Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Thursday, December 24, 2015

DC and streetcars #4: from the standpoint of stoking real estate development, the line is incredibly successful and it isn't even in service yet, and now that development is extending eastward past 15th Street

While I myself am no longer quite so enamored with DC's streetcar line, I have written quite a bit on its absolute success in terms of stoking real estate development.

Much of H Street NE is more than one half mile in walking distance from a Metrorail Station.

Significant development coming to Benning Road.  Last week's report in the Washington Business Journal ("Developer hopes to extend 'attraction' of H Street NE to the east with 180-unit project") about a new development on the 1700 block of Benning Road, more than 1.5 miles from Union Station, but a site that will be served by the new streetcar, is another confirmation that the streetcar is a success economically, even before it has started serving passengers.

Current conditions:  the right side of this photo shows the south side of the 1600 block of Benning Road NE. The site mentioned above is in the middle left.

Without a streetcar, development in that part of the H Street-Benning Road corridor is completely unimaginable.

It is imaginable now, but still gutsy, given that the streetcar hasn't started serving passengers yet, and has been subject of a lot of angst and opposition and a kind of diffidence on the part of the city's elected officials.  It appears that the current administration isn't too eager to move streetcar expansion beyond H Street, as plans originally intended.

New development proposed for the 1700 block of Benning Road NW, immediately east of Hechinger Mall.

Streetcar service makes all the difference to a developer. According to Jerry Zayets, Director of Multifamily Acquisitions and Development for Capital City Real Estate, the developers of the 1701 H Street project, the streetcar is the reason why they are developing at this location.

As he said in an interview:
"We love infrastructure.  And we were confident that the city would move forward and bring the streetcar into service."

Streetcar images from Fullertography.

The streetcar line is a significant quality upgrade of transit service compared to bus, and this reshapes residential and business location decision making favorably, in a manner comparable to the value of proximity to subway service.

Mr. Zayets confirmed the project has been harder to finance because the location is in a part of the corridor that hasn't been considered "premium" before, given that it is so far from a Metrorail station (1.6 miles from Union Station, more than one mile from Stadium-Armory station).

The site is outside of the comfort zone of the typical sources of real estate capital who see developing Downtown or around Metrorail stations as low risk, and have a hard time getting their heads around developing a high quality dense residential project more than one mile from a Metrorail station, even with streetcar service and lower land cost.

Note that another firm is pursuing a project on the 1600 block of Benning Road too.

Streetcar on Benning Road NE.

Because of the streetcar, sites beyond the half mile walking distance of a Metrorail station are being developed in a significant manner on H Street.  Of 11 projects in various stages east of 5th Street NE, six are dense, 6 to 7 stories.

No other part of the city beyond the catchment area of a Metrorail station can make a similar claim.

One half mile radius of Metrorail stations in the vicinity of H Street NE
This map shows five Metrorail stations and their catchment areas:  Union Station on the southwest, NoMA on the northwest, Stadium Armory and Benning Road on the southeast, and Minnesota Avenue on the northeast.

All told, so far, the estimated value of new real estate development on H Street NE east of 5th Street is $769 million.

This estimate does not include any of the development west of 5th Street NE.

On the left of this photo, the buildings pictured have been demolished, and two apartment buildings are being constructed, worth more than $200 million.  The projects will include a Whole Foods Market at 6th Street.

That is mind-boggling, far beyond what any of us imagined when we created the H Street Main Street revitalization initiative almost 15 years ago.

And that doesn't include sites that are likely to be redeveloped for which plans have not been developed (Hechinger Mall, CVS site, parking lot of Delta Towers, Atlas Flats north, UPO site on 17th Street NE, northern parking lots of RFK Stadium, etc.).

It itself, the streetcar service will reshape the "Starburst Intersection," where H Street, Benning Road, Maryland Avenue, 15th Street, and Bladensburg Road," as a node of density, comparable to the impact of a Metrorail station, but without a Metrorail station.

