Oncoming [Cal]Train


Developers make tracks to Caltrain stations from San Francisco to Silicon Valley


By Neil Gonzales

[dropcap]P[/dropcap]roximity to transit stations is spurring development and driving up property values along the Caltrain corridor from San Francisco to Silicon Valley. Rising Caltrain ridership sparked by the introduction of the Baby Bullet express service nine years ago already has boosted property values and construction activity. But $1.5 billion in planned Caltrain improvements, particularly electrification of the current diesel-fuel system, are expected to elevate values even more.

Since Baby Bullet service started in 2004 cutting travel times between some stations, Caltrain’s average weekday ridership has skyrocketed nearly 97 percent to 47,060, according to the agency. This year’s passenger count is up 11 percent from last year, and the continued increase has prompted Caltrain to add to its daily schedule, going from 86 trains to 92.

[quote]Caltrain predicts passenger counts will climb in excess of 60 percent by 2035 to more than 75,000 passengers on average every weekday.[/quote]

Electrification will shorten travel times even more and allow more frequent service on the 77-mile, 32-station route from San Francisco to Gilroy. “The Caltrain system is already seeing unprecedented growth, particularly on its peak-hour commute trains,” said Marian Lee, Caltrain’s chief modernization officer. “Modernization, which includes electrification and the installation of an advanced signal system, will not only help Caltrain meet the ridership demands we know are coming as the Peninsula population continues to grow. It will create a service that is cleaner and quieter.”

Caltrain plans to run six electric trains per peak commute hour in each direction at speeds up to 79 miles an hour. Currently, it operates five diesel trains per peak hour per direction at those speeds. Caltrain predicts passenger counts will climb in excess of 60 percent by 2035 to more than 75,000 passengers on average every weekday.

With Caltrain’s modernization plans, residential values near stations could increase by $1 billion or more, according to the Bay Area Council Economic Institute. The institute has determined that a one-minute reduction in expected travel time boosts housing values by 1.5 percent to 2.4 percent within a quarter mile of a station.

Robert McSweeney, managing director and senior vice president for the San Francisco Peninsula office of CBRE Group Inc., estimates that commercial property values could increase up to 25 percent. “If the trains are clean, efficient and quick, more people will utilize public transportation, and that will translate into higher land values,” he said.

Electrification will make Caltrain “an even more improved amenity,” not just for Legacy Partner’s proposed mixed-use development near the San Carlos Caltrain station but also for the entire town, said Jeff Byrd, senior managing director at Foster City-based developer Legacy.

Research indicates that commercial and residential values are already considerably higher near Caltrain stations compared to other locations. University of California, Berkeley, researchers Robert Cervero and Michael Duncan found in a 2002 study that being within a quarter-mile of a station was associated with a minimum 120 percent increase in the value of commercial land, or about $25 a square foot more than comparable properties. Duncan, now a professor at Florida State University, agrees that electrification will likely raise land values, but he cites improvements to passenger experience brought about by electrification as the real value driver. “The higher the service quality, the more the travel-time savings are, the more the willingness to pay to be close to that service,” he said. “That will have a positive effect on property values. Electrification may increase values 2 or 3 percent,” depending on the area and how much noise and pollution are reduced.

Land values near rail services in other parts of the country reflect transit gains. In another 2002 study, Cervero and Duncan found that commercial properties in San Diego experienced a premium of up to 91 percent if located within a business district near a station.

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Photography by Laura Kudritzki

West Coast Commercial Real Estate News