Urban Investment & Development

Urban investment directs capital toward city center infrastructure and projects to develop real estate.

Urban real estate investment and development can be highly lucrative. Some analysts also believe that inner-city investments are rapidly becoming more valuable in the United States, owing in part to increased population growth in core cities. These population shifts are notable in comparison to the last half of the 20th century, which was generally characterized by city center decline. For those considering investments in urban development, it can be good to know some of the basics of this kind of real estate business.

Basics

Urban investment and development is the process of converting the land and buildings in cities to more economically productive uses. Specifically, urban development usually means densification --- the replacement of smaller buildings with larger ones. Urban investment can yield a return when people and businesses move into buildings owned by the investors and pay rent. For urban investment to be successful, potential tenants must be able to find value in living or working in an urban context. For businesses, urban locations usually yield higher traffic and more nearby customers. For residents, urban locations might provide closer access to work, amenities or products.

Public Investment and Development

In many cases, governments and public agencies are responsible for urban investment and development efforts. In early incarnations, public agencies engaged in massive urban renewal projects that included planned retail districts, low-income housing developments and new infrastructure construction. More recently, urban investment has tended to be more low-impact, supporting the efforts of private developers with incentives like tax credits and loan guarantees. In some areas, public agencies called development authorities purchase land and make strategic investment decisions, much like a private developer.

Private Investment and Development

Private corporations also invest heavily in urban development. In some cases, these efforts come in concert with public investment. Private businesses might provide capital or management expertise in exchange for public support with transportation infrastructure or tax benefits. Private corporations may also engage in development activities without public assistance, motivated primarily by potential profits. Some real estate companies specialize in urban development as a major focus of their investment activities, while others make these kinds of investments in addition to rural or suburban real estate activities.

Urban Real Estate Funds

Private investment opportunities are sometimes organized in the form of mutual funds and real estate funds, to help attract capital. These arrangements help reduce the risk to individual investors by allowing them to put some of their money into urban development projects, and some into other investment choices. Real estate funds that specifically target urban development include the Canyon-Johnson Urban Fund and the Urban Strategy America Fund.

References

• The Transport Politic: The Downtown Renaissance Extends Its Reach; Yonah Freemark; 2011
• "How Cities Work"; Alex Marshall; 2001
• "The Ecology of Place"; Timothy Beatley and Kristy Manning; 1997
• Portland Development Commission: Brief History of Urban Renewal in Portland, Oregon; Craig Wollner et. al.; 2003
• Gerding Elden: Strategy
• Goldman Sachs: Urban Investment Group--Investment Strategy

Resources

• Canyon-Johnson Urban Fund: Overview
• New Boston Fund: Urban Strategy America Fund; Strategy
• Harvard Law School: Pension Funds and Urban Revitalization; Tessa Hebb; 2005