Introducing “Smart Growth”: One Firm’s Perspective on Making Development Smarter, Not Harder

San Francisco, MVE+Partners, Gateway Crossing, Passage at San Mateo
Image Courtesy of MVE + Partners

By Meghan Hall

The Bay Area’s development landscape has changed rapidly since major tech firms have made the region a global business hub. Municipalities, developers and property owners alike are constantly evaluating how best to accommodate the region’s rapidly growing population, with transit-oriented development (TOD) becoming a frequent topic of conversation amongst commercial real estate professionals and public officials alike. For Terrence Shaw and Ken Nilmeier, senior associate partner and principal of director and planning at MVE + Partners, respectively, TOD is a critical factor in addressing issues such as the region’s housing imbalance and traffic, one that will become increasingly important as the Bay Area grows.

Transit Oriented Development (TOD) has quickly become a very necessary type of infill project across the Bay Area as city officials and developers look to make use of every available scrap of space. When did you first begin to see TOD become an important—and more urgent—part of development conversations throughout the Bay Area?

Terrence Shaw, MVE + Partners

Terrence Seah (TS): TODs have been part of the Bay Area real estate discussion for at least several decades but have gained more attention in recent years as housing prices continue to escalate and traffic congestion worsens. The spread of homelessness into exurban communities down the peninsula and in the East Bay region as well as the pervasiveness of “van life” culture has made it difficult to localize the problem. As state and local governments try to tackle affordability through legislation – with AB 2923 signed but SB 50 failing again –  the focus on TODs  from developers on one side and residential communities impacted by these bills on the other has been at an all-time high.   

Ken Nilmeier, MVE + Partners

Ken Nilmeier (KN): In the late 1990s, MVE became engaged with TODs in properties and areas adjoining BART including South San Francisco, Oakland (Fruitvale), Walnut Creek and Dublin. In some cases, there were opportunities to “harvest” land that had been used as surface lots for “park and ride” facilities which had always been the long-range vision of BART officials. In other cases, private developers had the foresight to capitalize upon the value of providing residents with an alternative to the automobile. In places such as San Jose, MVE also became involved in projects where proximity to light-rail led to multi-family/mixed-use development in areas that previously were exclusively commercial. 

What are some of the main factors that have driven the demand for TOD in the Bay Area?

(TS): In many communities around the Bay Area, current land-use policies are no longer sustainable given housing market conditions. This disconnect has led to an affordability crisis heightened by construction cost escalation and scarcity of developable land for high-density housing. Ironically, the same land-use policies that for decades helped shape the character of communities surrounding the Bay Area are now detrimental to their growth and prosperity. TODs are a way to better align land use with infrastructure. 

Another driver is the steady increase in the transportation cost burden, as measured by monetary, time and convenience factors. As traffic congestion has increased, public sentiment to driving has shifted. The convenience of the owner-driven automobile has decreased leading to the consideration and adoption of other modes of transit. Across the United States, ridesharing, light rail, and commuter rail ridership have increased in recent years, making communities that offer convenient access to these modes of transit attractive. Though it hasn’t happened overnight, cities that have made the investment and commitment to transit are now reaping the benefits and are able to continue to evolve more sustainably.   

The desire for urban amenities such as retail/shopping, restaurants, and leisure activities are essential components to successful TODs and their long-term viability. Increased congestion on the roadways and time spent commuting highlight the attractiveness of living in a community where lifestyle essentials are within walking distance. For those who prefer urban rather suburban living, walkability over drivability becomes a convenience. 

As the Bay Area has become increasingly dense and development has ramped up over the course of the past market cycle, how have approaches and best practices for TOD evolved?

(KN): We are finally beginning to see a more proactive embracing of the benefits of transit by the development community and local jurisdictions through accepting and implementing lower resident parking ratios in transit-adjacent multifamily communities. This has resulted in considerable construction cost savings by limiting the need to build expensive structured parking in large quantities. Until recently, the development community and city officials had the tendency to build or mandate conventional suburban parking ratios for TOD projects. Now, we’re starting to see the appropriate retail programming for mixed-use retail in TODs, where in the past, local jurisdictions were overly optimistic regarding the demand and absorption of retail. 

