Since the mid-1990s, demographic and economic shifts have fundamentally changed markets and locations for real estate development. These changes are largely powered by growth of the knowledge economy, which, since the turn of the 21st century, has begun moving out of suburban office parks and into more walkable mixed-use places in an effort to attract and retain highly educated young workers and support creative collaboration among them.
Christopher B. Leinberger
Charles Bendit Distinguished Scholar and Research Professor of Urban Real Estate - George Washington University School of Business
Former Brookings Expert
This paper takes an in-depth look at six case studies to describe the process of catalytic development, a new model of investment that over the past decade has had remarkable success in creating such walkable communities. Catalytic development focuses on areas abandoned as a result of deindustrialization and auto-oriented development, in some cases recycling the very properties cleared or left vacant by mid-20th century urban “renewal” programs. Catalytic development incorporates many urban design best practices—granularity, incrementalism, and mixing of uses, scales, and people—and can address difficult urban challenges while delivering long-term economic returns to both the public and private sectors.
The catalytic development model
Walkable urban development has historically been the dominant approach to city-building. This changed in the early to mid-20th century, when drivable suburbs emerged as a new form of development made possible by the introduction of low-cost automobile transport, and then supported by market preferences, government subsidies, zoning regulations, and a financing formula that became well-understood and accepted in cities throughout the world.
Catalytic development represents a counterweight to these forces—a place-based response to changing demands that facilitates large-scale investment in concentrated, walkable urban areas. It has three defining features that set it apart from traditional real estate development:
- Patient equity—Financial equity that has expectations of returns over the long term, generally beyond year five of the investment and longer.
- Integrated development—The assemblage of and investment in proximate land parcels that together reshape the area and help spur additional growth, as well as the combining of conventionally separate real estate roles in single companies.
- Employment first—Either substantial employment growth early in the redevelopment process or an existing central employment base with significant entry-level opportunity.
Six case studies of catalytic development:
A major intervention from the philanthropic and private sector and a commitment to placemaking have turned around the most depressed major downtown in the country.
Close collaboration between the philanthropic, public, private, and nonprofit sectors helped turn a dull, empty urban core into a vibrant residential, cultural, and employment hub.
A private-public partnership led by the corporate community redeveloped Over-the-Rhine, a downtown adjacent historic neighborhood disrupted decades ago by urban renewal.
A private development group redeveloped South Lake Union, an underused industrial area, into a vibrant innovation district, concentrating new infrastructure, jobs, and housing in the area.
MIT partnered with a private master developer on a 25-year infill effort that converted abandoned factories to mixed-income housing, a hotel, biotech labs and offices, and retail establishments.
The unique city-state investment brought a rapidly growing Arizona State University to downtown Phoenix, leveraging a new light rail transit line and bringing new life to the area.
This report highlights six examples where private, university, or non-profit developers have employed the catalytic development model to reinvigorate walkable urban communities.
These case studies reveal important lessons for real estate developers, investors, anchor institutions, corporations, philanthropists, local government leaders and staff, and urbanists seeking to create economically productive and socially inclusive walkable urban places in their own cities, including:
- All of the case studies identified some kind of crisis as the context for catalytic development. In the most extreme cases, the downtown or other potential walkable urban place had hit rock bottom from a market perspective, but had economic, physical, cultural, or other assets on which to build.
- Catalytic development tends to be led by a proven leader who brings credibility from a combination of vision, track record, and access to patient capital. But developers must find a balance between their need for agility and control, and the need to engage the broader community in an inclusive process that builds trust and achieves equitable outcomes.
- Even when guided by a master plan, catalytic developments are multi-phase endeavors that cometogether one building at a time, adapting and responding to unexpected opportunities and challenges as they arise. Catalytic developers set the stage for their own long-term success with a flexible, incremental strategy, rather than a megaproject. Strong place management is vital to this process.
- Catalytic developers have a commitment to quality development, though achieving it can be difficult. Across the board, the case study participants emphasized a desire to “go above and beyond what the code requires,” develop “great open space …maintained very, very well,” and “design great buildings that are dictated not just by cost per square foot but also the long term aspirations for the institution and community.”
- A diversity of ideas, efforts, and shared risk is essential to the sustained growth of a catalytic development, demanding that developers actively encourage the ongoing engagement of other stakeholders in the community.
Catalytic development is not available or appropriate for all redevelopment situations. However, the explosion of private wealth of the last generation—one driver of income inequity—can also be used to turn brownfields, failing business parks, and center city and suburban town centers into thriving and vital walkable urban places. Catalytic development is not only about fostering rapid economic growth, but if done right, has the potential to create socially equitable, environmentally sustainable, and healthier places to live and work.