Current practices in commercial real estate have reduced resilience in relation to firms’ potential financial struggles, urban externalities’ impact on the long-term health of urban places, and for all parties when facing economic shocks. A lack of resilience is apparent during market highs and becomes even more of a central issue in times of crisis. As certain places lag behind others in terms of growth and innovation, a lack of resilience is also quite apparent in the long term.
Resiliency is defined as the outcome of a hedging strategy meant to achieve high, reliable, and consistent performance. When places are built in a more resilient development pattern, additional value is created as a result of risk reduction. This value has implications for developers, investors, underwriters, lenders, governmental entities, and the general public. If such value can be consistently delivered by a more resilient development pattern, the industry can financially tip the scales towards such a development pattern as a hedging strategy for both private and public interests.
This paper assumes the benefits of dense, mixed-use, walkable urbanism and agglomeration economics. Rather than debating the merits of different densities, this paper instead looks at different ways to achieve the same density. On one hand, a city or neighborhood can be comprised of large block-wide buildings. This is coarse-grained urbanism. On the other hand, a city or neighborhood can be comprised of narrower, but similarly dense, row buildings. This is fine-grained urbanism. The place, or portfolio, of row buildings is more resilient due to a greater level of diversification and incrementalism among physical constructs and their attributes, management entities, users, uses, destinations per block, financial structures, time and seasonality of use, and sudden changes to any of the above.
The paper is broken down into three sections. The first shows the negative impact of coarse-grained urbanism on real estate firms’ resiliency. The second depicts the positive externalities of fine-grained urbanism during normal economic times on vibrancy, innovation, productivity, and retail. The third details the stronger performance and recovery of both fine-grained urbanism and a balanced mix of uses during times of crisis, using original data analysis unique to this paper.
This study was conducted with support from the NYU SPS Schack Institute of Real Estate and New York University’s PolicyMap database. The author, Baxter Hankin, is a graduate student at NYU pursuing a degree in real estate development while working at Robert A. M. Stern Architects.
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