the walkup wake up call

7/29/2019 The Walkup Wake Up Call

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1

By Christopher B. Leinberger

The George Washington UniversitySchool o Business

DC:

The WalkUPWake-Up CallThe Nations Capital As a

National Model or Walkable Urban Places


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2 DC: The WalkUp Wake-Up Call The George Washington University School of Business 2012

I. IntroductIon 3

II. WalkuPs defIned 5

The Rise o the WalkUP 6

Form Meets Function 7

The 6 Types o WalkUPs 8

III. WalkuPs In Metro d.c. 15

The 43 WalkUPs 16

Geographic Findings 18

Product Findings 19

IV. WalkuP trends 21

The Last Three Real Estate Cycles 22

Metro DC: A Model or the Country 23

V. WalkuP rankIngs 25

Economic Rankings 26

Social Equity Rankings 31

VII. next stePs 35

Conclusions & Recommendations 36

Further Study 39

VII. aPPendIces 40

Methodology 41

Endnotes 42

Acknowledgments 43

Table o Contents

Thanks to:

The Center or Real Estateand Urban Analysis


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3

Welcome to the Future.There is a game-changing shit underway in real estate.

New research reveals how walkable urban places and projects

will drive tomorrows real estate industry and the economy

and what actions are needed to take advantage o

these market trends.

What was perceived as a niche market is becoming the market.

This research takes a deep look at Washington, D.C., a national pioneer

in walkable urban places, to identiy where development has and will

take placeand the economic and social impact it will have.

>>>>>>>>>>>>>>>>>>>>>>>>>>

I. Introduction


4/444 DC: The WalkUp Wake-Up Call The George Washington University School of Business 2012

industry: place management. This new eld develops

the strategy and provides the day-to-day manage-

ment or walkable urban places (reerred to in short-

hand as WalkUPs), creating a distinctive could only

be here place in which investors and residents seem

willing to invest or the long term.

This new research denesor the rst timewhere

most existing WalkUPs are in the metropolitan D.C.

region. It shows specic locations, the physical size

o the places, the product mix, the transportation

options and so orth.

This study then ranks perormance or these WalkUPs,

based on two criteria: economics and social equity.

The economic perormance metrics help determine

where dierent kinds o investors should put their cap-ital and how these WalkUPs stack up against one an-

other. The social equity perormance metrics demon-

strate whether a broad cross-section o metropolitan

residents can live in or have transit access to WalkUPs.

WalkUps are the outcome o smart growth policiesthat have been debated or the last two decades.

The time or debate is over. The market has spoken.

It is now time or the public sector to encourage, the

real estate industry to build and place managementto be strengthened or be put in place to give the

market what it wants.

This rst attempt at quantiying the economics

and social equity o WalkUPs is based on research

methodology, titled Walk This Way3, that Dr. Mariela

Alonzo and I developed at the Brookings Institution.

Over time, I expect the results to be modied and

improved. This is not only anticipated, but it is en-

couraged as the eld o urbanism and the real estate

industry make strides in better understanding how tobuild and manage great places.

Sincerely,

Cisp B. Linbg

Charles Bendit Distinguished Scholar andResearch Proessor o Urban Real Estate

Gg Wsingn Univsi Scl Businss

Introduction

real estate de-

velopers, investors, regulators, managers, academics

and citizens to rethink the way we manage the 35

percent o our nations wealth that is invested in real

estate and inrastructure, the built environment.1 This

is an important recalibration that aects how most o

us live, work and are entertained. To ignore this struc-

tural change would be akin to ignoring the impactroads and cars had on the built environment more

than a hal-century ago.

This new development model is walkable urban de-

velopment. Metropolitan Washington, D.C., stands at

the vanguard o this trend in the nation.

For decades, real estate practitioners, observers and

scholars have looked through an urban-versus-subur-ban lens. This can be traced to the U.S. Census, which

serves as the platorm or much o the research on the

built environment. The Census separates its data into

Wlbl Ubn: This orm o development has

much higher density, employs multiple modes o

transportation that get people and goods to walk-

able environments and integrates many dierent

real estate products in the same place.

Drivable sub-urban and walkable urban orms odevelopment have market support and appeal

and, despite their names, each are ound in both

cities and suburbs. In the case o metropolitan D.C.,

drivable sub-urban development is located in the

Districts Palisades neighborhood and in Virginias

Prince William County subdivisions. Likewise, D.C.s

Dupont Circle takes a walkable urban orm, as does

Reston Town Center in Fairax County, Virginia.

Drivable sub-urban has long been the dominant

approach to real estate development. Today, that

is reversing; the pendulum is swinging back to

walkable urban development. Market demand or

principal city and outlying counties. It is not unlike

the classic social science joke about the tipsy guest

who drops his keys at the ront door as he leaves a

party. While searching under a streetlight at the curb,

he is asked, Why arent you looking where you lost

the keys? He replies, This is where the light is.

We have watched and analyzed the urban/suburban

debate where the light was, even i that meant using

the wrong approach with the wrong datasets.

In cn dcds in u -bsd wld, v bn w bd s plin

dvlpn:2

Divbl Sub-ubn: This development has the

lowest development density in metropolitanhistory. It is car/truck driven and eatures stand-

alone real estate products and socially and racially

segregated development.

drivable sub-urban development, which has be-

come overbuilt and was the primary market cause

o the mortgage meltdown that triggered the Great

Recession, is on the wane. Meanwhile, there is such

pent-up demand or walkable urban development

as demonstrated by rental and sales price premiumsper-square-oot and capitalization ratesthat it could

take a generation o new construction to satisy.

This shit is extremely good news or the beleaguered

real estate industry and the economy as a whole. It will

put a oundation under the economy as well as gov-

ernment tax revenues, much like drivable sub-urban

development beneted the economy and selected

jurisdictions in the second hal o the 20th century.

Walkable urban development calls or dramaticallydierent approaches to urban design and planning,

regulation, nancing and construction. Most im-

portantly, it also requires the introduction o a new

Walkable urban development calls or radically dierent approaches to urbandesign and planning, regulation, nancing and construction. Most importantly,

it also requires the introduction a new industry: place management.

This research challenges


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II.WalkUPs

Defned


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WalkUPsDeined

The Rise o the WalkUPThe move toward WalkUPs started nearly two decades

ago in U.S. metropolitan areas. Today they promise to be

a powerul driver o the economy.

During the second hal o the 20th century, thedominant development model has been the amiliar

drivable sub-urban approach. Most real estate

developers and investors, government regulators

and nanciers have come to understand this model

extremely well, turning it into a successul develop-

ment ormula and economic driver.

However, starting in the mid-1990s, the pendulum

has been slowly moving back toward building

WalkUPs, which was the approach embraced by the

Washington, D.C., metro area and virtually every oth-er metropolitan area prior to World War II. In recent

years, real estate developers, investors, government

regulators and nanciers in the metropolitan D.C.

area have become quite comortable developing

and managing walkable urban projectsdistinguish-

ing the nations capital region rom most other metro

areas that have not yet recognized the importance o

WalkUPs in their uture development.

In act, metropolitan Washington, D.C., has emerged

as the model or how the nation should develop the

built environment, according to a 2007 Brookings In-stitution study,4 as will be expanded on in this report.

S hare of In c ome Property i n WalkUPs O v er the Last 3 R eal Estate Cy c les

Income Property = Oce, Retail, Apartment and Hotel

1992-2000 2001-2008

2009-Psn

24%34%

48%


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7

In metropolitan areas, land use is unctionally catego-rized as either regionally signicant or local serving.

Regionally signicant places have concentrations o

employment (export or base and regional employ-

ment), civic centers, institutions o higher education,

major medical centers and regional retail, as well as

cultural, entertainment and sports assets. Local-serv-

ing places are bedroom communities dominated by

residential development that is complemented by

local serving commercial and civic uses, such as pri-

mary and secondary schools, police and re stations,

and so on. Generally speaking, regionally signicantplaces are where the metropolitan area earns its

living while local-serving places are where people

spend their non-work lives.

When orm meets unction, a simple matrix emerges

that show how 100 percent o a metropolitan areas

land is used.

This research ocuses on the upper-let quadrant o

the matrix: regionally signicant WalkUPs (reerred to

as simply WalkUPs below). WalkUPs are where met-

ropolitan D.C. will build much o its wealth-creating

assets. This research has ound that WalkUPs, a niche

market 20 years ago, are becoming the market o the

uture, both in the metro D.C. area and, likely, in the

rest o the nations metropolitan areas.

Future research will ocus on local-serving neigh-borhoods, represented by the top right cell o the

matrix. For the District o Columbia, this means

neighborhoods like Petworth, Brookland and Cleve-

land Park. Outside the District, examples includeShirlington and Falls Church, Virginia. In this research,

the statistics or local-serving WalkUPs are combined

with drivable sub-urban development since we have

not yet separated them.

