Investing in Public Transportation Real Estate | Where High-End Developers Are Investing Right Now
By Paul Benson
Tuesday, August 5th, 2014
Public transit has been around as long as mankind. You could trace it as far back as Greek mythology, when Charon charged the newly deceased passengers a coin to be ferried across the rivers Styx and Acheron from the world of the living to the world of the dead.
Nowadays, public transportation has a major impact on the real estate industry. There is a growing market for high-end properties close to these areas.
Residential real estate prices for properties located near public transit are healthier and more conformable than in the expansive metropolitan region, according to the American Public Transportation Association and the National Association of Realtors.
Some of the top public transportation cities include San Francisco, Salt Lake City, Austin, Chicago, and Baltimore.
Notice that these cities also happen to be hot spots for young professionals? Not a coincidence.
Because of rising fuel prices, there is a greater demand for convenient access to public transit. This growing demand is primarily coming from the younger generation.
So let’s talk a little more about these cities and the way the public transit industry impacts developing real estate.
San Francisco has long been considered a public transportation-focused city. It is also one of the easiest cities in which to get around. Not coincidentally, San Francisco has some of the highest-priced real estate in the U.S.
Over 20% of the area’s population and 22.8% of its households lived within a half mile of public transportation in 2010, according to a survey from that year. Properties even closer to transit performed better than the rest of the market, with prices of those steps away from easy access exceeding those of some of the city’s priciest neighborhoods.
Salt Lake City is another city that has rapidly expanded in the area of public transportation. City officials developed a system called UTA Trax, which started off running just downtown and has since expanded from up north in Ogden all the way to Provo, south of the capital. UTA Trax now covers six counties.
The expansion outside of Salt Lake has opened up many opportunities not only for developing luxury real estate, but also for transit-oriented commercial real estate, such as mega malls and movie theaters.
Giant corporations such as eBay and Adobe have even created mini cities based on access to the Trax system from Ogden to Provo. This trend has developers scrambling to create more real estate for future stops and in any existing areas left.
Baltimore is rapidly becoming a popular city for developing real estate in conjunction with public transportation as well. The Baltimore Light Rail installed its first single line in 1983 and has since developed into a structure that covers all of Baltimore and its surrounding suburbs.
Reaching to places outside of downtown provides greater opportunities for flipping real estate in previously undesired areas. Some areas that were once abandoned are now trending with millennials, and in neighborhoods with old, forgotten townhomes and factories, newly remodeled condos and loft conversions are popping up.
Real Estate — Unrealized
According to the American Public Transportation Association, the average American transit commuter saved over $10,000 in 2011. We see this money being invested right back into yearly mortgage payments in these up-and-coming areas.
Real estate is the number one bet for millennials. They will cut costs anywhere they can to make a wise real estate investment — great news in the real estate business.
Developers are now starting to understand where and what to build in the next decade based on future transit destinations and city-center trends.
As an investor, you should also look for these trends and start buying up anything standing in these locations. In many cases, these places will have future value that has not yet been realized.
I will be publishing an in-depth study of the top transit-oriented cities and top projects in those regions shortly. Keep a lookout for that.