Ranking Walkable Urbanism in America’s Largest Metros • 2016 By Christopher B. Leinberger & Michael Rodriguez The George Washington University School of Business 1 The Center for Real Estate and Urban Analysis Table of Contents I. EXECUTIVE SUMMARY . 4 II. INTRODUCTION & METHODOLOGY . 5 (Walkable) Urban Rebound . 6 Form Meets Function . 7 Methodology . 8 III. METROPOLITAN RANKINGS . 11 Where the WalkUPs Are . 12 2016 Current Walkable Urbanism in the 30 Largest Metros . 14 Current Ranking . 15 Forward-Looking Indicators . 18 Development Momentum Ranking . 22 Development Momentum in Individual Metro Areas . 24 IV. SOCIAL EQUITY RANKINGS . 25 WalkUPs & Social Equity . 26 Social Equity Ranking . 27 V. CORRELATIONS & FINDINGS . 29 WalkUPs, Education & GDP per Capita . 30 VI. CONCLUSIONS & FURTHER STUDY . 33 VII. APPENDICES . 36 Endnotes . 37 Acknowledgments . 39 3 Executive Summary The end of sprawl is in sight. The nation’s largest metropolitan areas are focusing on building walkable urban development. For perhaps the first time in 60 years, walkable urban places (WalkUPs) in all 30 of the largest metros are gaining market share over their drivable sub-urban competition—and showing substantially higher rental premiums. This research shows that metros with the highest levels of walkable urbanism are also the most educated and wealthy (as measured by GDP per capita)— and, surprisingly, the most socially equitable. KEY FINDINGS Walkable urban market share growth in office and substantially higher GDP per capita . These relation- multi-family rental has increased in all 30 of the larg- ships are correlations, and determining the causal There are 619 regionally significant, walkable urban est metros between 2010-2015, while drivable relationships requires further research to prove . places—referred to as WalkUPs—in the 30 largest U .S . sub-urban locations have lost market share . The metropolitan areas . These 30 metros represent market share growth for 27 of the 30 metros is two Walkable urban development describes trends re- 46 percent of the national population (145 million of times their market share in 2010 . This is of the same sulting from both revitalization of the central city and the 314 million national population) and 54 percent or greater magnitude as the market share gains of urbanization of the suburbs . For nearly all metros, the of the national GDP . drivable sub-urban development during its boom future urbanization of the suburbs holds the greatest years in the 1980s, but in the reverse direction . opportunity; metro Washington, DC, serves as a mod- The 30 metros are ranked on the current percent- el, splitting its WalkUPs relatively evenly between its age of occupied walkable urban office, retail, and Indicators of potential future WalkUP performance central city (53 percent) and its suburbs (47 percent) . multi-family rental square feet in their WalkUPs, show that many of the metros ranked highest for compared to the balance of occupied square foot- current walkable urbanism are also found at the top SOCIAL EQUITY PERFORMANCE: age in the metro area . The six metros with the most of our Development Momentum Ranking—namely, walkable urban space in WalkUPs are, in rank order, the metros of New York City, Boston, Seattle, and The national concern about social equity has been New York City, Washington, DC, Boston, Chicago, Washington, DC . This indicates that these metros exacerbated by the very rent premiums highlighted San Francisco, and Seattle . will continue to build on their already high WalkUP above, referred to as gentrification . Counter-intuitive- market shares and rent premiums . ly, measurement of moderate-income household (80 ECONOMIC PERFORMANCE: percent of AMI) spending on housing and transpor- There are also some surprising metros in this top tation, as well as access to employment, shows that There are substantial and growing rental rate premi- tier of Development Momentum rankings, including the most walkable urban metros are also the most ums for walkable urban office (90 percent), retail (71 Detroit, Phoenix, and Los Angeles . socially equitable . The reason for this is that low cost percent), and rental multi-family (66 percent) over transportation costs and better access to employ- drivable sub-urban products . Combined, these three The most walkable urban metro areas have a sub- ment offset the higher costs of housing . This finding product types have a 74 percent rental premium1 stantially greater educated workforce, as measured underscores for the need for continued, and aggres- over drivable sub-urban . by college graduates over 25 years of age, and sive, development of attainable housing solutions . 