There is no question that as more sites are redeveloped, especially east of Bladensburg Road, the value of new development serviced by the streetcar on the eastern side of the corridor will top $2 billion.

Rendering showing streetcar service to Burnham Place and the extended and expanded Union Station over the railyard.

That excludes valuation of development west of 5th Street NE, of which the streetcar is an influence, but only somewhat, because proximity to Union Station and the NoMA Metrorail station is a greater driver, even though the Burnham Place project on the Union Station railyard is prioritizing streetcar access.

Reports say the streetcar has cost $200 million so far.

The value of new development in response to the streetcar is already almost four times greater than the cost of the streetcar.  Property tax revenues on the buildings, along with sales tax revenue from the retail and income tax on new residents and generated by the new jobs will be significant.

If that isn't success, I don't know how to define success ("Transportation chief asks if troubled District streetcar system can be saved," Washington Post, March 2015).

How can the city be satisfied with not continuing to expand streetcar service beyond H Street?

New real estate development along the H Street corridor
Building name Address # of units Value
Stationhouse 701 2nd Street NE375 $165MM*
Senate Square 200 block north 476 $210MM*
Capital City Realty 301 H Street NE 25 $9MM*
Telesis315 H Street NE 25-40 $12MM*
360 Apartments 360 H Street NE 270 $120MM*
Ava 300 block I Street NE 140 $60MM*
Douglas Development 501 H Street 25$11MM*
H Street Condominiums 601-645 H Street NE 307 $135MM*
Apollo 600 H Street 430 $189MM
Rock Creek Realty 600 block north 32 $15MM*
H Street Connection 800 block south 368 $162MM*
Wall Development 1115 H Street NE 16 $6MM*
The Maryland 1350 Maryland Avenue NE84 $40MM*
TBD 1401 H Street NE34$15MM*
Atlas Flats 1600 Maryland Avenue NE 257 $36MM
Valor Development 1603 Benning Road NE 300 $100MM*
1701 H Street NE 1700 Benning Road NE 180 $60MM

* = the value of the project is an estimate, and the cost does not necessarily include the cost of land.

Elsewhere in the city, taller buildings aren't being constructed outside of Metrorail station areas.  For the most part in DC, denser buildings are only being constructed within a few blocks of Metrorail Stations.  Only two exceptions come to mind, the Cathedral Commons site across from the National Cathedral on Wisconsin Avenue and the apartment building at 5333 Connecticut Avenue NW.

Is it merely a matter of allowable zoning?  Alex B., commenting on a previous entry in this series, pointed out that H Street NE has different zoning conditions from many other areas in the city, which allows for taller buildings.  He's right.  In fact, H Street has similar height condition allowability comparable to streets like Wisconsin Avenue, Connecticut Avenue, and 16th Street, which are known for tall apartment buildings.

Probably not, the zoning has been in place for a long time.  But from 1974 to 2006 excepting the senior housing and office buildings constructed as part of the post-riots H Street Urban Renewal Plan, only four buildings of that height had been constructed east of Union Station.

Since 2006, four sites have been developed at that height, clustered on the 200 and 300 blocks of H Street, as well as three buildings north of K Street, proximate to the NoMA Metrorail station, which aren't included in the listing below.  Now at least five sites east of 6th St. are being developed to that height, and one of the original four sites is being expanded.

Ugly but this was what was approved for the old Curtis Chevrolet site on Georgia Avenue NW around 2009.

Other areas with similar zoning conditions aren't experiencing comparable development. Georgia Avenue has similar zoning conditions to H Street, and outside of the area immediately around the Metrorail station at the intersection of Georgia and New Hampshire Avenues, it is not experiencing construction of the larger buildings being built on H Street NE.

