How do land-use decisions impact transportation patterns?
Andy Keeton (AK): We’re going to get into some really interesting topics today, and it’s all going to be kind of under this umbrella of something that you call location sustainability. The topic today being why location sustainability will help save the planet.
Before we kind of get into that and a little bit more about what Local Logic does, let’s kind of set the scene here. So let’s just start off with maybe a basic question for you but maybe not for others: how do land-use decisions impact transportation patterns?
Jason Stanley (JS): Great – so our cities, our regions are animated by people moving all over the place to get things done in their lives. Right, we need to sleep somewhere, we need to eat somewhere, we need to get to work somewhere, we need to go to the grocery store to get the food that we’re going to make for dinner, we need to bring our kids to school, we need to go to the park. We need to move around to get to those things that make up our daily, weekly, and monthly needs.
Those things are distributed in some fashion throughout a city or throughout a region. They’re connected by some grid of streets and transit, facilities, biking, and walking paths, and so on. So you can think of all of those things, those physical things, as pieces of the built environment. They’re almost like pieces on a gameboard connected by roads and networks and so on.
The decisions that go into deciding where those things are on the gameboard are what we refer to as land-use decisions. Is a plot of land going to be residential or commercial or office or parkland or a piece of infrastructure connecting those different things? Or is it going to be some mix of those things? There are millions and millions of land-use decisions that are happening in the run of a year, and we think of them almost as micro-decisions because it’s not the macro plan itself; it is the individual decisions about where to build and what to include in the building when you’re building it or where a household should move or where an employer should move.
Those millions and millions of decisions ultimately influence how people are going to be able to move around to get their daily needs and their commuting done. We know people spend a lot of time inside vehicles and different modes of transit moving around. We tend to think of commuting as a really important bucket, as you guys at Communifi know really well.
About 80 percent of the miles that an average household travels are not for work; they’re for things like getting the kids to school, going to the park, entertainment, recreation, and grocery store. So how the pieces are laid out on the gameboard really matters because you may be spending an awful lot of time in your car, or you might be walking to and from a lot of those things, so that’s what we mean when we say land-use decisions are really important at influencing the patterns of transportation in a city or a region.
How is sustainability being considered throughout the entire real estate value chain?
AK: I really like the gameboard analogy. I can very much picture that. So okay, that’s high-level land-use decisions, and that’s an aspect of what you might call the real estate value chain, and then you continue to go up that chain or down the chain to making real estate decisions, I wonder then since this is a sustainability podcast, we’re talking about location sustainability; how is sustainability being considered throughout the entire real estate value chain?
JS: So the value in supply chains for real estate is pretty big, there are many actors, and I’m going to focus on a couple of them. We have investors and asset managers, basically, the people that are providing the financial capital to make possible developments, the owning and building of properties, you have the real estate developers that are actually building or refashioning aspects of the built environment, and then you have people who are occupying the different pieces that are built on the gameboard, you have individual home buyers, households, you have employers that need offices, you have retail chains that need to locate somewhere you have companies that need to put their industrial or manufacturing or warehousing facilities in different places. So sustainability comes into play in a variety of ways for these different actors.
For investors, more and more of them are adopting ESG reporting and sustainability reporting practices. If you actually look at what they report on, though, overwhelmingly, they’re focusing on things related to the actual envelope of the building. They’re looking at the materials used to build the building and the facilities inside the building that make energy use more or less efficient and, to some extent, the actual mix of the energy that’s going into the electricity used in the building. But they are not actually focusing on things outside those four walls that are related to transportation. So they do very much take sustainability into account. It’s just a very particular and narrow definition of sustainability.
Developers, some of them – the biggest ones – are starting to report on ESG metrics in the same way as investors are, but there’s also a really big wave of green building practices. More and more developers are building with LEED certifications and other green sustainable building certifications. The same problem is true in that domain. If you look at the actual composition of those certification schemes, overwhelmingly, they’re focused on things that are not about things outside of the envelope. It’s about the materials used, the construction processes, the energy systems inside those dwellings and buildings, and those things are important. It’s just that it’s a narrow definition of sustainability; they’re missing the enormous amount of emissions and pollution and so on associated with the transportation to get to and from the asset in question.
So they’re not really thinking too much about transportation and mobility between these different assets, but they’re definitely thinking about transportation in another framing.
Developers, investors, and so on, transportation and proximity to things are actually really important for them, but it’s important for the classic market reasons. There’s a reason that people are not building residential towers in the middle of rural locations, and it’s because those things are very far away from workplaces and restaurants and so on. There’s a reason that a lot of developers have built-in dense mixed-use places in the past.
