Historical paradigms for appraising single-family homes have been fundamentally transformed. For decades, the main factors in determining the market value of individual family residences had been nearly solely based upon location (urban cores), square foot area, availability of commercial zoning, and the quality of local schools. However, today’s purchaser values other attributes of his/her potential new home significantly more than he/she did prior to the emergence of what is now referred to as “trail side equity.”
Trail-side equity refers to the rapid increase in property values that occurs when a community has public trail systems nearby. These include hiking trails, wildlife corridors (greenways) and State Park pathways. Because they provide the opportunity for direct access to the outdoors and physical activity (and do so without having to leave home or travel to a separate site) – they have become a significant factor in how much money consumers will pay for their next residence.
The Green Premium: Quantifying Natural Infrastructure
A premium green space has provided a quantifiable incentive to nearby residential property values in both urban and suburban planning for decades. Parks provide a premium value to residential property located near them; however, trails are providing an increasingly greater and geographically dispersed economic benefit. Because a traditional localized park confines all of the economic premium generated by it to a relatively small area surrounding its perimeter, a large scale hiking trail generates a significant amount of economic premium along an extended area (a corridor) of miles.
The “linear” nature of a hiking trail allows many homeowners (hundreds) to immediately or easily walk to public lands, thus creating a substantial corridor of increased property values. The premium created by being able to walk to a hiking trail is also strictly based upon geography and is typically found in areas directly adjacent to the trailheads. These locations typically command significantly better pricing than similar homes located two miles deeper into the suburban grid.
David Flanders, owner of HomeVisors Collective notes the long term permanence of natural development as it relates to assessing neighborhood viability. He states that while shopping districts may relocate and schools may adjust their boundaries, a regional hiking trail will remain a fixed part of the community. His company often finds that residential properties that are walking distance to a primary trail head experience a 10% to 15% increase in value compared to similar homes built two miles further into the suburban grid.
Additionally, this provides consumers with an alternative to pack up a car and drive somewhere to get away from the stresses of city life. This proximity provides a long term competitive advantage that protects homeowner equity during market downturns. Due to their designation as protected public lands such as state parks, national forests and permanent regional trail networks, parcels of land that border these public lands possess an inherent form of geographic protection.
As opposed to typical suburban developments that can continue to grow outward thereby expanding the total number of available units and reducing scarcity, there is a limited amount of land that borders a large-scale hiking trail network. Thus, when high demand exists for parcels of land located adjacent to hiking trail networks, and there is a limited quantity of land available (structurally finite), there is upward pressure on home prices that help protect against other economic downturns affecting housing markets.
Demographic Drivers: The Rise of the Wellness Homeowner
The long-term value of homes located near trails is significantly influenced by changes in demographics and preferences among generations. Currently, Millennials and Gen Xers make up a significant portion of the current buyer market. Both generations are willing to trade-off large amounts of unused interior space in order to obtain experiences with their lives, improved physical health and greater emphasis on sustainable environmental practices.
For many of these buyers, having the opportunity to leave their home office and have immediate access to a multi-trail system meets the needs of both a work/life wellness experience. This is not simply a short-term trend; rather, this represents a shift in how consumers will permanently allocate resources toward values. Demographically-driven changes in consumption habits have also been greatly amplified by the large-scale acceptance of remote and hybrid workplace arrangements.
Prior to the emergence of remote/hybrid work models, when most professionals had limited options for work schedules due to being physically tethered to large metropolitan office towers, the “value” of residential properties was determined largely by which location provided the most efficient commute into the city. With millions of high-income professionals now able to live wherever they choose, there has been a great movement of wealthier professionals from densely populated urban centers to secondary markets/suburban communities with abundant rugged terrain/outdoor recreational opportunities.
Real Estate Portfolio Construction Near Wilderness Corridors
Beginning with regards to the cost of renovating and investing in a piece of real estate; having trails within walking distance of your investment will fundamentally alter how you (as a real estate professional) go about evaluating deals and estimating profit margins. In many cases the amount of money required to buy and rehab distressed properties is determined by the physical attributes of the surrounding environment.
Many developers/renovators who invest in distressed properties have found that incorporating environmental factors into their evaluation process can allow them to develop accurate projections of resale times and buyer demand. Shannon Beatty, real estate investor with House Buying Girls, states that trail proximity is one of several key elements that affect both the way her company evaluates acquisitions and develops its exit strategy. Beatty states that when she finds a home located directly next to a state park trail head or a large hiking destination; her company budget for high end fixtures and features.
The reason for this is because the people who live in these areas view the trail system as part of their living experience, therefore they are generally non-price sensitive and very concerned with location. This consistent flow of buyers looking for specific housing options based on location creates inventory velocity for houses located on trails, allowing investors to write down their deal at tighter margins than would be typical elsewhere, while still maintaining confidence in being able to sell the property quickly.
The Economic Resilience of Eco-Conscious Infrastructure
Real estate equity is fully tested by macroeconomic contractions. In times of high interest rates, or slowing regional economies, many general types of housing are subject to price reductions due to stagnant inventory levels. Those homes that have been built with limited access to a finite supply of a natural asset (such as a national forest) seem to hold their own in the face of down markets historically.
The reason for this is simple: once a developer builds on an area it becomes impossible to build another home in that same location. This means that the homes backed by trails or parks have a protection from inventory overload which generally affects traditional subdivision communities. As such, investors look to protect themselves using this strategy. A home located along a designated public greenway or one that has a dedicated trail connecting it to a larger network will provide the investor with a consistent and stable source of potential customers.
These consist primarily of the outdoor enthusiast community, the retired “baby boomer” who wishes to continue being active in retirement, and the fitness enthusiast. Even if there is a downturn in overall volume of sales throughout the entire region, trail-side homes will maintain a high level of liquidity.
Municipal Integration and Future Equity Growth Strategies
Trail development has been one of the most successful investments cities have ever made. The future of trails looks bright for cities that have invested in their communities. Trail development is an investment by cities that will create new jobs, increase tax revenue through increased population numbers and also create opportunities for people to live healthier lifestyles.
Cities are now connecting local, regional, and national trails creating an extensive network that spans the entire country. As this happens we can see what many may call a “speculative bump” occur in areas near trail developments. This boom creates a tremendous opportunity for property owners who are able to capitalize on the increasing demand for housing. The goal of savvy real estate developers and investors should be to identify trail corridors early enough so they can purchase properties along these corridors at a lower price and then sell them once completed.
By purchasing real estate where there is current planning for trails, cities are providing a means for individuals to benefit from substantial increases in equity values based on the addition of the public amenities.