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| Opportunities & Exposures: Real Estate |
Urban Renewal
Richard M. Rosan
11/01/2004
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Fed up with long commutes and traffic gridlock, an affluent group of urban
pioneers is opting for the convenience of being close—perhaps even within
walking distance—to work and entertainment. After years of neglect, urban
centers are becoming increasingly popular as great places to live, work,
play—and invest.
Downtown immigration actually accounts for only a small
percentage of overall urban population growth. According to the U.S. Census
Bureau, 60 percent of growth occurring between 1990 and 2000 took place in
outlying areas; only 11 percent occurred in urban cores. However, approximately
two-thirds of all downtown census tracts gained population during that time,
including the downtowns of cities such as St. Louis, Baltimore and Pittsburgh
that lost population overall.
Clearly, this movement back in, which began as
a trickle of people undeterred by edgy locations, has evolved over the past
decade into a new wave of residents reaping the benefits of redevelopment.
Consider downtown Los Angeles. Its newly christened Walt Disney Concert Hall is
within blocks of new entertainment, convention and sports venues, as well as
other cultural and arts facilities. With more than 3,000 housing units added in
the past year, the center of Los Angeles is becoming not only a place to visit,
but a preferred place to live.
The urban revitalization trend finds its roots
in changes in consumer values, demographics and household formations. Our
economy is increasingly driven by creative knowledge workers who are well
educated, financially comfortable and highly mobile. These young, childless
professionals, along with empty nesters and immigrant households, make up the
market segment most likely to live downtown. Their demographic is growing: By
some industry estimates, up to 75 percent of U.S. households will have no
children living at home by 2020.
Such a demographic shift is radically
changing the faces of our cities. While city cores once relied heavily on
manufacturing and industries as their economic engines, they now rely on these
new residents for both economic and social stability. To meet the demand for
housing by the incoming households, developers are converting buildings that
once held machine shops and offices into lofts, apartments, live-work units and
condominiums.
This is creating lucrative investment and development
opportunities. The 2004 Emerging Trends in Real Estate report, jointly published
by the Urban Land Institute and PricewaterhouseCoopers, ranked infill projects,
typically residential or mixed-use, as among the most promising.
In fact,
for-sale housing in downtown and infill locations, including condominium
conversions, loft rehabs, townhouses and adaptive reuse projects, were listed by
Trends interviewees as the most favored development opportunity, followed by
affordable rentals in urban areas and urban brownfield restoration
projects.
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