Rediscovering downtown: An economic option for the future

January 24, 2010

For decades, suburbia has been the focus of growth and development in our cities.  Families moved out to the suburbs in search of better schools and bigger houses with two car garages. Life revolved around driving – everywhere. But as our suburbs mushroomed, our downtown areas declined.

Over the past several years, there has been a newfound energy in our city centers and the country’s economic future points to an expanded role for downtown development.  The recently published Emerging Trends in Real Estate 2010 reported that next-generation projects will orient to smaller housing units, close to mass transit, work and 24-hour amenities.  Downtown development will gain favor over large houses on big lots at the suburban edge. In Columbia, and in many other cities across the nation, urban leaders are arriving at the same conclusion: the economic advantages of mixed-use (some combination of residential, commercial or office) or infill (renovating empty buildings or lots) development in the downtown area ensure that this trend will continue for generations to come. What factors are driving this trend? 

Cost savings for government
Compact development downtown greatly reduces infrastructure costs required to build and maintain new roads, schools, power lines, sewer systems, drainage ponds, and fire stations water lines etc. In most cases, the infrastructure is already in place! The cost savings captured by state, county, and local governments, as well as by the developer are estimated to be approximately $125,000 per unit.  Most of the permitting costs, environmental fees, building permits and rising costs of utilities (stealth costs) are absorbed by taxpayers. Conserving an existing downtown building versus reproducing the building elsewhere results in an average savings of about $20 per square feet versus new construction.

In this country, we can save over $100 billion in infrastructure costs over the next 25 years by growing compactly.  Too many suburban dwellers chose not to connect the dots between the pressure to increase taxes and the cost of building, and subsequently maintaining, new infrastructure to support modern urban sprawl subdivisions and strip malls. 

Lifestyle choices
The city-center matrix of almost every metropolitan area has always boasted a variety of activities: housing, shopping, government offices, churches, libraries, museums, and health care and entertainment facilities. With major medical facilities, the University of South Carolina, government, banking, corporate and legal offices, as well as a growing number of restaurants, downtown Columbia is no exception. People want be close to the action.

People also want to be able to walk to work and thereby save on gasoline and vehicle maintenance.  50% percent of an individual’s gross income is spent on housing and transportation costs. People see the health benefits of walking. And for those who do not have to take a chunk out of their day to drive back and forth to work, time saved is a major factor in the improvement to the quality of life.

With those 55 and older, the suburbs are a tough place to grow old.  This age group finds the option of living downtown especially appealing: no more yard work, driving everywhere for daily needs and, in many cases, feelings of isolation.

The Urban Land Institute (ULI) estimates that if we diverted 60 percent of future growth to compact, walkable, downtown neighborhoods or multifamily development by 2030, the United States could reduce its annual emissions of carbon dioxide by 85 million metric tons. Environmental benefits extend to preserving green space, reducing the amount of paved surfaces, and decreasing air pollution. 

Young professionals and empty nesters are attracted to a downtown lifestyle.  These individuals represent 20 percent of the total population of the Columbia area, but in the years to come, the aging of the population, will make this number increase dramatically.

Political inertia and economics
The political will to reverse the trend of declining downtowns is evident all over the country. Redeveloping underutilized buildings as mixed-use preserves the diversity of architecture and saves money by not having to create new housing units and commercial facilities in another location. Protecting historic buildings adds to the beauty of a city and the sense of pride that citizens feel about their town.  Downtown mixed-use or infill development adds retail/commercial establishments on the street level. All of these make good sense to those overseeing decision-making at the political level.  Who does not want to have a vibrant and vital downtown?

In a report by Cornell University: …one person working downtown has the same impact as four people visiting or shopping downtown. One person living downtown has the same impact as eight people visiting or shopping. The report also says …additional employees and residents will generate demand for other businesses such as retail stores, entertainment and many other services. Additional income added to the downtown revenue base for each incremental unit of created housing amounts to $4,000 to $6,000 each and every year.

To entice new development to Columbia’s center-city, more people must live downtown. This process will not happen over night, but we look for this trend to continue well into the future. Going forward, it’s not a matter of picking suburban development over higher density development downtown, but perhaps finding a better balance between the two.   

By David Bryant
President, US Development
Written in collaboration with Tom & Jeff Prioreschi

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