Page 10 —
COLORADO REAL ESTATE JOURNAL
— July 15-August 4, 2015
Greater Denver
A
n emerging trend in
commercial real estate
is
transit-oriented
development. Initially con-
centrated in cities with highly
developed rail transit systems,
this type of development is now
occurring in cities such as Den-
ver; Dallas; Portland, Oregon;
Minneapolis; and Charlotte,
North Carolina.
Transit-oriented develop-
ments tend to be higher-density,
mixed-use commercial and resi-
dential properties that are close
to public transit stops, particu-
larly light rail, commuter rail
or bus rapid transit. Residents,
employees and visitors to TOD
properties take advantage of
“walkability,” reduced need
for automobiles, proximity to
services and the convenience
of shorter commutes. All these
factors tend to have a positive
effect on rents and prices.
In metro Denver, bus and
rail transit is provided by
the Regional Transportation
District, a seven-county pub-
lic agency. Initially the light-
rail component had lines from
downtown to Five Points and
Littleton. Approval of the Fas-
Tracks expansion program by
metro voters resulted in the con-
struction of new light rail, com-
muter rail and bus rapid transit
lines to most parts of the metro
area, all of which will be opera-
tional by 2018.
Transit-oriented development
in metro Denver has been con-
centrated mainly in the apart-
ment sector, taking advantage
of low vacancy rates and strong
demand. At the end of the first
quarter
of
2015,
over
20,500 units
were under
c o n s t r u c -
tion, of which
about 7,200
could be con-
sidered tran-
sit oriented
due to prox-
imity to tran-
sit stations.
In addition,
deve l ope r s
had proposed
19,709 units,
with TOD apartment commu-
nities accounting for 6,200 of
those units. These TOD proj-
ects amount to nearly a third of
the apartment units under con-
struction or planned in metro
Denver.
Developers also are starting
speculative office development.
Most of the proposed buildings
are downtown, especially near
RTD’s hub at Denver Union
Station, but others are being
proposed along the Southeast
light-rail line, in Boulder and
Cherry Creek North. In addi-
tion, several major tenants
recently announced plans to
move downtown from subur-
ban locations to take advantage
of transit access, especially Den-
ver Union Station.
From a developer’s perspec-
tive, the benefits of TOD vary
depending on property type
and market. According to a
2014 study byArthur C. Nelson,
professor of planning and real
estate development at the Uni-
versity of Arizona, “Planners
and public
officials have
a s s u m e d
that the larg-
est
share
of
market
responsive-
ness to tran-
sit stations
o c c u r r e d
within
the
first quarter-
mile and the
rest out to
about one-
h a l f - m i l e .
E m e r g -
ing analysis is relaxing those
narrow bands for apartments
and office land uses, the pre-
miums for which can extend
well beyond a mile, with half
or more of the premium found
within the first one-half mile.”
Another study of office rents
completed by Nelson in 2014
was Office Rent Premiums
with Respect to Distance from
Light Rail Transit Stations in
Dallas and Denver. The study
found, “As the distance from
a (light-rail) station increases,
rents fall … but at a declining
rate.” Based upon the data ana-
lyzed in this study, the distance
threshold for the effect of light-
rail station proximity on office
rents for the Denver market is
estimated at “about 3.3 miles.”
Most analysts do not expect
employees to walk three miles,
but rather they use alternative
transportation, such as bicycles
or shuttles.
Ridership is the key to the
combined success of light rail
and the associated transit-ori-
ented devel-
o p m e n t .
A c c o r d i n g
to a study
by
G.B.
Ar r i n g t o n ,
Light Rail and
the American
City, “A suc-
cessful TOD
can increase
ridership at
an individual
station 20 per-
cent to 40 per-
cent and up
to 5 percent
overall at the regional level.”
Transit usage is enhanced by
bringing riders closer to transit
facilities through well-planned,
compact
developments.
Arrington further states that
“successful TOD projects have
to be successful without transit
in order to be successful with
transit.” He says projects should
be “transit oriented” and not
“transit dependent.”
The value associated with
the proximity to rail-transit
stations is known as a “tran-
sit premium.” The Center for
Transit Oriented Development
examined several studies and
concluded the impact on real
estate values for “transit premi-
ums ranged from a few percent
to over 150 percent increase.”
The study noted, “Increases
were most dramatic for office
and retail uses while single-
family residential value premi-
ums range from 2 percent to 32
percent, condominiums range
from 2 percent to 18 percent
and apartments from 0 percent
to 45 percent.”
Demographics also influence
TOD viability. In a 2013 study
by the American Public Trans-
portation Association, nearly 70
percent of millennials use “mul-
tiple ways of getting around a
city or suburb.” According to
54 percent of millennials polled,
public transportation ranked
highest as the “best mode to
connect to all other modes,”
including car-sharing, cycling,
walking and car ownership.
Millennials are among the best
customers for TOD real estate,
especially residential.
Overall, several factors help
make transit-oriented devel-
opment feasible and success-
ful. Based on experience with
transit-oriented development
in metro Denver and other
comparable cities, those factors
include:
• Stations within walkable
proximity to major employers,
sporting and entertainment
venues, shopping, medical cen-
ters, colleges and universities or
other civic facilities. These types
of stations become destinations.
• Stations adjacent to, or with-
in walking distance of, high-
density multifamily residential
units or established residential
neighborhoods. These locations
also feature “drop-off” lanes
and retail and restaurant uses
that cater to arriving or depart-
ing passengers. In some cases
parking garages also are pro-
vided.
• Stations with convenient
options for transfers to other
modes of public transporta-
tion.
s
Eric Karnes
Director of market
research, James Real
Estate Services Inc.,
Denver
Denise Moore
Director of
multifamily valuation,
James Real Estate
Services Inc., Denver
Bill James, MAI,
CCIM
President, James Real
Estate Services Inc.,
Denver
