The economy in Texas has been rapidly diversifying in recent decades, and there are many newer types of business opportunities. Some investors are looking at transit-oriented development (TOD) as a potentially sound investment. According to the Kinder Institute at Rice University, research shows that transit investments such as those happening in Houston typically increase land values by 30% to 40% within a few years.
Successful results involve work by various stakeholders, including federal, state and local governments, transit authorities, community organizations and developers. The Tidwell Transit Center in Houston is an excellent example of this mix of transit, residential housing, commercial areas and public spaces. Alongside the transit infrastructure, the various groups work hand-in-hand to transform a property or an entire neighborhood.
The development process
Private developers working on TOD-oriented projects need to source and leverage substantial amounts of funding and provide overall project coordination. Commercial real estate counsel can provide various services to further a project’s success. The services include:
- Planning: Before purchasing the land, it is wise to look at the potential funding and tax planning opportunities unique to TOD while also determining the best type of development.
- Acquiring the land: It is essential to do due diligence, negotiate earnest money and other agreements, determine any restriction issues related to the land or transit project, and address the myriad issues that can stymie the closing of the deal.
- Building and development: During the process, there can be zoning and land use issues, concerns about easements, environmental concerns, contracts for contractors, construction deals, design contracts, and work required with the community, transportation agencies and other stakeholders.
- Financial strategy: Developers can weigh conventional options like loans and equity investments or new opportunities specific to TOD, such as the U.S. Department of Transportation’s Build America loans.
Building the future today
The Federal Transit Administration announced funding for a Pilot Program for Transit-Oriented Development Planning FY 2023 on August 8, 2023, with a closing date of October 10. This and other TOD opportunities will become increasingly common in the years to come. Working with the right people now can put some developers ahead of the pack.