Wednesday, April 22

The coming "great age of redevelopment"

From Recycling the Suburbs,
The American suburb as we know it is dying. The implosion began with the housing bust, which started in and has hit hardest the once vibrant neighborhoods outside the urban core. Shopping malls and big-box retail stores, the commercial anchors of the suburbs, are going dark — an estimated 148,000 stores closed last year, the most since 2001. But the shift is deeper than the economic downturn. Thanks to changing demographics, including a steady decline in the percentage of households with kids and a growing preference for urban amenities among Americans young and old, the suburban dream of the big house with the big lawn is vanishing. The Metropolitan Institute at Virginia Tech predicts that by 2025 there will be a surplus of 22 million large-lot homes (on one-sixth of an acre [675 sq m] or more) in the U.S.


...a transformation is under way in regions that were known for some of the worst sprawl in the U.S. Communities as diverse as Lakewood, Colo., and Long Beach, Calif., have repurposed boarded-up malls as mixed-use developments with retail stores, offices and apartments. In auto-dependent suburbs that were built without a traditional center, shopping malls offer the chance to create downtowns without destroying existing infrastructure, by recycling what's known as underperforming asphalt. "All of these projects are developer-driven, because the market wants them," says Ellen Dunham-Jones, a co-author of the new book Retrofitting Suburbia.

Not every suburb will make it. The fringes of a suburb like Riverside in Southern California, where housing prices have fallen more than 20% since the bust began, could be too diffuse to thrive in a future where density is no longer taboo. It'll be the older inner suburbs like Tysons Corner, Va., that will have the mass transit, public space and economic gravity to thrive postrecession. Though creative cities will grow more attractive for empty-nest -retirees and young graduates alike, we won't all be moving to New York. Many Americans will still prefer the space of the suburbs — including the parking spaces. "People want to balance the privacy of the suburbs with more public and social areas," says Dunham-Jones. But the result will be a U.S. that is more sustainable — environmentally and economically.

While the Times is prone to exaggerating for effect (i.e. "the suburbs are dying") the basic data is true. Major malls, big box and retail developments have been closing for years. This is very similar to what was seen in urban centers. This is causing suburban blight which is devaluing the suburbs as it once did the urban centers.

The hope is that we as a nation will deal with it directly this time, via redevelopment, instead of simply fleeing it for greener pastures.

What's more the basic theory is sound. I think Americans are starting to see that we can no longer just keep sprawling. We have to take the time to redevelop and build upon the old, to try and deal with some of its problems instead of simply making a new suburb in another cornfield.

It's the layering on of new development over historical development over many, many generations that solves the problems of urban planning and teaches us lessons while creating the character and history sought after to sustain long term growth.

This layering is how European cities... and indeed all cities eventually developed. We've largely ignored this development in the U.S. simply because it's cheaper and easier to literally move to a greener pasture. Eventually though we must grapple with the issues of redeveloping areas, both urban and suburban.

We're moving into an era which might well become known as "the great redevelopment".

The rise and fall of great American cities, the rise of the suburbs, what's next?

There's no where else to flee, the entire mass population can't go back to the land. This age of redevelopment is barely at it's infancy... barely on the horizon. It's been going on in some small degree for years, but at this point it still barely started and I doubt we can expect it to be as radical as the flight to the suburbs.

I think when we look back we'll see it's symbolic start in the redevelopment of major league sports complexes in urban centers that we've been seeing for the last ten to twenty years. It's a sign of what is wanted, even it it's not yet known how to accomplish it.

Redevelopment of urban centers is a common concept, but few even recognize the decline and need for redevelopment in the suburbs as well.

To use a metaphor comparing investing in real estate to investing in the markets, I'd liken investing in new suburban real estate both commercial and residential to be like day trading and penny stocks. It's an easy quick good buck so long as you get out before the bubble collapses... but guess what, everyone eventually gets caught holding.

Alternatively I'd liken redevelopment to Warren Buffets "value investing". It may be very early in the game but there's value to be had in those blighted urban centers, small towns and even in those blighted suburban centers. The key is investing in finding the right markets and backing the right re-developers. They are the next growth market.

This real estate bubble collapse is a clear reflection of a market that's focused to much on the short term... bankers and buyers alike.

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