The Walkability Premium in Commercial Real Estate Investments

Jeffrey D. Fisher

Indiana University - Kelley School of Business - Department of Finance

Gary Pivo

University of Arizona

August 30, 2010

Real Estate Economics, Forthcoming

This paper examines the effects of walkability on property values and investment returns. Walkability is the degree to which an area within walking distance of a property encourages walking for recreational or functional purposes. We used data from the National Council of Real Estate Investment Fiduciaries (NCREIF) and Walk Score to examine the effects of walkability on the market value and investment returns of more than 4,200 office, apartment, retail and industrial properties from 2001-2008 in the USA. We found that, all else being equal, the benefits of greater walkability were capitalized into higher office, retail and apartment values. We found no effect on industrial properties. On a 100 point scale, a 10 point increase in walkability increased values by 1 to 9 percent, depending on property type. We also found that walkability was associated with lower cap rates and higher incomes, suggesting it has been favored in both the capital asset and building space markets. Walkability had no significant effect on historical total investment returns. All walkable property types have the potential to generate returns as good as or better than less walkable properties, as long as they are priced correctly. Developers should be willing to develop more walkable properties as long as any additional cost for more walkable locations and related development expenses do not exhaust the walkability premium.

Keywords: Walkability, Walking, Responsible Property Investing, Sustainability, Pedestrians

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Date posted: August 31, 2010 ; Last revised: May 12, 2014

Suggested Citation

Fisher, Jeffrey D. and Pivo, Gary, The Walkability Premium in Commercial Real Estate Investments (August 30, 2010). Real Estate Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1668873

Contact Information

Jeffrey D. Fisher (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-7972 (Phone)
812-855-5875 (Fax)

Gary Pivo
University of Arizona
Tucson, AZ 85721
United States
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