Research on metropolitan D.C.s WalkUPs is basedupon the 2012 Brookings Institution report, men-

tioned above, that developed a methodology to

dene WalkUPs (geographically and by product

mix) and to rank them using separate economic and

social equity perormance metrics. The Brookings

research statistically dened regional signicance

as having a minimum o 1.4 million square eet o

oce space and/or a minimum o 340,000 square

eet o retail space.5 These metrics were used to rank

the WalkUPs that emerged rom the research and

to create our levels o economic and social equity

perormance.6

Regionally signicant and local serving WalkUPs

are likely to be the major generators o real estate

growth in the uture. Although no scal impact

analysis has yet been undertaken or the D.C.-areaWalkUPs, their contribution to total government tax

revenues in the region is expected to be many times

the proportion o land they consume. In Arlington

County, or example, the share o property tax assess-

ments rom the countys seven regionally signicantWalkUPs is ve times the amount o the land the

WalkUPs occupy.7 Fiscal impact studies throughout

the country indicate that WalkUPs tend to produce a

signicant net surplus (tax revenues minus costs o

service), subsidizing the local serving areas o

the jurisdiction.8

Form Meets FunctionRegionally signifcant WalkUPs will be the primary location o economic

growth in metropolitan D.C. For most other U.S. metropolitan areas,

regionally signifcant WalkUPs will also play a signifcant role in the uture.

Regionally

SignificanTlocal SeRving

WalKaBle URBan

WaLkUP(Walkable Urban Place)

1-2% of Metro Area AcreageNeIGhBorhooD

3-7% of Metro Area Acreage

DRivaBle SUB-URBan

eDGe CIty


BeDroomCommUNIty


U S Metropol i tan Lan d Use O pti on s


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Examples: Downtown D.C. and Golden Triangle

Downtown WalkUPs are the original downtown

sections o a metro areas principal city. Downtown

WalkUPs are dominated by oce space (83 percent

o total square ootage) and have modest though

ast-growing residential (6 percent). Only one per-

cent o the space is occupied by retail, althoughone-o-a-kind regional assets (convention center,

Verizon Center, museums, etc.) account or 10 per-

cent o all space.

WalkUPsDeined

The 6 Types oWalkUPsThere are six types o regionally signifcant WalkUPs

in any metropolitan area. Metropolitan Washington is

the only metro area that possesses an example o each.

PHOTOS:Christopher Leaman

a. The National ArchivesBuilding and Navy Memorialon Pennsylvania Ave. NW

B. A quintessential GoldenTriangle street scene

C. Hines Interests oce,residential and retail mixed-use project on the old con-

vention center land; the lastsurace parking lot down-town to be redeveloped

D. The Chinatown FriendshipGate at Gallery Place at 7thand H Sts.

e. Woolly Mammoth Theatreand new downtown oceand residential at 7th andD Sts. NW

F., G. & h. Golden Triangleood trucks at FarrugetSquare

1 Downtown

P roduct Mix: Downtown

Average % of Total Square Foo tage

oFFICe:

83%

aPartmeNt reNtaL:

3%

retaIL: 1%

For-SaLe hoUSING:

3%

a

B

e

F

h

G

C

D


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9

e

Examples: Capitol Hill, Capitol Riverront,

Dupont Circle, Foggy Bottom/West End,

Logan Circle, NoMA and SW Federal Area

Immediately adjacent to downtown, these WalkUPs

usually have a lower density than downtown andpossess unique character.

Downtown Adjacent WalkUPs have a substantial

amount o oce space (58 percent), but they also

have signicant residential (24 percent) and our

times the relative retail o downtown (4 percent).

The result is generally a lively, 24-hour environment.


a. & B. Waterront sculptureand ountains at Yards Parkin Capitol Riverront

C. & D. Dupont Circle parkand ountain

e. The Studio Theatre at 14th& P Sts. NW in Logan Circle

F. & G. Victorian row housesin Logan Circle

h. Free Wednesday nightyoga in the park at DupontCircle

I. Sweetgreen is amongmany new restaurants at theFoggy Bottom Metro Stationat George WashingtonUniversity

J. Whole Foods at 14th &P Sts. NW

2 Downtown Adjacent

Product Mix: Downtown-Adjacent


oFFICe:

58%

For-SaLehoUSING:

16%

aPartmeNt reNtaL:

8%

retaIL: 4%

a

B C D

FG

h

I

J


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WalkUPsDeined

Examples:Adams Morgan, Columbia Heights,

Georgetown, H Street/Atlas District, Tenleytown,

U Street/Shaw, Van Ness and Woodley Park

Historically local-serving neighborhood commer-

cial, these places declined ater World War II but, inrecent years, ound a new economic role.

Urban Commercial WalkUPs in metro D.C. are dom-

inated by residential property (56 percent) and are

marked by more retail (15 percent) and less oce

space (20 percent) than downtown or downtown

adjacent. The retail in urban commercial WalkUPs is

generally characterized as urban entertainment, such

as restaurants and nightclubs, as well boutique shopsand urniture and home dcor stores.


a. The Northern Exchangecondominium underconstruction at 14th andR Sts. NW by developerPN Homan

B. Recently opened George-town Waterront Park

C. The intersection o U St.,16th St. and New HampshireAve. NW

D. Alley grati along U St.NW

e. Georgetown WaterrontPark

F.The Pug bar on H St. NE

G. Pedestrian crossing inthe U Street Corridor at16th St. and New HampshireAve. NW

h. & I. Georgetown retail on

M St. NW

3 Urban Commercial

P roduct Mix: Urban Commercial


oFFICe:

20%

For-SaLehoUSING:

43%

aPartmeNtreNtaL:

13%

retaIL:

15%

a

B

C

e

D

G h I

F


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11


a. Park space in the mixedresidential/commercial de-velopment at N. EdgewoodSt. and Clarendon Blvd.

B. & C. Downtown SilverSpring

D. Iced coee romNorthside Social Coeeand Wine

e. Liberty Tavern on thecorner o Wilson Blvd. andN. Irving St.

F.Sidewalk dining inClarendon

G. Single amily neigh-borhood within walkingdistance o Clarendon

h. Rental apartments underconstruction in Clarendon

I. Pedestrian on DowntownSilver Springs mosaic tilestaircase

4 Suburban Town Center

Examples: Bethesda, Clarendon, Frederick ,

Historic Fairax City, Old Town Alexandria,

Rockville, Rosslyn and Silver Spring

Typical Suburban Town Centers are 18th or 19th-

century towns that were swept up in the sprawl othe metropolitan area ater World War II. Following

decades o decline, they have ound a neweconomic role.

Suburban Town Centers have relatively less oce

space than in downtowns or downtown adjacent

areas (although oces still occupy 46 percent o

all space), more residential (30 percent) and signi-

cantly more retail (16 percent).

Product Mix: Suburban Town Center


oFFICe:

46%For-SaLe

hoUSING:

19%

aPartmeNtreNtaL:

11%

retaIL:

16%

a

B C

D

e

F

G

h

I


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WalkUPsDeined

Examples:Annandale CDC, Baileys Crossroads,

Ballston, Carlyle, Courtthouse, Friendship Heights,

New Carrollton, Pentagon City, Prince Georges Plaza,

Seven Corners CDC, Tysons Corner, Virginia Square,

Wheaton and White Flint

These WalkUPs were mid-to-late 20th century stripcommercial that became obsolete and then evolved

into higher density development.

Somewhat similar to suburban town centers, Strip

Commercial Redevelopment WalkUPs have relatively

less oce space than in downtowns or downtown

adjacent areas (46 percent o all space), more resi-

dential (31 percent) and signicantly more retail

(16 percent). Many o these WalkUPs include regional

malls that have been or will be urbanized. This typeo o WalkUP will be the major ocus o walkable

urban development over the next generation.


a. Street musician inWelburn Square in Ballston,Arlington

B. Commuters on their wayhome in Ballston

C. Commercial oce spaceand Virginia Tech ResearchCenter on N. Glebe Road

in BallstonD., e., F. & G. Green spaceand armers market inWelburn Square

h. Walkway in Ballston atStuart and 9th St. N

5Strip CommercialRedevelopment

Product Mix: Strip Commercial Redevelopment


oFFICe:

46%

For-SaLehoUSING:

19%

aPartmeNtreNtaL:

12%

retaIL:

16%

a

B C

e F

G

h

D


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13

Examples: Crystal City, Kentlands,

National Harbor and Reston Town Center

Oten criticized as being steri le, Greeneld WalkUPs

are situated where major investment has quickly

turned ormerly undeveloped land into a walkable

urban place.

