Oslo, a small, nine-unit, infill apartment building that features a distinctive modern facade in the Shaw neighborhood of Washington, D.C., is designed to appeal to young people who want to share an apartment. This project embodies much of the small-scale principles described in the article. (Michael Wilkinson, 2015/ULI Case Studies)
As the real estate industry continues to evolve in terms of project finance, design, and execution, one idea gaining quiet speed is small development. Projects that are seen as being at the vanguard of “small” bring together today’s best thinking of real estate professionals in how to shape the built environment.
Defying a universal or clear-cut definition, small development has the following among its characteristics:
- Small development is incremental. It is perhaps even surgical at times—helping infill the broken teeth of existing urban blocks or properties that have disappeared or become obsolete.
- Small development is often highly designed and “curated.” Infill development of a distinctive site within the fabric of an existing neighborhood is almost always a unique endeavor and cannot be formulaic. A project that works anywhere will not work in such a location. It has to be carefully thought out—optimizing a Rubik’s cube of density, parking, life-safety requirements, and appropriate contextual design, among many other elements.
- Small development often manifests the best thinking in sustainability and mixed use. This is because the intellectual capital that gets poured into solving the Rubik’s cube begets more focused thinking about what the project should do for its environment and community.
- “Small” can heal and transform. Incrementally adding to neighborhoods adds new energy and activity, helping reveal or “polish” the intrinsic value of the existing fabric. “Small” is often the seed that leads to transformation of and reinvestment in neighborhoods at the edge.
ULI has quietly but steadily advanced the research and discussion regarding this subject for more than five years, starting with the first Small-Scale Developers Forum in San Francisco in 2012. This program spawned ULI’s Real Estate Entrepreneur Program, offering program topics of specific interest to professionals in the “small” sphere. This effort has been further augmented by the longstanding Small-Scale Development Council and, more recently, case studies that profile excellent examples of projects that deliver many of the cited attributes of such projects.
Related: ULI Case Studies: Oslo, Washington, D.C.
ULI is not the only organization focused on this subject. As the concept gains momentum across the globe, a growing number and variety of organizations are helping expand the knowledge base, train aspiring professionals, and add to the portfolio of successful small development.
In September 2015, leaders from nine organizations focused on “growing small” as a development approach convened in Louisville, Kentucky, to discuss the potential of this movement to help each group achieve its mission of an improved built environment. Convened and organized by ULI member Andrew Frey, the day was supported through the efforts of Jim Kumon at Strong Towns, as well as the National Trust for Historic Preservation’s Preservation Green Lab program, whose seminal research in April 2014 began to quantify the economic benefits for communities of small, fine-grained development.
Participating in the day’s discussion and debate about how to advance the concept of small development were leaders from the Congress for New Urbanism (CNU), National Town Builders Association, Incremental Developers Alliance, National Main Street Program, Project for Lean Urbanism, and LOCUS, as well as ULI, Strong Towns, and Green Lab.
The unprecedented gathering had an informal agenda constructed to help the groups share their efforts, discuss impediments they continue to see, and define the values and messages that can be expressed with one voice in taking this sector of the real estate industry to a much broader scale.
“What will it take to have 10,000 people operating in this space in ten years?” asked Lynn Richards, president of CNU. Many ideas were offered to help achieve that goal, but those attending agreed quickly that two primary barriers—though not unique to small development—present a particular challenge:
- A regulatory environment that is neither agile enough nor scaled for small development. This adds significant time and cost to projects, often making small, craft-like development an almost philanthropic effort. Added costs show up in the need to address “one-size-fits-all” standards and permits fees; in addition, specialty consultants and design increase expenses without adding value, as do construction requirements meant for much bigger efforts.
- Lack of “right-sized” capital. During ULI’s Small-Scale Developers Forum in May 2014 in Austin, Brett Wilkerson, managing director of Hawkeye Partners LP, noted that most institutions are more inclined to invest $50 million in one deal rather than $1 million in 50 deals because of the management and underwriting time each smaller project requires. This means that organization of the capital stack for small deals is often more laborious and time-consuming, involving a “cocktail” of friends and family, program-related investment, grants, and high-net-worth capital—adding further time and management requirements to an already burdened project effort.
Undaunted by these two realities, the group shared an impressive list of individual efforts, programs, publications, and related research underway to continue to advance the agenda of small-scale development.
At the core of these efforts is a desire to make small, infill, and entrepreneurial development more visible and an active part of community building. Christopher Coes, director of LOCUS, a network of real estate developers and investors, noted that small-scale development can be a tangible way to express the abstract concepts of social justice and shared assets across a community, because many people can participate in and play different roles in shaping that communities.
The day’s conversation highlighted that there is no single solution to the problem of how to “grow small,” and each group is approaching the subject from a different vantage point according to its own member interests and motivations. That fact is perhaps where the power of the one-day summit became evident: by aligning messages and sharing resources, but without adopting a single “toolbox,” those gathered can reach a much broader constituency and achieve scale much faster.
The day concluded without fanfare or a manifesto—in some ways mirroring the incremental and workmanlike code of small development. The ethos embodied in small developers is classic entrepreneurialism: keeping one’s head down and moving through barrier after barrier one step at a time, but always maintaining a clear vision and a dream of doing something better than the norm.
Working together, deliberately and in partnership with one another, those attending the summit made it seem that they might just get to those 10,000 small developers sooner than deemed possible six months earlier.