(This will change somewhat with the redevelopment of the Walter Reed campus, which is about three quarters of a mile from the Takoma Metrorail station.  Douglas Development also proposes a taller building on Eastern Avenue at the Maryland state line, which is about one mile from the Silver Spring Station, but abuts South Silver Spring, which is marked by buildings taller than what is allowable in DC.)

In 2011, the developer for the Walmart site on Georgia Avenue was very clear that they were not interested in spending years lining up financing to build apartments along with retail, when Walmart was ready to move forward immediately.  Photo by Ed McMahon.

A classic case is the "Walmart" at Georgia and Missouri Avenues (about 1.5 miles from any Metrorail stations) touted unfortunately by many urbanists as an example of pro-urban chain retail entry--but the building is a one story, single use building, even though the site had been permitted for mixed use and up to 450 apartments ("Missouri loves company," Washington City Paper, 2009).

Rendering of the Fort Totten Walmart store.

By contrast Walmart's two stores in DC that are part of mixed use developments, multistory buildings mixing retail with either commercial space or housing, are both within one-half mile of Metrorail stations.

So it's fair to argue that the development on H Street east of 5th/6th Streets is mostly attributable to the streetcar.  Or that the streetcar has accelerated the development of the sites.

It's definitely true for development east of Bladensburg Road.  Jerry Zayets, was very clear about the streetcar line as being essential to their decision to develop so far away from a Metrorail station.  As he said:
"We love infrastructure.  Rail in the ground [and streetcar] is completely different from bus.  Bus routes can change.  Rails stay in place."
Bus service map in the Benning Road-H Street corridor.  The corridor has plenty of bus service, and in fact the X2 busline is one of the highest used lines in the system and has been for decades.  Despite the high frequency service, bus service did not significantly contribute to revitalization objectives.

Developers and choice riders like rail more than bus.  Rail service, previously in our area only heavy rail, but now about to include streetcar and eventually light rail (in Montgomery and Prince George's Counties in Maryland), is in-the-ground service that shapes decision making not just of developers but of residents in choosing where to live and businesses in choosing where to locate.  Bus service doesn't compare.

Remember the quote from the other day?:
If choice riders aren't using transit then developers will pay little attention to transit availability when making development decisions.
In 2003, I suggested that H Street Main Street should develop a "housing development policy" for our retail trade and interest area, including Bladensburg and Benning Roads, calling for mixed use redevelopment at Hechinger Mall and the extension of the city grid to the northern parking lots of RFK Stadium.

3701 Benning Road NE.  WAMU/NPR photo.  It would be nice to spur the development of this and similarly languishing properties.

It's incredible to see now that this can and will happen, although over extremely long time horizons and with "pump priming" actions like the streetcar.

Extending streetcar service deeper into Ward 7 as a revitalization initiative.  Earlier plans for the streetcar called for extension of the service south on Minnesota Avenue and Benning Road, to the Benning Road Metrorail station.  Likely that would be as rejuvenating for those streets as it is for the H Street district.

As the streetcar enters operation and people develop experience and comfort with the service, and as development continues to grow within the streetcar catchment area, likely the current plans to halt streetcar expansion will reverse, and service can be developed in those areas that need the kind of jump start that the service is providing on H Street.

Georgia Avenue.  Similarly, Georgia Avenue has languished for 20 years as a slew of Councilmembers (Jarvis, Fenty, and Bowser) all claimed they would reverse the decline.

Outside of the developments at the Petworth Metro, spurred by WMATA's sale of land on the west side of the station, which became the Park Place Apartments, not much has happened.

The area around Howard University has languished for decades, and the university has had many failed attempts trying to create a "Howard Town Center."  The Walter Reed campus will be redeveloped (even when the campus was "open" the commercial properties nearby weren't all that) but in a manner that won't realize all the opportunities that were present in the site.

Streetcar service, in strong markets anyway, likely can be a "revitalization solution" for corridors, which are otherwise difficult to improve.  This will be the topic of the fifth post on DC and streetcars.

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At 11:50 AM, Blogger washcycle said...

