In this year’s State of the Union Address, President Obama urged the government to aggressively increase spending on improving and creating infrastructure projects. In fact, his 2015 budget calls for $302 billion to be spent over four years on surface transportation alone.
If this spending is approved, look for an increase in infrastructure improvements and in the number of new transit- oriented developments across the country that will open up more opportunities for new retail space.
The Transport Politic, a web site that follows transit-oriented development across the globe, recently posted an article and infographic illustrating openings and construction starts planned for 2015 for the U.S., Canada and Mexico. The article states, “There is more than $90 billion being spent on new projects under construction and more than $7 billion being spent on major renovations underway in the U.S., Canada, and Mexico, accounting for a total of 667 new miles of fixed-route transit services.”
That’s a lot of new transit development which may not historically have turned the heads of retailers or private retail developers. However, according to The Transit Politic, this trend is turning around, as more local governments and private developers are working together to reap the benefits of connecting new development with transit investments.
The Environmental Protection Agency recently published a report called “Encouraging Transit-Oriented Development: Case Studies that Work.” The report stressed the importance of leveraging public-private partnerships to increase the success of transit-oriented developments. “Research shows that transit can add significant value to land near stations. Developing the land maximizes that value and can yield significant revenues from long-term ground leases, rents or sales, as well as increased property and sales taxes and farebox revenues, and provide increased revenues from fees on everything from parking to business licenses.”
One example of this type of public-private partnership is the Hudson Yards Redevelopment Project in Manhattan. The project is a joint venture between the New York City Department of City Planning and the Metropolitan Transportation Authority (MTA). These entities are working with two private real estate firms, Related Companies and Oxford Properties, who have formed a joint venture to develop the focal point of the project, Hudson Yards.
The MTA worked closely with the JV to structure a flexible deal. The MTA created a “severable” ground lease that allows developers to cut the space into several ground leases, making it easier to secure financing.
“Hudson Yards, Manhattan West and all the proposed development around both projects are great examples of enhanced transportation infrastructure helping to facilitate large scale, urban development. Without the extension of the seven line subway, the viability of a project of this scale and diversity uses probably wouldn’t be feasible in the near term,” said Patrick Smith, executive vice president in SRS’ New York office.
Hudson Yards encompasses approximately 28 acres and is expected to include retail shops, restaurants, office space, residential, hotel, cultural and public open spaces. The first official retailer slated to join the development is the city’s first Neiman Marcus who will be joined by Coach, L’Oreal and 147 additional, as yet unannounced, retailers.
With the increased demand for live/work/play solutions in large urban settings, look for increased interest by retailers and private developers to take advantage of the high commuter traffic, tourists, office workers and residents surrounding these developments. By Janie French, Director of Business Development.