According to panelists at the Urban Land Institute’s (ULI) Fall Conference, green space not only improves communities but also can add millions of dollars (billions in large cities like New York) to adjacent commercial real estate properties.
Based on a survey of 100 U.S. parks, cities are being “brought back from the brink,” or pushing forward economically due to park development. This is partly due to private funding, as well as support from city governments.
The ULI says that property owners should invest in park development as it offers a number of benefits, including:
1. Reduction in air pollution, water pollution and flooding
2. Improved health for the local population
3. Increased tourism
4. Increased property values
5. Elevated office rents in adjacent properties
New York City’s Bryant Park is a good example of how park revitalization can increase commercial real estate property values. The owners of the W. R. Grace Building across the street, invested $3 million in the park that was part of a private renovation program clear it of drugs and crime and to institute an activity program. Today, the park boosts a winter marketplace, summertime film series, singles bars and fitness programs.
These improvements contributed to the Grace Building’s $19.5 million increase in annual rental revenue and $216 million building valuation increase – more than double the percentage increase for competitive submarkets over the same period of time.
In a separate study by the University of Arizona, walkability was also associated with a higher value for office, retail and apartment properties. Researchers found that walkability was associated with lower cap rates and higher incomes, suggesting it has been favored in both the capital asset and building space markets.
Many commercial real estate investors have focused their due diligence on evaluating a property’s location, condition of the property and local demographics. These findings demonstrate the importance of conducting a detailed analysis that includes walkability, parks and general quality-of-life of the population.
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