so many projects proliferate and what benefit do they provide to their communities? Is this just a real estate play, or does it bring lasting value to the community?
Transit-Oriented Development in the United States: Experiences, Challenges, and Prospects, a study published by Transit Cooperative Research Project (TCRP), defines transit-oriented development (TOD) as "compact, mixed-use development near transit facilities and high-quality walking environments." These are high-density commercial and residential real estate developments above or surrounding centers of mass transit, including bus and rail.
The benefits of TOD, according to the TCRP study, are wide-ranging for all participants: "The most direct benefit of TOD and joint development is increased ridership and the associated revenue gains. Other primary benefits include the vitalization of neighborhoods, financial gains for joint development opportunities, increases in the supply of affordable housing, and profits to those who own land and businesses near transit stops. Secondary benefits include congestion relief, land conservation, reduced outlays for roads, and improved safety for pedestrians and cyclists."
Goals of TOD
Among the immediate goals for TOD are increasing public transit ridership and providing residents and transit users with a hub of commercial conveniences provided by small- and medium-sized businesses. Interestingly, TOD centers are not traditional economic clusters, which leverage off each other. Transit-oriented developments are origin and destination centers, centered around transit-focused catchment, and capitalize on enhanced local and regional accessibility. Diversity in services is important in programming commercial and retail in TOD.
Federal and state governments have been supportive of TOD because it limits land-use sprawl, reduces carbon dioxide emissions, and reduces traffic congestion. For cities and towns that have embarked upon TOD, it has been a tool to regenerate areas that have proved resistant to renewal by the private sector, including older and/or more industrial areas. It also provides an upgrade of transit facilities and services surrounding transit nodes and can increase the tax base through a higher use of property.
Communities have also found TOD investment to be useful in attracting direct investment and in growing locally-owned businesses, providing jobs and increasing employment and sales tax revenues.
There are specific demographic drivers that underlie the movement to TOD. The overall U.S. population is experiencing higher growth rates, with immigration adding upwards of 35 percent of the natural increase, according to the U.S. Census Bureau. The population is aging, the age at which couples get married is rising, and household size is declining - all factors that are increasing the pool of empty nesters and young urbanites who are more likely to live in urban areas.
With a further shift to a service economy and more knowledge jobs being created, along with higher gas prices and a focus on renewable energy and the environment, higher-density planning and development is attractive on many fronts. With the world economy in recession, efficiency is increasingly important.
Academic research supports the concept that TOD delivers a quality work force. Studies have shown that efficient transportation systems breed higher work force productivity (Productivity and Metropolitan Density, Ciccone and Hall, 1996) and employment density increases average productivity (Trends and Issues in Continuing Professional Education, Cervero, 2000). In addition, innovative businesses and creative activities are most likely to be urban-centered and located in cities. And industries that hire college-educated workers are often more centralized, located in a city's inner ring, according to a study by The Brookings Institute.
Transportation has always been a key site selection factor. Traditionally, company projects locating in or surrounding urban centers have had superior access to a work force - for which they have often paid a premium for both labor and property - over communities of less density. For international companies, airport access for managerial and executive movement has always been crucial.
Access to and availability of work force have been increasingly important location criteria since the mid-1990s, given low unemployment. Even with the recent recession, as U.S. unemployment has soared to over 8 percent, access to a quality, educated work force still remains critical. The fluid access that TOD provides to its regional work force can give a company flexibility in hiring and can feed its long-term growth and productivity.
Case Study: Charlotte, N.C.
Charlotte, North Carolina, is a good example of the benefit of a long-range plan centered around TOD. The city's light rail, LYNX, has been 14 years in the making, with its impetus the South End redevelopment and the refurbishing of a historic street car. Mayor Patrick McCrory, who championed the light-rail installation, part of the Charlotte Area Transit System (CATS), credits TOD for the area's successful regeneration of an older block corridor dating its industrial activity back to the 1920s and `30s. Support for the plan was hard-fought and included passing a sales tax increase for funding.