4 Foot Traffic Ahead: Ranking Walkable Urbanism in America’s Largest Metros • 2016 © The George Washington University School of Business 2016 INTRODUCTION & METHODOLOGY 5 Introduction & Methodology (Walkable) Urban Rebound Walkable urbanism development is now propelling real estate growth in office, retail, and multi-family rental product types from a rental premium and absorption basis in the largest 30 U.S. metros. Since the mid-20th century, metropolitan areas in Most real estate developers and investors, govern- walkable urban metros, 81 percent of 2010-2015 the United States have been generally divided into ment regulators, and financiers have well understood office and rental multi-family absorption by square two categories: “central city” and “suburban” .2 The this model, turning it into a successful formula and footage is now walkable urban . Walkable urban new 21st-century development patterns suggest economic driver throughout the mid- to late-20th products in WalkUPs generate substantial rental this former dichotomy is less meaningful; we need century . In addition to real estate, this model fueled premiums, suggesting pent-up demand for more more salient categories to examine and understand demand for automobiles, drove road construction, walkable urban development . contemporary and future metropolitan development and supported the finance, insurance, and oil indus- in the United States . tries . In short, this development model provided a Walkable urbanism could provide the same met- solid foundation for the U .S . economy for the majori- ro-level economic base in the 21st century economy The more useful dichotomy to understand metro- ty of the 20th century . that drivable sub-urbanism did in the mid-to-late politan3 America is “walkable urban” and “drivable 20th century . However, this growth will not be real- sub-urban” development . Both types of develop- By the mid-1990s, the redevelopment of center cities ized without appropriate infrastructure, zoning, and ment can occur in either a metro’s central city or in and suburban town centers, accompanied by the financing mechanisms at the federal, state, and local the metro’s suburban area . New Urbanism movement, demonstrated there was levels . revived demand for walkable urbanism, the dominant DRIVABLE SUB-URBAN vs development form before the early 20th century . Both development forms, drivable sub-urban and WALKABLE URBAN DEVELOPMENT walkable urban, are now viable in most of the 30 Walkable urban development includes: largest U .S . metropolitan areas . However, these two During the second half of the 20th century, the now- forms are fundamentally different, requiring land ac- • Substantially higher densities (1 .0 to 40 FAR, familiar drivable sub-urban approach dominated real quisition, zoning, construction, financing, marketing, though mostly in the 1 .0 to 4 .0 range) estate development . and management . • Mixed-use real-estate products, or the adjacent Drivable sub-urban is characterized by: spatial mix of products • Historically low-density development (generally • Emerging “new” product types, such as rental 0 .05 to 0 .4 floor area ratio or FAR) apartments over a ground-floor grocery store • Segregated real-estate product types (different • Multiple transportation options, such as bus, rail, real estate product types generally separated bicycle, and pedestrian-friendly sidewalks, as well from one another) as motor vehicles, that connect to the greater • Standardized product types that, aside from metro area . Within the boundaries of the WalkUP superficial architecture, are similar throughout itself, most destinations are within walking dis- the country tance . • Cars and trucks as the predominant transporta- As this survey shows, and previous metro-level re- tion mode . search demonstrates,4 walkable urban development This has been referred to as sprawl . appears to be a rising, or even dominant, factor in real estate development . In the most highly ranked 6 Foot Traffic Ahead: Ranking Walkable Urbanism in America’s Largest Metros • 2016 © The George Washington University School of Business 2016 Introduction & Methodology Form Meets Function Understanding 21st-century metropolitan land use options. Real estate professionals often categorize metropoli- trations of employment (particularly in base/export Local serving locations, frequently called bedroom tan land use into two economic functions: regionally or regional-serving businesses and jobs), and can communities, are predominantly residential with significant or local serving . include civic centers, higher education facilities, complementary commercial development, such major medical centers, and regional retail establish- as grocery and drug stores; doctor, dentist, bank Regionally significant locations, which the brokerage ments, as well as one-of-a-kind cultural,