Valuable Insights for Optimizing City Real Estate Portfolios
The American city has dealt with its fair share of challenges—with the recent pandemic causing the most significant economic and social disruption in decades. Working in partnership with Places Platform, LLC, we are excited to introduce a first-of-its-kind study, "Reimagining Cities: Disrupting the Urban Doom LoopExternal Link", aimed at providing innovative strategies that not only confront these challenges head-on, but also offer a blueprint for reimagining cities and optimizing city real estate portfolios. Ultimately, optimizing the real estate mix to maximize foot traffic, real estate value and economic output ensures cities thrive and provides dividends to all stakeholders: real estate investors, businesses, policy makers and the general public.
OUR APPROACH
Most studies on the urban doom loop have focused on the problem rather than the solution. But our approach involves an analysis of real estate product portfolios across 15 key U.S. cities, with a special focus on regionally significant, walkable urban areas, called WalkUPs.
By combining multiple data sources and using a place-based research approach, we’ve constructed a unique dataset, offering a first-of-its-kind, comprehensive view of all real estate products across 208 WalkUPs in these 15 cities. We source and merge data for: office, retail, multifamily rental, industrial, hotel, sports and entertainment, higher education (mostly a mix of office-equivalent space and dorms), owner-occupied (generally office and industrial), Government Services Administration (GSA), and for-sale housing. In doing so, this study provides insights into city real estate trends through a holistic prism with product types often not considered.
Exploring the historical context and economic implications of urban doom loops, we offer strategic recommendations to enhance existing product portfolios to increase real estate valuation and drive GDP growth, both of which drive public sector revenues and subsidize social services.
By combining multiple data sources and using a place-based research approach, we’ve constructed a unique dataset, offering a first-of-its-kind, comprehensive view of all real estate products across 208 WalkUPs in these 15 cities. We source and merge data for: office, retail, multifamily rental, industrial, hotel, sports and entertainment, higher education (mostly a mix of office-equivalent space and dorms), owner-occupied (generally office and industrial), Government Services Administration (GSA), and for-sale housing. In doing so, this study provides insights into city real estate trends through a holistic prism with product types often not considered.
Exploring the historical context and economic implications of urban doom loops, we offer strategic recommendations to enhance existing product portfolios to increase real estate valuation and drive GDP growth, both of which drive public sector revenues and subsidize social services.
REPORT CONCLUSIONS
CITIES SPOTLIGHT
KEY TAKEAWAYS
| 01/ | WalkUPs (regionally significant, Walkable Urban Places) are the most powerful economic engines of the city, occupying just 3% of the land but contributing 57% of city GDP. |
| 02/ | WalkUPs are extraordinarily productive, generating significantly more GDP per acre than other parts of the city. This productivity underscores the importance of investing in these walkable urban areas to capitalize on their economic potential and contribute to broader city revitalization. |
| 03/ | Investing in WalkUPs provides significant rent and price per square foot premiums due to pent-up demand for walkable and mixed-use places. |
| 04/ | Portfolio theory applies to cities’ real estate, not just individual investors’ portfolios. A diversified real estate portfolio is crucial for both investors and cities alike. Most central city portfolios are currently over-concentrated in office spaces, which has contributed significantly to valuation declines. A balanced real estate product mix—including residential, retail and entertainment—can enhance portfolio performance and resilience. |
| 05/ | The impact of the pandemic on these walkable urban areas is showing signs of reversal with city population growth once again resuming since 2022. This suggests the early 21st century “return to the city” trend will resume, leading to increased vibrancy, recovery and growth in property values and city tax revenues. |
| 06/ | This is not to minimize decline in values that office investors are realizing in today’s market. In the near-term, investors will face challenges, but those also present longer-term opportunities, including spearheading the reimagining of these urban cores. |
| 01/ | WalkUPs (regionally significant, Walkable Urban Places) offer unparalleled location efficiency due to a diverse development mix, encompassing multifamily rentals, for-sale housing, offices, retail, hotels and entertainment all within a convenient walking distance, making them ideal for real estate occupiers seeking proximity and accessibility. |
