May 19, 2016

Transit-Oriented Development

What Is It?
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To tell it short, Transit-oriented Development (TOD) is a mixed-use residential and commercial area designed to maximize access to public transport and often incorporates features to encourage transit ridership. TOD is a hot topic right now as metropolitan areas deal with transportation and congestion-management options. Most if not all urban areas have a mass-transit system in place, but very few Americans make use of them. TOD creates a lifestyle centered on a mass-transit system that many urban dwellers could appreciate. As metropolitan areas develop their transit systems, there will be many opportunities for developers and professional service firms to jump on board the TOD trend.

Transportation is one of the major issues metropolitan areas are facing today, and it will continue to be a challenge in the future. As cities become more and more dense (over 80% of the U.S. population live in urban areas), new solutions to combat increasing traffic congestion and lack of parking are going to have to come to light if cities want to attract and retain residents.

Solutions proposed in the past include extensive bus routes, carpooling programs, and more recently, thanks to the rise in connect-ability, working from home. Another solution however, has been light rail transit. Light rail transit, or LRT, is urban public transport using rolling stock similar to a tramway, but operating at higher capacity, and often on an exclusive right-of-way. Basically, LRT is a passenger train that can hold a large amount of people, runs on a defined track, and has its own route and schedule through a specific corridor. LRT is very similar to a tramway system, and we will consider them the same. Bus Rapid Transit (BRT) is very similar to LRT; the system uses a bus in place of a tram, but still has a specified right-of-way in order to avoid traffic congestion.

LRT has just recently picked up in popularity across the United States. It has been popular overseas for much longer. In Japan, for example, passenger railways have been transporting a significant percentage of the population since their first railway opened in 1872. Today, roughly 43% of Japan’s population commutes by tramway or LRT, while less than 5% of Americans use any form of public transportation to get to work. Granted, Japan is about 1/25th the size of the United States, but we could still learn a thing or two from their public transportation system.

Very few metropolitan areas in the United States utilize public transport as much they could, with New York City leading the way at 55% of commuters, followed by Jersey City, Philadelphia, and San Francisco. There is work to be done in cities outside of the Northeast, and a lot of this has to do with lacking infrastructure. There simply hasn’t been a big push to get these systems constructed and in place. This is beginning to change.

Last year, the GROW AMERICA Act was introduced to the House of Representatives. This Act would significantly increase funding for public transportation projects across the country. Currently, it is under the supervision of the Subcommittee on Research and Technology. The Act could be passed in the near future, but until then, states are relying on the Federal Transit Administration’s New Starts program. This program appropriates roughly $2 billion to light rail, heavy rail, commuter rail, streetcar, and bus rapid transit projects each year. Projects must go through an extensive evaluation process to receive the funds.

Public Transit is the Backbone of Transit-Oriented Development

Constructing new LRT and BRT lines that flow into major metropolitan areas provides ample development opportunities for the public and private sectors alike, and developers of commercial and residential spaces will see major opportunities as well.

Each line that is constructed will have multiple stops along the way to its final destination. At these stops, there will be stations where people will purchase their tickets and wait for the tram or bus to arrive. To get to these stations, people will either be walking, driving, or receiving a ride. Regardless of how they get there, these people will be passing by prime real estate every single day. This is where land developers, retailers, and residential investors will have a huge opportunity. Basically, TOD is a development area that is specifically identified to provide convenient living, shopping, and eating centers to transit riders. A person can arrive at the station in the morning, having walked from their apartment or home that is close by, ride the rails into work, ride home, stop by the grocery store outside of the station, and walk home for the evening. Rinse and repeat, every day. This provides an attractive location for transit riders to live, and will hopefully encourage those who don’t utilize public transit to consider moving to these areas and taking part.

Land developers see the newfound area attractive as an opportunity to build apartments, restaurants, grocery stores, and other retail outlets. In Japan, on one of the more popular tramways, one of the stations is literally located inside of a department store. Whether you arrive and are one step away or across the street, the goal of TOD is the same: Provide consumers with a convenient place to live, shop, and eat, all within close proximity to their main method of transportation.

While transit-oriented development is becoming a popular niche market for many developers and professional service firms, the transit “backbone” must be in place, or at least approved, before capitalization can occur. The construction period for these LRT and BRT lines can range from 2-5 years, assuming minimal delays, and planning starts years in advance of this; environmental impact studies must be conducted and finalized, public opinion weighed, and funding secured.

Overall, public transit projects don’t spring up overnight; however, once there is talk of a new line being built, developers and retailers can begin to evaluate possibilities for TOD. As mentioned, the United States’ public transit infrastructure is in its infancy. Look for serious public (and private) investment to push these projects forward, and with them, TOD will follow.

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