Walkers in the City

photo by Derrick Coetzee

The Center for Real Estate and Urban Analysis at The George Washington School of Business has released Foot Traffic Ahead: Ranking Walkable Urbanism in America’s Largest Metros for 2016. The Executive Summary opens,

The end of sprawl is in sight. The nation’s largest metropolitan areas are focusing on building walkable urban development.

For perhaps the first time in 60 years, walkable urban places (WalkUPs) in all 30 of the largest metros are gaining market share over their drivable sub-urban competition—and showing substantially higher rental premiums.

This research shows that metros with the highest levels of walkable urbanism are also the most educated and wealthy (as measured by GDP per capita)— and, surprisingly, the most socially equitable. (4)

This strikes me as a somewhat over-optimistic take on sprawl, but I certainly welcome the increase in walkable urban places over a broad swath of metropolitan areas. The report’s specific findings are that

There are 619 regionally significant, walkable urban places—referred to as WalkUPs—in the 30 largest U.S. metropolitan areas. These 30 metros represent 46 percent of the national population (145 million of the 314 million national population) and 54 percent of the national GDP.

The 30 metros are ranked on the current percentage of occupied walkable urban office, retail, and multi-family rental square feet in their WalkUPs, compared to the balance of occupied square footage in the metro area. The six metros with the most walkable urban space in WalkUPs are, in rank order, New York City, Washington, DC, Boston, Chicago, San Francisco, and Seattle.

Economic Performance: There are substantial and growing rental rate premiums for walkable urban office (90 percent), retail (71 percent), and rental multi-family (66 percent) over drivable sub-urban products. Combined, these three product types have a 74 percent rental premium over drivable sub-urban.

Walkable urban market share growth in office and multi-family rental has increased in all 30 of the largest metros between 2010-2015, while drivable sub-urban locations have lost market share. The market share growth for 27 of the 30 metros is two times their market share in 2010. This is of the same or greater magnitude as the market share gains of drivable sub-urban development during its boom years in the 1980s, but in the reverse direction.

Indicators of potential future WalkUP performance show that many of the metros ranked highest for current walkable urbanism are also found at the top of our Development Momentum Ranking—namely, the metros of New York City, Boston, Seattle, and Washington, DC. This indicates that these metros will continue to build on their already high WalkUP market shares and rent premiums.

There are also some surprising metros in this top tier of Development Momentum rankings, including Detroit, Phoenix, and Los Angeles.

The most walkable urban metro areas have a substantially greater educated workforce, as measured by college graduates over 25 years of age, and substantially higher GDP per capita. These relationships are correlations, and determining the causal relationships requires further research to prove.

Walkable urban development describes trends resulting from both revitalization of the central city and urbanization of the suburbs. For nearly all metros, the future urbanization of the suburbs holds the greatest opportunity; metro Washington, DC, serves as a model, splitting its WalkUPs relatively evenly between its central city (53 percent) and its suburbs (47 percent).

Social Equity Performance: The national concern about social equity has been exacerbated by the very rent premiums highlighted above, referred to as gentrification. Counter-intuitively, measurement of moderate-income household (80 percent of AMI) spending on housing and transportation, as well as access to employment, shows that the most walkable urban metros are also the most socially equitable. The reason for this is that low cost transportation costs and better access to employment offset the higher costs of housing. This finding underscores for the need for continued, and aggressive, development of attainable housing solutions. (4, footnote omitted)

There is a lot of import here. Is there more than a correlation between walkability and the educational level of the workforce and, if so, why? Why don’t more housing affordability studies take into account transportation costs when evaluating the affordability of a given community? What is the trend line of this new direction toward urbanism and how far can it go in the face of decades of investment in car-based communities? This annual study will help us answer those questions, over time.

Reiss on the $1M Parking Spot

Law360 quoted me in NYC’s $1M Parking Spot Shows Appetite For Luxury (behind a paywall).It opens,

Atlas Capital Group LLC caused a buzz Wednesday with its listing of a parking space in a condominium building in SoHo for $1 million, more per square foot than the homes above it, but experts say in the context of a burgeoning luxury market such a price may just be the beginning.

That price for a 99-year license that allows the condominium resident to use the parking space — even one in its own condominium unit and tax lot — may sound wild, but experts say much of the attention this property has gotten may be a bit overblown, especially considering the level to which many are willing to go for comfort and convenience in New York City.

“It’s not really about $1 million for a parking space,” said Bruce Bronster of Windels Marx Lane & Mittendorf LLP. “If you were just going to condo a parking space, you couldn’t get $1 million for it. It has to do with having an amenity on a very expensive apartment.”

There aren’t many places to park in SoHo, making a convenient parking spot a hot commodity, but experts say the bigger message is that New York City’s luxury residential market is hotter than ever, creating new opportunities for developers to differentiate themselves with the right amenities.

The development is at 42 Crosby Street, near Broome Street, where Atlas Capital Group is turning what used to be a parking lot itself into a condominium building with three-bedroom units ranging from $8.7 million to $10.45 million, according to information gathered by The New York Times.

The eye-popping element comes when one looks at the price per square foot. Some of the parking spots — there are actually 10 being built under the condominiums — are expected to be up to 200 square feet, but they will reportedly all cost between $5,000 and $6,666 per square foot. The condominiums, on the other hand, are only going for about $3,150 per square foot.

But experts say this isn’t too surprising, considering the demand for luxury housing and amenities that has skyrocketed in recent years.

Prices for luxury residential properties have risen to pre-recession levels and surpassed them in some cases, with a few record-breaking penthouse deals passing the $90 million mark thanks to flush foreign investors.

More than anything, experts say, the $1 million parking spots are a way for Atlas Capital Group to distinguish 42 Crosby from other apartment buildings and draw in those investors willing to pay top dollar.

“The million-dollar spots do highlight how developers have seriously monetized amenity spaces,” said David Reiss, a real estate professor at Brooklyn Law School. “In all likelihood, the prices for amenities like parking spaces will follow the same trend line as those for the apartments to which they are attached.”

And it’s not just parking spaces; Reiss said he has seen similar setups with amenities such as storage facilities and rooftop cabanas commanding top dollar.