‘Development Economics 101’:
How Will Growth, Emerging Economic Pressures
& Market Forces Influence In-fill Redevelopment?
For
Maryland-National Capital Park & Planning Commission
By
W. Thomas Lavash
Economics Research Associates (ERA)
Washington, D.C.
Creating Thriving & Sustainable Communities
Guiding Questions
• Where will the County’s 213,000 new residents live?
• How can we sustain “livability” in existing
communities?
• How do we prevent decline of older areas?
• How will growth affect residential development?
• How can we sustain high-quality public services &
facilities?
Creating Thriving & Sustainable Communities
The Fundamentals
• Are there sites to (re-)develop? How competitive are
they?
• What are the potential hurdles to overcome?
• What does the market analysis say? How do
demographic forecasts & market conditions translate
into development potential?
• Does it pencil out? Can a developer create long-term
value?
• What are the potential costs & benefits to the public
sector?
Creating Thriving & Sustainable Communities
What is In-fill?
• The planning buzz—
-Mixed-use vs. multi-use
-New Urbanist
-T.O.D.
-Urban retrofit, suburban in-fill
-Lifestyle center, category killers
• Obvious shared goals—reining in
sprawl, strengthening diverse
neighborhoods, protecting open
space, enhancing the public realm,
reducing reliance on the automobile
Creating Thriving & Sustainable Communities
Two Examples
Creating Thriving & Sustainable Communities
Market Common—Arlington
• “Mixed-use lifestyle urban
village”
• $120 million project built on
former Sears Dept. Store site,
vacant for 10 years
• Three phases comprising
172,000 SF of retail, 300 MF
units, 87 townhouses, Whole
Foods
• Anchored by national retailers
with top sales performance
• Entirely privately financed,
achieving premium rents, sales
• Phase I sold in 2003 for record
$986/SF
Creating Thriving & Sustainable Communities
Market Common—Arlington
• Mix of unit types attracts first-
time renters & empty nesters
• Strong market conditions did not
require any public support
• Complicated site development,
structured parking requirements
increased development costs,
necessitating higher rents, sales
prices
• Project stimulated adjacent
redevelopment of retail, office,
300 new housing units
McCaffery Interests
Creating Thriving & Sustainable Communities
Paseo Colorado—Pasadena, CA
• “New Urbanist”, open-air village
• $222 million project developed
as public-private partnership
• 15-acre site was a failed, 1980s
mall that had eliminated city
street grid
• 590,000 SF of retail, 400 MF &
loft apartments ranging in size
from 600 to 1,400 SF
• Anchors include Macy’s, 14-
screen cinema, dining district
Creating Thriving & Sustainable Communities
Paseo Colorado—Pasadena, CA
• City took lead role in
redevelopment
• Relocation of existing retail
tenants required extensive
negotiations
• Significant public outreach—60
meetings—resulted in
unanimous project approval
• City provided $32 million for
parking & costs associated with
street grid
• Generating net new property &
sales taxes, TIF funds
Creating Thriving & Sustainable Communities
Lessons Learned: This is NOT Easy!
• In-fill is more complex, requires greater
understanding, more time to develop
• More expensive, more complicated financing requires
higher rents, sales
• Multiple development partners with specific expertise
• Longer time required to realize return-on-investment
• Oriented to affluent households
• In strong markets, housing helps a project pencil out
• Higher land & project costs requires higher densities
Creating Thriving & Sustainable Communities
Lessons Learned: This is NOT Easy!
• Mix of housing types—broadens market appeal—to
young singles, empty nesters
• Adding residential may help a project pencil out
• Retail in-fill emphasizes anchor tenants that generate
evening traffic, enhance ’18-6’ environment
• Proximity to transit generates premiums
• Higher retail sales performance generates spin-off
benefits to community
• Stimulates additional adjacent redevelopment
Creating Thriving & Sustainable Communities
