Transit-oriented development (TOD) is the urban growth strategy of the future, and it is a major priority of large cities. It can enhance urban vibrancy and quality of life.
What is transit-oriented development? TOD integrates urban places designed to bring people, activities, buildings, and public space together with easy walking and cycling connections between them and transit services to the rest of the city.
One of the key considerations in TOD is strategic coordination between stakeholders. This includes local government agencies, city planning, developers, residents, and public policy. Effective communication and collaboration among these groups are essential to ensure that transportation infrastructure, land use planning, and community needs are aligned. Developers must also consider the needs of diverse populations, including affordable housing options, green spaces, and amenities that enhance the quality of life for residents. Zoning for TOD requires thoughtful consideration of urban planning goals. Zoning codes must support mixed-use developments, higher densities, and pedestrian-friendly design to encourage transit ridership and accessibility.
The Department of Transit indicated that $17.6 million will go into TOD projects in 16 states in the upcoming years. A recent example is the Indian Creek Station project in Atlanta which was just announced on March 30, 2024. The proposed site includes a 30-acre land acquisition involving MARTA (Metropolitan Atlanta Rapid Transit Authority) This 1.7 million square-foot development will feature 1,600 residences set among four acres of parks and recreation space. Other components include food and beverage (25,000 SF) retail, grocery and community center (20,000 SF), office (300,000 SF), and a bus transportation facility (45,000 SF) along with 3,800 parking spaces offered in eight different garages. The next step is getting the property rezoned, which will take place in May 2024.
Public agencies are reinvesting in their transit in significant ways. Another example of a major TOD reinvestment in transit is the San Francisco Bay Area’s Bay Area Rapid Transit (BART) expansion to complete the loop around the Bay. This will be the largest single infrastructure project ever constructed in Santa Clara County. Phase II will consist of 6 miles of transit service from Berryessa Transit Center into downtown San Jose and ending in the City of Santa Clara. This transit expansion is estimated to carry 54,600 passengers, to be completed in 2040. BART owns an estimated 250 acres at 27 stations that could accommodate future development. (bart.gov)
Impact of TOD on Real Estate Markets
Properties located within proximity to transit stations or hubs may experience higher demand and, consequently, may see an increase in their market value. This is most often a consequence of planning departments allowing greater density, along with the attendance population increase. Convenience of easy access to public transportation makes these properties more attractive to homebuyers and tenants alike, leading to a competitive real estate market in these areas. From an investor’s perspective, TODs may present opportunities in the real estate market most often due to an upzoning of property.
The aforementioned San Francisco Bay Area Rapid Transit (BART) Silicon Valley expansion, though not yet completed, is already shaping transit-oriented development in its own market. The San José Flea Market property, a 120-acre project site adjacent to BART’s Berryessa Station, is undergoing planning to develop the site with 2,818 dwelling units and 365,622 square feet of commercial uses. To the north of this planned project is another new development with 1,000 new multifamily units and 118,580 square feet of commercial space.
According to Maria Aji, PhD, at Valbridge Property Advisors | Northern California, who appraised the Flea Market property, transit-oriented development attracts a younger crowd, thereby drawing a larger number of quality retail tenants.
TODs are generally successful when they are planned and supported by comprehensive policies that promote mixed land uses (office, retail, and residential), affordable housing, public infrastructure. TOD may lead to economic improvement in the surrounding area, mostly because it increases accessibility and connectivity of a property to a larger population base. If prior to TOD a property had a local market, it now has a regional market due to quick access.
These developments typically offer a mix of housing types, from apartments and condominiums to townhouses and single-family homes, catering to a diverse range of residents. This diversification not only enhances the social fabric of the community but also creates opportunities for people of different income levels to live in proximity to public transportation, fostering a more inclusive environment. Schools also play a role in TODs, according to Aji. The high density of the TOD projects brings a large population base in the area, who need services nearby. Private schools and daycares are one of those necessities for residents living in the area. The pedestrian-friendly design of TODs encourages physical activity, social interaction, and a sense of community, leading to healthier and happier residents.
Appraisals for Transit-Oriented Development
Transit-oriented developments may have an impact on real estate markets by promoting sustainable urban growth, boosting local economies, diversifying housing options, enhancing livability, and offering attractive investment opportunities. As cities continue to grow and evolve, TODs represent a model for smart, inclusive, and sustainable development that benefits residents, businesses, and the environment alike. This compact urban form not only maximizes land use efficiency but also reduces the need for long commutes and reliance on personal vehicles. As a result, TODs contribute to a more sustainable environment by curbing carbon emissions and promoting a greener lifestyle. Retail businesses, restaurants, and service providers in and around TODs may benefit from the increased foot traffic, leading to higher revenues and job opportunities. Each situation must be studied in detail, rather than simply assuming that TOD automatically results in a benefit. Often it is the population increase, rather than the transit itself, that drives value.
As developers and government agencies begin to plan projects that incorporate transit-oriented development, they will need professional and reliable appraisals for their own internal planning, feasibility studies, construction loans, and for other related purposes. Contact Valbridge Property Advisors to discuss how we can help with your planning and development process.