Making Tracks

Why the real estate industry should stay mindful of a frequently overlooked issue with profound implications for every market.
Executive Editor Paul Rosta
Executive Editor Paul Rosta

Rapid growth in population, jobs and investment is a problem that cities and real estate markets usually like to have. Nevertheless, success breeds its own challenges. As Holly Dutton points out in this month’s CPE cover story this month, economic expansion is closely tied to the infrastructure that does much to spur growth in the first place.

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Take the Phoenix metropolitan area. Valley Metro, the regional transit agency, estimates that the area’s 28-mile light rail and streetcar network has already attracted $12.2 billion worth of investment and projects another $4.2 billion worth of future commercial and residential development along existing routes.

And more infrastructure investment is on the way. In Tempe, a $192 million, three-mile-long streetcar line is on track to open by 2021. Two years later, Valley Metro will debut a 5.5-mile light-rail line connecting south Phoenix to the downtown hub. Voters are all in, too. A ballot measure that would have killed the light-rail program lost nearly two-to-one in August.

Contradictory Case

Nashville presents a fascinating and contradictory case. As Dutton notes, the capital of Tennessee (and, of course, country music) offers enviable qualities: a burgeoning healthcare industry, small-town friendliness and more than 20 institutions of higher learning, to name a few. A symbol of the city’s aspiration to join the ranks of elite real estate markets is Nashville Yards, a  $1 billion mixed-use district that will be anchored by a $230 million Amazon office campus.

But a large-scale infrastructure expansion is proving to be an uphill climb. In May 2018, Nashville voters soundly rejected a $5.4 billion ballot measure that would have funded a new light rail network and other improvements. Observers have variously attributed the defeat to inadequate messaging, objections to proposed tax increases and a split between older and younger voters. Whatever the causes, Nashville’s next vote on transit funding is probably years away.

Of course, transit projects can be boondoggles as well as boons. But when metros fail to keep up with upgrades, they risk constraining their own potential. The consequences of delaying or abandoning a real estate project are often profound; such is also the case for the roads, bridges and railways that serve as the arteries of the built environment. Even though the daily demands of business require unending time and energy, I’d urge all industry professionals to stay on top of the infrastructure issues that do much to shape the direction of commercial real estate.

Read the November 2019 issue of CPE.