Good planning and a willing community can make it easier to successfully redevelop commercial property in urban and central business "infill" areas, speakers told a.... Good planning and a willing community can make it easier to successfully redevelop commercial property in urban and central business "infill" areas, speakers told a real estate forum at the annual National Association of Realtors(r) Conference & Expo.

"With capital chasing real estate, investors are more willing to go into diverse communities and consider ground-up development, especially in underserved markets," said Richard McCoy, president, CEO and chief investment officer at Urban America, LP, New York City. "The United States is a cheap place to invest, given the devaluation of the dollar," said McCoy, who has been involved with over $400 million worth of inner city commercial development.

Investors in such projects often include partnerships of banks, public pension funds and individuals. "Once they understand the economic viability and successful approaches to infill development, they become enthusiastic investors," McCoy added.

Retailers in redeveloped areas with residents in mind typically enjoy very high customer traffic. "Many of our tenants have the highest customer volume per square foot of space in these infill projects in all of the locations where they operate," McCoy said. "This increases customer traffic, provides a better experience for customers and offers higher profits for tenants. In some cases, we are negotiating a 'percentage lease' so we can also tap into the advantages of these high-traffic properties."

The percentage of minority populations will increase over time, McCoy said, and they have significant buying power. Out of the 100 largest cities in the U.S., 48 have majority "minority" populations. "This requires visionary change - businesses need to meet customers where they are and customize development to appeal to the people living in these areas," he said.

Successful communities have entertainment complexes, healthcare and educational facilities in the inner city areas. "Infill is exciting because the population density, the buying power of the residents and tax incentives are there to be tapped, sometimes with free land and cheap credit. Seniors are coming back, people don't want long commutes and transportation is already in place."

Kennedy Smith, a principal with the Community Land Use and Economics Group, LCC, in Arlington, Va., said tax credits are an important ingredient in the economic viability of financing infill development. Smith, a previous director of the Main Street Program at the National Trust for Historic Preservation, said the federal Historic Rehabilitation Tax Credit and federal New Markets Tax Credit are applicable in redeveloping older or historic commercial buildings.

"By thinking small and embracing the character of older buildings, opportunities can be created -- especially in communities with demonstrated public-private partnerships and a stable political environment," Smith said. She identified several keys to successful infill development: design, organization including private-public cooperation, promotion and marketing, and economic restructuring. By working with communities that have a sound downtown and good organization, it is easier to cut red tape and find innovative solutions, she said.

"Historic redevelopment works best when considering what will complement rather than disrupt the existing economic structure and environment," Smith said.