New urban projects yield solid returns

But only a tiny percentage of U.S. real estate dollars are now invested in neotraditional developments. or every dollar that institutions invest in traditional neighborhood developments (TNDs), an estimated $1,400 goes into conventional real estate projects. While TND investment is minuscule in relative terms, it has totaled an estimated $1.1 billion — a figure that has grown by 60 percent annually over the last five years. Cultural and economic trends indicate that TND investment will continue to grow at a rapid pace. One reason is the strong interest in “Smart Growth,” i.e. compact, mixed-use, pedestrian-oriented development (see article on page 17), and the New Urbanism. Another is that many TNDs are providing developers with strong returns on investment (see Table 1). Annual returns on most of the six projects listed range from 25 percent to 45 percent, measured by the annual increase in market value of developed property as determined by sale and resale prices. The TND returns substantially exceed the real estate investment returns reported in the National Council of Real Estate Investment Fiduciaries Property Index (just under 9 percent average annual return over the last 10 years). The TNDs also exceed the returns from common stocks (S&P 500), which have a

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