ULI San Diego-Tijuana News

Millennials Now Pushing a Wider Group of Cities Toward Transit-Based Transformation

This article was originally published on CoStar.com on January 15, 2019 by Lou Hirsh

Lifestyle Priorities Change Urban, Suburban Centers

They may not yet be cities that never sleep but San Diego and other metropolises across the country are building centers around train and bus lines in an effort to transform central business districts from after-work ghost towns into magnets for millennials.

Developers and planners are seeking to create areas where people can spend at least 18 hours a day at home, work and in stores, restaurants and venues in hopes of building a critical mass that attracts more jobs, entertainment, shops, eateries, apartments and the millennial demographic with its disposable income, analysts and executives say.

The rise of millennials, a generation of more than 80 million adults ages 22 to 37, in the workforce is spurring investors’ increasing confidence in the emergence of these all-day cities as a driver of future development, according to a 2019 real estate trends report from development research organization Urban Land Institute and consulting firm Pricewaterhouse Coopers. They largely focus on generally urban and suburban markets outside of the largest U.S. coastal cities, long considered “gateway” markets by national and global investors.

Among the top changes in these smaller markets, stretching from California to Florida, developers are considering how to put vehicle-centric elements such as streets and parking lots to better use over the long haul as bike and scooter lanes, ride-hailing apps and self-driving technologies overtake car ownership as the preferred transit modes.

San Diego in particular is working on a $2 billion expansion of its light-rail trolley system that when completed in 2022 will connect one of its most vibrant employment hubs -– University Town Center, known as UTC, and the next-door University of California San Diego campus -– directly with neighborhoods in the region’s South Bay area, currently home to the largest supplies of relatively affordable housing.

New stops along that northward extension of the trolley’s Blue Line should, in theory at least, alleviate chronic traffic congestion and provide opportunities to form new 18-hour clusters of activity spurred by new housing and commercial elements, provided local neighborhood objections to higher-density projects can be overcome.

“I don’t think San Diego understands yet how important the Blue Line extension is to our urban future,” said developer Andrew Malick, a director at San Diego-based Malick Infill Development, during a recent trends forum presented by the local chapter of the Urban Land Institute, a Washington, D.C.-based research organization focused on urban planning and development issues.

“Anybody who has driven from the Chula Vista-South Bay market up to the work centers in Sorrento Mesa and UTC, knows that if there was another option to sitting in that traffic, they’d take it,” Malick said.

Paul Jablonski, chief executive of the San Diego Metropolitan Transit System, which oversees the trolley, said he’s already hearing enthusiasm from hospital employers in the University Town Center-University of California San Diego area about the coming trolley extension completion.

“Their demand for technical professionals is so high,” Jablonski said, adding those hospitals and other employers in northern San Diego see the chance to better retain and recruit workers who now commute across crowded freeways from areas to the south where housing is more affordable.

Suburban Demand

Ed McMahon, a senior fellow in the Washington office of the Urban Land Institute who’s focused on sustainable development and environmental policy, noted that nine of this year’s top 10 U.S. cities viewed by investors as markets to watch in 2019, and 17 of the top 20, are considered likely to become 18-hour cities if they haven’t already reached that status.

The list includes Dallas and Austin in Texas, Orlando and Tampa in Florida, the Raleigh/Durham area of North Carolina, and Nashville, Tennessee.

Millennials shaped many of the urban core development priorities of the past decade, and their influence is expected to shift to the suburbs as that age group marries and raises children. One result, said Silvergate Development Principal Ian Gill, is that he would “love to be doing more transit-oriented development,” especially in suburban areas where land and other costs are often lower than in urban core neighborhoods.

Larger U.S. multifamily developers, like South Carolina-based Greystar, are finding that transit orientation is not only a priority among tenants, but it also helps in garnering city and lender approvals for projects.

“It’s really tough to get a deal done these days that isn’t transit-oriented,” said Jim Ivory, senior development director at Greystar, which is now under construction on a high-end University Town Center apartment complex and is currently leasing its recently opened Park 12 in downtown San Diego’s burgeoning East Village, near a major trolley stop.

“It only makes sense to locate your housing next to transit,” Ivory said, even in the case of luxury projects. “Residents will use transit if it works for their life.”

To become smoother-operating hubs of activity, these 18-hour cities will need to deal with some of the downsides of consumer trends like e-commerce. McMahon said he thinks that “free shipping” is actually a misnomer when it comes to urban functioning because items ordered online are now clogging streets with package delivery trucks at all hours of the day in many major cities.

He said shipping firms will need to adjust, making more deliveries at night and using more cargo-carrying bicycles for short-hop deliveries within urban centers. Also, McMahon said cities and developers will need to plan for the day when many parking lots and garages become obsolete as more people eschew driving cars in favor of ride-hailing services like Lyft and Uber, and eventually self-driving vehicles.

Many developers, he said, have already begun planning new projects so parking garages can be easily converted later to other uses, like offices, apartments and retail. New parking decks, for instance, need to minimize elements like slanted surfaces that could make future conversions difficult.

“Joni Mitchell sang about how we took paradise and put up a parking lot,” McMahon said. “One of the big opportunities is taking those parking lots and turning them back into paradise.”

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