Investing for the long-term

New Urban News Article with graphs, 9/1/03

Real estate finance expert suggests that new urbanists increase equity and reduce conventional debt to reap the advantage of greater eventual appreciation.

Christopher Leinberger of Arcadia Land Co., a leading new urbanist finance theorist, believes that financial returns from new urban communities lag behind conventional suburban development (CSD) in the first few years. But if done right, those new urban developments will greatly outstrip CSD in the long term, he says. (Graph 1 on the next page illustrates his point.)

Conventional suburban projects lose their value in the mid- to long-term, Leinberger says, because they are built cheaply — at $35 a square foot, for example, for cinder-block and simulation stucco retail stores — and because the worth of their locations declines quickly as sprawl moves demand farther out. What was once the “100 percent” intersection becomes passé as newer strip malls are built elsewhere. Though suburban centers sometimes get a second life if they are substantially refurbished, they can still fall prey to sprawl and inexpensive construction.

Urbanism, by contrast, is more durable, Leinberger says. Quality urbanism uses longer-lasting materials, since it is meant to be experienced up close as one walks past, not from a car traveling 45 miles per hour, 150 feet away — and it generates its own value of place. Three examples of quality urbanism cited by Leinberger are Country Club Plaza in Kansas City, Missouri, developed by J.C. Nichols; Coral Gables, Florida, developed by George Merrick; and Seaside, Florida, by Robert Davis.