Commercial market demand is making infill development viable and profitable, while high-density development increases efficiency and leads to higher economic productivity, according to presentations at a commercial real estate forum at the National Association of Realtors Midyear Legislative Meetings & Trade Expo in Washington, D.C.

Amy Liu, deputy director of the Center on Urban & Metropolitan Policy at The Brookings Institution, said 18 out of 24 cities studied saw increases in their downtown populations during the 1990s. “Changing demographics may benefit high-density development,” she said. “The general population is aging, and by 2020 the share of people in all age groups will be nearly the same. Household size is shrinking while cities are becoming more diversified, fueled by Asians and Hispanics.”

Liu said immigration has sustained the growth of many cities. Even so, decentralization still dominates, with suburban populations growing faster than urban populations during the last decade. Slow-growing areas have consumed enormous amounts of land relative to population growth, especially in the Northeast and Midwest, and overall densities have been declining.

“By contrast, higher densities and vibrant downtowns attract talented workers, lead to higher economic activity and productivity, and save tax dollars,” Liu said. “Education is the key to economic competitiveness – knowledge is driving the economy. What’s more, educated workers are attracted to vibrant and distinctive downtowns with lots of amenities and a tolerant culture.”

Liu said research shows that productivity increases in cities with higher employment density and in accessible cities with efficient transportation systems. In addition, dense development saves taxpayers money because infrastructure costs per dwelling are lower and more efficient.

Some industries create less sprawl than others. “Innovative businesses and industries with educated workers generally need less land and tend to locate more in centralized areas,” she said.

However, cities are not capturing the bulk of favored household types or age groups. “States and localities must promote reinvestment and infill development policies, such as vacant land reform, zoning and land use reform, and provide incentives to improve main streets,” Liu said. “They should invest in attracting educated workers in key service sectors, and conduct better research on the benefits of a restoration economy. They need attractive, high-density developments that appeal to all household types, income levels and ethnic background.”

Nelson Migdal, an attorney with Holland & Knight LLP specializing in commercial real estate in Washington, D.C., said the demographic factors are favoring infill development. “Redevelopment of parcels in urban areas revitalizes those areas while allowing for the use of existing infrastructure and services,” he said. “Infill can range from small redevelopment to mixed-use and ‘big box’ retail developments. However, there are unique challenges that face infill development.”

“As a result of changes to government policies and laws, brownfields have become ‘fertile’ for development, but many of the zoning regulations are outdated,” he said. As an example of a successful brownfield redevelopment, Migdal cited NAR’s new award-winning building in Washington, located on Capitol Hill.

There can be an extended timeline to acquire parcels from different owners or to clean up a site. As a consequence, there is a varied permit process and a possible need for variances, and fewer opportunities for economy of scale, so community support is needed as well as education of local officials. Midgal said financing such developments can present a challenge, but success stories are making it easier.

Other issues include environmental impact, the balance of retail and residential development, and parking concerns. “The greater the balance, the more appealing infill projects become to local government,” he said.

Volatile equity and stock markets are drawing capital to commercial development, helping to fulfill demand and expand the redevelopment of downtown cores. “More developers are building to ‘want,’ to fill the needs in these areas.”

“Infill can aid creation of livable communities and downtown cores. When focused on the pedestrian, infill can also help to ease traffic congestion,” he said.

The National Association of Realtors is a trade association, representing 1 million Realtors involved in all aspects of the residential and commercial real estate industries.

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