Greeneld WalkUPs have among the most balanced

product mix. Oce (45 percent) is in balance with

rental and or-sale residential (33 percent), while re-

tail (6 percent) tends to be urban entertainment and

boutiques. The large upront capital costs requiredor Greeneld WalkUps and high market risk mean

ew will probably be attempted in the next generation.


a. & B. The Marina atNational Harbor

C. The Awakening, analuminum sculpture byJ. Seward Johnson, Jr.,was relocated to NationalHarbor rom Hains Point

D. Boutique retail alongAmerican Way

e., F. & G. Retaurant andretail development at theAmerican Way andWaterront St.

h. The intersection oMariner Passage andWaterront St.

I. Gravel bike paths alongthe waters edge

J. Rosa Mexicano onWaterront St.

6 Greenfeld

P roduct Mix: Greeneld


oFFICe:

45%For-SaLe

hoUSING:

17%

aPartmeNtreNtaL:

16% retaIL: 6%

a

B

C

D

e

F

hG

J I


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15

III.WalkUPs in

Metro D.C.


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Loudoun

County

Loudoun

County

Prince William

County

Prince William

County

3030

1616

Frederick CountyFrederick County

WalkUPs inMetro D.C.

The 43 WalkUPsThough concentrated inside the Beltway, Metropolitan D.C.s

regionally signifcant walkable urban places span seven counties.

Id # WuP nm a

1 ads mgn 61.82

2 annndl 242.70

3 Bils Cssds 471.11

4 Bllsn 342.85

5 Bsd 518.41

6 Cpil hill 510.89

7 Cpil rivn 304.73

8 Cll 223.81

9 Clndn 207.83

10 Clubi higs 413.17

11 Cuus 246.63

12 Csl Ci 365.34

13 Dwnwn DC 635.49

14 Dupn Cicl 284.51

15 Fgg B/Ws end 498.61

16 Fdic 377.14

17 Findsip higs 359.64

18 Ggwn 132.60

19 Gldn tingl 179.54

20 h S/als Disic 292.02

21 hisic Fix Ci 439.40

22 knlnds 385.76

Id # WuP nm a

23 Lgn Cicl 228.57

24 Ninl hb 190.95

25 Nw Clln 597.69

26 Nma 240.35

27 old twn alxndi 377.98

28 Pngn Ci 240.46

29 Pinc Gg's Plz 277.43

30 rsn 246.32

31 rcvill 518.60

32 rssln 316.45

33 Svn Cns CBC 278.75

34 Silv Sping 403.16

35 SW Fdl Cn 266.21

36 tnlwn 571.47

37 tsns Cn 2176.34

38 U S/Sw 361.42

39 Vn Nss 753.81

40 Vigini Squ 190.56

41 Wn 489.78

42 Wi Flin 444.37

43 Wdl P 382.71

DOWNTOWN

DOWNTOWN ADJACENT

URBAN COMMERCIAL

SUBURBAN TOWN CENTER

STRIP COMMERCIAL

REDEVELOPMENT

GREENFIELD

WlUP tp:


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17

FairfaxCountyFairfaxCounty

ArlingtonCounty

ArlingtonCounty

AlexandriaAlexandria

MontgomeryCounty

MontgomeryCounty

Prince GeorgesCounty

Prince GeorgesCounty

District ofColumbiaDistrict ofColumbia3737

55

66

3939

44

1313

77

2525

3636

1515

4141

4242

99

1010

2727

33

3131

22

88

2121

3434

2222

4343

1212

3838

1717

3232

2020

1414

3333

2929

35351111

2828

26262323

2424

4040

19191818

11

0 2 4 61

Miles


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WalkUPs inMetro D.C.

Geographic FindingsGeography-ocused distinctionsrom their size to

their locationdefne Metropolitan D.C.s WalkUPs.

t w 43 ginll signicn WlUPs

in D.C. in 2012. The amount o land in the

metropolitan area used by these WalkUPs is .91

o 1.0 percent., and their size ranges rom 62 to

2,176 acres with an average o 408 acres. Walking

distance is what limits a WalkUPs size.

t dnsi s WlUPs vgs 0.62

gss f i (Far),9 nging 0.13

4.26. The gross FAR or the region, excluding

these 43 walkable urban places, is only 0.04. In

other words, the regionally signicant WalkUPsare 15 times denser than the rest o the region.

t WlUPs clus in nws pin

plin , which has been metro D.C.s

avored quarter since at least World War II.10

S 34 pcn plin jbs lc-

d in WlUPs. Overall, WalkUPs have an employ-

ment density o 50.5 jobs/acre, compared with

non-WalkUPs employment density o only 0.9

jobs/acre. About 65 percent o the regions jobs in

public administration and 44 percent o its jobs inknowledge industries are in WalkUPs. Local-serv-

ing jobs (grocery clerks, teachers, police ocers,

reghters and sanitation workers, etc.), which ac-

count or 35 percent o all jobs, are least likely to

locate in WalkUPs.11 Thereore, the share o export

(or base) and regional jobs that are ound in metro

D.C. WalkUPs is probably closer to 50 percent.

Sinc 2000, nw WlUPs v gd in

Disics ns nd sus s, spcill

lng ms Gn Lin. This brings more

employment and opportunities closer to low-in-come households. Few other metropolitan areas

are seeing regionally signicant private sector in-

vestment outside their respective avored quarters.

onl 42 pcn WlUPs in Disic

Clubi. a supising 58 pcn in

sububs. t Disic Clubi s 49 pcn

l squ g ll wlbl ubn l

s pduc vsus 51 pcn in sububs.The growth o new regionally signicant WalkUPs

in the suburbs over the past 20 years is the major

reason why metropolitan D.C. has the most walk-

able urban places in the country. The trend toward

WalkUPs is as much about transorming the sub-

urbs as it is about redeveloping the central city. ti- 43 ginll signicn

WlUPs, 77 pcn, v il nsi

cunl inslling il nsi. Two addition Walk-

UPs (Reston Town Center and Baileys Crossroads)

have rail transit planned within the next decade,raising the total to 81 percent. Eight WalkUPs have

no rail service and none planned. Statistically,

there is no proven causal connection between rail

transit and the development o walkable urban

places. However, the high percentage o WalkUPs

with rail suggests that it is an important actor. Asthe WalkUPs without rail demonstrate, however,

it is possible to develop walkable urbanism with-

out rail.

t is bu n ginll signicn WlUP

v 130,000 sidns in D.C.,

quivln svn ig WlUPs v

illin sidns (5.7 illin sidns in

dividd b 43 plcs). Assuming met-

ropolitan D.C. is the model or how the country

is developing the built environment, this would

suggest that there are hundreds o regionallysignicant WalkUPs that should be developed in

U.S. metro areas over the next generation. How-

ever, is too early to say with condence that this

ormula will hold as the WalkUPs trend matures.

In the 1960s, when regional malls were rst being

developed, there was similar uncertainty aboutthe population needed to support each mall.


19/44

19

Product FindingsThe strength o WalkUPs or many orms o income-producing real estate

has become apparent. Ofce, hotel, rental residential and sports/convention

development have each adapted to this orm. However, retail and or-sale

housing still ace challenges.

t 4.1 billin squ l s

in plin D.C. However, this gure nota-

bly omits owner-user space (i.e. government,

corporate and institutional-owned space). That

is because there is not a reliable data source

or this type o real estate, though this might beaddressed in the uture.12

t un spc in ginll signicn

WlUPs is 11.6 pcn l.

Inc-pducing pp, wic includsc, pn, il, insiuinl nd ll

nn--sl l s, ls 1.34 billin squ nd ccuns 33 pcn D.C.s

inc l s. Again, this excludes owner-oc-

cupied space, which would certainly increase this

percentage. WalkUPs account or 29 percent o all

the income property in the region. The rest alls

into the other cells o the matrix on page 7, name-ly regionally signicant and local-serving drivable

sub-urban and local-serving walkable urban.

Inc-pducing l s in WlUPs visbwn 2.4 pcn nd 60 pcn ll spc

in gin. Again, the local serving WalkUPs,

like Petworth in the District or Shirlington in Vir-

ginia, are not included in these numbers, so total

WalkUP market share is higher. In order o lowest

to highest, the percentage o income-producing

WalkUPs by product square ootage are:

> Flex Industrial 2.3 percent> Industrial 3.7 percent> Heath Care 7.6 percent

> Institutional 17.2 percent> Rental Residential 13.8 percent> Retail 21.5 percent

> Hotel 51.3 percent> Ofce 54.8 percent> Sports/Convention 60.0 percent

F-sl sidnil (singl il, wnuss

nd cndinius) ccun 67 pcn l l

l s in gin. Only 3 percent o this

inventory is in WalkUPs. The rest is split betweendrivable sub-urban and local-serving WalkUPs,

although it would seem that the majority would

be in drivable sub-urban locations.

avg vcnc-djusd nnul c n in

WlUPs is $36.78 p squ , cpd $20.98 divbl sub-ubn c ns,

75 pcn nl piu. Comparable data or

20 or 30 years ago is not available, but most real

estate proessionals would recall that drivable

sub-urban rental rates had a signicant premium

over the ew WalkUPs in existence in the 1980s.Those positions have switched, giving a signi-

cant market advantage to WalkUPs and indicating

pent-up demand.

