Streetcars & Real Estate Values - Analyzing The Effect

By
Real Estate Agent with Realty One Group Mountain Desert AZDRE# SA582422000

Tucson Modern Streetcar - Downtown TucsonThe Tucson Modern Streetcar celebrates its 1st Anniversary of operation this weekend, with ridership that has exceeded goals - averaging over 4,000 riders per month (11% over the expectation of 3,600 monthly riders).  The Sunlink Streetcar posted 1,000,000 passenger rides about 6 weeks ahead of schedule this May.  Many new businesses and tens of millions of dollars in private investment have started transforming the corridor along the route to great fanfare, but lost in the hype & hoopla was the answer to the question:  "What effect has the streetcar had on residential real estate values?"  Nobody had performed a study on that subject!

Earlier this year, the Arizona Senate Transportation Committee was taking a look at public transit infrastructure & wondering whether there had been side benefits to fixed-route (streetcar, light rail, etc) projects.  Senator Bob Worsley (R-Mesa), the Chair of the Senate Transportation Committee asked me to put together an analysis for the committee - to show positive or negative the effect, if any, the Tucson Streetcar had on residential real estate values.  The results were much more than what I expected, given the timing of the Great Recession between voter approval & construction of the line.  The areas serviced by the route are Downtown Tucson, 4th Avenue & the University of Arizona - with the Mercado District of Menlo Park at the west end of the streetcar line.

 

 What I did is compare the average price of all residential properties within 1/2 mile of the Tucson Streetcar route to that of the base Tucson Metro.  In order to get a solid baseline to begin with, I went back to the year 2000 - well before the creation of the Regional Transit Authority (approved by voters in 2006) which included plans for a streetcar as one of the projects.

Single-story home in Armory Park del Sol - Downtown TucsonBasically, property values were virtually the same in the Tucson Metro and the Streetcar Corridor in 2000.  Prior to the RTA being approved by voters in 2006, we started seeing some separation between the values in the 2 areas - partially due to a high-end "green" housing development selling historic-style homes with solar electric panels beginning in 2004.

The startling difference was seeing the value performance of the Streetcar Corridor vs the Tucson Metro during the crash:  residential property within the corridor only lost 12.7% of value vs 23.1% for the metro!  As the market started digging out of the rubble in 2010 to the end of 2014, values in the corridor rose at a rate 100% faster than the rest of the Tucson Metro.

Another point of interest to me was the spike in numbers of transactions each time a milestone was reached to bring the Modern Streetcar project to fruition in Tucson.  I am interested to see if there will be another surge in purchases around the July 25 anniversary date.

Whether people see investment in light rail or streetcars as a worthy use of public dollars - if your community has a new project in the works for the near future, predicting greater performance near the rail lines might well be a reasonable expectation vs the rest of the market...at least in the beginning.  You know I'll be following the data for long-term performance measures.

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Rainmaker
1,087,556
Greg Nino
RE/MAX Compass, formerly RE/MAX WHP - Houston, TX
Houston, Texas

Great post. I have seen similar debates about the addition of a new bus line in the area - mostly negative opinions.

Jul 22, 2015 06:23 AM #1
Rainmaker
289,144
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Thanks Greg - before deciding to locate my office in Downtown Tucson, I studied what happened in other cities that put in fixed-route (rail based) public transit...and the results were similar to what I found.  Numerous studies have shown that bus lines have either no effect or a negative impact on values.

Jul 22, 2015 08:58 AM #2
Rainmaker
656,927
Claude Labbe
Real Living | At Home - Washington, DC
Realty for Your Busy Life

Kent,

We've just built a new streetcar in Washington, DC and this topic has been hot debate.  The perspective I have is that the neighborhood was going through a veritable revitalization process, which was happenning regardless of the streetcar.

The line was completed in 2011 (tracks were laid in 2007).  There was an issue where the cars weren't ordered.  As of now, July 2015, the cars are here, but service hasn't begun because of operational and safety failures.

Even if it were to operate, the line is some 20 city blocks long, but stops 2 blocks short of connecting to Union Station (major train, bus & subway station).

more intel here..

