The Urbanist Musings of Pete Saunders

CSY At Forbes: Turning Vacant Land And Buildings Into An Asset

Michigan Central Station in its ruin porn days.  Via Ford Motor Company, that will soon change.  Source: finance.yahoo.com

(Note: this was published at my Forbes site last week.  Please check out this and other great pieces at Forbes. -Pete)

Last week, one of Detroit’s most iconic ruins was given a new lease on life. Michigan Central Station, the 105-year-old train station and office building empty since 1988, will be occupied once again. Ford Motor Company announced that it would purchase the 17-story, 500,000-square-foot building located in Detroit’s historic Corktown neighborhood, at downtown’s western edge. Ford plans for the building (and other recent acquisitions in the area) to house the company’s mobility and technology offices, putting it between rebounding downtown Detroit and the Blue Oval’s international headquarters in suburban Dearborn, but squarely in the middle of a trendy and rapidly accelerating Detroit neighborhood. Initial reports say that Ford will move 2,500 workers from their Dearborn complex into the old train station, and projects that as many as another 2,500 workers for Ford suppliers and vendors will relocate there as well. Ford wants to immediately tap into the growth and positive vibes surrounding downtown Detroit and its adjacent neighborhoods like Corktown (Midtown, Woodbridge and the east riverfront area have seen similar activity) and is pursuing an aggressive timeframe that will have the renovation complete and the building occupied by 2022.

That’s great news for the Motor City. But until the renovation is complete and the building occupied once again, it will solidly remain in in the minds of Detroiters as one of the most visible symbols of the city’s decline — more than a generation of abandonment.

A lot of attention has been given over the last decade or so to the “superstar” coastal cities, and how they’ve become victims of their own success. The soaring real estate prices in hot spots like San Francisco, Seattle, New York and Washington are well-known. But what happens to cities where the economy effectively ceases to function? When the outflow of residents causes the real estate market to grind to a halt? Where real estate prices fall so much that buildings become irredeemable, and vacant property spreads across the landscape?

Cities across America face the challenge of vacancy and abandonment every day.

This was brought up in a recent report jointly produced by the Center for Community Progress and the Lincoln Institute of Land Policy. Alan Mallach, Senior Fellow at the Center for Community Progress and lead author for the study, found that vacancy and abandonment in American cities skyrocketed in the aftermath of the Great Recession, particularly in Rust Belt “legacy” cities and in booming Sun Belt destinations. But as we’ve moved further from the depths of the recession and housing crisis and economies strengthen, many cities continue to deal with the residue of abandonment.

Mallach found ways to conceptualize the extent of vacancy and abandonment and devise possible solutions in weak markets. Mallach examined levels of vacancy and abandonment within 25 cities nationwide — 10 large legacy cities, 5 small legacy cities, 5 so-called “magnet” cities, and 5 Sun belt cities, and evaluated changes in vacancy rates between 1990 and 2010. Large legacy cities like Detroit and Cleveland are well known for having significant amounts of vacant land and buildings, as seen with the Michigan Central Station. Small legacy cities like Gary, IN, Flint, MI and Dayton, OH also have profound levels of vacancy and abandonment. Magnet cities like Washington, D.C. and Seattle have seen their numbers of vacant structures and land reduce over the last twenty years, while Sun Belt cities witnessed a rapid rise following the Great Recession and then a rapid decline, leaving them with a slightly higher number of vacant structures today than they had a generation ago.

Of particular concern to Mallach was the growth and persistence of “hypervacancy”, or census tracts with land vacancy rates in excess of 20 percent. Mallach found that hypervacancy grew substantially in nearly all legacy cities, despite rising housing costs and land values in other parts of the respective cities. In 1990, six percent of census tracts in Cleveland had a vacancy rate higher than 20 percent; by 2010 that number shot up to 50 percent. Baltimore’s rate of hypervacancy grew from 7.5 percent to 29.5 percent over the same period.

This increase in legacy cities isn’t due to an expansion of abandonment across the respective cities. It’s due to the increased concentration of vacancies in neighborhoods where vacancies have already emerged. While cities, legacy and otherwise, might have an overall vacancy rate in the 5%-20% range, at the neighborhood level it’s more common to find a group of high-income neighborhoods with vacancy rates below 5%, and moderate or low-income neighborhoods with vacancy rates approaching — and exceeding — 50%.

The typical response by cities of all types with vacant and abandoned land is to wait for the market to act. Magnet cities have been buffeted by global economy winds to reduce vacancies. Sun Belt cities were able to reestablish themselves as destinations and have been able to weather the vacancy storm. Legacy cities don’t have that luxury.

How do they overcome the crisis of vacancy? Mallach suggests there’s no one-size-fits-all policy prescription for dealing with vacancy and abandonment, but he urges cities to be proactive and develop a workable vacant land strategy that considers these recommendations:

  • Consider vacancy as an asset, not a liability.
  • Aggressively utilize all the tools available to your municipality to track the number, status and condition of vacant lots and buildings.
  • Pursue the removal of any and all impediments in state law for the effective reuse of vacant land.
  • Consider innovative tools, such as the use of land banks and receivership programs.
  • Foster more market-driven vacant property reuse programs that can 1) allow developers to obtain properties with clear, marketable title; 2) create a supply of homes in move-in condition for home buyers; and 3) provide access to mortgages for qualified buyers.
  • Make greening a prominent, sustainable and long-term strategy in your overall vacant land reuse program.
  • Make sure that demolition is utilized as part of an overall strategy for revival.

I’d add that in most cases where real estate markets have collapsed as they have in legacy cities, intermediate steps by the nonprofit community become necessary prior to the effective re-entry of the private sector economy. Legacy cities should build or strengthen existing nonprofit community institutions that can partner with local government to prepare communities for revival.

Not every city has a Ford Motor Company ready to acquire and renovate a structure that’s been recognized as an eyesore for nearly 30 years. Even Detroit didn’t have that until economic momentum began building for the city. Some cities will have to wait until the momentum is strong enough to make the private investment incentive worthwhile. Until then, there are steps that cities can make on their own.

3 Responses to “CSY At Forbes: Turning Vacant Land And Buildings Into An Asset”

  1. D Holmes

    The negative impact of that building on the perception of visitors to Detroit probably can't be overstated. There's something shocking about seeing an abandoned skyscraper and I remember doing a double take when I first saw it passing through Detroit.Milwaukee had something similar in the historic Pabst brewery which sat on the highest point in downtown as well as immediately adjacent to the main north south freeway passing through downtown. With trees starting to grow from its roof for over a decade it was a reminder of the city's industrial decline and economic struggles.By the end of 2018, after a 10 year effort, every remaining historic building and every vacant lot will have been restored or redeveloped. Now it serves as a more powerful symbol of Milwaukee's renewal and reinvention. I suspect Ford project will have a similar impact.

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  2. D Holmes

    I am also a big believer in the concept that vacancy resulting from industrial declines makes provides opportunities for reinvention that may never be matched in cities that did not suffer this decline. This is especially true when the sites are clustered along waterfront areas or in or immediately adjacent to the downtowns. These cities, 100 or 150 years into their existence are offered a clean slate to reinvent what may ultimately be some of their highest value and most compelling areas from scratch. Without the decline, wholesale change (and reversing the urban planning mistakes from the 1950s onward) may prove to be nearly impossible Detroit- with a level of abandonment that is nearly unmatched, but in a metro area and city that still has incredible legacy assets) has an opportunity for reinvention that may be unmatched if it can fully take advantage of the opportunities that abandonment has provided.

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