Impact of commercial development on inner city revitalization : an analysis of projects in Boston

Abstract

During the last two decades community development corporations (CDCs) have expanded their inner city revitalization efforts from affordable housing to other activities such as commercial real estate development. In the City of Boston alone, CDCs have developed several commercial projects totaling over 406,000 square feet of space. Although the scale and costs of these projects were different, they have something in common: significant public subsidy to fill the gap between the cost of the project and the value after completion. CDCs justify the public subsidy with the argument that commercial projects revitalize distressed neighborhoods, creating jobs for local residents, improving the physical appearance and business climate of the neighborhoods, increasing the variety of products available to residents, and creating local wealth. However, must of the evidence about the impact of commercial development on revitalization is anecdotal. Without a full understanding of how commercial real estate impact local communities, it is difficult to justify these public investments. This thesis proposes a framework to assess the impact of commercial development on inner city revitalization using five impact indicators, these are 1) job and income creation, 2) fiscal impact, 3) leverage of private capital, 4) physical improvement and overall revitalization, and 5) impact on capacity building. This framework is utilized to analyze the impact of two CDC-sponsored commercial projects in Boston. These projects are the JP Center in Hyde/Jackson Square and Egleston Center in Egleston Square. This thesis demonstrates that the public benefits generated by both projects out weighted the public investment. It proves that job creation and physical improvement are the most significant impact on revitalization. The thesis examines the two case studies through the tension between local constituents and CDCs when developing commercial projects. That is, commercial projects require strong credit-worthy tenants-typically national tenants-to make the project financially viable. Without such tenants these projects will not leverage private financing, which in turn will further increase the subsidy required. However, attempts to bring national tenants to CDC-sponsored commercial projects are seen as threatening to existing businesses and perceived as not contributing to local wealth creation. As a result, CDC-sponsored projects face local opposition that counters the revitalization of the neighborhood. This thesis asserts that CDCs can attract national tenants to anchor their commercial projects and strengthen local businesses simultaneously. The thesis proposes alternative models to achieve both goals and spur the revitalization of inner city commercial districts.