With smaller homes, urban lifestyles, and sustainable communities among the forces that will shape the future of real estate development, what redevelopment opportunities exist now worth pursuing?
Many urban neighborhoods across the United States are experiencing dramatic transformation, including the metro Washington, D.C., area, this issue’s market focus. Parking lots, underused commercial properties, and former industrial sites are being replaced by condos, apartments, and townhouses, many in mixed-use developments. In fact, in eight U.S. regions, redevelopment in urban neighborhoods accounts for between one fourth and one half of all new construction this year, according to the U.S. Environmental Protection Agency.
With echo boomers eventually outnumbering their parent’s generation, this new housing market will not necessarily view real estate as a safe investment, which could mean higher demand for rental housing. For those echo boomers who will prefer to send their children to public schools in the suburbs, suburban town centers with amenities similar to those in cities could become an increasingly attractive option. And certain mixed-use development trends are starting to become prevalent, including a small-town feel, a focus on walk-ability, and smarter planning for transportation.
In this issue, Urban Land asked ULI product council members what redevelopment potential exists, given the current economy. The consensus is that the best locations offer a high quality of life and access to mass transit, such as transit-oriented and infill development opportunities. Funding for large mixed-use projects near future transit stations is, in many cases, already in place.
Prime candidates for reuse include neighborhood shopping centers and old hospitals and hotels.
Tax increment financing, new-markets tax credits, federal matching dollars, and philanthropic support are the financing mechanisms being used, in addition to some U.S. Department of Housing and Urban Development (HUD) financing for rental housing.
Where demand exists for rental housing, smaller projects with a retail, medical, or municipal component are getting built, while more and more stalled projects that have run out of cash are being redone at lower price points. The lack of ready sources of capital is forcing developers to partner with city and state governments in creative ways to get projects built.
In New Orleans, which has regained about 75 percent of its pre-Katrina population, the public housing authority has started redeveloping mixed-income HOPE VI projects in some of its larger communities. ULI’s advisory services panel report, prepared in the aftermath of the hurricane, emphasized strengthening the city’s capability for planning and development, with an equitable and transparent process for financing and rebuilding in those neighborhoods where reconstruction could start immediately.
And even in these difficult economic times, ULI still finds a number of projects worthy of its Awards for Excellence in the Europe, Middle East, and Africa region, and Asia Pacific. The awards program—the centerpiece of ULI’s efforts to identify and promote best practices in all types of real estate development— recognizes well-designed and well-built projects that are innovative examples of land use that significantly enrich their environments. The difference responsible land use development can make in terms of longevity and overall community sustainability differentiates these winners from opportunistic, short-term, and incoherent approaches to development.