I’m currently in the process of concluding work with a historic reuse team focused on next steps for the H.D. Hudson Manufacturing Building in Hastings, Minnesota. The City-owned Hudson Building is of substantial size, and offers open floor plans and high ceilings – a blank, solid canvas. The Hudson was featured as a “hot property” recently in the Minneapolis Star Tribune.
From a finance perspective, the chief hurdle for historic reuse is reconciling long-term lease rates or purchase prices, with a rehabilitation investment that may include remediation, demolition, site costs, and a collection of items that can petrify typical investors: HVAC, roofs, stormwater management, vertical circulation, accessibility improvements. My role on the team, led by Will Stark of Stark Preservation Planning, has been to:
Historic structures offer uncommon attributes for the very reason that their construction occurred in a different marketplace. In the late 1800s when the Hudson Company put up the Hastings facility, materials including stone and lumber were available at lower real cost than today. The proximity of the building to the Mississippi River distinguishes the building regionally, in part because regulations have evolved to protect the river from development impacts. The reuse or demolition of the structure will, either way, continue to influence the health of downtown Hastings.
Access is valuable. In metro regions effective passenger transportation is a critical ingredient of continued competitiveness and quality of life. Due to a range of economic and political factors, rail transportation is expanding as a mode for moving freight and people alike.
Shared experience of regions in the U.S. and internationally suggests that rail transit infrastructure endows nearby property with a substantial value premium. Economist Joe Cortright analyzed 94,000 home sales in 15 metropolitan U.S. markets, and found that homes located within walking distance to varied amenities are valued more highly in the marketplace than comparable property situated elsewhere. Examining two neighborhoods in Charlotte, North Carolina, Cortright identified that a typical home in the Wilmore demands a premium of $34,000 or 12% of median value, compared to much less pedestrian-accessible Ashley Park. The experience of other metro areas including Jacksonville, Chicago, Sacramento and Austin reflect premium levels of $10,000 or more for homes of median value in neighborhoods with high levels of non-auto access.
Early evidence of light rail transit (LRT) lines in this region is consistent with Cortright’s findings. The University of Minnesota’s Center for Transportation Studies released preliminary results of a second-phase study of property appreciation near the Hiawatha LRT Line in Minneapolis. The process, using residential sale data, has found positive impacts of roughly 25% on single- and multi-family housing located near station areas. Candidly, the Hiawatha Line has been a success in terms of ridership but isn’t particularly effective in stitching neighborhoods together with downtown. If effects are favorable here, they will be so for coming lines that connect Saint Paul and Minneapolis, and Minneapolis’ downtown to its south side and suburbs beyond.
It’s not just residential property values that are influenced by accessibility. Analyses undertaken for the Urban Land Institute and the National Association of Realtors found a 23% premium in California’s Santa Clara County land values within ¼ mile of light rail transit stops. Another study of the San Diego LRT system found land value premiums as high as 72-91% for commercial land located near station areas on particular lines; the same study found that commercial land on other lines was discounted by the presence of the LRT stations. A 2007 study of the dense network of Dutch rail stations concluded that commercial property within ¼ mile of a rail station exhibited a land-value premium of over 12%.
Recently, Donjek was hired by a client in the Southeast U.S. to explore national models for financing development adjacent to LRT investments. We focused on multiple tools used to great effect nationally:
Each region is distinct in its history, its disposition about public/private partnerships, its attitudes toward transit, and how high-impact regional decisions are formulated and implemented. These tools are applicable in degrees depending on these and other factors.
LRT and fixed-rail transit infrastructure doesn’t belong everywhere. And as the Federal Transit Administration has made clear in the last week, the federal government doesn’t intend to build systems that can’t be supported by ridership in the long term.
One key element to making transit work – for the environmental and fiscal health of the country and its communities – is concentrating development and redevelopment potential where it will be most accessible. These public finance tools can be part of that equation.
Over the last several months, I have been working with developer and consultant Michael Lander (Lander Group) and urban designer Peter Musty (Peter Musty LLC) to develop a concise, visual statement about the prospective impact that transportation investments can stimulate. Hopefully, you’ll find the graphic product below clear and persuasive – and you can download a pdf version here if you prefer.