Another smart expansion of the line would be a N-S line from the Potomac Ave metro along 14th and 15th streets and then up Bladensburg Road to Eastern Avenue. There's a lot of under-invested land along Blandesburg (and a chance to allow it to run in its own right-of-way if the courage were there.

At 3:29 PM, Blogger Richard Layman said...

very good suggestion... but, in the next iteration (but I need to find a good designer so it can be expressed graphically) of my ideal Metrorail system, I am thinking that I would say a goodly portion of that area would be served by a leg of a separated Silver Line.

(1) the separated blue line, but now termed the (mostly) separated Silver Line, (2) as it goes east from Union Station along H Street should pick up the Orange Line from Benning Road, (4) which would then create a new separated Orange Line from Stadium-Armory, (5) I would create a split at 15th Street that goes up Bladensburg to Fort Lincoln (and even beyond if PG County is into it).

The advantage this would have although in a roundabout way would be serving the 17 acres that Douglas Development now owns, that when Abdo Dev. was gonna develop it, they called Arboretum Place, at the intersection of New York Avenue and Bladensburg Road. It would be within one half mile of Ivy City.

I'll have to do some transit shed radii in developing the graphic presentation.

I'd like to eliminate the above-ground portion of the Orange Line to Minnesota Ave. from RFK to simplify redevelopment. But you lose a link between the end legs of the Orange and Blue Lines.

Maybe you could have a shuttle between the two lines, like they do here and there in NYC, but we don't do with Metrorail currently.

At 9:22 AM, Anonymous charlie said...

Somewhat off topic:

There was also a piece in the post that GGW ran on Skyline and the proposed Arlington streetcar:

Which sort of proves the point that the Arlington Growth Machine didn't want the streetcar.

At 7:19 PM, Blogger Richard Layman said...

I've been away so I will have to go back and read the Post for the days I was gone.

I imagine that the ArCo GM sees streetcar on Columbia Pike as a distraction given all the other ec. problems Arlington has with decline of its commercial base given consolidation and the Silver Line's repositioning of Fairfax, plus Alexandria's ability to undercut its positioning for federal buildings because of the hyperdifficulty of getting Congress to approve prospectus leases with higher than normal pricing.

.... but, and I don't know the economics of Virginia well enough, the streetcar on H Street isn't about enabling growth and extension of the CBD, it's about land intensification and the attraction of residents to multiunit buildings.

In DC, that makes a big difference because the city collects income tax off residents. It wouldn't have the same effect in a local jurisdiction in Virginia, because taxation is different. (In Maryland, half the state income tax is actually a local income tax that goes back to the counties.)

BUT, the problem for the Growth Machine in Arlington is that they compete with Alexandria, Fairfax, Loudoun, Prince William, etc.

They need more population and economic vitality to remain competitive with other jurisdictions for residents and business.

The streetcar would have re-opened Columbia Pike as a superior place to live in the same way that H Street has been repositioned by the streetcar.

Having first moved to that neighborhood in Sept. 1987 (I haven't lived there for 10 years...), it's almost unimaginable how that neighborhood has been repositioned.

Of course, there are other elements to it, and no less important was the NoMA Metro Station, which gave people with choices the confidence to live north of H Street (e.g., when I lived there at first, there probably weren't 10 white people living north of H St. and south of Florida Avenue, out of 1750 dwelling units).

But it also had that "one neighborhood over" opportunity which Columbia Pike doesn't possess in the same manner, given H Street's place abutting on the north the Capitol Hill Historic District and its proximity to Union Station, Downtown, and the US Capitol.

In short, just as the GM in DC is indifferent to the streetcar (not the most innovative of the real estate development community), I think they are looking at this in a very shortsighted way, not thinking about all the elements.

I can see a streetcar on Georgia Avenue, and one on Kennedy Street to Fort Totten/Riggs Road (such a line has never been part of the planning), extension of the streetcar east to Benning Road Station and along East Capitol/Central Avenue, of course on Martin Luther King Avenue, as incredible repositioning devices.