Vluins c spc signicnl igin WlUPs. Annual oce rental income in the

region totals $13.6 billion; 68 percent o these

rents are generated by regionally signicant

WalkUPs. Valuations are directly related to rental

income and capitalization rates. Since cap rates

tend to be substantially lower in WalkUPs,13 which

translates into higher valuations, combining the

rent premiums and the lower cap rates results in

an even higher percentage o metro area ocevaluations in WalkUPs.

ang -sl using, p-squ- vlus

ginll signicn WlUPs 71 pcn

ig n vg ll plcs in

D.C. . WalkUps average price is $398

per square oot versus the drivable sub-urban av-

erage price o $222 per square oot. Once again,

i local-serving walkable urban or-sale housingwere combined with these regionally signicant

WalkUP housing results, the premium would

probably be even larger. The 2012 Brookings

research, which had a larger sample o drivable

sub-urban or-sale housing, indicates that there

is more than a 100 percent premium or WalkUPsover drivable sub-urban or-sale housing on a

price per-square-oot basis.


20/44



21/44

21

IV.WalkUP

Trends

lk T d


22/44


WalkUP Trends

The Last Three Real Estate CyclesThere are big questions acing developers, investors and public ofcials:

What direction is the real estate market headed? Is it more drivable

sub-urban or more walkable urban?

Data covering the past three metro D.C. real estate

cycles (1992 to 2000, 2001 to 2008, and 2009 to the

present) make it possible to see where dierent real

estate products have been built. Only data or oce,

retail, apartments and hotels or these three cycles is

available.

As mentioned, data is available only or regionally

signicant WalkUPs, the balance being both drivable

sub-urban locations and local-serving WalkUPs. This

data, thereore, understates the amount o walkable

urban product developed during each cycle since

local-serving WalkUPs are lumped in with drivable

sub-urban.

real estate cycles QuantIfIed

t s u inc pp cgis(c, il, pn nd l) lcd in

WlUPs incsd sdil v ps

l s ccls. These our product types

together accounted or 24 percent in the 1990s

cycle, and rose to 34 percent in the 2000s cycleand 48 percent in the current cycle that startedin 2009.

oc spc ws div nd wd

building ginll signicn wlbl u-

bn pduc. Some 38 percent o the oce space

delivered in the 1990s cycle was built in WalkUPs.

This increased to 49 percent in the 2000s and to

59 percent in the current cycle that started in 2009.

rnl pn dvlps v bgun

ggssivl pusu wlbl ubn lcins. In

1990s, nl 12 pcn gins nwnl pn spc ws buil in WlUPs. In

l 2000s, is s 19 pcn nd s

scd 42 pcn d. In addition, the

volume o rental apartments in local-serving Walk-

UPs has probably increased the walkable urban

rental apartment market share considerably inrecent years, as local-serving WalkUPs in Petworth

and Mount Vernon show.

Dvlpn il spc lgs. onl 8 pcn

il spc dvlpd in gin in

1990s ws lcd in WlUPs. F l2000s, i s 16 pcn bu s lln 13

pcn ccl sing in 2009.The likelyreason is that many, though not all, retail tenants

have not yet gured out how to build walkable

urban retail ormats, particularly when it comes

to big box stores. Many smaller specialty stores(Urban Outtters, Brooks Brothers, etc.) and many

grocery stores (Saeway, Harris Teeter, Whole

Foods, etc.) have walkable urban ormats. The

big box retailers like Wal-Mart are just attempting

walkable urban locations. Big box walkable urban

pioneers, such as Target and Home Depot, only

have ve or so years experience with this ormat.Adding local serving WalkUPs to these product to-

tals will probably signicantly increase the percent-

age o retail that is walkable urban in the currentcycle; many rental apartments over grocery stores

are under construction in local-serving WalkUPs.

tsns Cn nd Wi Flin, w nw

WlUPs in D.C., ipn dls gin nd cun. Both represent large

strip commercial redevelopment WalkUP types

and both were the poster children o edge city

drivable sub-urban development in the late 20thcentury. They are signicant or another reason:

Many o the neighborhood associations surround-

ing these places became supporters o increased

density because o the promised walkable urbanuture. NIMBYs (Not in My Backyard) became YIM-

BYs (Yes In My Backyard). Tysons Corner is about

to open our new Metrorail stations. Because o its

size, Tysons Corner will likely be split into three,

or even our, WalkUPs. Currently it covers 2,176

acres when the metropolitan average or a Walk-

UP is 408 acres.

Wlbl ubn dvlpn usd b

nic . td nd in uu, i will bcnsidd the . This will become increas-

ingly obvious once local-serving walkable urbandevelopment is olded into the analysis.


23/44

23

Richard Florida, director o the Martin Prosperity

Center at the University o Toronto School o Manage-

ment and originator o the concept o the creative

class, has most clearly demonstrated this connec-

tion. As Florida says in The Rise o the Creative Class

Revisted,14 the Creative Class is ... the key orce thatis shaping our geography, spearheading the move-

ment back rom outlying areas to urban centers and

close-in walkable suburbs. He quotes Carly Fiorina,

then-CEO o Hewlett-Packard Co., as saying, Keep

your tax incentives and highway interchanges; we will

go to where highly skilled people are.

Florida and this research demonstrate that most

highly skilled, highly educated creative class workers

want to work and live in walkable urban places. Thecreative class is driving the current and uture knowl-

edge economy and, in turn, driving the demand or

walkable urban places.

Metro DC:A Model or the CountryThe nations capital region, intertwined with the ederal government

and buered rom some recessionary eects, seems an unlikely national

model or real estate development. But its signature characteristics include

the elements needed to thrive in the current and uture knowledge economy.

Metropolitan Washington, D.C., is an improbable

model or the uture o the built environment. As the

nations capital, it benets rom a one-o-a-kind eco-

nomic and employment base, namely the ederal gov-

ernment, which has a recession-resistant oundation.

The counter-argument or those who maintain that the

presence o the ederal government disqualies the

nations capital rom consideration as a model or the

uture o the built environment is that all metropolitan

areas have a unique base economy. In Detroit, that

industry is autos. In Seattle, it is aircrat and sotware.

In Columbus, it is state government and insurance.

Having a unique economic base cannot disqualiy a

metropolitan area rom being the national model.

In addition, metropolitan D.C. resembles other recent

boomtowns. Like Dallas, Orlando and Atlanta, it is a

southern metro that has been invaded by Yankees

who uel its population and boost its employment.

Like Austin, Boston, San Francisco/San Jose and Ra-

leigh, it has a notable technology sector. Metro D.C.

also sprawled in a drivable sub-urban ashion in thelate 20th century, just like all boomtowns, yielding

arguably the worst trac congestion in the country.

Still, metropolitan D.C. sits near or at the top o

surveys on walkability. According to a 2007 Brook-

ings survey, the greater D.C. area has more WalkUPs

per capita than any large metro area. Notably, metro

D.C.s population holds more college degrees per

capita than anywhere else in the nation. An educated

populacethe number o people over age 25 with

college degreesis an indicator o the strength o the

local knowledge economy. And knowledge workerswant walkable urban options.

this population grew rom 20 percent in 1990 to 28

percent in 2010.

Putting aside the DC metro area, the next ve mostwalkable large U.S. metropolitan areas have college-

educated populations in 2010 that were equivalent

to metro D.C.s in 1990. A plausible assumption can

be made regarding education levels: that the next

ve most walkable metro areas are 20 years ahead

o both the nation and the lowest ve metro areas.

Further, assume that metro D.C. is roughly 40 years

ahead o the nation as a whole. It is possible that thecountry will ollow the trajectory o the most walk-

able metro areas and metro D.C. over the next ew

decades. As education levels continue to increase

and the country evolves urther into the knowledge

economy, the walkable urban trend will continue.

Metro D.C.s population holds more college degrees per capita than anywhereelse in the nation. An educated populace is an indicator o the strength o the local

knowledge economy. And knowledge workers want walkable urban options.

