The value of infill development
By: J. David Chapman/October 1, 2020
I appreciate projects that are compact and walkable, offer a mix of uses, and create a sense of place. Such projects on infill sites have environmental benefits because they can reduce development pressure on outlying areas, helping to safeguard lands that serve important ecological functions; can reduce the amount that people drive, improving air quality and reducing greenhouse gas emissions; and can lead to the cleanup and reuse of formerly economically viable but now abandoned sites, including those contaminated with hazardous substances.
Developers of all sizes, from independent small-scale firms to large, publicly traded companies, are building infill projects throughout the country, and are doing so profitably. These projects have quietly become a huge part of the renaissance of Oklahoma City and Tulsa. We now are seeing suburban infill play a role in the revitalization in the ignored suburb cities of Norman, Broken Arrow and Edmond. Developers have sought infill projects as an opportunity to participate in flourishing downtown areas in these once-ignored suburban markets.
Opportunities for infill development exist in cities and towns throughout the country; however, infill development can present unique challenges, including smaller parcels with fragmented ownership, potential for existing environmental contamination, higher capital costs, more limited financing options, and a longer regulatory approval process. These barriers, real or perceived, are often surmountable and are beginning to diminish as infill development becomes more prevalent and more developers and city municipalities get experience and understand their importance and value.
Several trends point to a sustained increase in demand for infill development and a market opportunity for developers. Consumer preferences for the amenities that infill locations offer are likely to grow as changing demographics affect the housing market. Driving this real estate market trend are the needs and preferences of aging baby boomers, new households, and one-person households. Infill locations are likely to attract many of these people and employers are following.
These trends in the residential and commercial sectors give developers economic incentives to find solutions to the potential barriers to infill, and local governments are helping as well. Lower infrastructure costs and higher rent and sales prices for infill projects will help make infill projects profitable for developers, supporting neighborhoods that are better for the environment and improve quality of life.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).