... then again, I still would rather invest in Metrorail expansion. But face it, a separated yellow line up Georgia Avenue could do the same thing there, but the other places mentioned aren't conducive to adding Metrorail service.

As a pump primer, I definitely see the value of streetcar in the quiver of tools for revitalization, and transit improvement.

At 7:28 PM, Blogger Richard Layman said...

I remember Kwame Brown pushing small and local business and "the Main Street model" for other places in the city.

Fenty's intent was to junk MS, as he saw it as a Williams administration initiative, not as a proven program with a good structure independent of politics. CM Brown kept it going.

But I remember being struck by how CM Brown said "Main Streets bring development". He was referring to 8th St. SE.

He had no idea of what worked why and where and no recognition of the fact that how just designating a place as a Main St. and providing way too little money and time was not the right way to make a difference and bring development to places.

E.g., I remember my original emails to Dan Tangherlini putting out my reasoning for why expanding the "Great Streets" program of investment in streetscape based on the H Street (and 8th Street SE) experiences (for H St. is was projected) wouldn't have the effect they predicted because those areas were emerging at best and much of the residential areas abutting the Great Streets corridors were distressed, not healthy or transitioning (e.g., 8th St. SE is surrounded by high value residential, H Street was one-over, and solidly middle class--but the commercial district didn't reflect that reality).

Great Streets isn't enough. Maybe for the really tough places you need streetcar (or Metrorail).

At 7:35 PM, Blogger Richard Layman said...

the interfluidity piece is deep, but more a restatement of other work. That's important though. Yes, constraints on supply raise prices. For many that's a good thing. That's what isn't recognized by the economists. There are opportunity costs sure, but there's something to be said for the difference in the housing values in NW neighborhoods in DC vs. District Heights, MD.

The point is selective intensity as a way to augment values.

Again, that comes down to the growth machine argument as an explanation for how land use works at the local level.

At 10:07 AM, Anonymous charlie said...

Well, I liked the interfludity piece because it tracks another statement from Krugman on urban economics -- that it is a rats nest of externalities and market clearing prices are not a way to deal with problems.

In terms of Columbia Pike, article did a good job explaining that it was Fairfax, not Arlington that had the biggest potential gain from streetcar.

Arlington has done good job developing the Pike up to Glebe road. With BRAC the idea of a one seat commute into Pentagon City (and then a very long walk to the pentagon) is not very attractive.

At 3:26 PM, Blogger Richard Layman said...

Have a stack of the Post now, but am doing LIFO (last in first out) so I haven't made it to that point/article yet.

But the point you make about the 2005 BRAC cycle is very important. It came after the initial run of Columbia Pike planning and the choice of the streetcar as a transportation device and stoker of economic development. The changed circumstances weren't reflected necessarily in the Pike plans.

Because it took as much as 5 years or more for the changes to take effect, streetcar planning lagged.

Arlington has a major conflagration in Crystal City and to some extent now in the Wilson Blvd. corridor, because the rental rates can be undercut by Alexandria and Fairfax.

Maybe the GM is overwhelmed with that and just didn't believe they had the time and energy to deal with streetcars.

I don't know that part of Arlington/Fairfax that well. I seem to recall that Southern Towers is out there (Southern Management is likely a leading member of the Growth Machine, but maybe less important in ArCo specifically). The Towers are out of place density wise but that was because back when they were developed there was an expectation/outside chance that a Metro line would go out that way (comparable to why the area around PG Plaza is denser and had been since the early 1970s, with some govt. tenants, because of the knowledge of the coming of the green line).

So yes, I could see why Fairfax wanted a streetcar out that way, comparable to why they wanted the Silver Line.

At 3:29 PM, Blogger Richard Layman said...

Glaeser et al probably don't like zoning, see it as an interference with the market.