Significant planning went into maximizing usage by providing an integrated system of rail and bus systems linking to road infrastructure and park and rides, as well as with sidewalks and biking lanes. Key to success was emphasizing cleanliness and safety - "number one is safety," says McCrory. The economics must be supportable and "the numbers must work." The result was an increase in ridership exceeding expectations.
Terry Shook of Shook Kelley, an
architecture and urban planning firm involved early in the project,
believes that TOD provides a hidden opportunity for communities by
providing a future vision and creation of a brand - for example, the
Historic South End is casual and consumer-based, a differentiation from
Uptown, Charlotte's downtown city center. He notes that property prices
have soared from between $4 and $6 per square foot in 1994 to around
$60 per square foot today.
Even in the current economic
recession, expansion will continue as the city extends the rail line
connecting several city colleges and universities. Also in development
is a 29-acre former industrial site being assembled by Cherokee. Its
Southline development is planning a combination of commercial,
residential, and retail uses, adjacent to a new light-rail station.
Cherokee says rail service to the area began in 2007 and ridership is
As for contributing to attracting business,
McCrory says that his city's progressive transit focus "has shown
business that we are preparing for the future, which will help their
future productivity. It sells itself and has been a contributing factor
for all business recruiting." General Dynamics is one success he touts.
The area's local banks (Bank of America and Wachovia, now Wells
Fargo) have expanded branches onto the line. Lance, Inc., the cracker
producer headquartered on the Southline in Charlotte, has been
retained. Economic development benefits also extend to travel and
tourism. With the rail and buses convenient to Charlotte's Convention
Center, the CATS system provides easy access to sports - including
football and basketball - and entertainment such as opera and touring
Broadway shows, helping in the recruitment of conventions and
One of the opportunities provided by TOD is the opportunity for companies to work together in joint development with local governments to plan and implement projects. A natural fit is between local developers and city/county governments, both cooperating on and contributing to various aspects of a project. Common joint development arrangements are ground leases and operation-cost sharing.
Public-private joint ventures can include joint intermodal transfer and commercial-retail space at a transit center. For example, the government partner can contribute its expertise in transportation, zoning, approvals, and public funding; the corporate partner can contribute development and real estate expertise and provide private capital.
There is also an opportunity for expanding corporations and businesses to work with developers to plan new corporate offices, secure access to the work force and provide amenities to employees. With credit hard to come by, private funding coupled with government funding can work together to bridge gaps.
New Spin on Old Idea
Transit-oriented development is not a new idea. It has been around for ages. Older European cities have historically centered themselves around transit hubs. The TOD concepts are being used throughout the world, including in emerging markets. One of the most ambitious redevelopments currently on the map is in India's financial capital, Mumbai. The Dharavi slum is Asia's largest slum, covering 535 acres, and is prime real estate, lying at the junction of two busy commuter lines not far from the city's international airport.
The plan calls for relocation of the area's residents into new housing with healthcare, schools, and business locations for the local entrepreneurs, while the slum site is razed and redeveloped into upscale housing and commercial real estate befitting the city's world status. The tendering process has begun and the developers plan to break ground in the next few months on the multibillion-dollar redevelopment.
Closer to home in the United States, TOD provides opportunity for citizens, government, and companies. With changing demographics, citizens will be drawn to the efficiencies of living near TOD. Governments and cities will be able to upgrade services, regenerate key transportation linkages, and demonstrate a progressive stance on urban renewal and accessibility to assist in recruiting new business.
Companies seeking to relocate and/or grow may find, as unemployment decreases once again, an important competitive advantage in locating close to a TOD with accessibility to services and work force. With the continued support of the federal government in legislation like the American Recovery and Reinvestment Act of 2009, with its strong focus on infrastructure, TOD improvements are likely to assist communities as they emerge from the current recession and prepare for the future.
For additional information about transit-oriented development, visit the Federal Transit Administration's TOD website: www.fta.dot.gov/planning/planning_environment_6932.html.
Richard K. Greene is a senior consultant for The Williams Group Real Estate Advisors on many TOD projects; visit the company's website at www.twgroup.net. He is also a principal of Creative Cities International, using arts and culture as a lever for economic development; visit the organization's website at www.creativecities.org.