Compact cities are better for their inhabitants, the environment and investors, according to the Urban Land Institute (ULI) and the Coalition for Urban Transitions.
In a new report, Supporting Smart Urban Development: Successful investing in density, the two organizations have attempted to quantify the impact of quality of place on real estate investment returns and have argued cities with “good density” are more likely to provide higher risk-adjusted real estate investment returns than more dispersed cities.
Based on a quantitative analysis of 63 global cities, the report identifies six characteristics associated with “good density”: clustering structure (land use patterns within cities and regions), economic and employment infrastructure (availability of investment, jobs, and talent), built infrastructure (physical density and mixture of uses), green and blue infrastructure, public transport infrastructure, and good governance. The report also says compact cities allow for the creation of low-carbon and livable urban areas. These attract investors as they help solve problems such as pollution, high unemployment, inequality and stagnant economic growth.
The report was unveiled last week in London by a group of supporters including Bouwinvest Real Estate Investors, Capco, CBRE Global Investors, Grosvenor, LaSalle Investment Management, M&G Real Estate, PGGM, Redevco, and Union Investment. McKinsey & Co. also contributed to the report as a project adviser. The companies supporting ULI and the Coalition for Urban Transitions in their research also have released a statement that commits them to championing further understanding of the opportunities and benefits of dense cities that are well-managed and well-serviced.
Simon Chinn, a senior analyst at Grosvenor, argues the report shows investor attitudes toward measuring density need to change. “Density encompasses more than just the number of people living or working within a defined area,” says Chinn. “It has to account for key characteristics of urban form, such as clustering patterns, mixed-use planning, amenity offer and transport infrastructure, which collectively play a role in creating the right kind of density for cities.”
Nick Godfrey, director of the Coalition for Urban Transitions, adds the evidence gathered by his organization and ULI shows long-term real estate investors, people and the environment do not have to be in conflict over efforts to put cities onto a low-carbon and more equal path. “On the contrary, national and local governments and well-informed real estate investors can find common cause in promoting improved public transport, cycling and walking; protecting public parks; and reducing energy waste in cities,” he says.
