People who are moving back to city centers are fueling a sweeping urbanization trend that can be seen coast-to-coast from New York and L.A. to smaller metros such as Cleveland and Charlotte. And developers who are looking to ride the coattails of emerging, trendy urban neighborhoods are finding plenty of opportunities.
Downtowns that once saw people pack up and move to the suburbs are now seeing reverse migration as more residents return to city living. That shift is due in large part to the hard work – and capital – that cities have put in to reinvent themselves and entice people back to the city core to live, work and play. Oftentimes, even a single project can start the ball rolling in transforming a neighborhood and sending property values soaring.
Super Bowl 52 recently shined a bright spotlight on one example in Minneapolis. The new NFL stadium that opened in fall 2016 has since sparked more than $1 billion in redevelopment in the blocks surrounding the new stadium. What once was an area that consisted of aging, underutilized commercial properties and surface parking lots has been transformed into a vibrant “East Town” neighborhood with new housing, hotels, retail and office space.
Atlanta is another city that is in the midst of transformative change thanks to its new Atlanta BeltLine project. The city is about mid-way through its master plan of converting a former rail line into a new transit corridor and urban greenway that is expected to include 33-miles of multi-use walking and biking trails, 22-miles of pedestrian-friendly rail transit and 1,300 acres of park space when it is completed in 2030.
The project has already sparked more than $3 billion in redevelopment – and sent property values soaring. According to a recent Curbed article, a research report that surveyed property values within a half-mile of the BeltLine between 2011 and 2015 showed that some areas saw property values jump between 18 and 27 percent higher compared to other areas of the city. Although that spike in values has raised criticism about the gentrification and loss of affordable housing options, it also highlights the potential opportunity for developers to create both market rate and workforce housing along with other commercial projects to support that residential base.
Developers and investors are finding ways to piggyback on these major developments and the broader transformative change that comes with them. The key is to target projects that are underway or proposed that have the potential to be “game changers” in a market, and then identify nearby properties that represent a viable redevelopment, renovation or conversion project.
Finding Off-Market Opportunities
Finding untapped opportunities in these emerging markets often requires digging below the surface. For example, Downtown L.A. has seen more than $27 billion in new investment over the past two decades with projects that have been widespread in neighborhoods such as Broadway, South Park and the Financial District. Redevelopment is continuing to expand out into other areas of the city.
Case in point is the Arts District. The neighborhood has seen a surge in residential redevelopment and conversions of old industrial buildings into trendy apartments and lofts. Currently, there are two residential projects under construction and another 15 proposed. Savvy developers are looking at viable sites that can support more residential, as well as additional commercial projects to serve that growing residential base.
The Reonomy database shows dozens of underutilized properties in the neighborhood. For example, there are two residential projects proposed along Alameda Street between East Third and Fourth Streets. The Alameda & 4th Lofts is expected to deliver 63 units, while plans for the neighboring 330 S. Alameda call for 186 units. Directly to the south, there are a half-dozen small industrial buildings sitting on small lots. Potentially, a developer could step in and buy out the existing small owners and assemble a larger development site.
Urbanization is widespread and shows no signs of slowing. Cities are continuing to evolve, improve existing infrastructure – and in some cases – completely reinvent themselves. Private developers that do their homework will be better able to capitalize on those new urban opportunities as they continue to emerge.
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