Streetcars and Real Estate Rents with Implications for Transit and Land Use Planning

Abstract

Modern streetcars seemed to have emerged as the darling of America's downtown revival. Planners, however, have little experience with market responses to modern streetcars to help guide future efforts, or improve or expand current ones. This paper is the first to report the association between real estate rents and proximity to streetcar stations based on all streetcar systems launched in the U.S.A. since 1990. Using multiple functional forms, the paper shows that real estate rents for office, retail, and multifamily properties increase with proximity to streetcar stations. The analysis further tests outcomes using five functional forms: linear, semi-log, double-log, quadratic and fine-grained distance band (using one-eighth mile increments). It appears that the distance band functional form specification may be the most useful for transit and land use planning purposes. Results suggest that streetcar planning and associated land use planning should anticipate heightened demand for multifamily residential development near streetcar stations, perhaps displacing office development to about half a mile away. Retail activities may benefit from additional level of competition for location near streetcar stations by both residential and office development. Indeed, analysis finds that whereas multifamily residential rent premiums with respect to streetcar station proximity extend a mile outward, office rent premiums are lower closer to stations but rise rapidly about a half mile away, presumably outbidding multifamily residential development. Retail activities take advantage of this competition roughly to the area between the office and multifamily rent premium thresholds. Implications for fixed guideway transit and land use planning practice are offered.