Human-scaled, creative development can't gain a foothold because most of the money in real estate comes from institutional investors that prefer predictable, large scale projects like subdivisions and strip malls, says Neil Takemoto of CoolTown Beta Communities:
Why is it that the vast majority of new development is at an institutional scale, and we don't see human-scaled fine-grained urban fabric, the kind that makes historic neighborhoods so desirable? Well, it's mainly because the vast majority of real estate development investment dollars come from institutional investors, and where does that money come from? Your pension and insurance dollars are sourcing this tremendous pool of capital that has to be invested somewhere. To those investment managers with billions to manage, why manage fifty projects if you can manage only ten instead? That simply means they'll prefer investing no less than $5 million at a time, which translates to $15 million projects. That precludes most every single human-scaled building you’d find, explaining why human-scaled neighborhoods weren't built since the 1920s, leaving only large-scale strip malls, subdivisions, office buildings…The thing is, the emerging you-centric market is demanding customized and personal, not mass-produced and commoditized. So how in the world is the supply of investment capital going to accommodate this? By focusing on the long tail - which is essentially anything and everything else that’s a 'non-hit' or 'non-blockbuster', but in sum is greater. The good news is that it's inevitable - witness the rise of Netflix instead of Blockbuster; Amazon/eBay/iTunes instead of Wal-Mart; YouTube instead of TV, all of which focus on the thousands of individual niches of smaller interests that are in sum greater than the only the most popular interests. All that was missing was a reliable system of delivery.
Read the rest at: Moving the Tipping Point for Creative Places | Planetizen
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