Much has been made of the reurbanization trends witnessed over the last decade, as the suburbs have lost some of their cachet and downtown areas have become sexy once more. There are plenty of reasons, from demographic trends, costs of driving, the Great Recession and deindustrialization, but at the center of most of these reasons is walkability.
WalkScore.com uses an algorithm to determine a (you guessed it) Walk Score for any given address in the U.S. or Canada, based on the proximity of amenities such as grocery stores, restaurants, coffee shops, bars, gyms, museums, art galleries and other cultural resources. They then rate the address from 1-100, with a score of 90-100 being a “walker’s paradise”, a score of 70-89 being “very walkable” (with most errands accomplishable on foot), and lower scores indicating decreasing walkability. (A pause for bragging rights: my home neighborhood of Fells Point in Baltimore achieved a walk score of 94.)
So everyone can appreciate the appeal of walkability, but why the increase over the last decade? What's changed?
To start with the obvious, consider demographics. Generation X, currently aged roughly 35-49 and in the midst of their child-rearing years (read: most likely to desire suburban living), is not a very large generation. But the baby boomers (roughly 50-69) and millenials (roughly 18-34) are much larger generations, and both are in phases of life more likely to value walkability and local amenities over acreage and child containability. Empty-nesters and young professionals want to be able to walk to the local café or sports bar, and simply don’t need the large yard with the white picket fence.
Safety makes a big difference in livability and public perception as well. Consider that violent crime rates in the U.S. have also been on a downward trend since a peak in 1991, leading to a general feeling of greater security and safety in urban areas. The violent crime rate in 2012 was the lowest since 1970, at 386.7 violent crimes per 100,000 people.
Looks count for something too, of course. As American cities have deindustrialized, the old smoke plumes, factories, soot and tenement buildings have given way to sparkling glass skyscrapers, upscale condominium towers, boutique retail shops and connoisseur craft beer and wine gastropubs catering to foodies.
There is also data from the 2010 Census (and some limited data more recently) that show greater development in urban centers than in suburban areas, showcasing the increased demand for urban real estate. But suburban centers can also be extremely walkable, and in many cases this appeal is starting to be marketed more aggressively to potential tenants.
The trend and growing appeal of walkability can also be seen in the decline in driving rates. According to a recent study by the U.S. Public Interest Research Group, the number of households without cars increased in 84 out of 100 metro areas surveyed. The average per capita miles driven also decreased in 54 out of 74 metro areas examined by the Federal Highway Administration.
Driving is, after all, expensive, between the cost of the car itself, gas, maintenance, insurance, parking, tolls and repairs. According the PIRG study above, driving has particularly declined among younger Americans aged 16-34 over the last ten years, and the costs associated with car ownership and usage are a likely contributor to young people’s proclivity for walkable urban neighborhoods. And as older Americans drive less, they begin to value having a grocery store a block away, or their favorite restaurant around the corner.
So what does this mean for real estate investors?
While amenities within walking distance have always improved the value of local real estate, the growing appeal of walkability and shift towards urban and suburban centers can mean higher rents for savvy landlords. Investors should keep a close finger on the pulse of upcoming property development and amenities opening up, to scoop up properties before the influx of new amenities becomes common knowledge. Websites like WalkScore and Zillow can be used to compare current home prices, rents and walkability, to spot neighborhoods that may have disproportionately low prices compared to rent and walkability.
Landlords with properties in highly walkable neighborhoods should emphasize the local amenities, and there is no shame in using gimmicks like including a “Walk Score” in the rental listing.