2014 National Rail Volution Conference - Christine Maguire - Market Realities and TOD

1. TOD Market Dreams + Realities
Rail-Volution 2014
Minneapolis, MN
September 22, 2014

2. 2
Discussion Agenda
 TOD in (my) context
 Current trends in the marketplace
 Opportunities for public-private
partnerships
 Lessons Learned
 Discussion / Q&A

3. 3
What is Transit-Oriented Development (TOD)?
Development pattern
characterized by a mix of land
uses surrounding a transit
station:
 High density and intensity
 Synergistic uses such as
housing, retail, employment
and entertainment (24/7)
 Walkable environment through
hard and soft scape treatments
 Target .5 mile around the
station
Top: Tempe, AZ Bottom: Garland, TX

4. 4
TOD: A Brief (revisionist) History
Development Pattern Technology Time Frame Example
Steam-powered
commuter rail
mid-1800s New York, San Francisco
Electric streetcar and
horse-drawn carriage
late 1800’s to early 1900s
Pacific Electric Railway in
southern CA, Chicago “L”)
Auto-oriented
Development
Auto dominance Post WWII
Suburbs spurred by Federal
Interstate Highway System
Transit-Related
Development
Rail and bus transit
Post Urban Mass Transit
Act of 1964
Lease-revenue focused joint
ventures with transit
agencies
Transit-Supportive
Development
Rail and bus transit 1980s - present
Lease-revenue and
ridership focused joint
ventures
Development-oriented
Transit
Source: Institute of Urban and Regional Development Working Paper 2009-02

5. 5
Which One is It?
Development-oriented Transit
(transit-lead high density development)

6. 6
Which One is It?
Right: Santa Clara Valley Light Rail Authority
Top Left: Phoenix Metro (Tempe)
Bottom Left: Dallas Area Rapid Transit (DART)
Transit-related Development
(auto-lead low density development)

7. 7
Which One is It?
Transit-supportive Development
(high density mixed use development)
Right: Norfolk, VA
Top Left: Capital Metro proposed Leader Station
Bottom Left: Murray, UT proposed Fireclay Station

8. 8
 Millennials
 technologically sophisticated
 diverse and embrace diversity
 environmentally conscience,
 educated
 strapped for cash
 sense of community and places to “hang out”
 Baby Boomers
 demand for smaller footprint
 Convenience and access to amenities/services
 cash conscious
 sense of community
Greater Desire for TOD

9. 9

10. 10
This TOD Stuff is Expensive
Development Costs
Higher density building costs – elevators, building codes for safety and energy efficiency
Upgrade existing infrastructure if urban infill
Need structured parking
Market Rental Rates
First project must “prove up” the market
Retail siting requirements rule regardless!
Dictated by space supply and demand
Entry Costs
Regulatory “brain death” factor (by-right density?)
Land cost and ability to assemble
Few developers can successfully carry this off

11. 11
 Intense competition for expanding development “market share”
requires product differentiation: sense of place
 Tool for spurring economic development – connection of jobs
centers with housing centers regionally or locally
 Having a light rail station in addition to traditional bus service
seen as a “return” on years of investment in a transit district
 Public desire for more “resilient development” – appropriate
density, environmental stewardship and public amenities
 Widening funding gap: Increasingly scarce federal and state
funding at a time of rapidly increasing construction costs
Public Perspective on TOD

12. 12
Private Perspective on TOD
 Intense competition for expanding development “market share”
requires product differentiation: sense of place
 City Policy through comprehensive planning and zoning
regulations (ease of obtaining density?)
 Little to no appetite to construct speculative commercial
development - established markets with demonstrable (not
proforma) demand
 “Finance, finance, finance is the new location, location,
location.” (Kirk Williams, Cypress Equities)

13. 13
Financing TOD
 Banks have little to no appetite to finance speculative development
 Bank regulations limit the amount of construction financing
 Small pool of seasoned developers & contactors
 Underwrite on the separate parts and as a whole
 Relatively long financing and entitlement lag -
higher carry costs and higher risk
 Opportunities for hidden surprises (environmental issues)

14. 14
Lesson #1: Many Tools for Partnerships
Reducing Development Costs
Federal tax credits for housing and/or energy efficiency
By-right higher density zoning
Expedited permitting and review
Fee waivers
City CIP investment in infrastructure
Tax Increment Financing (TIF) and tax abatements
Federal/Regional/State grants
Removing Barriers to Entry
Land assemblage/swaps
Below market land lease
ROW/street abandonment

15. 15
Lesson #2: Residential Density Leads
Transit Type DU/Acre
Persons/
Sq. Mile
Bus - minimum service 4 6,192
Bus - Intermediate Service 7 12,096
Bus - Frequent Service 15 25,920
Light Rail 9 15,552
Rapid Transit 12 20,736
Source: Mineta Transportation Institute
 Need high residential density
(approximately 15,000
persons/ sq. mile) to sustain
light rail
 Synergy between housing,
retail and transit only if easily
walkable
 People only willing to walk
2,300 feet for general
purposes
 Commuter support of transit
needs residential density at
both ends

16. 16
Lesson #3: Retail Follows
 Retail is a business
operation – rent subtracts
from service
 Retail site location science:
(cluster, scale, access,
visibility, zoning, consumer
preferences, competition
and capture)
 Free rent won’t change bad
fundamentals
 A vacant development is
worse than no development
 MANAGE EXPECTATIONS

17. 17
Christine Maguire, AICP, EDFP
Senior Manger ◊ DPFG
609 Castle Ridge, Suite 310
Austin, TX78746
Christine.Maguire@dpfg.com
512-732-0295
Discussion and Q&A
“If you ask me a questions I don't know,
I'm not going to answer.”
--- The Immortal Yogi Berra