Pop quiz! What do most major cities have in common?
They were all built near a significant body of water–be it a river, lake, or ocean. While modern cities’ commerce and transportation don’t depend on marine traffic the way they did in America’s early days, water still plays a significant role in any city. Rivers and lakes add to the town’s beauty and create opportunity for waterside attractions, marinas, and so on. Waterfronts hold a huge amount of economic potential.
Consider this. If you were looking at two separate apartments, of similar size and quality, in the same geographical area, which one would come with a steeper rent: the one overlooking a river, or the one overlooking the bus depot across the street?
A waterfront can be an enormous driver for demand, rents, and commercial development. Strangely, though, many cities are struggling to take full advantage of such areas. I’m thinking specifically of cities in the Mid-Atlantic.
Here in Philadelphia, the Delaware waterfront is struggling to emerge from its industrial past. Despite its popular Penn’s Landing park, an enormous Dave & Buster’s, a seasonal concert venue, and the SugarHouse casino just up the street, the area is still blighted by dilapidated former factories, vacant store fronts and unused gravel lots.
However, the city’s Planning Commission recently approved three projects proposed for the area adjacent to the river: two 12-story apartment buildings and one 16-story apartment building. Philly.com reports,
All three projects have been controversial because their designs deviate markedly from standards in the city’s new waterfront master plan and zoning code. Commissioners justified their votes by saying the projects would help jump-start a new neighborhood on the waterfront.
Typically, developers are constrained by zoning regulations meant to protect the historic quality of the nearby Old City neighborhood. Apparently, the need for economic stimulus outweighed commissioners’ interest in historic preservation. Though I won’t take either side of the debate, I can understand the appeal of three new multifamily projects: more residents leads to more commerce and additional development.
Philly isn’t alone in its struggle to populate its waterfront. Just across the river, Camden, New Jersey has been working toward the same goal, but with substantially greater challenges. Perennially ranked one of the most dangerous towns in America, Camden has in recent years turned to its waterfront for a source of badly needed income. Today, it has a number of attractions to draw in tourists:
- The Susquehanna Bank Center – one of the area’s most popular concert venues
- The Adventure Aquarium
- The Battleship New Jersey
- The Camden Children’s Garden
- The Riversharks baseball stadium
If you go to the Camden Waterfront’s website, you’ll see beautiful pictures of all these attractions, but you won’t see the rest of the city, the parts you drive through to get there.
That’s the problem. The area can attract short-term visitors, but not the sustained, diverse commerce that comes through large-scale office, residential, and retail development. Unfortunately, the Camden waterfront’s economic growth is restricted by the city to its east.
Baltimore, Maryland, is much farther along, having positioned its waterfront as a major destination for both locals and visitors. It’s Inner Harbor–home to an aquarium, high-end hotels, shopping and other attractions–has achieved a level of success Philly and Camden can only dream of. Baltimore Business Journal reports that its Harborplace Mall, operated by an affiliate of General Growth Properties (NYSE: GGP), has just agreed to a 158% rent increase from the city.
All of which means the property and its tenants are continuing to perform strongly, despite the down economy. Inner Harbor, though, benefits from its position in the city’s central business district. Unfortunately for other waterfronts, a river isn’t enough; property values and development surrounding the area are equally important to a riverfront’s CRE activity.