Redevelopment is the Answer?

September 2nd, 2010

The development economy has been suffering for several years now and financial pundits are not yet predicting the real upturn.  There have been a few upticks to tease us along the way, but the real resurgence of lending, building and buying has not started yet.  Most of the current work in the marketplace is institutional or governmental, with a few user-specific private developments in the mix.  With lending being held in the vised grip of post TARP institutions, prospectors and developers have to be more creative to find the most promising investment tools that provide good return on investment, and then they need to find the users that can finance the use of the building or development.  A difficult task when there are so many empty spaces on the market.  So where do we find the hottest opportunities?  Maybe redevelopment is the answer.

Redevelopment Opportunities

Redevelopment requires certain ingredients from the start, such as an existing or former use and improvements, existing infrastructure, such as road and utilities, existing impervious surfaces and “engineered” drainage, and public perception of a previously disturbed natural space.  These ingredients often occur in urbanized or industrial locations, where the economic climate changed at some time and left the space for greener pastures, or to new spaces that offer more efficient production.  Perhaps the space is still used, but not efficiently, operating as a burden on the community by wasting energy and causing unnecessary impacts to the natural environment or the surrounding community.  Perhaps the right redevelopment opportunity is an existing residential community that is suffering from deferred maintenance, and would be less expensive to replace than repair.

Additional Redevelopment Elements

In any case, the ingredients of redevelopment opportunities are typical elements of a new development plan that the developer would assume to have to pay for, design and construct.  So right off the top, the project pro forma excludes some access and utility costs, offsite road construction, etc.  For stormwater management in Maryland there are lighter rules for redevelopment too.  Another important element of redevelopment opportunities is market and demographics.  Typically urbanized areas have more market opportunity for retail because the dollars live there and will shop there, if given the available opportunity.

Another underrepresented ingredient could be the availability of transit or some form of public transportation that may already exist in the communities of and surrounding redevelopment sites.  In a tight economy when people are saving money any way they can, the use of transit is strong and thus the opportunity for transit-oriented development (TOD) is a win-win for new development.  TOD is a lightning rod concept in many urbanized areas to help spark investment in otherwise stagnant or failing economies.  This is where there appears to have a good return on investment for lenders and end users.

The attached article from the Urban Land Institute is an interview of five real estate experts from around the country discussing the hottest redevelopment opportunities, as they see them.  http://urbanland.uli.org/Articles/2010/SeptOct/Nyren1

ESteere   Frederick Ward, Infrastructure
Frederick Ward Associates, Planning, Redevelopment, Urban Land Institute