Opinion: New Economy Cities
- Nov 14, 2013
With the fundamental shift that is occurring in the American economy, developing the right mix of housing in our urban centers is more important than ever.
The overall revitalization of our cities is inextricably linked to the nation’s new economy, which is no longer dependent on manufacturing but instead driven by diverse sectors that include healthcare and the biosciences, business and professional services, new media, international trade, hospitality and higher education. The emergence of these sectors as powerful economic forces is tied to creative class agglomerations in urban areas across the country. It is a secular trend embedded in our nation’s new economic DNA and, as such, has the potential to entirely transform our cities over the long term.
Cities are going to fulfill their new function in American society as the principal engines of the economy by recycling their physical space. And as former manufacturing districts are redeveloped into employment centers focused on the new industries, the creation of supportive residential real estate will be essential to their success.
Los Angeles is one city that has demonstrated exceptional foresight in realizing that residential development is integral to the vibrancy of its downtown, which has been attracting new industries in recent years. Additionally, city leaders have recognized that conversion of the existing building stock is the most efficient manner of providing this much-needed housing. As such, they have created effective incentives—including the city’s adaptive reuse ordinance—that have been instrumental in transforming buildings that were once factories, warehouses and mechanical shops into attractive living spaces that meld historic character with the most modern amenities.
One area of downtown Los Angeles that has played a key role in the revitalization of the city core is the Arts District. Once primarily an industrial area, this neighborhood is now home to art studios, creative offices, galleries, independent shops and popular restaurants and cafes, including some with iconic backgrounds like the Urth Caffe. In addition, the internationally acclaimed Southern California Institute of Architecture (SCI-Arc) and the City’s Clean Tech Lab are also located here.
The Arts District also features unique multifamily projects, such as the Barker Block community that was developed by CityView in partnership with Blackstone. This project exemplifies CityView’s mission of providing smart capital for smart growth. It not only represents a wise allocation of capital, but is also a successful adaptive reuse project that has contributed positively to the revitalization of the Arts District and downtown Los Angeles overall.
Featuring an attractive mix of lofts and townhomes, Barker Block has been one of the best-selling for-sale developments in downtown Los Angeles over the past several years. The project has breathed new life into a property that dates back to the early 1900s. Originally constructed as a furniture manufacturing site, the complex is now a multifamily community that is delivering a crucial residential component to the Arts District. With 241 live/work lofts already completed, an additional 68 lofts and townhomes will be added to Barker Block as part of the final phase that is currently underway. With its high ceilings, sturdy construction and rich historic character, this former industrial complex that was originally constructed for the Barker Furniture Company lent itself perfectly to a loft conversion. CityView, working with The Kor Group, has been able to redevelop the property in such a way as to offer ample floor space and open designs that can be adapted to a buyer’s tastes at reasonable prices. And due to the historic nature of the property, the units feature distinctive details such as exposed brick and heavy timber beams.
Residential projects like Barker Block are a key component of the urban renewal that is occurring throughout the country in the wake of the new economy. The repurposing of existing building stock to create dynamic work/live/play districts is no longer limited to cities that are well-established economic engines for the country, such as Boston, Chicago and New York.
These vibrant districts are also taking shape in Philadelphia, Milwaukee and St. Louis, as well as smaller cities like Akron, Providence and Youngstown. Developing an eclectic variety of residential properties is essential for their success over the long term. Offering a mix of housing types located near employment centers helps those areas thrive and also provides the added advantage of street-level vibrancy. Many types of multifamily products are needed in these up-and-coming urban areas, which means ample opportunity for developers and investors. A mix of upscale, middle-income and affordable housing is crucial, with both rental and for-sale units needed.
Since adaptive reuse development does carry the potential for additional costs associated with the transformation of existing factory-style construction into multifamily product, choosing to build in cities with leadership that understands the importance of attracting new uses to critical districts can be a significant factor in making the economics of the project work.
In order for city leaders to actualize the live/work/play districts that are so pivotal to a successful revitalization, they need to first focus on attraction efforts—such as revamped zoning policies—that create the settings conducive to new uses. Then, they must create an economic rubric that encourages multifamily developers and other important players to invest.
Effective strategies have included pricing assembled land in attractive ways and modifying tax policy to provide business incentive districts. Additionally, city leaders should foster collaborations with other entities that are invested in the success of urban neighborhoods, such as local schools and community development corporations.
Of particular importance are partnerships with anchor institutions like universities, medical centers and corporate headquarters that have an equal stake in the revitalization of those areas and can influence it greatly through their own expansion plans.
After 30 years of economic transformation and urban crisis, cities are finally experiencing population growth, neighborhood revitalization and real estate resurgence. Providing a varied mix of residential product types is essential for propelling cities down this new path as central engines of our new economy, thus creating numerous multifamily investment opportunities in the urban infill market going forward.
Henry Cisneros is the chairman of CityView and former HUD Secretary. He devotes his efforts to improving the urban environment through CityView’s investment funds and its “Smart Capital for Smart Growth” strategy. Prior to establishing CityView, he served as Secretary of the U.S. Department of Housing and Urban Development and was the four-term Mayor of San Antonio, Texas.