In short, Metropolitan Washington, D.C., can be used

as a model or the uture o the built environment

because it is also the arthest along in adjusting to

the demands o the knowledge economy and highly

educated workers. The graph on the ollowing page

shows the growth in college-educated residents in

the ve least walkable large U.S. metros as well asthe the nation as a whole; as illustrated in the chart,

Also consider that in 1990, metro D.C. had ew mean-

ingul walkable urban areas. Its downtownlike many

city centers across the nationwas abandoned and

considered dangerous. No suburban-located walk-

able urban places had yet emerged, except or Old

Town Alexandria and Rosslyn. When Joel Garreau

wrote Edge Cityin 1989, the seminal book about therise o drivable sub-urbanism, his prime example

W lkUP Tr d


24/44


WalkUP Trends

was Tysons Corner in suburban Virginia. It was the

worlds largest drivable sub-urban concentration o

commercial enterprises. Tysons is now on the path o

becoming walkable urban.

A rise in highly educated knowledge workers haspowered the explosion in demand or and devel-

opment o walkable urban places in metro D.C. and

elsewhere. These highly educated creative class

workers, especially the young Millennials (born be-

tween 1982 and 2004), want the option o living and

working in walkable urban places. Since metro D.C.

has relatively more o these workers than any other

metropolitan area, it is not surprising that it leads

the WalkUPs phenomenon. As these Millennials age,many seem to be moving to or near suburban Walk-

UPs, such as Arlington. When it comes to developing

suburban WalkUPs, metro D.C. has a substantial lead

over all other U.S. areas.

Development o WalkUPs is obviously not conned

to metropolitan D.C., as the 2007 Brookings survey

revealed. The Wall Street Journal has recenlty report-ed on numerous examples o corporate headquar-

ters moving back into downtown Chicago and evendowntown Detroit, as well as the rise o high-tech

concentrations such as Silicon Alley in New York City

and the growth o high-tech rms south o Market

Street in San Francisco.

The trajectory or large metropolitan areasand the

country as a wholeis toward a better-educated popu-

lation, the expansion o the knowledge economy and

a growing demand or more walkable urban places.

Metro D.C. just happened to get there rst.

Growth of Col leg e-Ed uc ated Populat i on% o Adults 25 or Older in Select U.S. Metro Areas with at Least a Four-Year Degree

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

1990 20102000 2020 2030 2040 2050

DC REGION

% COLLEGE EDUCATED IN:

PROJECTED

% COLLEGE EDUCATED IN:

NEXT 5 MOSTWALKABLEMETRO AREAS

5 LEASTWALKABLEMETRO AREAS

NEXT 5 MOSTWALKABLEMETRO AREAS

NATION &5 LEASTWALKABLEMETRO AREAS

NATION

D.C.s % of collegeeducated adults is

20 years ahaead ofthe next 5 most

walkable metroareas...

...and 40 yearsahead of the

nation as a wholeand the 5 leastwalkable metroareas


25/44

25

V.WalkUPRankings

WalkUP Rankings


26/44


WalkUP Rankings

coPPer

sIlVer

gold

PlatInuM

0

$10

$20

$30

$40

$50

Office Retail Residential(Rental)

Residential(Ownership)

Overall

Rent(orRentEquivalent)perSquareFoot

Rents by Product Type

COPPER

SILVER

GOLD

PLATINUM

l i

I

I

Wa l k Score & FAR by Ca tegory

WALKSCORE

GROSS FAR**Floor Area Ratio,a Measure of Density

0

0.5

1.0

1.5

2.0

2.5

3.0

65

70

75

80

85

90

95

FAR

WalkScore

CO PPER SILVER GOLD PLATIN UM

Economic RankingsWalkUPs in Metro D.C. all into our levels

when measured by economic perormance.Each WalkUP level has dierent growth and

investment potential than the others.

These charts summarize the relative rent, Walk Score and FAR

perormance o the 42 WalkUPs (SW Federal Area was omitteddue to data irregularities) by level. Each ranking is based upon

the rents achieved or oce, retail, rental apartment and or-sale

housing (converted to the equivalent o annual rent).

The average rent per square oot or the WalkUP was deter-

mined and weighted based upon the percentage o square eet

per product type. The assumption is that the amount the market

is willing and able to pay in rent is a proxy or the economic per-

ormance o the WalkUP. Rent is a proxy to be sure, but the bestproxy we have at the moment.


27/44

27

avg k mics

Walk Score: 77.30

Acreage: 531.1 acs

Gross FAR: 0.41(Floor Area Ratio)

Annual Rent per Sq. Ft .{$= $10}

oFFICe:$21.82

retaIL:$25.17

aPartmeNt:$22.02

Housing per Sq. Ft. {$= $10}

For SaLe hoUSING:$252.16

Square Footage

totaL:9.3 illinsq. .

oFFICe:

43%

For-SaLehoUSING:

19%

aPartmeNtreNtaL:

12% retaIL:18%

which will probably be served by the Columbia

Pike streetcara game-changing investment.

An important Copper example is Silver Spring,

especially when viewed with its social equity rank-

ing (Platinum, the highest). Silver Spring walks the

tightrope in attempting to achieve higher econom-

ic returns without gentriying and detracting romits unique and diverse character.

There are many potential WalkUPs waiting to move

onto the WalkUP list. One that stands out is Poto-mac Yards in Alexandria. The proposed private sec-

tor-nanced Metro station will mark the beginning

o its transormation while the required greater

density o zoning is now in place. This will spark the

redevelopment o the existing big box center, an-

chored by Target and a multiplex cinema, into highdensity, mixed-use development, converting the

current interim land uses into a WalkUP. Another

potential WalkUP is the Minnesota Avenue Metro

station area, which will emerge as the greater cen-

ter city builds out over the next 10 to 20 years.

Prince Georges County has three WalkUPs listed

as Copper (New Carrollton, Prince Georges Plaza

and National Harbor). There are others that could

earn a place on the Copper list in the uture, suchas West Hyattsville, College Park, Naylor Road and

Branch Avenue, the result o new development and

place management. The key to the evolution o the

new WalkUPs to the northeast and southeast is the

expansion o the avored quarter. No metropol-

itan area in the country has witnessed substantial

market-based employment growth outside theavored quarter. However, land and inrastructure

constraints in metro D.C.s avored quarter haveled to this tentative expansion, which currently

includes WalkUPs such as NoMA, Capitol Water-

ront, New Carrollton, Wheaton and Silver Spring.

Metro D.C. growth outside the avored quarter is

the rst market-based bridging o the notorious

west-east divide and is to be welcomed since it

brings services and jobs where they are needed

most. Still, it is important to recognize how unusual

and tentative this trend is. To continue, it must be

nurtured by inrastructure and zoning changesrather than by levying onerous costs or ees on

uture development.

cHaracterIstIcs

The lowest level o economic perormance, Copper

WalkUPs have generally demonstrated the intention

to be walkable urban. These places have decided toinvest in transportation inrastructure, revised their

zoning and sometimes introduced place manage-

ment. However, they have not yet seen dramatic

new walkable urban development and are not close

to achieving critical mass. Some private investment

in walkable urban projects may have begun but the

Copper WalkUP may still be drivable sub-urban in

nature or the redevelopment may be fedgling.

The Copper level WalkUPs have the lowest rents, arethe least dense and are the least walkable. Com-

pared to the rest o the drivable sub-urban region,

there is only a 4 percent price premium or oce

space in these WalkUPs over drivable sub-urban

oce space. However, or-sale housing prices are 13

percent higher, residential rental rates are 23 percent

higher and retail rates are about 26 percent higher.

oBserVatIons

Copper WalkUPs Tysons Corner and White Flint arenational models o strip commercial redevelop-

ment. Both are at the Copper level since they have

recently made or committed to make signicant

transit improvements, and both have dramatically

increased and made legal walkable urban zoning.

Tysons Corners, as the largest drivable sub-urban

location in the country (with more than 42 million

square eet), is about to open our Metro stations.

Tysons covers 2,176 acres, nearly twice the acreageo the ve Rosslyn-Ballston corridor WalkUPs

(1,305 acres). There is no doubt that Tysons willevolve into at least three separate WalkUPs, each

with its own character, density, product mix and

perormance, and place management.

Some WalkUPs have achieved the Copper ranking

without much conscious eort. Examples are Seven

Corners, Baileys Crossroads and Annandale, all in

Fairax County, Virginia, and Van Ness in the Districto Columbia. While comprehensive plans have been

proposed to transorm these places into more vibrant

WalkUPs, the character is still perceived as drivable

sub-urban with little private/nonprot sector-led

eort to accelerate and manage these places. One

notable exception may be Baileys Crossroads,

coPPer

annndl

Bils Cssds

Csl Ci

Fdic

h S Ne/als Disic

hisic Fix Ci

knlnds

Nw Clln

Pinc Ggs Plz

rcvillSvn Cns CBC

Silv Sping

tsns Cn

Vn Nss

Wn

Wi Flin

WalkUP Rankings


28/44


avg k mics

Walk Score: 86.18

Acreage: 319.0 acs



oFFICe:$33.01

retaIL:$37.25

aPartmeNt:$28.93



sIlVer

cHaracterIstIcs

Places in the Silver tier have the private develop-

ment and, usually, the place management required

to become a regionally signicant WalkUP, but

critical mass has not yet been achievedalthough it

is obvious it eventually will.

