Cities are getting more colorful. As urban cores become revitalized and walkable, street art has become a notable presence on thousands of walls across the country. This is a progression from the crude forms of graffiti with which many of us are familiar as the new art is often on a grander scale and of a very sophisticated quality, incorporating large murals, mosaics and complicated stencil work.

Developers are recognizing the appeal of visually stimulating elements to their projects, capitalizing on the new drive to have “Instagrammable” destinations that bring people in for photo opportunities, who then stay to patronize local retail shops, and rent office space or apartments when they like what they find.

Can the presence of street art affect real estate pricing? The evidence is starting to suggest that it can create a positive value impact. Researchers at the University of Warwick in England set out to quantify the link between street art and value. Their thesis, that areas of higher concentrations of street art would see a correlative uptick in real estate values, looked at images of London uploaded to the social media site Flickr between 2004 and 2013 in which the word “art” was tagged. They used that data to compare the number of art images in a neighborhood to changes in residential real estate prices. They found that increases in mean residential property prices are significantly associated with higher proportions of art images per neighborhood.

These results have been borne out anecdotally in other places. In Miami, for example, visitors from all over the world flock to the Wynwood neighborhood to see the “Wynwood Walls,” a series of murals painted on the exterior walls of old warehouses and open to the public. The project opened in 2009 with 18 large works and has grown exponentially, with hundreds of buildings in the area now covered in street art. The trend was so successful that rents began to increase substantially, from an average of around $10/SF in 2008 to current rates over $125/SF in buildings closest to the Walls.

Valbridge is partnering with academic partners at Old Dominion University and Texas A&M University to conduct an in-depth study of the impacts of street art on commercial real estate values and will be presenting research at the upcoming American Real Estate Society annual conference in Phoenix this April. Preliminary findings suggest as much as a 30% pricing premium for buildings with artwork on them.

The addition of street art to structures is not without its potential complications. As works of original visual art, many pieces may be protected by an obscure federal law called the Visual Artists Rights Act of 1990, or “VARA.” VARA seeks to protect an artist’s moral rights, protecting the integrity of the artist’s reputation and the original work from being destroyed, distorted, mutilated, or modified in any way that “would be prejudicial to his or her honor or reputation.” Unlike copyrights, VARA rights cannot be transferred from the artist to anyone else, and expire upon the artist’s death. VARA rights can, however be waived by the artist.

With private ownership of a commercial building, the wall is the painting, so control of that wall can become problematic between the property owner’s rights and the artist’s VARA rights if the property owner wants to modify or redevelop the property. Some important features of how VARA affects real property include:

• Artwork is covered under VARA only if it is of “recognized stature”. To determine if a work qualifies, the artist must prove that the work is viewed as meritorious and that this is recognized by art experts, other members of the artistic community, or by some cross-section of society. This sets a rather low bar to determine that a work is of recognized stature as there are many ways to convince a court that a cross-section of society deems the work as having merit, particularly in the age of viral social media presence.
• The property owner cannot destroy or alter the work in any way. This includes scrubbing it off, painting over it, or carving a drive-through window out of it. The property owner does, however, have the right to sell the artwork if it can be moved without destruction. VARA only protects the integrity of the art, not the physical location of the work or the ownership of it.
• If the property owner wishes to demolish a building on which artwork of recognized stature exists, the owner must make a documented good-faith attempt to notify the artist before destruction and grant 90 days from contact for the artist to remove or document the work (at the artist’s cost).
• VARA does not apply to works that advertise or promote a product or service.
• Works that are illegally done (i.e., without the property owner’s permission) are likely not protected by VARA, though case law is not yet entirely clear on this point. If a work has been in place for a long time and is of recognized stature in the community, it may be protected by VARA and copyright, even if illegal. If the illegal work can be moved without destroying it, VARA rights will probably apply.
• VARA does not protect works from being covered up. A property owner has every right to cover up a work as long as it does not damage the work. However, owners have faced tremendous public outcry when they have obscured access to popular artwork.
• New York and California grant even stricter moral rights to artists, so property owners and real estate professionals need to be aware of the restrictions that apply to their sites. In New York, the law is called the Artists Authorship Rights Act (1984) and in California it is known as the California Art Preservation Act (1979).

Conflicts have been few so far between artists and property owners. Most artists recognize the place of their work in the larger built environment landscape, and street artists especially are comfortable with the ephemeral nature of their art. Problems tend to arise when a property owner acts with disregard or disrespect to the artist, the artwork, or the community. Such a case recently made headlines in New York when a developer painted over dozens of well-loved murals on a site that had been known as 5Pointz and was ordered by a federal judge to pay the artists $6.75 million in statutory damages. This was one of the first cases establishing street art and graffiti as eligible for VARA protections.

Because VARA allows artists to waive their VARA rights, property owners are best protected against VARA claims by securing a waiver before commissioning a work or before buying a property that has street art incorporated. This could have special relevancy to title companies.

Developers, property owners and other real estate professionals need to be aware of street art, VARA, and how it can potentially impact the value of residential and commercial real estate. It cannot simply be excluded as personal property from the valuation any more than tenant improvements can be. As it becomes more common as an amenity, real estate professionals will need to do their due diligence.

Contact Michele Wood, Director of Research Valbridge | Houston if you have questions about the impact of street art.

Valbridge Property Advisors is the largest independent valuation firm in North America with over 80 offices throughout the US.