What Is Surban Development and How to Invest in It

November 24, 2020 | Sundae Investor Team

What is surban development? Learn everything you need to know to successfully invest in this newest real estate trend.

No, that’s not a typo in the headline. The word “surban” is a mashup of suburban and urban. It refers to the space between urban and suburban. The term first appeared when John Burns Real Estate Consulting started using it in 2016. It describes a new approach to mixed-use development. In this framework, urban features such as walkability and shopping amenities combine with suburban affordability and the polished feel of the suburbs. All while keeping the suburban calling cards of low crime rates and good schools.

Surban developments follow the principles of the “new urbanism.” That movement seeks to revisit the way cities and towns were built before automobiles transformed the landscape. Another way to think about the concept of surban is as a “15-minute city.” In other words, a place where everything a resident needs is no more than 15 minutes away from their home. After the COVID-19 pandemic forced people to keep their worlds more tightly edited, surban development looks poised to stick around awhile.

Key features of surban developments

  • Walkability among living, working, and shopping spaces
  • Focus on experiences
  • Community-minded open spaces
  • Accessibility of public transportation
  • Reduced focus on cars, driving, and parking
  • Appeal to both millennials and baby boomers
  • Priced more like a suburb than a city

How surban areas develop across the U.S.

Some U.S. cities plan to reintegrate existing housing stock and business strips by making changes in zoning or bolstering public transportation. For example, Atlanta city planners redeveloped a former railway corridor into a multi-use trail. Called the Beltline, areas along the trail transformed large parts of the city’s real estate market. The addition of the Beltline created many walkable havens, dotted by restaurants and local retail. Investors in the Beltline’s early development saw their properties appreciate faster than in the rest of Atlanta.

Other projects, like the 17-acre $170 million Culdesac Tempe development across the Salt River from Phoenix, seek to create a live-work-play community from the ground up. There, the idea is that residents have all their needs met within the community with no need to leave (or drive). The project is on a light rail line for those who need to commute and limited parking is available.

Large cities, such as Atlanta and Phoenix, aren’t the only ones to experience this shift. Small to midsize cities, like Nashville, are embracing these developments, too. Burkitt Commons—a planned neighborhood with up to 38,000 square feet of shops and restaurants and 200 townhomes and condos—has surban aesthetic in mind.

Existing suburban communities sometimes take steps to shift their makeup to surban living. For instance, the Portland suburbs of Beaverton and Hillsboro are rethinking their structure in favor of connectivity. They want to mimic the city experience without the urban traffic and pricing. A similar push is happening in the Twin Cities.

Investing in new mixed use real estate has challenges. It often involves a lot of money and expertise, from the use of real estate agents to lenders to lawyers. It’s less difficult to read a community’s move from more traditionally suburban to surban development. Someone with a watchful eye and smart real estate investment strategy can capitalize on that shift.

How to invest in and around surban development

To invest in places transforming from suburban to surban, you need to pay attention to what’s happening in a given community. Keep up on rezoning. Observe where members of the creative class are moving after being priced out of nearby big cities. What places attract both the millennials and boomers? What infrastructure already exists that could turn into a thriving community attraction? Also, see what changes are happening in the community around transportation hubs and new developments. You need to be a predictor of change. 

Three ways to capitalize on surban development:

  • Put your money in REITs or real estate investment trusts that focus on mixed-use projects.
  • Invest in an occupied mixed-use building in an up-and-coming area.
  • Buy distressed property near land that’s being rezoned or redeveloped with surban design in mind.

The key to capitalizing on surban development is to buy low before an area’s full potential has been realized. Then, either sell high or adjust your rent to market rates for optimal cash flow.

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