Silver WalkUPs have the greatest value-creation po-

tential or investors and developers. While they may

still have an image as being somewhat economi-

cally risky, as evidenced by their high capitalizationrates and relatively lower valuations, this will likely

be improved with more development and place

management. The result will be lower capitalization

rates and, thereore, higher valuations as they move

into the Gold tier.

Silver WalkUPs have 44 percent higher rents and are

53 percent more dense than Copper WalkUPs. They

achieve a nine point higher Walk Score on average.

oBserVatIons

Each Silver WalkUP took a dierent path to reach

this level o economic perormance. NationalHarbor and Reston Town Center are Greeneld

WalkUPs, which can suer rom eeling sterile.

However, all have made remarkable strides in

creating walkable urban vibrancy or specic target

markets attracted to new development. Carlyle

and Pentagon City have been strip commercial

redevelopment WalkUPs, taking advantage o

either ederal government or regional mall anchors

at their Metro stations.

Old Town Alexandria has leveraged its historic

character, innate urban character, tourism and arts.

R g

ads mgn

Bllsn

Bsd

Cll

Clndn

Clubi higs

Cuus

Ninl hb

old twn alxndi

Pngn Ci

rsn twn Cn

rssln

U S/Sw

Wdl P

Its major drawback is a lack o rail transit. Columbia

Heights is a national model o urban commercial

WalkUP redevelopment, ocusing on regional

retail while maintaining a diverse, mixed-income

community.

Many o Arlingtons WalkUPs are in the Silver tier.

Arlington has more WalkUPs per capita than any ju-

risdiction in the country and is the suburban model

o walkable urban development.

Bethesda barely missed a Gold ranking. The rede-

velopment o the area adjacent to the south o the

Metro station has been a national model, as has

its place management. The Woodmont Triangle iswhere the uture o opportunity exists.

The lack o private/nonprot place management is a

concern or uture economic progress in Old Town,

Carlyle, Pentagon City and Columbia Heights.

Adams Morgan has successully implemented an

urban entertainment strategy, but it has possiblyleveled o in perormance, unable to broaden

this strategy.

Square Footage


oFFICe:

40%For-SaLehoUSING:

25%

aPartmeNtreNtaL:

15%

retaIL:

10%


29/44

29

avg k mics

Walk Score: 87.62

Acreage: 356.4 acs



oFFICe:$39.29

retaIL:$42.82

aPartmeNt:$35.74



gold

cHaracterIstIcs

Gold WalkUPs have achieved critical mass; there is

a there-there. Investors recognize this by lowering

capitalization rates (increasing valuations). Land

prices are at a premium, refecting the higher rents

and selling prices per-square-oot that have beenachieved. Developers are attracted to Gold WalkUPs

since the market risk is low and there are relatively

assured exit strategies or selling stabilized projects

to institutional investors.

Average rents or Gold WalkUPs are 19 percent

higher than those o Silver WalkUPs, although their

Walk Score and density are similar. Gold Walk-

UPs or-sale housing prices are twice the drivable

sub-urban average in the metro area, though only10 percent higher than Silver or-sale housing prices.

Two actors stand out in the economic perormance

o these WalkUPs. One is that most have aggressive

place management, mainly nonprot BIDs, although

there are public sector exceptions. The other actor is

described in the Brookings Walk This Wayresearch:

Walkable places beneft rom being near other walkable

places. On average, walkable neighborhoods in met-

ropolitan Washington that cluster and orm walkable

districts exhibit higher rents and home values than

stand-alone walkable places.

The greater center city o the District (the down-

town, downtown adjacent and some o the urban

commercial WalkUPs) have achieved Gold and

even Platinum rankings as a result o clustering. The

economic perormance o both NoMA and CapitolRiverront is particularly remarkable since they have

only been in existence or one real estate cycle.

Cpil hill

Cpil rivn

Dupn Cicl

Findsip higs

Lgn Cicl

Nma

tnlwn

Vigini Squ

oBserVatIons

There are a number o WalkUPs that do not have

active place management but still have achieved

Gold ranking. This is more a matter o having been

dealt a good hand by the market. Dupont Circle

was the rst WalkUP to emerge ater the walkableurban decline o the late 20th century. It was built

in the ormer luxury mansion district, Embassy Row,

and beneted rom early reinvestment by the gay

communitynow recognized as an urban pioneer-

ing demographic.

Still, competition rom well-managed competitive

WalkUPs could derail the economic success o

these unmanaged WalkUPs. Dupont, in particular,

could be vulnerable to its at, dumb and happyapproach to place management. For example,

there are no plans to have streetcarsthe regions

major rail transit investment in the early 21st cen-

turyto connect Dupont to the rest o the WalkUPs

in the District. That will be seen in retrospect as a

major mistake.

Square Footage


oFFICe:

46%

For-SaLehoUSING:

25%

aPartmeNtreNtaL:

9%

retaIL:

8%

WalkUP Rankings


30/44


avg k mics

Walk Score: 95.96

Acreage: 361.51 acs



oFFICe:$43.67

retaIL:$45.29

aPartmeNt:$40.68



PlatInuM

cHaracterIstIcs

This exalted ranking has been achieved by only

our o the 43 WalkUPs. All are in the District, which

is remarkable considering that 30 years ago these

places were viewed as secondary investment

opportunities or worse. The Platinum ranking is theclearest indication that the walkable urban trend

has revitalized the center city, particularly over the

past 15 years, and reversed the relative economic

perormance o drivable sub-urban versus walkable

urban places.

Platinum WalkUPs predominantly are where large

institutional owners, such as insurance companies,

pension unds, sovereign wealth unds and REITs,

have chosen to invest, resulting in the lowest capital-ization rates and highest valuations and land prices.

The Platinum WalkUPs have the highest rents,

19 percent above Gold. Oce rents, retail rents,

and housing prices (both rental and or-sale) are

more than double those in drivable sub-urban

areas. The average density is more than triple that

o Gold WalkUPs and has substantially greater walk-

ability over all competition.

Dwnwn D.C.

Fgg B/Ws end

Ggwn

Gldn tingl

oBserVatIons

The our Platinum WalkUPs all benet rom being

adjacent to other WalkUPs and, with the exception

o Foggy Bottom/West End, rom aggressive place

management. They also have a preponderance o

oce space (78 percent o all space), which runscounter to the popular wisdom that a balanced

portolio o dierent product types is needed or

optimal economic perormance.

Downtown and Golden Triangle combined orm theactual downtown o the District o Columbia. The

city core has regained its position as the regions

premier business district, with rising oce mar-

ket share since 2004 (ater more than 50 years o

relative decline) and the regions highest rental ratesand lowest vacancies. Foggy Bottom/West End has

large wealthy institutions (The George Washington

University, the World Bank, etc.) and is geograph-

ically situated between downtown and the other

Platinum WalkUP, Georgetown. It is evolving into

D.C.s Upper East Side. Much can still be accom-

plished, including re-establishment o downtown

as a major retail concentration, continued growth in

convention activity and, perhaps surprisingly, reloca-tion o ederal oce space away rom downtown.

Vacated ederal space should be replaced by more

walkable and vital private sector oce, hotel, residen-

tial and retail. Downtown needed the ederal pres-

ence to survive the downward spiral o the late 20th

century, but portions should now decamp to new

WalkUPs, including Copper and Silver. Relocation o

the U.S. Dept. o Transportation and the U.S. Patentand Trademark Oce to Capitol Riverront andCarlyle, respectively, over the past decade demon-

strates how eective this anchoring strategy can be.

Square Footage


oFFICe:

78%

For-SaLehoUSING:

5%

retaIL:

3%

aPartmeNtreNtaL: 3%

l i


31/44

31

WalkUPs all into the same our levels as

the economic rankings, although driven by

entirely dierent variables.

There has been no previous attempt at developing social equity

perormance rankings or WalkUPs. This ranking is, by its very

nature, controversial. It is hoped that the release o these rankings

will provoke lively discussion, urther research and eventual con-

sensus on how to measure social equity in walkable urban places.

The methodology is controversial because there is disagreement

over what is a positive societal good and what is a negative one.

The word that best captures this in urbanism is gentrication. A

new word, it rst appeared in Websters Collegiate Dictionaryin

1964, dened as the process o renewal and rebuilding accom-

panying the infux o middle class or afuent people into deterio-

rating areas that oten displaces earlier, usually poorer, residents.

