In cities around the U.S., train stations are being converted to multi-modal transit hubs anchoring impressive new neighborhoods, and private developers are cashing in. John Gendall rides the rails to skyrocketing real estate prices.
One of great rites of passage for most Americans, from baby boomers to Generation Y, was the trip, often on a sixteenth birthday, to the Department of Motor Vehicles to get the first driver’s license. But research from automotive data company Polk shows the share of car purchases made by young adults (ages 18–34) plummeted by 30 percent between 2007 and 2011, while the share for adults aged 35–44 fell by 25 percent. Younger Americans, it would seem, are not as eager to get licensed up at the soonest opportunity. Not only has this sent carmakers scrambling to render the driver’s seat with all the trappings of a smartphone—the commodity that young adults actually do covet—but it has also instigated a series of land use trends that are reshaping American cities, and train stations are taking center stage.
“Teenagers and young adults aren’t even getting driver’s licenses,” said Amtrak chief of corridor development Bob LaCroix, “These trends are making our stations very interesting to the real estate community.” ‘Interesting’ would be one way to put it. ‘Potentially very lucrative’ would be another.
New Yorkers will be familiar with this effect from Hudson Yards and Atlantic Yards, where the Related Companies and Forest City Ratner are, respectively, developing on the formerly uncovered rail yards of Penn Station, in Midtown, and Atlantic Terminal, in Brooklyn. But in cities across the country—Denver, Salt Lake City, Minneapolis, Miami, Philadelphia, San Francisco, Seattle, and Los Angeles—developers and municipalities are making serious investment in transit and transit-oriented develompents. “Every major metro area in the country, really, is doing a pretty substantial build out of its transit systems,” said Rachel MacCleery, Senior Vice President at the Urban Land Institute (ULI).
Since developing suburbs by the swath is becoming less tenable for economic and environmental reasons, municipalities and developers are more tactically considering land use within city centers. In Philadelphia, for example, the main train station, 30th Street Station (which happens to be the third busiest station in Amtrak’s system) is ringed with significant real estate anchors: the University of Pennsylvania, Drexel University, and, just across the Schuylkill River, City Hall, the Philadelphia Museum of Art, and the Center City district. Though the station itself is an impressive historic structure and though it has this orbit of vibrant neighborhoods, its immediate context leaves something to be desired. One local architect, who wished to remain unnamed, called it “the hole in the middle of the donut.” Amtrak, which owns the station and over 80 acres of rail yards, including—and this is important—the air rights over them, is teaming up with neighbors Drexel University and Brandywine Realty Trust to develop a comprehensive master plan for the station and its context. To do this, Amtrak tapped SOM, Parsons Brinckerhoff, OLIN, and HR&A Advisors in May 2014 to undertake the two-year planning process.
Real estate professionals and transportation advocates point to Washington DC’s NoMa district as a particularly compelling precedent. Close to Union Station, the area, once dominated by parking lots and warehouses, had long suffered from high vacancy rates. In 2004, though, an infill transit stop was added to the Washington Metro commuter rail line, instigating a surge of real estate activity. Now, Washington is looking to build on that success with a redevelopment of its Union Station. Working with the Union Station Redevelopment Corporation, the U.S. Department of Transportation, Maryland Transit Administration, Virginia Department of Rail and Public Transportation, and the Washington Metropolitan Area Transit Authority, Amtrak engaged Parsons Brinckerhoff and HOK to author a 15-to-20-year master plan that will triple the passenger capacity in the station, double the train service, and plan for real estate development on and around the station.
The Washington project highlights one of the challenges of working with historic train stations in urban contexts: they come with what LaCroix called “serious constraints.” Unlike the suburbs, which, for the most part, can be transformed into buildable lots with the sweep of an earthmover, train stations typically demand greater finesse. “There tends to be more complexity to transit-related developments,” said Eric Rothman, president and transportation expert at HR&A Advisors. “There are always very important operational concerns.” As a simple case-in-point, LaCroix explained, “we can’t expand south because there is a little something called the U.S. Capitol.” Each of the other cardinal directions come with their own inviolable obstacles, so the Parsons Brinckerhoff/HOK plan goes below grade, but, LaCroix is quick to point out, “in an elegant way—not a Penn Station way.”
In Seattle, where ZGF Architects completed a restoration of King Street Station in 2013, Daniels Real Estate is undertaking the so-called North Lot Development, a four-acre, 1.5 million-square-foot mixed-use project directly adjacent to the station. Though he identified the transit hub as the catalyst for the project, Daniels president Kevin Daniels conceded, “working with transit is a challenge,” citing the intricacies of moving people through infrastructure, between heavy rail and light rail, rail and bus, regional busses and local busses. “Developers can tend to get very myopic from our side, and transit folks can get very myopic from their side,” he said. “While it might be easiest to line up busses in front of restaurants, that doesn’t work from the development side. The design has to find common ground with what works for them and what works for us.”
Cases abound of historically preserved train stations that contribute little to community and economic development. What these cases demonstrate is that architectural attention on the station itself needs to be coupled with a serious commitment to the underlying transportation infrastructure. While the historic restoration of Seattle King Street Station was a critical element for the success of the project, that alone was not sufficient to anchor the neighborhood. The city and its transit agencies have committed to investing in transit and undertaking the gritty, long-term work of transforming the historic building into a multi-modal hub, orchestrating heavy rail, light rail, and local and regional buses.
Cutting the ribbon on its transit hub this summer, Denver Union Station has become an important model for other transit-related developments. Having effectively reshaped the metropolitan experience in Denver, the project has stimulated urban development both at and around the station itself, but also along the network of transit routes that the station catalyzes. The Denver Union Station Neighborhood Development Company, a joint entity between developers East West Partners and Continuum Partners, has essentially shifted the city’s center of gravity toward the train station, which, for decades, had been dangling on the margins of Denver’s downtown area. The project included the historic preservation of the station itself, a robust public investment in transit, but also a real commitment to neighborhood building. Where Amtrak passengers once looked out onto acres of dusty landscape is now in the midst of becoming over five million square feet of commercial, residential, and civic space spread over nearly 20 acres. Several restaurants and a new hotel opened this summer. A Whole Foods is on the way. “It’s an incredibly complex station, but we’ve created a neighborhood, not just a transit station,” said Chris Frampton, a managing partner at East West Partners. Private developers play a fundamental role in realizing these transformations. “We typically seek developers through competitive processes,” said LaCroix, acknowledging that Amtrak is not in the best position to build neighborhoods. “When transportation agencies do the developing, they do it wonderfully, but they do it for trains,” said Frampton, making the case for private development to help in making neighborhoods.
“Transit investments are important, but they are only one part of making a neighborhood,” said Rothman. “The stations should be as inviting a place as possible to non-transit riders and transit riders alike. It needs to be a civic asset, not just a transit asset,” said Rothman. “Transit itself is not going to make a neighborhood.”
This is not just an act of civic altruism. “The marketplace is paying,” said MacCleery. In Denver, where the property leases had peaked at $435 per square foot, East West and Continuum recently leased One Union Station at $600 per square foot.
With this arrangement between transit agencies, private developers, and architects, everyone stands to profit. “We don’t have to own the real estate to get value out of it,” said LaCroix. “Smart, good development works for us. We can develop a very symbiotic relationship with private developers.”