| 02/ | With high density floor area ratios, WalkUPs make efficient use of space, allowing occupiers to maximize their operations while contributing to the sustainable growth and development of walkable urban places. |
| 03/ | These vibrant walkable urban places are enriched with cultural institutions, nightlife, professional sports and urban universities, providing a dynamic atmosphere that attracts businesses and residents alike, thereby boosting community engagement. The vitality that comes from more Play amenities creates the energetic environment that can drive employees to want to be in the workplace more frequently. |
| 04/ | Urban cores, WalkUPs in particular, continue to be one of the best places for occupiers to locate in order to maximize the number of workers within any given commute zone and to optimize in-office attendance. |
| 05/ | The negative impacts of the pandemic on walkable urban places are reversing, with positive population growth restarting in 2022. This resurgence points to renewed demand and vitality, offering occupiers promising opportunities for growth and expansion. |
| 06/ | Effective place management in WalkUPs can ensure a high quality of life through enhanced cleanliness, safety and well-managed public spaces, such as parks and festivals, which are crucial for attracting and retaining occupants. |
| 01/ | WalkUPs (regionally significant, Walkable Urban Places) are fiscally efficient, subsidizing the rest of the city. Because of WalkUPs’ significant rent and price per square foot premiums, they generate higher per square foot tax revenues and incur lower government service costs per square foot, enhancing their positive impact on city budgets. |
| 02/ | To maximize urban development and economic output, cities must strategically balance their real estate portfolios, integrating Live, Work and Play components. This diversification can optimize property values and enhance overall city GDP. |
| 03/ | Effective place management, through initiatives like business improvement districts (BIDs), is crucial for maintaining the vibrancy and safety of city neighborhoods. This non-profit place management ensures enhanced cleanliness, security and active public spaces, which are essential for sustaining economic vitality. |
| 04/ | Investing in WalkUPs can help address urban challenges such as crime and homelessness by providing net fiscal revenues for affordable housing options and improving access to essential services while putting more “eyes and ears” on the street 24/7. This investment can lead to healthier and more equitable cities. |
| 05/ | Quick and proactive governmental response is essential. Assessed values lag market values, meaning that more challenges lie ahead. Successful examples of timely and forward-thinking policies in city revitalization include the post-Katrina recovery in New Orleans and other examples in the study. |
| 01/ | WalkUPs (regionally significant, Walkable Urban Places) that offer just the right product mix of Live, Work and Play create a vibrant lifestyle by seamlessly integrating housing, offices, retail and entertainment options within walking distance, allowing residents and visitors to enjoy numerous amenities all in one place. |
| 02/ | These areas are lively hubs that foster community engagement and economic impact through cultural institutions, nightlife, professional sports and urban universities, providing enriching experiences and opportunities for social interaction and personal connections. In fact, 70% of the foot traffic in these areas come from people visiting these kinds of amenities. |
| 03/ | The positive population growth in central cities since 2022 indicates a return to their pre-pandemic walkable urban vibrancy, reinforcing that they are attractive and dynamic places to live and work, with a promising outlook for continued growth. |
| 04/ | WalkUPs promote economic and environmental efficiency with high-density development, which not only maximizes real estate values and net fiscal impact on city budgets but also supports sustainability by reducing the need for extensive car travel and lowering the carbon footprint of daily life. |
| 05/ | By investing in walkable urban areas, cities can reduce crime rates and homelessness by providing cities with the fiscal resources to subsidize affordable housing and better access to social services, while providing more “eyes and ears” on the streets 24/7. |
Authors
Christopher B. Leinberger
Managing Director/Co-founder, Places Platform, LLC; Charles Bendit Distinguished Scholar & Emeritus Professor and Chair, Center for Real Estate & Urban Analysis George Washington University School of Business; Co-Founding Partner, Arcadia Land Company
Michael Rodriguez, AICP
Managing Director, Places Platform, LLC
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