Transit-oriented developments are bringing multiple transportation options closer to consumers while drawing a new generation of riders to mass transit.

By Jennifer Merer

The Golden Age of transit may have arrived. Driven by the skyrocketing price of gasoline, choked freeways and the desire for simpler, less harried lifestyles, consumers nationwide are taking a fresh and more positive look at public mass transit, and equally important, living, working and shopping at transit-oriented developments or mixed-use developments at transit stations. 

Ridership is up on transit systems nationwide, and every uptick in gas prices seems to convert a few more frustrated drivers into satisfied transit passengers. Local, state and federal governments, working in close partnership with the private sector, are investing billions of dollars in new and expanded public transportation infrastructure. 

At the same time, a new generation of innovative development is blossoming at and around public transit stations. TODs serve the dual purpose of bringing transit closer to consumers and, at the same time, creating compact communities that bring riders to mass transit systems. 

TOD projects typically also include retail, commercial and other activities that serve these residents and attract other consumers to the development. It’s a solution that works for communities, developers and citizens.

The trend is clear: Consumers are climbing aboard public transit.

Demographics and lifestyle preferences are bringing many riders through the transit turnstiles. A study by Fannie Mae and the Brookings Institution highlights a population resurgence in many inner cities, with 75 percent of downtown districts gaining population and attracting new investment in housing and retail. Research shows that empty nesters, the creative class and other demographic groups are moving to city centers, drawn by art, theater and other urban amenities, close proximity to work, and the availability of efficient and convenient transit systems. 

Congestion is another factor. According to the advocacy group Reconnecting America, ridership on public transit systems throughout the United States has grown 21 percent since 1995.  More recent surveys by the American Public Transit Association, including a 2006 sampling of public transit agencies in major U.S. cities, show that higher gasoline prices have indeed spurred transit ridership in recent months. 

Governments and private investors are responding to this growing demand for public transportation. Some 25 projects, representing a $16 billion investment, are in the transit “new starts” pipeline nationwide, with successful systems being expanded and new systems planned or being built in a number of metropolitan regions.

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A new kind of planned development is sprouting near many of the country’s mass transit stations, bus rapid transit stations, and park and ride facilities. 

TOD is based on a collaborative community planning approach in which transit systems are closely integrated with other land-use decisions. 

Many of those projects embrace a more holistic live-work-play philosophy that incorporates transit, moderate- to high-density housing, retail and entertainment, commercial and office space, and even health care facilities into a community-based, pedestrian-oriented design.

When well planned and executed, transit-oriented development meets both the supply and demand requirements of any successful development. TOD supplies convenient transportation to riders while at the same time creating affordable, close-in housing that builds additional demand for public transit.

Due to the uniqueness and complexity of most TOD projects, cities and developers increasingly seek out specialists who can spot and minimize potential problems while maximizing the opportunities of each property. 

In previous years, when two major highways intersected, commercial development would inevitably spring up near the crossroads. Much the same is happening with TOD, as cities, landowners, developers and consumers recognize the value of being near a transit hub. 

Developers can often command a 20 to 30 percent premium on residential and retail properties near TODs, because transit-focused developments are increasingly seen as the urban centers of the future. 

People want the convenience of being able to walk from their apartment or condo to a shop, a restaurant, their place of work or a transit station. People are willing to pay a premium for that kind of access.

Successful TODs typically require close collaboration between the public and private sectors: Builders and developers need the funding available only from public agencies. At the same time, government agencies increasingly recognize that they need expertise found only in the private sector for things like design, development and traditional construction loans to make transit and related developments work.

Federal funding is available to finance many aspects of a TOD, from housing and garages to landscaping, lighting and open spaces. Thanks to a growing recognition of the value of transit-oriented developments, a capital market focusing specifically on investments in developments at and adjacent to metropolitan transit hubs is emerging. TODs are a magnet for both consumers and savvy investors.

It costs about $10 million to build a transit station these days, and when a public agency makes that kind of investment, developers and the owners of adjacent land naturally want to get the highest and best use for the property.  So we immediately see the emergence of high-density, mixed-use transit-oriented developments around these stations.

In recent years, TODs have shifted from a largely theoretical planning stage toward a growing, nationally recognized real estate market segment. When TOD projects are well conceived and championed, more experienced and capable developers will respond. Municipalities now perceive the value of transit-based projects and are increasingly willing to support the mixed-use developments that make TODs feasible. 

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