Food Adds Flavor (and Value) to Real Estate: “Agrihoods” and Other Food-based Concepts

Homebuyers and developers have developed an appetite for more food-based amenities, said panelists speaking at the recent ULI Food & Real Estate Forum in Tarrytown, New York. “One of the hottest trends in new home development is incorporating agriculture . . . communities that include working farms are popping up all over the country,” says Sarene Marshall, executive director of the ULI Center for Sustainability.

Edible landscaping, farm-to-table restaurants, and the fruits and vegetables from a 25-acre (10 ha), on-site organic farm, all draw homebuyers to Serenbe, a 1,000-acre (405 ha) community 30 miles (48 km) outside of Atlanta in Chattahoochee Hills, Georgia. New houses at Serenbe can sell for quite a premium over comparable new homes nearby.

Food amenities, like those found at Serenbe, add value to real estate projects, panelists said, but on-site farming is not the only option. “Food halls,” markets, incubators, and restaurants also add to the desirability of residential developments and lead to higher office rents. Many of these concepts can also help improve community health by making more good food options available to people who live nearby.

“Food continues to be a driver,” says Ken Hubbard, senior managing director for Hines and forum chair. These amenities can also help residents, workers, and shoppers forge a new relationship with food—especially if the food is grown on site—helping change the way Americans eat and how that food is grown. That can translate into better health and environmental sustainability—in addition to adding to the project’s bottom-line success.

From Golf Courses to Farms

Builders have known for years that real estate that includes open space earns higher prices. In the 1990s, 40 percent of all new golf courses were tied to residential development, according to Marshall. The golf courses added to the value of the homes, but they cost millions of dollars to build and maintain.

Agricultural neighborhoods, or “agrihoods,” may provide a better amenity. There are a number of successful agrihoods across the United States, including Rancho Mission Viejo, in Orange County, Calif. “It provides that place-making,” says Amaya Genaro, director of community services for the 23,000-acre ranch and farm, habitat reserve, and community.

“Forget about the golf courses,” says Theresa Frankiewicz, vice president of community development for Crown Community Development. “Our buyers want to have a real environment.” She recently completed the master-planning and entitlement process for a 6,800-acre (2,752 ha) agrihood near Tucson, Arizona.

Investments in farmland and community gardens do not have to significantly increase development costs compared to other kinds of green space. “It will probably not cost more than traditional landscaping,” says Lara Hermanson, principal with Farmscape, which has created hundreds of rooftop gardens and other agricultural spaces in California. On average, the company’s raised beds typically cost $30 per square foot ($323 per sq m) to create, roughly comparable to the cost of traditional landscaping. Meanwhile, residents typically pay an extra $7 per month, per unit in rent to live at apartment communities that include Farmscape’s gardens.

Barriers to Integrating Food and Agriculture
Many new food concepts need to overcome regulatory barriers. Localities may still have rules that can keep out mixed-use developments’ farmers markets and even cooking demonstrations. “We are still fighting these battles,” says Bill McKinney, director of food research and evaluation for the Food Trust, which helps increase access to affordable, nutritious food and information to make healthy eating decisions.

However, public officials are increasingly eager to avoid becoming just a bedroom community for the big city an hour’s drive away. “Preserving farmland can be the only way that you get a [surburban development] project approved,” Daron “Farmer D” Joffe, chief farming officer for the Leichtag Foundation and Coastal Roots Farm says.

Agrihoods also benefit from being close to other protected farmland and the infrastructure of other businesses that support those farms. “There is a big difference between protecting a farm and protecting farming, which relies on a larger economy that includes the tractor dealer and seed supplier,” Marshall says.

Food Is More Than Farming

In cities, developers also make their properties more valuable by including space for food. “The big buzz today is the food hall,” says Robert Futterman, Founder, Chairman and Chief Executive Officer, Robert K. Futterman and Associates.

Gotham West Market, a food hall modeled after indoor markets common a century ago, has already helped make the Gotham West apartment tower a success. “The food hall helped us lease the apartments,” Chris Jaskiewicz, Chief Operating Officer for the Gotham Organization, Inc. Gotham West opened in 2013 and was fully-occupied well ahead of schedule in its new neighborhood on the Far West Side. “I’ve heard the building might be half-leased if not for the food hall.”

The food hall is home to ten unique, high-end food vendors ranging from an Ivan Ramen Slurp Shop to an Ample Hills Creamery ice cream shop. “We try to provide an immersive experience,” says Jaskiewicz. “We want people to interact with our chefs. You see the chefs when you walk in.”

Food halls like these can also help to improve the access of low-income communities to fresh, local food and economic opportunities by accepting Supplemental Nutrition Assistance Program (SNAP) benefits and providing “food incubator” spaces, which house shared kitchens and training programs for food businesses that are just starting off.

Like the agrihoods and working farms, these innovative food vendors tend to pay relatively little in rent. “We could have made a lot more money had we given the space to a bank,” says Jaskiewicz, but “It creates value in other aspects of the building,” says Peter Peterson, vice president for Related Urban. The Related Companies is reserving 32,000 square feet of space for 35 indoor and outdoor vendors at its massive, 20-million-square-foot, Hudson Yards development on the Far West Side of Manhattan.

“We are taking a huge risk,” says Peterson. “We are building all the infrastructure.” The vendor spaces can require a tremendous amount of hardware, ranging from elaborate utility connections to underground storage.

“You pay for everything – these food halls can cost $500 to $700 per square foot to build out,” says Futterman.

Related also continues benefit by making space for top restaurants at its high-rise properties. “Bringing in the right restaurant means the office team can lease their space,” says Peterson.

However, not every property owner appreciates the long-term value that even a famous restaurant can provide. The Union Square Café, also in New York City, recently lost its space in Union Square, a neighborhood that the landmark restaurant arguably help to revive since it opened in 1986. Fortunately, a building owner a few blocks away offered the Union Square Café space to reopen. “They could have called any number of banks, and number of drugstores to pay three or four times more,” says Richard Coraine, chief development officer, for the Union Square Hospitality Group.

Creating a New Food Culture

Attendees at the forum got to visit a working farm, the Stone Barns Center for Food and Agriculture, in Pocantico Hills, New York. The farm is also home to a world-famous restaurant, Blue Hill at Stone Barns, a farm-to-table restaurant serving food grown on the 80-acre (32 ha) farm or on other organic farms nearby.

The bread served with dinner came with a lesson in organic farming. To grow the bread’s emmer wheat without chemical fertilizers, organic farmers plant other crops—ranging from barley to broccoli to spelt—that nourish the soil. “It’s soil health that gets us the big crops like corn or wheat,” says Dan Barber, the founder and executive chef of Blue Hill. “The flavor of the jaw-droppingly delicious bread actually came from all the other crops.”

The market value of these other crops, however, ranges from variable to negligible. Barber supports the agriculture that has made his farm-to-table restaurant famous by crafting recipes that rely on these other crops—like a “rotation risotto” made with rye, barley, buckwheat, and millet, along with cowpea shoots and mustard greens, all suited to the local climate and to creating the necessary soil conditions to grow a crop of emmer wheat.

“The best restaurants . . . the top 25 restaurants in the world . . . are reinterpreting their local cuisine,” Barber says.

Real estate that brings people in closer touch with the food that they eat—like agrihoods, farmers markets, food halls, or farm-to-table restaurants like Blue Hill—can potentially create connections that support a more sustainable and inclusive food-based economy.