They somehow see capital as pure. The reality is that zoning has always been about maintaining and boosting real estate value and advantaging certain areas at the expense of others.

That's how you build wealth, for some anyway.

At 8:20 AM, Blogger Richard Layman said...

another way to look at it is with the line about "that's a feature not a bug." I was reading the commentary on the original Molotch article, the back and forth between John Logan and Molotch (which then led them to work together on the expansion of the thesis).

Molotch's response included this:

... in my view the scale of locality (e.g., suburb or city) is not ultimately a proper subject for a field of study. Instead we need an integrated analysis of the meaning of territory and locality--at least parallel in breadth to the scheme that the early human ecologists (i.e., Park and Burgess) set out to develop, but informed by the recognition of location as a means of trapping surplus value and "speculative profit," and the social organizational consequences of that overwhelming and critical function.

At 9:29 AM, Anonymous charlie said...

RE: BRAC. The decision to move jobs to the quarter pentagon on 395 probably was also a killer. I think that pre-dated BRAC.

Urban value; yeah, one of my big think items this year is the urban nest of externalities essentially traps and captures value.

At 3:27 PM, Blogger Richard Layman said...

Yep. again, a feature, not a bug, in terms of capitalism. If the guy writing that blog had a bit more of a sociological background, it would have added depth to his criticism of market urbanism.

Only theoretically are market clearing prices supposed to be "low."

At 7:16 AM, Blogger Richard Layman said...

Speaking of sharing links, on this topic spurred by the interfluidity article, a very interesting article on Vancouver's housing market, with some good links to academic studies:

At 3:15 PM, Anonymous James D said...

So here's a thought...
Is the reason why developers like streetcars because they are permanent in part because a community spends much more on implementing a streetcar line than a bus line? If I was spending tens of millions of dollars a year to rebuild a street with rails, I wouldn't want to reroute the line and spend tens of millions more a couple years down the road.

I mean, if there was a way you could spend $200 million dollars on H Street to improve the bus system--maybe provide a segregated bus-only lane, brand new bus shelters for bus stops comprising the top 50% of the system's riders, could that draw developers to the corridor?

Or, might it be that rails in the ground and wires in the sky signals to someone a way that they can traverse the area (making it more attractive to people who don't/ can't use a car), versus a bus system that has fewer or smaller visual cues?

Because I'm confused how streetcars are more attractive than city buses when they're basically the same--minus the fossil fuel engine, the rubber versus metal wheels, and probably the picture of the clientele traveling on each method.

At 5:01 PM, Blogger Richard Layman said...

first, there is a huge difference between regular bus and streetcar in terms of noise.

But I think the biggest difference, at least in the US, is that higher quality bus service doesn't seem to be attractive to choice riders. It's also about class mixing, sure.

So you could do the things you suggest, and in this entry, I did suggest it almost two years ago, that it would be worth testing a high quality bus service, which I think could be rebranded by using double deck buses:

But I don't think it would make much difference.

And as the person I quoted from an email discussion said:

If choice riders aren't using transit then developers will pay little attention to transit availability when making development decisions.

So it comes down to developers being attracted to what attracts "quality" potential residents. Rail seems to be superior over bus.

BUT, I still think it would be worth doing a test of a high quality bus service, using double deck lines, with great marketing etc., to see if it would be possible to make a difference.

Using these principles among others:

But yes, if we had a dedicated set of transitways downtown, that would begin to reset the stage for repositioning of bus service.

A conundrum, definitely.

At 9:27 AM, Blogger Richard Layman said...

James, just came across this article:

about Buffalo and improvements to the bus service and ridership increases.

I don't know how true it is, but there is no question that with dedicated transitways improving speeds, marketing improvements, improvements to waiting stations and stops, and probably buses (double deck...) there could be large ridership increases.

ESPECIALLY if parking is not free, which most surveys show as one of the most significant factors in the decision to drive vs. the decision to use transit.


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