Gentrication is both a loved and hated word, depending on ones

perception as to whether it brings about positive or negative socialimpacts. Still, gentrication can be an unequivocal orce or good

i it is harnessed to pay or social programs and public investment.

coPPer

sIlVer

gold

PlatInuM

Social EquityRankings

HOUSING &TRANSPORTATION COSTSas a % of Area Median Income

SHARE OF JOBS INTHE REGIONAccessible in 90 Minutes

DIVERSITY INDEX (2010)

Social Equity Measures by Category

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

10

20

30

40

50

60

70

80

CO PPER SILVER GOLD PLATIN UM

DiversityIndex

In examining social equity, we looked at variables that are consistently available nationally.

Those variables include these ve:

husld using nd nspin css as a percentage o the metropolitan area medi-

an income. These are used to measure actual aordability since housing and transportationare intimately linked, especially i the household has to drive until you qualiy. Relative

weighting equal to 30 percent o total score.

Unpln , since a WalkUPs ability to provide jobs or people living within it is a

basic component o social equity. Relative weighting equal to 20 percent o total score.

Divsi Indx, developed by ESRI, represents the likelihood that two persons, chosen at

random rom the same area, belong to dierent race or ethnic groups. Relative weighting

equal to 15 percent o total score.

Pcng cng bwn wis nd blcs, a proxy or gnicin with displacement

o the Arican American population being a negative indicator, in the WalkUP between the

2000 Census and the 2010 Census. Relative weighting equal to 15 percent o total score. S jbs ccssibl b nsi wiin 90 inus rom the WalkUP. Relative weighting

equal to 20 percent o total score.

WalkUP Rankings


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oBserVatIons

Two WalkUPs that share much in common, Georgetown and Old Town Alexandria,

are listed at the Copper level. They are the oldest, most historic, riverront places

(water orientation in real estate is exceedingly valuable) and have no rail transit.

These common actors are partially responsible or the poor rankings. For exam-

ple, it is expensive to buy land or aordable housing in these WalkUPs and theirwaterront locations result in unstable geology, one o the reasons Metro tunnels

were not built.

The lack o rail transit accessibility aects other Copper WalkUPs. Being on the

metropolitan ringe complicates accessibility in Kentlands, Frederick and HistoricFairax City.

H Street/Atlas District, the newly redeveloping WalkUP in northeast D.C. that seems

to be replacing U Street/Shaw as the young urban entertainment area, achieved

a surprise low ranking. The primary reason was the change rom a predominantlyblack neighborhood to an integrated neighborhood. This highlights the diculty

in developing a social equity ranking system: An argument can be made on both

sides o this issue about the societal benet, or harm, o such a change.

cHaracterIstIcs

The lowest level o social equity, these eight WalkUPs

have on average:

t igs usld using nd nsp-

in css n WlUPs (56 percent o aver-

age metro household income). As an average,

this is signicantly higher than the benchmarkor neighborhood aordability established

by the Center or Neighborhood Technology

(45 percent); in the least aordable WalkUP,

Georgetown, average housing and transporta-

tion is 84 percent o area median income, nearly

double the national average.

hig n vg unpln (with three

notable exceptions).

t Lws Divsi Indx, meaning an individ-

ual is only 39 percent likely to come into contact

with a person o a dierent ethnic background

at random, compared to 53 percent or allWalkUPs. Copper WalkUPs have about the same

Diversity Index as the average metropolitanarea in the country (40 percent).

an x si in cil cpsiin in many

WalkUPs, such as H Street NE and, to a lesser

extent, Frederick, with white residents repre-

senting a larger share o the population and

black residents a smaller share.

Unil p ginl nsi ccssibili

(six o the eight do not have rail transit availabil-

ity) and the worst accessibility among WalkUPs

to regional jobs.

coPPer

Cll

Fdic

Ggwn

h S Ne/als Disic

hisic Fix Ci

knlnds

old twn alxndi

tnlwn

avg k mics

Housing &Transportation Costs:

(As a % o median income ormetropolitan D.C.)

Unemployment: 8.25%

Diversity Index:39.42

Racial Change:7.61%(Change in % o whites vs.blacks rom 2000 to 2010)

Job Accessibility:44.92%(Share o jobs accessible by

transit within 90 minutes)

56%


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33

avg k mics



Unemployment: 7.74%





ads mgn

Bils Cssds

Bllsn

Bsd

Clubi higs

Csl Ci

Dupn Cicl

Fgg B/Ws end

Lgn Cicl

Pinc Ggs Plz

rcvill

Svn Cns

Vigini Squ

Wi Flin

avg k mics



Unemployment: 8.31%





sIlVer

cHaracterIstIcs

The second lowest level o social equity, these 10

WalkUPs have on average:

t scnd igs usld using nd

nspin css (44 percent o average

metro household income) though substantially

lower than Copper and, on average, just withinthe national average (45 percent). Downtown

D.C. has the lowest percentage (30 percent) in

the region, even lower than many households

spend on housing by itsel.

rlivl lw unpln (7.7 percent).

a sw ig Divsi Indx (43

percent), though this was mainly due to two

WalkUPs that are not diverse (Capitol Hill and

Woodley Park). This ranking is only slightly bet-

ter than U.S. metro areas overall (40 percent).

rlivl uncngd cil cpsiin

bwn 2000 nd 2010, with the notable

exceptions o downtown D.C. and U Street/Shaw, where the demographics shited dramat-ically, with white residents representing a much

larger share o the population mix and black

residents a much smaller share. In contrast, over

this period, Tysons Corners population shited

signicantly in the opposite direction, with white

residents becoming a much smaller share and

black residents a somewhat larger share.

Subsnill b ginl nsi ccssibil-

i jbs than Copper WalkUPs, and accessi-

bility comparable to Gold and Platinum levelWalkUPs. This is primarily due to the act thatmost have Metrorail stations.

Cpil hill

Clndn

Dwnwn D.C.

Findsip higs

Nw Clln

rsn twn Cn

tsns Cn

U S/Sw

Vn Nss

Wdl P

cHaracterIstIcs

The second highest level o social equity, these 14

WalkUPs have on average:

ang lws using nd nspin

usld css in the region (37 percent),

substantially below those o Copper or Silver

WalkUPs or the national average (45 percent).The presence o Metrorail in nearly all o these

places is a signicant actor in the lower aver-

age transportation costs.

abu s unpln s Silv

WlUPs.

a subsnill incsd Divsi Indx (62 per-

cent) compared with Silver and Copper WalkUPs

and the national metropolitan average (40 percent),

although there are some low outliers, notably

Dupont Circle and Foggy Bottom/West End.

rlivl uncngd cil cpsiin

bwn 2000 nd 2010, with, again, a ew

notable exceptions. In Logan Circle andColumbia Heights, white residents came torepresent a much larger share o the population

mix and black residents a much smaller share.

There were similar, but less dramatic patterns

in Adams Morgan and Prince Georges Plaza,

where signicant declines in the Latino popula-

tions were also observed. In contrast, the white

population o White Flint became much less

dominant over this period as the Asian popula-

tion increased dramatically.

Subsnill b ginl nsi ccssibili jbs than Copper WalkUPs and comparable toSilver and Platinum-level WalkUPs. This is primari-

ly due to most places having Metrorail stations.

gold

44% 37%

WalkUP Rankings


34/44


Cuus

rssln

Silv Sping

Wn

avg k mics



Unemployment: 5.97%





PlatInuM

cHaracterIstIcs

The highest level o social equity, these our WalkUPs

have on average:

t s lw lvl using nd nsp-

in css s Gld WlUPs (37 percent), sub-

stantially below the Copper and Silver WalkUPs

as well as the national average.

t lws vg unpln (6 percent).

t igs Divsi Indx (72 percent) withparticularly high ratings or Wheaton (the high-

est) and Silver Spring.

Insignicn cngs in i cil cpsiins

bwn 2000 nd 2010, with the exception o

Silver Spring, in which the white population grew

relative to the black population, which declined.

Subsnill b ginl nsi ccssibili

jbs n Cpp WlUPs and comparable

to Silver and Platinum level WalkUPs. This is primar-

ily due to most places having Metrorail stations.

37%


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35

VI. Next Steps

Next Steps


36/44


Conclusions &RecommendationsThe metropolitan landscape has never been systemically categorized by walkable

urban versus drivable sub-urban. There is much to learn. Even this frst glimpse

reveals startling dierences in economic and social equity perormance.

Investors and developers looking or new opportunities should understand

these place characteristics beore investing, matching their risk tolerance and

the implicit market risk implied in these rankings, such as:

Investing in a Copper WalkUP means that a long-term time rame is required

to maximize returns, though entry prices are relatively modest. Place strategyand management or a Copper WalkUP is particularly important to ensure

economic perormance.

Silver WalkUPs are prime or growth in the existing real estate cycle and

there is an opportunity or this WalkUP to emerge with a Gold ranking,increasing returns substantially.

