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The Power of Infrastructure to Transform CRE

September 18, 2019

Roads, bridges, jobs, and commercial real estate values all benefit

Infrastructure forms the fabric of our daily lives and powers our economic prosperity. Buildings, roads, bridges, and communication networks are just a few examples of the vast web of systems that give us space to work, play, and learn. When these systems are maintained and functioning well, they enhance the value of a region’s commercial real estate, leading to increased occupancy and higher rents.

Room to grow

The U.S. has long struggled to properly fund and develop its infrastructure, which has resulted in traffic congestion, blackouts, and worrisome conditions for many bridges and roads. In 2017, the American Society of Civil Engineers gave the country a grade of D+, saying that $3.6 trillion would be needed by 2020 to get to an “adequate” level of infrastructure. This shortfall has a significant cost attached to it—every year, we spend 5.5 billion hours sitting in traffic, at a loss of $120 billion in time and fuel. Miami knows this problem firsthand, as it ranked as the 10th most traffic-clogged city in 2018, with the average local driver in the car 64 hours a year.

But there is hope on the horizon. Politicians of all stripes agree on infrastructure as a basic good, as do 75 percent of Americans as a whole. An increase of $18 billion a year would create 200,000 jobs and add $11 billion to the U.S. economy. CRE investors know this all too well—infrastructure is one of the top reasons people choose to purchase or develop a property. When roads, power grids, and sea-ports are running smoothly, the value of nearby CRE improves dramatically.

Lifts all boats

The benefits of an improved infrastructure across many categories that have great importance to CRE investors.

  • Access. If your building is easily accessible by well-paved roads, subways, and buses, or walk/bike paths, it will be easier to visit and to do business there. The tenants of this building, therefore, will be much more inclined to pay top dollar for rent.
  • Jobs. 14 million people work in positions connected to infrastructure, making up 11 percent of the U.S. workforce. These include truck drivers, train engineers, power grid technicians, and pilots.
  • Transit. Businesses located near public transit can charge 80 percent more rent than their more distant counterparts. In addition, the rise of rideshare and driverless automobiles demonstrates the need for thoughtful urban planning and well-paved roads. Case-in-point, the new Brightline train, which connects Miami to West Palm Beach (and, eventually, Orlando) is a hopeful counterpoint to the city’s traffic woes.
  • Energy. As renewable sources of energy grow and become more widely adopted, there are dozens of positions that come with them, such as those who install solar panels, and natural gas workers who need trucks, rails, and pipeline.

Major projects on the horizon

Many urban areas have heard this call to action and have projects already in the works:

  • Miami’s “signature bridge” will connect historic Overtown with neighborhoods that sit along Biscayne Bay, reversing an urban planning decision in the 60s that forced many families out of their homes to make room for I-95, and cut them off from the rest of the city.
  • Houston’s 180-mile beltway called the Grand Parkway will connect major employment centers and ease congestion in the notoriously car-heavy town.
  • Los Angeles’ public transit system is in for a major makeover, extending it’s Gold, Expo, and Purple Metro lines to the city’s west side and beyond.

Although the country as a whole still has a long way to go towards systemic infrastructure improvements, these initiatives show how individual communities can take steps to smartly overhaul their roads, bridges, and railways. CRE will be a chief beneficiary of this work.

Morris Southeast Group stands ready to help you take full advantage of this trend, with CRE expertise born from years of experience. For a free consultation on our commercial real estate investment or property management services, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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