I will be eager to see if there is yet a noticeable differnce in pricing. I may have to somehow replicate your study locally.

Jul 24, 2015 03:06 PM #3
Ambassador
4,308,044
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Kent Simpson - the public transportation usually favors real estate market - just because of the commuter convenience.

Nice to see that happening with StreetCars in Tuscon.

Jul 24, 2015 03:13 PM #4
Rainmaker
289,144
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Claude - I think a major part of the Tucson Streetcar's success is that it links the University of Arizona to Downtown, which is in the beginning stages of a major renaissance...and the route goes through the 4th Avenue district (known for its funky-cool shops, bars & restaurants).  I think it is safe to say that the resurgent Downtown area would not have attracted the flow of investment dollars that have been poured into it in the past 5 years without the commitment to putting the streetcar in place.  In just the past 3 years, over 50 new bars, nightclubs & retail shops have opened, where the streetscaps was mainly boarded-up windows, decaying buildings & "fringe" businesses looking for the cheapest rent in town.  Just this week, 2 proposals were presented to the public for renovating a major bus transit hub - looking to develop vertically, adding varied mixed-use to the parcels while keeping the transit hub in place.  Estimated investment in this project is just under $50MM for one & $175MM for the other:  Ronstadt Center Joint Development.   

Hopefully, DC will be able to expand the lines in the future to truly connect with other transit options, such as Union Station.  The idea in Tucson is that this is the first stage in further expansion of the system...whether that actually happens in the next 10 or 15 years is unknown. 

I understand the frustration with the delay on cars - DC & Tucson ordered their cars from the same company (United Streetcar - a subsidiary of Oregon Ironworks), which has been closed after flirting with bankruptcy since its inception - not even an emergency infusion of cash from the State of Oregon could save it.  Due to the requirements of the federal T.I.G.E.R. Grant that helped fund the Tucson system, all components had to be made in America, which actually forced price increases & delays:  there was no US source in place to make the right type of rail, United Streetcar was the only (created to make streetcars for Portland) US streetcar source, using licensed technology from Czechoslovakia's Skoda company, so SunLink was forced to buy from United & find a steelmaker to custom-produce rail, or lose the grant.  Instead of being able to purchase equipment & components from existing companies in the world market, the requirement caused delays & cost increases.  Maybe jobs were created in the short term, but the closure of United this February shows the difficulty of creating a company to compete with established players in a limited market.

Praful - in everything that I've studied, only fixed route (rail) systems have shown a benefit to real estate values.  

Jul 25, 2015 03:30 AM #5
Rainmaker
638,544
Maria Morton
Platinum Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

Kent, the relationship between the streetcar and home values in Tusccon is very interesting to me as we are in the process of getting a streetcar line in Kansas City. 

Jul 25, 2015 04:49 AM #6
Rainmaker
289,144
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Maria - where is Kansas City's line proposed?  Will it take people to Westport? (I watched the 1988 NCAA Basketball Championship outside Buzzard's Beach when Kansas won!)

Jul 25, 2015 05:35 AM #7
Rainmaker
656,927
Claude Labbe
Real Living | At Home - Washington, DC
Realty for Your Busy Life

Kent, I see you are very plugged into this topic.   I was speaking with someone today about your blog, and yes, I'll send you my DC stats when I get them.  He and I were both saying that if we could have any longevity in the city administration, the plans in DC would bear more fruit.

There were plans for 33 miles, but those have been shelved.  The city of the future simply can't be more cars.  Tuscon is showing that; I may have to head down next time I'm in Phoenix just to have lunch and check it out for myself.

Jul 25, 2015 11:26 AM #8
Rainmaker
289,144
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Claude - it all comes down to funding.  2nd in line of importance is zoning to maximize the impract.  The funding part of the equation is what has me doubtful as to the timeline of future expansion - in our area, all levels of government are basically broke!

I look forward to hearing from you next time you come out to AZ - give me a "heads-up" - depending on the timing, I might just be up in the Phoenix area anyway.

Jul 27, 2015 02:51 AM #9
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Rainmaker
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