The Annual Meeting of the Nashville Downtown Partnership was held today at the Renaissance Hotel, with all the luminaries of downtown’s real estate, retail, philanthropic and political establishment in attendance.  I was there in my capacity as a Board Member of the Urban Land Institute since the Keynote speaker was Patrick L. Phillips, our new CEO for ULI.

A couple of impressions up-front – the ball room was packed!  This is a good sign.  I remember attending these luncheons several years ago and it is remarkable how well attended they are now.  Second, I got the chance to meet Nick Zeppos, the Chancellor of my alma mater, Vanderbilt.  He is a very personable, warm man and has a great vision for where Vanderbilt is going and how inter-related the University and the health of Nashville’s downtown are.

Primary reason for the post though, was to share Patrick Phillips’ observations on the state of downtowns and why he is bullish on their health.  Mr. Phillips opened his talk with the rather bold statement that good downtowns are entering the “best 10 to 20 years in history.”  Given the current shambles that commercial real estate finds itself in, that is a startling statement.  It was enough to break up the game of Russian Roulette that several developers were playing at one of the back tables!  But Phillips backs up his forecast with four key points:

1. Demographics – the population of the United States is expected to grow from 270 million to 360 million over the next 20 years and up to 420 million in the following twenty.  That’s about 4 Nashville’s worth of folks every year.  Now, he acknowledges that most of those people will go to the suburbs, but even if only 5-10% of those people move to the downtown cores of leading cities, there should be some good development opportunities.

The second part of the demographic equation that Phillips discussed is the impact of the “Millenials,” the baby boomlet that was delivered between 1988 and 2000.  This generation seems highly motivated to adopt an urban lifestyle – and they will become renters and homebuyers over the next twenty years – another favorable trend.  The third and final part of the demographic push, is the baby boomers themselves – me included!  No one really knows what the retirement behavior of this generation will be, but the peak of the boomers is currently hitting their mid-50’s and, like the Millenials, they seem to like the urban feel.  I can vouch that our condo sales in midtown Nashville at 807 Eighteenth and 1101 Eighteenth were fueled by empty-nester baby-boomers, tired of the 2-acre yard in the ‘burbs.

2. The Economics of Development – Phillips believes that macro-economic forces on labor and material will drive cost budget up and will put greater pressure on developers to develop (and re-develop) lower cost, more compact urban developments.  Historically, this is why cities have grown and as downtowns improve and add population and amenities, that concentration will begin to feed itself as more services are required.  Clearly one of the “bigs” in this equation is the price of gasoline – once it gets back to $4 per gallon, that 4,000 sf house in the ‘burbs with the 35 minute commute each way doesn’t look so good.

3. Public Service Delivery – some of the same forces that the private sector will have to deal with in the coming years are going to affect state and local governments acutely and make it more difficult for regions to expand across new geography.  This will force a more compact development pattern that will help downtowns continue to turn around.

4. Climate Change – Phillips believes that awareness of climate change will influence more and more people to accept the densified lifestyle of the urban experience.  Further, legislative changes that impact building codes and tax laws will add to the pressure to re-develop and improve existing infrastructure with more efficient, “green” building forms.

Bottom line, and we here at M2H Group couldn’t agree more is this: compact development and re-development opportunities are the “low-hanging fruit” in development right now.  Now, if we could just get the credit markets to open up to allow for this wonderful vision to come to fruition we will be getting somewhere!

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