The Emergence of ’15-Minute Cities’ and Considerations for Investors

The 15-minute city is not new; initially introduced by Colombian-French scientist Carlos Moreno and later adopted as official urban planning policy by Paris City Hall, its promise is for its residents to access amenities without needing their vehicle for accessing them.

An ideal neighborhood should enable its inhabitants to access jobs, groceries, medical care and school pickup within 15-minute walking radius from where they live. While this all sounds wonderful from an investment perspective, what really matters is whether there is sufficient demand to sustain its existence as a viable asset class and its growth over time.

So are 15-minute cities worth factoring into your real estate investments, or are they simply passing trends?

Since most real estate preference surveys focus on walkability as an increasing demand factor, and the National Association of Realtors’ (NAR) Community and Transportation Survey offers one of the best sources of data on this subject every three years – yet its latest survey in 2023 provided mixed results if measured solely based on walkability as an attractiveness measure.

Only 48% of respondents ranked walkability as a high priority when considering moving, instead focusing on high-quality public schools in the area (62%), short commute times (61%), having a large yard (56%) and having a spacious house (54%). Furthermore, majority (53%) were homeowners while only 36% were renters.

Not that being in a walkable community doesn’t matter; rather, it doesn’t matter enough for current homeowners’ decision-making process.

Does that imply that the 15-minute city concept has no value to real estate investors? No. Indeed, it could prove more effective than surveys on walkability for making decisions about real estate investments.

“Walkability” doesn’t define its value unless coupled with knowledge of where people will walk to. The 15-minute city concept goes beyond building more sidewalks and bike lanes; its core principles include sustainability, solidarity and citizen participation.

Simply stated, community building involves people developing meaningful relationships and supporting each other within their localities – this differs significantly from your typical suburban residential neighborhood with sidewalks for jogging.

Research that delves deep into renters’ preferences has demonstrated their increasing alignment with this vision of an inclusive community where individuals can connect.

Venn, a resident experience company, conducted an in-depth survey with 1,500 renters of multifamily apartment units throughout the U.S. and found that most prefer three things.

1. Living in an area with flourishing local businesses (4 out of 5 respondents).

2. Expand their social connections and develop relationships with their neighbors (three-quarters of respondents).

3. Opportunities for community volunteering (three out of four respondents).

The Venn survey demonstrated that landlords often misunderstand what renters want, mistakingly believing they’re attracted to smart home technologies or free subscriptions such as Netflix. Yet these things don’t play much of a factor when making decisions about where and whether or not to renew a lease; instead, satisfaction with local communities was found to double renewal rates when compared with those who felt isolated within them.

Psychologically speaking, this makes perfect sense. Renters understand that their housing may not meet all their expectations – most tenants must compromise in terms of space, furnishings and even type of housing they end up renting – no amount of Netflix streaming can change that! Making friends in your new neighborhood and visiting an enjoyable cafe might just help lessen some of the discomforts of renting.

Survey results also demonstrated that people responded more favorably to apartment advertisements that featured images depicting living areas with people, rather than only images of empty apartments.

As is often the case with real estate investing, successful market research requires employing nonlinear thinking. Although walkability matters to renters, taken alone it’s less effective. Instead, what pays off more is assessing an entire neighborhood; walkability serves as an indicator for which areas boast successful businesses and communities.

Detroit Director of Planning and Development Antoine Bryant recalls growing up in a walkable Brooklyn neighborhood in an article about 15-minute cities: “From my window, across the street was a bodega (similar to mini grocery store). Fish market, dry cleaner, meat market, pizza place, dry cleaner again, liquor store hardware store all within close proximity – then another bodega.”

Modern renters want this. Cities such as Portland, Oregon, Boston and Baltimore that excel in urban regeneration do not merely improve walkability; their success stems from creating sustainable green spaces, flourishing small businesses and an overall friendly and inclusive atmosphere that renters find attractive – they are willing to pay more for it too! Renters not only favor this setup theoretically but are prepared to pay extra to enjoy it fully.

Recent rental market trends in Portland indicate the importance of conducting your research at an individual neighborhood level rather than looking at overall rent statistics.

Portland’s average one-bedroom rents have seen an annual increase of 4%. Meanwhile, Portland’s popular King’s Hill Historic District with restaurants, cafes, daycare centers and other services experienced an astonishing 31% jump! For added perspective: King’s Hill has an outstanding walkability score of 94%! What gives?