Investing in Gold or Platinum WalkUPs is much less risky but the high price

o entry refects this. The upside o Platinum investments might be relatively

less but will be more stable and, thus, attractive to institutional investors

(insurance companies, pension unds, REITs, etc.).

The public policy response to these market trends should be to encourage the

economic growth and resulting scal benets to each jurisdictions revenue base.

The rst step needed to make this happen is to monitor the increasing econom-

ic perormance o WalkUPs so as to understand the scal impact on government

revenues. The second step is to make sure the zoning is in place and the properinrastructure is planned and nanced in order to make the place more walk-

able, to increase its job density and to attract an educated workorce.

Copper and Silver WalkUPs may require special attention rom the jurisdiction

via investment in quality o lie improvements (as opposed to subsidies or

corporate relocation or developer incentives). However, long-term public sec-

tor investments in specic projects, as opposed to upront subsidies, are more

appropriate. A public investment approach helps a project get nancing as

productively as a subsidy, but it also carries a hoped-or return o capital, plus

prot rom the investment, that the government can then re-invest.

Gold and Platinum WalkUPs need little in the way o special public nancing

programs. For example, there is no reason to provide incentives or Platinum

econoMIc conclusIons

Incss inavg k mics

As the average Metro

D.C. WalkUPs economic

level moves rom Copperto Silver, Silver to Gold,

and Gold to Platinum,

there are substantial

increases in perormance:

Walk Score:+6.22 pins

Ofce Rent:+$7.28/squ nnull

Retail Rent:+$6.71/squ nnull

Rental Apartment Rent:+$6.22/squ nnull

For-Sale Housing Price:+$113.00/squ

Statistical analysis shows that there are three actors

that explain 90 percent o the increased economic

perormance in the 43 metro DC WalkUPs.

WalkaBIlIty

B isl, Wl Sc xplins 67% incs in cnic pnc.

As measured by Walk Score, a fnding confrmed by theBrookings Walk This Way research.

JoB densIty

adding jbs p c wlbili xplins 84%

incs in cnic pnc.

Workforce educatIon

adding nub ws wi cllg

dg wlbili nd jb dnsi xplins90% incs in cnic pnc.

As measured by percentage o college-educated

persons over 25 in the workorce living in a WalkUP.

WlUP plc ngs nd invss/dvlps

wuld ipv i cnic uns bincsing wlbili, jb dnsi nd

ducin lvls w c.

Note that simple subtraction o these three actors is nota correct way o understanding their individual impact

since there is substantial overlapping co-variability.


37/44

37

places like Georgetown. In act, there is the possibil-

ity o engaging in value capture where sharing the

private sector upside returns rom public improve-ments, say a street car line, could help und those

public investments or social programs like aordable

housing. Basically this is a private sector Tax-Incre-

ment Financing (TIF) program.

socIal eQuIty conclusIons

Since there is no agreed upon measure o social

equity, it has been somewhat like discussing theweather. Everybody talks about it, but there is l ittle

that can be done about it. Eventually, agreement

on a social equity perormance metric will allow or

more eective management. I you cannot measure,

you cannot manage.

One obvious conclusion is that increased economic

perormance leads to lower social equity outcomes.

Georgetown epitomizes this with a Platinum econom-ic ranking and a Copper social equity ranking. Golden

Triangle has taken care o this issue by gerryman-

dering so as to have almost no one living within its

boundaries, making it dicult to measure social equity.

On the other hand, WalkUPs with high social equity

have lower economic perormance. Two Platinum

social equity WalkUPs, Silver Spring and Wheaton,

had Copper economic rankings. The other two Plat-

inum social equity places, Rosslyn and Courthouse,had Silver economic rankings.

There are lessons rom those WalkUPs that do well

on both measures. Dupont Circle, Logan Circle, and

Virginia Square were double Gold while Foggy Bot-tom/West End scored Platinum/Gold. All are older

WalkUPs with many smaller buildings, ranging rom

modest to the very highest rents or sales pricesal-

though this could just be part o the evolution rom

partially aordable to completely gentried.

What is needed is a conscious strategy or each

WalkUP to create and maintain aordable and

workorce housing, as well as to increase accessibil-ity. Having social equity measures will provide placemanagers and their jurisdictions with goals to which

they can aspire. Implementation o the social equity

goals should be the responsibility o the place

management organization and part o its charter

granted by the local jurisdiction.

However, the second reason is land values. In Dupont

Circle, the land cost as a percentage o the house

is at least 50 percent. That compares with most

drivable sub-urban housing, where it is 20 percent.

The shortage o walkable urban residential land,

especially or townhouses and small lot single-am-

ily housing, is driving up land prices. This makes

no sense in the United States since we have no

shortage o land. What we do not have is enough

walkable urban land.

Public policy that creates more in-ll residential land

(browneld, rezoned, assembling small parcels,

knocking down obsolete uses, etc.) is the most

crucial way to address social equity concerns.

NIMBY opposition to high-density development

One obvious conclusion is that increased economic perormance leads to lower

social equity outcomes. Georgetown epitomizes this with a Platinumeconomic ranking and a Copper social equity ranking.

The ultimate solution to aordable housing is to

build more walkable urban product. There are two

reasons why walkable urban housing costs more

than the drivable sub-urban product. The rst is the

quality o construction. It must be higher quality or

walkable urban product (better oundations, serious

architecture, buildings right up to the sidewalk, etc.).Most people compensate or this additional cost byoccupying a smaller amount o space.

is equally responsible or the land shortage. An

education campaign must be undertaken to turn the

opposition into YIMBYs, such as happened in Tysons

Corner and White Flint.

Given a growing understanding o how economi-

cally successul WalkUPs can be, we must gure outhow to take advantage o this rising tide o econom-ic activity to pay or social equity perormance.

Next Steps

S oc i a l Equi ty v s Ec on omi c R an ki n g s


38/44


q y gScatterplot Showing the Distribution o the Metro D.C. WalkUPs

on Both Economic and Social Equity Rankings

PLatINUmGoLDCoPPer

S o cia l E q uity Rank ings

EconomicRankings

PLatINUm

Go

LD

SILVer

CoPPer

SILVer


39/44

39

Further StudyNo research report would be complete without the obligatory

more research needs to be done. This is particularly the case

with WalkUPs research.

There are a number o areas that require expanded

research:

This research ocused on regionally signicant

WalkUPs. Local-serving WalkUPs, walkable urban

bedroom communities, need to be quantied

and better understood.

This research is a snapshot in time (early 2012)

but longitudinal research will help understand

what actions are needed to improve economicand social equity perormance over time.

Comparisons to other metropolitan areas willprovide insights into how this market trend is

unolding as well as a larger universe o the six

dierent types o WalkUps rom which to learn

how to improve perormance.

Optimal product mix in a WalkUP is a much-de-

bated topic in urban circles. How much retail or

housing is best or economic or social equity

perormance? The urbanism eld contains many

opinions about the optimal product mix but ew

measurable principles.

There is need to quantiy the illusive concept

o critical mass, colloquially reerred to (usingGertrude Steins masterul phrase) as having a

there-there. We can eel when a place is at criti-

cal mass but this eeling has not been quantied.

The expansion o the avored quarter to the

northeast and southeast in metro D.C. is a major

social and economic change that needs to be

better understood. What can be done to encour-

age this positive market trend? The economic measures should include devel-

opment o a GDP measure or a WalkUP. GDP

measures have come down as ar as metropoli-

tan areas. It is time to push this gold standardo economic perormance measurement to the

WalkUP level.

Social equity measures need to be rened.

There are clear and agreed-upon denitions o

aordable and workorce housing, but there is

no agreed-upon measure o social equity.

economic growth, quality o lie and social equity.Regionally signicant and local-serving WalkUPs,

although likely to be located on less than 10 percent

o the land in any region, could house most o the

population growth and spur economic develop-

ment or the next generation. WalkUPs will provide a

oundation or the regional and national economy.

More knowledge about this trend will propel how Americans invest in thelargest asset class in the economy, an investment that directly infuences

economic growth, quality o lie and social equity.

There needs to be a determination o scalreturns resulting rom government investment

in inrastructure and operating programs. The

measurement o additional government revenues

resulting rom these investments should be calcu-

lated continuously, just as the private sector does.

Since the economic returns o public sector

investments tend to accrue to the private sector,

we need to understand more about the potential

o value capture. These private sector, TIF-like,

arrangements can help pay or inrastructure and

social programs.

The maturity o walkable urban development inmetropolitan Washington makes it a model or the

nation. More knowledge about this trend will propelhow Americans invest in the largest asset class in

the economy, an investment that directly infuences

Yet the creation o economically successul WalkUPs

with high social equity is a huge challenge, possible

the largest domestic challenge U.S. society currently

a

the walkup wake up call

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