Developers intrigued by Md. push to build around public transit 

Posted: 10:00 am Fri, June 25, 2010
By Tania Anderson

Maryland Gov. Martin O’Malley’s move to designate more than a dozen public transit stations as spots that will receive money for mixed-use development has piqued the interest of real estate developers.

With the state assistance, real estate developers say they are more likely to be part of the movement to integrate more retail, office and residential space within close proximity to public transportation hubs.

“This is very forward thinking for state government, which is doing what they can do to encourage development at transit stops,” said Toby Bozzuto, president of Bozzuto Development Company in Greenbelt. “We’re increasingly in an environment where public transportation is becoming important and necessary.”

But state officials have some forces working against them, including a sluggish economy and some developers who still need some convincing about these projects.

O’Malley designated 14 transit stops throughout the state — seven in the Baltimore region, seven in the Washington, D.C., suburbs — as transit-oriented development sites. These sites will get financing through the Maryland Department of Transportation and the Maryland Economic Development Corp., as well as priority consideration for the location of state offices and laboratories.

O’Malley announced plans to move the Department of Housing and Community Development from Crownsville to Prince George’s County, a move blasted this week by Anne Arundel County Executive John Leopold.

Real estate developers say state and local funding for these types of projects is essential because of the high cost of building around public transportation sites and the requirement that the site include parking, which comprises the biggest chunk of the price. Most transit-oriented mixed-use projects feature below-ground parking or large parking decks, which are the most expensive types of parking structures to build, developers say.

Transit-oriented development is also fairly complicated because of the special building regulations around public transportation and the various approvals and studies that need to happen. All this has prevented developers from doing these kinds of projects without some public funding, even with the potential upside many advocates see.

“You’d think the developers would be fighting for the chance to develop around transit stations,” said Gerrit Knaap, executive director of the National Center for Smart Growth Research and Education at the University of Maryland. “But if you do develop around these stations, land is odd-shaped, there’s lots of coordination, lots of players involved. The institutional obstacles are formidable.”

Bozzuto said the projects are expensive because of the accommodations needed to deal with people living, working and shopping in one location rather than spread out through a community. But they’re also attractive because they tend to command higher rents.

Bozzuto Group was chosen in 2006 as the developer for the Odenton MARC site, a $150 million project in Anne Arundel County that is one of the 14 transit-oriented development sites designated by the state. The project has run into some roadblocks.

It’s in the pre-development stage, which Maryland is funding, and an interim development agreement is expected at the end of the year. The project, which was first proposed nearly five years ago, depends on Anne Arundel County infrastructure upgrades. The county is also considering paying for the project’s garage.

Knaap conceded that not all developers will be jumping at the chance to work on a transit-oriented development. The state’s outreach and marketing to real estate developers will be critical because of the sputtering economy, which shows signs of life one week only to seemingly backslide the next amid a new batch of financial indicators.

“Having developers put up capital is not an easy thing,” Knaap said.

The location of transit-oriented development is also a major factor in making them successful, said Robert Bavar, vice president of Bavar Properties, a real estate development firm in Timonium and president of the National Association of Industrial and Office Properties.

“Not everywhere is downtown Bethesda,” said Bavar, who has not done any transit-oriented development. “Areas where there isn’t much density and you just build mixed-use — that doesn’t mean it’s going to be successful.”

Transit-oriented development as a concept has been around for awhile, and Maryland has been more aggressive than most states in supporting these types of projects, Knaap said. However, its neighbor to the south has bragging rights to Ballston in Arlington County, Va., which is held up as one of the most successful designs of residential, office and retail space in the country.

“If you look on the Maryland side, things look good in Silver Spring and Bethesda,” he said. “But the Green Line [Metro’s line running through Prince George’s County] doesn’t look so good.”

But Bozzuto is optimistic that the state funding — it’s not yet clear how much will be allocated for transit-oriented development — will attract more interest from developers.

“A lot of the projects aren’t feasible because the cost outweighs the benefits,” he said. “If the government can [provide assistance], then it’s going to make a project like that much more feasible.”