Economic Development Reference Guide

Real Estate Redevelopment

Vacant and older buildings blemish many urban neighborhoods, contributing to blight, crime, and perceptions of the neighborhood as an undesirable place to live and do business. Vacant buildings lead to disinvestment. The Urban Land Institute estimates that the United States holds 876 million square feet surplus of industrial space, which present threats to neighborhoods if left unattended, and opportunities if reused or redeveloped.

Property redevelopment and reuse refers to the process of taking previously developed property or areas to a higher, more productive use. Redevelopment consists of demolition with new construction, or the process of improving an area through both new construction and property reuse. Property reuse is the renovation or rehabilitation of an existing building. Reuse and redevelopment projects, often located in distressed neighborhoods, are usually high-risk development projects from a private sector point of view, and require public action to leverage private activity.

As commercial and residential activity continues to move from the urban core to the suburbs, cities lose jobs and tax base, and face higher levels of blight. Redevelopment and reuse provide ways to rebuild neighborhoods economically, remove blight, and improve the quality of life.

The economic developer may act as a coordinator among developers, banks, regulatory authorities, and private businesses, which are the end-users of most redevelopment projects. Urban economic developers may become involved in real estate redevelopment to revitalize their core areas and retain firms within the city limits.

Trends in Real Estate Redevelopment

Redevelopers are looking to cities not only for existing buildings and infrastructure, but for growing markets. Many cities in the United States are littered with empty shells of buildings that once housed manufacturing firms, derelict shops, and huge empty warehouses. Many of these buildings are in or near to city centers, making the buildings ideal for redevelopment and meeting the demands of the new economy. The following are key trends:

• Buildings are being reused for mixed-use projects incorporating retail, office, and housing, or solely as office developments. The size of older industrial buildings and redundant department stores makes them difficult to redevelop. Mixed-use development can capitalize on this by including multiple components that serve different markets simultaneously.

• Old office buildings, lofts, and warehouses are being retrofitted with high bandwidth fiber optic cables and microwave antennas for IT firms and other businesses needing large open plan buildings.

• Carrier hotels for IT businesses are being developed from old warehouses in urban cores because these buildings offer high load bearing capabilities and high ceilings essential necessary to store large amounts of equiment.

• Mixed-use projects in central urban areas include more market-rate and low-income housing to meet demand for housing closer to the workplace.

• Public finance continues to play a crucial role, especially in the revitalization of distressed neighborhoods.

• Federal funding and financing for redevelopment comes primarily through HUD community development block grants, HUD section 108 loans, EDA public works grants, and various revolving loan funds.

• Real estate redevelopment is often part of downtown and neighborhood development.

• Public-private partnerships are increasingly common in redevelopment projects.

• Redevelopment projects addressing environmental concerns include features like:

  • Quality insulation to cut HVAC costs
  • Natural lighting to cut electricity costs
  • Solar-heated hot water
  • Reuse of building materials, such as bricks from demolished buildings
  • "Smart" buildings, which sense when people are (not) present and adjust heat, lighting, etc. accordingly.

• Military bases are often redeveloped for economic development purposes.

Benchmarking and Evaluating Real Estate Redevelopment Programs

Like brownfields projects, redevelopment and reuse projects are pursued to meet economic and social objectives. Evaluation, therefore, should consider both. Redevelopment and reuse projects require long time frames to implement; thus, it should be expected that economic benefits will increase over time. Studies of EDA projects showed that full jobs-creation impacts often take six to ten years to emerge. Project comparisons should take time frame into consideration.

Because property reuse and redevelopment may not create as many jobs as business finance, retention, or attraction programs, it should be evaluated using a wide range of indicators. C rucially, the main goals of property redevelopment and reuse are to remove blight, improve the quality of life, and create an environment that attracts new commercial and residential investment. Job creation is only one of several key objectives, so it should be used as one of the judging criteria, not the main criterion.

Quantitative measures

• Cost per job created/retained
• Private sector leverage
• Percent of jobs held by local residents/low income persons
• Average salary of jobs created
• Spinoff private investment
• Crime rates

Qualitative measures

• Significance of project to community
• Stated project goals and the degree to which they have been achieved (e.g. creation of open space or crime reduction)
• Community engagement in the process
• Perceptions of the neighborhood
• Degree and character of public-private partnerships

Web-based Resources for Real Estate Redevelopment

• Black's Guide
• The National Association of Housing and Redevelopment Officials
• National Association of Industrial & Offices Properties (NAIOP)
• NAID, An Association of Defense Communities
• National Trust for Historic Preservation
• National Park Service
• New Leaf Green Development
• Urban Land Institute
  
  
• Business Journals:
  • American Business Law Journal
  • Wall Street Journal
  • Washington Business Journal

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• Economic Development Finance Programs
February 17-19 | Lansing, MI

• Economic Development Credit Analysis
March 3-5 | Los Angeles, CA

• Economic Development Strategic Planning
March 18-19 | Springfield, MO

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