Original Post | Forbes Magazine | June 3, 2019
Many years ago, I had the chance to be shown a real estate listing for a Park Avenue apartment in Manhattan. This was an apartment in name only. Replete with maid’s quarters and a formal dining room with 11-foot ceilings and a working fireplace, not only did it overlook Park Avenue, but also, according to the listing, it had a “view of Central Park.” Way out of my league. Just out of grad school, I was living in a 500 square foot studio apartment overlooking a parking lot. Didn’t matter. You don’t say no to this.
Darling I Love You, But Give Me Park Avenue
It was classic. A crisply uniformed doorman with white gloves opened the burnished oak door with gleaming brass handles to let me into this time-piece from the 1920s. As the real estate agent toured me through what seemed a maze of rooms, I was looking through every window for that Central Park view. Not seeing it, I finally asked, as delicately as I could, what room had the view of the park? She led me to a guest bathroom. If I lowered the single frosted glass window and looked through the space between two other buildings, I could see the park. Indeed, there was a sliver of green if you looked hard enough.
We love our parks, particularly those who are city dwellers. It’s one of those funny contradictions. People move to population-dense cities for the social interaction, economic opportunity and cultural enrichment. But once there, one of the things people value highest is open space.
That value is quantifiable in the pricing of urban real estate, notes Tom Monti, a Corcoran Group Member and real estate professional in Manhattan. “Central Park is the focus in Manhattan,” he observed, continuing “apartments on the park, namely Fifth Avenue, Central Park West and Central Park South, have greater value than those that are further from the park.” He offered a specific example: a Fifth Avenue apartment with direct views of the park will command a 40% to 50% premium to a comparable unit, on the same floor, in the same building with no park view.
Keep Manhattan, Just Give Me That Countryside
It isn’t just residences on the toniest of city avenues that gain additional value from open-space proximity. In bucolic Chester County, Pennsylvania (Moody’s: Aaa; Standard & Poor’s: AAA)—known as themushroom capital of the nation—the county maintains an Open Space Preservation program. To quantify “proximity value,” the county prepared a detailed report. Homes located within half of a mile of a park, preserved farmland or privately conserved lands saw values $11,000 higher than homes further away. Quarter mile access increased values $13,119. That boosted the county’s coffers to the tune of $27.4 million in property tax revenues and transfer taxes.
Cities, towns and counties alike are aware of the value of open space and fund the purchase, improvement and care with municipal bonds. In 2018 there were 33 ballot measures to approve issuing municipal bonds to fund a variety of open-space measures. In a strong plurality, voters in 18 states, from Rhode Island to California, approved 31 of the measures, green-lighting an expected $7,973 million in bond issuance for open space initiatives.
To make sure those initiates are having the intended positive impact in a community requires clearly defined and quantifiable metrics. The American Planning Association (APA) offers some insights. Using Green Infrastructure as the broad rubric; the APA assigns specific categories and metrics to assess and measure green infrastructure in a community. This includes the percentage of tree canopy coverage, distance to park entrances, community gardens, and acres of park land per 1,000 population.
Open Space to Basis Points
It’s well-established that open space adds value to homes. In turn, this adds credit value to bonds. Adding open-space metrics and measures as part of investment analysis can offer some further insight into both the stability of the existing residential tax base and the potential for those values increasing over time. And those municipal bonds funding those parks and open spaces? Those might provide a bit of green themselves to an investor’s portfolio.