The strong link between walkability and CRE is undeniable. Commercial establishments in walkable neighborhoods often generate more retail sales revenue and command higher property assessments than those in less walkable areas. And because the US currently lacks walkable real estate, there are plenty of generational investment opportunities for CRE investors with long-term horizons.
The ROI of walkability
Research confirms that better walkability — especially near public transport — boosts several critical commercial real estate metrics. An uptick in Walk Score(a measure of how easily errands can be accomplished on foot) affects everything from property values and rents to retail sales and occupancy rates. Even in downturns, walkable properties tend to maintain stronger price resilience. Here are the numbers:
- The Urban Land Institute reports that a 10-point increase in Walk Score typically boosts commercial property values by 5-8%. Being near public transit can even add a 40% to a whopping 200% premium to property prices.
- Findings by Real Capital Analytics support these numbers. Their research shows that properties in central business districts have soared 125% in value over the last decade, in contrast to car-dependent zones, which only grew by about 20%. This trend doesn’t just apply to cities. Even commercial properties in suburban areas with high walkability saw increases of 43%.
- The rental growth impact from walkability is quite profound. Recent results from George Washington’s Center for Real Estate and Urban Analysis highlight that walkable urban offices, retail spaces, and multifamily homes command rental premiums of 90%, 71%, and 66% over suburban alternatives. This represents a combined premium of 74% for walkable urban properties over their suburban counterparts.
- This value surge isn’t just for commercial spaces, either. ULI found that residential properties also gain $700 to $3,000 per unit with each additional Walk Score point. Extensive studies from the think tank Brookings Institution and analytics platform State of Place show that higher walkability levels lead to meaningful rent increases for offices and retail spaces.
- A study by HR&A (commissioned by the NoMa Business Improvement District in Washington, DC) found that mixed-use developments beat single-use properties in urban cores and suburbs. What’s driving this trend? Millennials and baby boomers now prefer to live in energetic, walkable environments. Companies are catching on, too — they’re paying premium rents to be in these dynamic locations to attract top talent.
What exactly makes a place “walkable”?
Walkability measures how friendly an area is to pedestrians. Aside from measuring the distances between key points of interest, it also evaluates several aspects that enhance or hinder the ease and pleasure of walking, including the following:
- Pedestrian infrastructure – Are there sidewalks, crosswalks, pedestrian bridges, and other features that make walking safe and convenient? Better infrastructure encourages people to travel on foot.
- Land use patterns—How are different areas used (for housing, businesses, or parks), and how close are these areas to each other? This proximity affects how far people need to walk and the variety of places they can easily reach on foot.
- Street design—This factor considers street widths, the traffic they handle, how they are laid out, and whether bike lanes, speed limits, and other traffic-calming features exist.
- Safety and security—How safe do people feel in the area? The crime rate, street lighting, and the visibility of pedestrians to vehicles can influence this.
- Social environment – What is the neighborhood’s overall atmosphere and community vibe? This can affect how comfortable and willing people are to walk.
- Accessibility – How easily can people with disabilities move around safely and independently? This metric considers curb cuts, ramps, and accessible public transport.
As you can see, walkability is about the distance between amenities and how friendly an area is to walking. Several organizations have developed specialized metrics and indices that factor in various aspects beyond proximity to quantify this.
- Walk Score—This metric assesses the walkability of a CRE location based on its proximity to amenities such as restaurants, coffee shops, grocery stores, parks, and public transportation. The scale ranges from 0 to 100; higher scores denote better walkability.
- Transit Score—Similar to the Walk Score, this metric evaluates how well the local public transport system serves a location. Scores range from 0 to 100, with higher scores reflecting better access to buses and trains.
- Bike Score—This score considers bike lanes, traffic density, and the terrain’s hilliness to measure how conducive a location is to cycling. Like the others, it ranges from 0 to 100, with higher values indicating more favorable biking conditions.
- National Walkability Index – This comprehensive index (developed by the Environmental Protection Agency) assesses walkability facets, including pedestrian infrastructure, land use patterns, and demographic characteristics.
While these indices were primarily designed for urban planning and policymaking, they’re also extremely useful for CRE investors who want to evaluate a neighborhood’s walkability and pinpoint areas that need enhancement. These tools can give insight into which places can be developed into livable and sustainable communities.
Why does walkability matter in CRE?
Sprawling parking lots and lengthy commutes are becoming relics of the past. Unlike previous generations, many of today’s buyers and renters demand convenience and a strong sense of community — both of which walkability delivers. This shift is reshaping how commercial real estate is valued.
Better for local businesses
Wouldn’t it be nice if you could walk to your favorite local bakery or bookstore whenever you please? Walkable neighborhoods are ideal environments for local businesses. As foot traffic increases, businesses also thrive, enhancing the area’s vitality and boosting CRE values, too.
This isn’t just theoretical. A New York City Department of Transportation study found that pedestrian and bicycle upgrades near properties spiked retail sales by 49% — 46% more than the borough-wide growth of just 3%.
Small expansions of pedestrian areas also slashed commercial vacancies by 49%. Moreover, turning a curb lane into outdoor seating boosted pedestrian traffic by over 75% and increased neighboring business sales by 14%. The Brookings Institute supports these findings, showing an 80% surge in retail sales with each improvement in the State of Place Index level.
Accessibility
No one enjoys sitting in traffic or circling for parking. Walkability allows people to leave their cars (or never even buy one) and walk to their destinations. This ease of access attracts potential tenants and can enhance a commercial property’s appeal and value.
Healthy habits
Walking beats driving any day, especially when it comes to health. Walkable neighborhoods draw people who prefer integrating physical activity into their daily routine rather than hitting the gym. This health-first approach naturally elevates property values in these areas.
Consider this: Adults living in walkable neighborhoods are 1.5 times more likely to get enough physical activity and are 0.76 times less likely to be obese than those in less walkable areas. Kids in walkable, pedestrian-friendly communities are much more active, too. In a study of children aged 10 to 13, those who lived in the most walkable neighborhoods used active transportation (like walking or biking) more than twice as much as those in less walkable areas. The study also found that well-connected streets and safe traffic conditions contributed to more active transportation.
A sense of community
Walkable areas tend to create vibrant community atmospheres that are much more difficult to achieve in car-dependent neighborhoods. Pedestrian-oriented neighborhoods encourage social interaction and promote a sense of belonging. When people can easily walk to shops and other amenities, they’re more likely to interact with their neighbors and support local businesses. This strong community ultimately lifts property values.
Sustainability
As more cities promote walkability through investments in infrastructure and planning, up to 5 of urban transportation will likely transition from driving to walking by 2050. This shift could cut greenhouse gas emissions by as much as 3.51 gigatons of carbon dioxide and decrease car ownership costs by at least $3.18 trillion. Ultimately, fewer cars mean lower emissions and better air quality. This attracts health- and eco-conscious residents while adding value to CRE properties in the area.
Opportunities to create more walkable real estate
Did you know that the average Walk Score in the US is only 48 out of 100, landing most locations firmly in the ‘car-dependent’ category? This reality opens up plenty of excellent prospects for CRE investors. Integrating walkability into your investment strategy and grounding these strategies in solid CRE fundamentals will allow you to capitalize on exciting opportunities.
Conclusion
More people now choose to walk rather than drive, and this trend likely will last a while. Increased environmental awareness is changing how we live, shop, and work, making the benefits of investing in walkable CRE assets clear and compelling. You can capitalize on higher rental yields and attract long-term tenants by choosing CRE properties in pedestrian-centered neighborhoods.
Explore CRE financing solutions for your next walkable project with our team of private commercial lender here at Private Capital Investors.
