Investing In Transit

In Christopher Leinberger's mind, which way mainstream American lifestyles trend is evident in what's on television.

In the mid to late 20^th Century when suburban lifestyle was on the rise, shows like Leave It To Beaver and The Brady Bunch ruled. In the later 20^th Century and early 21^st Century when Americans are returning to urban living, shows like Seinfeld and Friends are on top. That's the way the University of Michigan urban planning professor and director of the graduate certificate in real estate development sees it.

As the pendulum swings back toward city centers, more and more people follow it into dense cities. Part and parcel of that trend is having transportation options, which means living near mass transit lines so they can live, work and play at a variety of places within easy walking distance.

As more and more major metropolitan areas build up their mass transit to serve this growing population, they are seeing billions and billions of dollars of development around those lines. The type of development that could explode around Metro Detroit's Woodward and Michigan avenue corridors. And the more permanent those options are, i.e. rail, the more at ease consumers feel and the more investment comes.

"With rail you know where it's going," Leinberger says.

Texas-sized development

Back in the 1960s, Plano was a dusty little Texas town of 3,500 people at the edge of the sprawling Dallas suburbs. 

And then the light rail stop came.

Today Plano is a bustling city of 250,000, home to several major corporate headquarters (EDS, Frito-Lay, JCPenney, etc.) and frequently cited as an example of an aerotropolis community. Tens of millions of dollars have poured into the city and a great deal of this recent growth is clustered around a single light rail stop for the Dallas Area Rapid Transit's Red Line.

More than $3.3 billion (that's with a "B") has been invested around stations on DART's 45-mile light rail system, according to a study by University of North Texas economists. Plano is just one of the lucky recipients of this tidal wave of investment. About $140 million worth of new buildings and more of restorations have popped up around its downtown light rail station and even more is on the way.

"Every six months to a year something major happens," says Frank Turner, executive director of the development business center for the city of Plano. "And there are a lot of smaller projects in between that. It's the smaller projects that make it a much more organic movement."

These transit villages growing around the light rail stations are popping up faster than roadside armadillos. Commercial property values around the light rail stations have shot up 53 percent more than properties not served by rail between 1997 and 2001. Residential property values increased 39 percent.

Light rail has also driven up demand for people to live, work and play in these areas. Federal Transit Administration predicts that demand for transit-oriented housing in the Dallas area will jump to more than 260,000 units by 2025, a 364% increase. All made possible through DART's ability to offer transportation options.

"So many people are willing to come in and invest around rail lines its surprising," says Morgan Lyons, manager of media relations for DART. "It's a testament to the power rail can have to attract investors."

Development in the other D

That attraction is what brought Galatyn Park Corporation to the table in Dallas. Once its corporate chieftains caught wind that DART would extend its Red Line in the late 1990s, they immediately contacted the transit agency to coordinate their development plans with DART's expansion plans.

The result is the Galatyn Park station near the city of Richardson and two major freeways. The development includes more than 1 million square feet of new or refurbished office space for corporate giants like BlueCrossBlueShield and Countrywide, new community art centers, a hotel and hundreds of condos, lofts and apartments. All within easy walking distance of the light rail station.

It adds up to about $500 million of investment so far on Galatyn Park Corporation's 500 acres next to the station. And of those 500 acres of agricultural land, 350 are still available for development. Plans are already underway to build another 4,000 housing units on them within the next few years.

"DART has been a strong partner for us," says Don Dillard, vice president of Galatyn Park Corporation. "We work with them quite closely. They want ridership and we want development. The two go hand in hand."

Which is not to say the area's development is completely dependent on the light rail line. The acreage inevitably would have been developed as Dallas continues its outward sprawl. But the new construction would have been much more exurban, built primarily around cars instead of people. More importantly, Dillard points out investment would have been equal to only a third of what light rail attracted.

The same can be said about Plano. Its downtown, like so many other cities, had been left behind as the city's borders expanded. Then talk of the light rail began and before the station even opened in 2001, developers had finished the first phase of Eastside Village --a 250,000 square foot mixed-use development on 3.5 acres based around 230 apartments-- and were working on the second phase of a similar sized project.

