Report: Real estate markets favor smart growth locations

A forthcoming report from LOCUS President and real estate professor Chris Leinberger offers evidence for what many have known intuitively for the past several years: Smart growth areas in more walkable, transit-oriented neighborhoods are the main drivers of real estate market growth right now.

Specifically in the Washington D.C. area — which is at the forefront of this national trend, according to Leinberger’s research — 42 percent of new apartment development since 2009 has taken place in these walkable neighborhoods, up dramatically from 19 percent between 2000 and 2008, and 12 percent during the 1990s. Likewise, rents in more walkable neighborhoods are already surpassing or meeting their more sprawling counterparts.

“That’s the market telling you, dramatically, build more of this stuff,” Leinberger told the Wall Street Journal. “There’s pent-up demand for walkable urban.”

In the report, Leinberger examines 43 distinct neighborhoods he identifies as “regionally significant walkable urban places.” These are neighborhoods that contribute greatly to the Washington area as job-creating centers; most of the economic growth in and around the District is tremendously concentrated in these places.

43 distinct walkable neighborhoods drive Washington D.C. area job creation and economic development. Those places are in greater demand than their counterparts in less walkable areas, and this market shift is clear based on rising property values and rents.

Building on previous research that suggested the shifting market demand toward smart growth locations, Leinberger also suggests in The Atlantic Cities that even these new numbers are conservative. The desire to live in neighborhoods near jobs, shops and schools is only going to increase, so it is imperative for policy-makers and real estate developers to make changes in how they do business that reflect this shift:

Leinberger is basing his analysis not on projections of where consumer demand may go next, but on these trends that have been gaining steam for some time. You can also detect this shift, he adds, in the price premium the market now demands for a walkable home or office over a comparable outlying one (“and we’re not comparing a dump to a mansion,” he adds).

It helps his argument that he’s talking in market trends and not moral imperatives. Much of the conversation around “walkable urbanism” sounds almost paternalistic to suburban ears, as if everyone should and must decamp to high-rise condos above a Whole Foods. In fact, although Leinberger has labeled these communities “walkable urban places,” more than half of them in the Washington region are actually located outside of the District (including, for example, this one). “This is about the urbanization of the suburbs,” he says.

He isn’t advocating that suburbanites move downtown. If he’s imploring anyone to action, it’s the builders and real estate developers who don’t seem to have picked up on shifting market demand yet, and the policymakers who have the power to clear obstacles to this kind of development (for starters, by promoting multi-modal transportation and mixed land use).

“There’s no value judgment here,” Leinberger says. “For people who want the big back yard, this is also good news, because it’s cheap. And the reason it’s cheap is because we as an industry built too much of it.”

Academics, major developers and elected officials will gather at George Washington University next week with Leinberger to officially release the report and to discuss its findings in more detail. The event will take place September 11 at the Jack Morton Auditorium.

For more information about Leinberger’s latest research, contact Tom Madrecki, Smart Growth America’s press manager, at [email protected], or George Washington University’s Dustin Carnevale at [email protected].