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Where Will Future Development Occur?

A confluence of factors will result in most growth taking place on the fringes of major metros.

The location of new commercial real estate will be determined by how fast the economy recovers, how additional commercial development fits future residential strategies, and how decisions about growth are made. The U.S. economy will recover slowly. Consumers have reduced incomes and are saving more. Businesses are reluctant to expand without more customers, as jobs come back gradually.

Some urban planners contend this situation requires changing basic U.S. urban growth policies followed for 65 years. Instead of further low-density, outward growth on undeveloped land, they say metropolitan areas should shift residential growth into high-density infill in established communities.

Also, many suburbs were designed around vehicles, but millions of older residents will be unable to drive. They would be better off living where they could walk to grocery stores and other services.

“Walkability” proponents believe the remedy lies in more public transportation, developing high-density neighborhoods near transit stops and locating future population growth in established communities, but with higher densities. Such a strategy also would reduce future pollution from autos.

Whether growth occurs on urban fringes or in infill areas will affect where future commercial properties will locate. They will follow the residential growth.

Development on hold
In the near future, there will be little expansion of shopping centers, office buildings, hotels, and industrial buildings. There is too much vacant space of these property types to stimulate much more investment in the short term.

Moreover, the strategy of densifying existing metropolitan areas and making them more walkable, rather than expanding outward poses major problems. One is the sheer size of future population growth. The Census Bureau projects the population will grow by 55 million from 2010 to 2030, compared with 58 million from 1990 to 2010. In the latter period, the average density of new suburban growth was lower than the density of metropolitan settlements in the previous 45 years since World War II.

Dose of reality
It is unrealistic to believe that even half the additional 55 million people in 2030 can live in infill spaces, or that high-density development will replace large parts of existing built-up areas. So most future growth will continue to be on suburban peripheries.

New neighborhoods will not feature the high densities that are typical of transit-oriented developments like those in Manhattan and Arlington, Va.

A second issue is whether most of the added 55 million people will be satisfied with living in areas based heavily on public transportation. In 2000, only 4.5% of all commuting in America was done on public transportation, and over 80% of all personal travel was in automobiles or light trucks. Vast portions of our suburbs are unserved by public transportation. The reliance on private vehicles is not going to disappear anytime soon.

Moreover, public transportation — especially rail — always loses money. Yet there are no funding sources to increase its capacity. We need to slash our dependence on imported oil. But the best way to do that is to shift the engines in private vehicles to electricity, natural gas, or hydrogen, not to shift people out of private vehicles.

The third problem is that few U.S. metro areas plan growth on a regional basis. Local governments control almost all decisions about growth and the types of housing and neighborhoods they will contain. Those governments are dominated by homeowners who normally reject major changes in the status quo.

These realities mean that future commercial real estate development will arise slowly and will still consist mainly of outward expansion at metropolitan fringes rather than a radical shift to walkability, public transit, high density, and mainly infill developments.

Tony Downs is a senior fellow at the Brookings Institution. He can be reached at [email protected]

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