"Those two projects were the tipping point where the market actually changed significantly," Plano's Turner says. "It showed the market actually had come back in downtown and that transit oriented development was viable in an urban setting."

Since then development of new projects and redevelopment of older buildings has exploded in Plano's downtown. Although the $140 million in new projects the city has experienced in recent years are largely due to Dallas' growth, the new light rail station supercharged the downtown, creating the kind of revitalization cities like Detroit long for.

Turner estimates that $50 to $60 million, about 40 percent, of the $140 million has been within the immediate area of the light rail. The station breathed new life into a downtown dying the stereotypical suburban death, creating a walkable mixed-use community. Property values increased and new investment followed as developers recognized a growing demand for the urban lifestyle.

"What the light rail did was bring a focus to these areas that were overlooked," says Jack Wierzenski, director of economic development and planning for DART. "These projects as they stand today would not have happened without it."

Possible development in our D

And this type of story has been unfolding for decades across America. A metropolis recognizes the need for mass transit options, invests in permanent transit fixtures like light rail and hundreds of millions of development dollars and population growth follows. It's a formula that has been repeated time again in New York, Chicago and San Francisco and has been catching on in recent years in Minneapolis, Cleveland, St Louis, Phoenix and Portland.

But not Michigan and not in Metro Detroit. The maxim that investment follows transit lines is paid plenty of lip service but rarely pursued. In Metro Detroit investment around transit lines, i.e. expressway exits, means a few fast food restaurants and maybe a big-box retailer or two.

"It's not just about transit," says Conan Smith, executive director of the Michigan Suburbs Alliance. "It's about development and redevelopment. Too many people in this region only see transit as a way to get from Point A to Point B. They don't see the larger context of it."

Or the complexities of it. For one thing building a mass transit line means more than extending a bus line and expecting lofts to magically appear. It doesn't work that way. Although systems like bus rapid transit, where buses have their own lane on roads, do attract dollars, they aren't nearly as strong as other options like streetcars, elevated trains or subways because they just don’t have the staying power of rail.

"The reason why is when you put in rail or streetcar tracks or heaven forbid a subway, that is a long-term investment there," says Mark Nickita, president of Detroit-based architectural firm Archive D.S. "That eases the minds of developers. A bus system is not at the same level of an investment corridor as a rail system. These permanent lines become hot spots and a tremendous amount of development follows there."

But that's only if local leaders allow it. Municipal officials have to be onboard to allow for dense, multi-use building or it doesn't work. The idea is that higher density heightens the quality of life by making life walkable.

Bringing life's necessities within a reasonable walk of a transit station opens up a world not designed around cars, making it more people friendly. Of course, doing that would require a reversal of suburban Detroit priorities, namely reliance on the almighty auto. A few communities are starting to buck that trend, such as Birmingham's Triangle District or downtown Ann Arbor, but there is only so much that can be done without viable and effective mass transit.

"It's about designing for people and not for cars," says Megan Owens, executive director of Transportation Riders United. "It's not that cars are excluded but people are put front and center instead of cars. You can only get so much vibrancy and density when every other building is a parking structure. That's a problem in downtown Detroit. It's a poor investment in high-quality real estate."

There are encouraging signs that this type of dense, multi-use, pedestrian-oriented development is already happening with projects like The Fifth at Royal Oak, Ferndale's ID Woodward Lofts and Ypsilanti's Thompson Block. A key point of these projects is how they are within walking distance of everything their respective downtown offers.

The problem is these downtowns can't be self-sufficient. It's rare that someone can, or wants to, work, live and play in only their transit village. Connecting these downtowns through something like light or commuter rail allows all of the amenities in all of these downtowns to become within easy walking distance of each other.

Connecting the communities along the Woodward or Michigan avenue corridors is a perfect example of this. Having the option of living in Ferndale, working in Detroit, eating dinner in Royal Oak and going clubbing in Pontiac makes more sense with fast reliable mass transit like commuter or light rail than relying on buses that are subject to the same traffic jams as motorists. The same can be said for Ann Arbor, Ypsilanti, Dearborn and Detroit.

"Each of these suburban nodes doesn't have enough critical mass to take it to the next level," Nickita says. "If you take all of them and connect them, then it works."