Changing the market: The value of active transportation
As active transportation projects proliferate, real estate professionals have taken note of the value that consumers place on access to active transportation options. In an interview with Ed McMahon from the Urban Land Institute (ULI), we discussed the role of active transportation in the Wellness Real Estate trend. Ed provides insights regarding the progress that we have seen in active transportation infrastructure and the benefits of active transportation from a economic perspective, ultimately demonstrating how health and economic sectors can work together to achieve success towards respective goals.
How would you describe the Wellness Real Estate trend and its inception?
Because there was a slow uptake of the sustainability market within the real estate industry, we were skeptical of the response we would receive from our members when we started the Building Healthy Places initiative 5 years ago. To our surprise, the uptake on the health side of things has been much faster than expected. I think there are a couple of reasons for that. First, it helped that the public health community was ahead of us on the built environment research and were eager to engage with those responsible for designing the built environment. As such, it became important that we foster a dialogue between the public health community and the development community. Second, developers and real estate professionals had already been doing things that were “health promoting.” They just weren’t talking about them that way. The wellness real estate movement gave them an opportunity to market these things. It became beneficial to show consumers the cost-benefit of the bricks and mortar and programmatic features that promote health, which tend to be relatively low-cost.
How does active transportation play into the Wellness Real Estate trend?
A lot of work in the real estate world has looked at active infrastructure and value. And when we talk about value, we look to supply and demand principles. For example, after the recession, there was an over-abundance of large-lot, single-family housing, but not as many options to accommodate the 75% of households without school-age children (i.e. single people, empty-nesters, retirees who wanted to down size, and young professionals). In addition, the public health community started promoting the health benefits of living in walkable neighborhoods at the same time that individuals started to notice how active modes of transportation saves money. Young people now seem to be more interested in mobility rather than car ownership. They are concerned with how do I get around my town, and now we have all these technologies that enable mobility without having to own a car. As developers started to take note of the fact that people value places where they can get around without a car, more development projects focused on urban revitalization and walkable neighborhoods.
What has contributed to progress in active infrastructure?
Economics. Depending on the region, every one point increase in WalkScore equates to $700 to $3,000 increase in home value. So, from an investment perspective, it just made sense to build in walkable neighborhoods. People like Capital Analytics looked at commercial premiums, and found that there was 125% appreciation over a 5-year period in walkable destinations compared to a 22% appreciation over 5 years in a car-dependent ones. Chris Leinberger and associates at the George Washington University School of Business did a study and found that, on average, the projects in walkable neighborhoods were getting 74% higher rents than comparable drive-only neighborhoods. So, we started seeing these incredible price differentials. And as with everything, when the market changes, the world changes.
Fortunately, because bike infrastructure is relatively cheap compared to automobile infrastructure it had a catalytic impact on real estate. Over the course of twenty years, federally-funded bicycle infrastructure projects have grown from just 50 projects a year to over 2,500 projects. Shared-use mobility has become popular as well, growing from 7 bike share systems worldwide in 2002 to over 800 systems today. Policies and programs around safe infrastructure have grown as well. There are now over 1,000 communities with Complete Streets policies, whereas a decade ago we had none. The key to success in the bike world is connected, low-stress bike networks. When we create a network that feeds into a regional network, smaller projects then develop because of this bigger system. These smaller projects that connect then offer a opportunities for real estate development projects because of the added value of access to transportation. So, just as we invested in the interstate highway system that led to urban sprawl, we are now beginning to see trail-oriented development for more active modes of transport.
How can we drive the conversation around active infrastructure & health within the real estate community?
Co-benefits and cost. A major co-benefit for active infrastructure for developers is the impact on parking. Indeed, parking needs are changing. For example, it is estimated that there will be 40-90% less parking needs in the future because of technological advances and shared-use mobility. This is beneficial from a health, sustainability and financial perspective. The public health community can use parking requirements and demands to drive the conversation with the real estate industry. Since you can park 12 bikes in one car space or even put in a bike-share station instead, it makes sense to start looking at these more cost-effective options.
Another selling point is the cost of bicycle infrastructure. We estimate that, on average, bicycling infrastructure costs about one-sixth to one-eighth of what car infrastructure costs. If we could get more people riding bikes by creating safer and more convenient infrastructure for cycling, we could see a big impact on mobility, reducing road infrastructure and associated costs. For example, Portland, Oregon, has built a 300-mile network of bike trails, bike lanes and bike boulevards for about the same cost as one mile of urban freeway. In California, for example, there is a protected bikeway on Market Street in San Francisco that costs $445,000 per mile compared to the $571 million per mile cost of a concurrent street widening project along a street called Doyle Drive and a $2.7 billion per mile cost of expanding the Bay Bridge. These projects demonstrate that if you want to get more bang for your buck, you need to invest in walking and biking!
How does WELL Certification increase the value of real estate development projects?
I think a big selling point is project differentiation. If you can’t differentiate your project in the world we live in today, you have no competitive advantage. And everyone is concerned about their health, so WELL projects become more attractive to potential tenants, driving the demand. Wellness certifications can add to the valuation of the building itself and the area around the building. In terms of the valuation of an area, this has more to do with the site and whether it is close to transit and safe, connected trails and sidewalks. For example, the Cultural Trail in Indianapolis found property values within 1 mile of the trail went up 148% compared to citywide property values at 21%. We need more of these studies to make a bigger impact in the industry. Where we used to think of a catalytic project as an interstate highway, what I am suggesting is that community-wide revitalization today might be a trail project. Those who invest in active transportation infrastructure are going to be more competitive and the local economy will surely benefit. In addition to the economic benefits, these projects get people up and and moving around!
To learn more about the Movement concept in WELL, explore our new WELL v2 platform.