What are the biggest challenges that landowners, developers and city officials face when pursuing TOD?

(TS): Getting a TOD entitled is typically a long and tedious process. Addressing community opposition to up-zoning, higher-density, perceived effect on home value and project aesthetics are also significant challenges to building a TOD. Communicating with and getting buy-in from community groups is typically the key to pursuing TODs as well as providing concessions to stakeholders to allow a project to move forward.  

(KN): Several jurisdictions have taken the initiative to include transit adjacent districts in their general plans, and in some cases, have proactively prepared “station area plans” that allow for increased densities and promote smart-growth development thereby relieving the developer of some entitlement risk. These city-led plans include community consensus building so that when a developer submits applications to implement components of such a district plan, the community has already been engaged and is partially vested.  

In your opinion, what are some of the benefits of TOD? How can TOD function to revitalize urban communities?

(KN): With increased density and less reliance on the automobile, TODs can form the nucleus of a walkable community and provide a more dynamic alternative to the suburban car-centric development syndrome that has plagued most of post-war U.S. When TODs hit a tipping point, their benefit to transit is convenience through supportive amenities and alternative transportation modes such as rideshare, bikeshare, scooters, secure parking, and storage. These amenities add to the overall quality of the community and helps attract “choice riders” – those who can afford a car but choose to be less dependent on it for their daily needs. If more residents and office tenants elect to walk, the viability of providing them with quality services and amenities will emerge as well as a host of social benefits from being more active participants in revitalizing communities.  

MVE + Partners is working on two TODs in the Bay Area: Passage at San Mateo, a 935-unit mixed-use project within walking distance to Caltrans, and Gateway Crossing, a 24-acre project intended to be a new epicenter in Santa Clara. How are these two projects examples of effective TOD in the Bay Area? 

(KN): Both projects are key examples of high-density residential buildings that are introduced adjacent to transit. Each involves redevelopment from non-residential land uses, includes project-serving and vertically integrated retail and services, and has a degree of pre-entitlement from proactive city-led land use policies. Both projects also have enough critical mass and land area to create a distinctive neighborhood district with place-making elements such as meaningful park space and other amenities that serve residents and the surrounding community. 

What makes TOD successful? 

(TS): It is important to understand and remember that TOD is more than one project. It’s an area that is a quarter- to a half-mile radius around a transit stop. A TOD is successful when it embodies a walkable community and provides easy access to both urban amenities and convenient transit connection to the wider region. As part of a larger transit network, the TOD, when not associated with a major transportation center such as a union station, functions primarily as a destination for the local community. In a perfect scenario, there is demand for multiple land uses within the TOD including residential, office, hospitality, and services. Such locations could thrive with or without transit, where place-making and community building are important in the planning and design process so that projects can generate adjacent redevelopment and TODs can evolve into distinct places.

Looking ahead, are there any trends that you think will emerge when it comes to TOD in the region or elsewhere? Why or why not?

(KN): A very promising trend is the willingness of the California State Legislature to introduce laws relative to assuring that “smart growth” land use policies are implemented in transit-friendly locations. While lawmakers are currently negotiating the language of such legislation, the extent to which “nimby-ism” is thwarted, even if it means that local control is diminished, should attract free enterprise and investment in TODs. The cost, duration and uncertainty of obtaining entitlements have become a growing deterrent to investment and are contributing to the severe housing shortage experienced in much of the state. Should this legislation be enacted, the real estate industry should be expected to lead a housing boom in transit-friendly areas. Parking reductions, un-bundled parking, and affordable housing incentives will further spur development. Ideally, the evolution of walkable mixed-use districts centered around transit will foster the ability for residents to enjoy quality of life with less reliance on automobile transportation. 

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