So it’s not that they’re not thinking about those things, it’s that they’re thinking of it through the prism of where the demand is, they’re not thinking in terms of internalizing some of the externalities associated with how they build so they’re not going to build in the middle of nowhere, but they might build a suburban development that’s completely single-family detached homes and where they know they’ll be able to sell those homes at an attractive price but where the externalities associated with the transportation to and from those dwellings are not on the shoulders either of the people living there or the people investing in them. So they’re in a sense getting away with it right now, and they’re building non-sustainable things that are market-friendly, they’re not being forced to actually report on and internalize and own the fact that those dwellings imply a heavier reliance on cars and specifically
gas-powered car transportation for right now.
What is the four walls paradigm?
AK: Sustainability is obviously a key part of the equation right now, transportation is maybe not really being thought about too much, although to a degree because you want your location to be somewhere people can actually get to, but besides that, you’re not necessarily thinking about the entire trip that it takes to get to and from these locations. You mentioned the four walls. That’s where people are thinking about sustainability. Can you talk a little bit more about that four walls paradigm and what that means?
JS: We like to refer to what you just referred to there as the four wall paradigm, and what that is is it’s coming back to what I just said a minute ago that sustainability is becoming a core way that people think about decisions in real estate and the built environment, but it’s limited by this paradigm that people are trapped inside right now where we think of sustainability in real estate as being about the materials we use to build the structure and how operationally efficient that structure is.
We ignore things like whether you need to drive back and forth to that location, whether it’s easy for people who live or work at that location to access other things nearby. The things that drive the crazy amount of emissions that come from personal transportation today, we know that about 30 percent of emissions in the United States today come from transportation: it’s the largest single economic category driving emissions right now.
And the bulk of those come from personal vehicle transportation, and we know that a huge number of trips are for relatively short – like under three miles – trips. We also know that looking at transportation survey data, that the overwhelming bulk of trips right now is for people accessing things like grocery stores and schools and so on, and that’s in cars.
If we’re not thinking about where the pieces are on the gameboard, and we’re only thinking about things like whether we can improve the efficiency of the engines that people move around in or something like that, we’re never really going to put a serious dent in the amount of miles and the amount of emissions that are coming from transportation, at least not for another 30/40 years.
So the four walls paradigm in a sense is a critique of the current way of thinking about sustainability in real estate to get us to think not just in terms of the envelope but instead about the full ramification of where you’re building, what you’re building, and what that means in terms of the overall footprint of a household, not just the footprint of when they’re changing the gauge on their heating measure and whether the concrete is clean. Those things are important, but if people are spending an enormous amount of time in their cars as a result of where they live, that’s a decision that you have a lot of influence over. And so we’re trying to expose that four walls paradigm as a way of trying to force that onto people’s agenda.
What is location sustainability?
AK: I like how that’s phrased. So let’s get into the key topic today so what is location sustainability? Presumably, this is getting beyond the four walls and talking about that next stage in the sustainability matrix.
JS: Location sustainability is a little bit like the yin to the yang of the four walls paradigm. It’s the pieces that are missing or a lot of the pieces that are missing. We think of location sustainability as the extent to which any given place is in a location or neighborhood where many of the core needs, daily, weekly needs of the household are possible, or you can meet those things through some short walk or active mode of transportation and where you have good access to transit to make accessing other parts of a city or region fairly easy because not everything is going to be available nearby even in the best location.
It’s not a binary concept. It’s not like we grade location places based on whether they are or not location sustainable. By contrast, it’s a graded scale, so any given location will score somewhere on this notion of whether it is or is not possible or easy for a person who is located in a given place to access many of those core needs in the run of a day or a week.
So accessibility is a core part of how we approach location sustainability, but it’s not the only one. Pleasantness is a really key one as well, so what do we mean by pleasantness? That’s the amount of greenery that’s available, the infrastructure, the quality of the infrastructure that’s available for people to move around on. Why is that important? Because we know that the likelihood of someone going for a walk to a store or using their bike to get to a shop or work depends a lot on the quality of the experience and the safety of the experience of people using those modes of transit.
Take the simple contrast between someone walking, let’s say half a mile, to get somewhere. If they do it along a tree line, on a fairly quiet street, that’s one thing. If they need to cross a six or eight-lane highway to get there, it’s a very different thing. We know that the likelihood of someone walking is much higher in the former than in the latter, and so we take that into account when we’re thinking about whether things are truly accessible in a way that makes likely active modes of transit when we’re measuring places based on their location sustainability.
How does Local Logic impact location sustainability?
AK: You started getting into this but let’s keep diving in. How does Local Logic play in this space? What is it that you all do, and how do you think about location sustainability?
JS: So Local Logic is a company that’s digitizing the built environment. We collect reams of data about the built environment in cities and regions, and we expose that data to people making real estate decisions.
We build a lot of insights on top of that raw or slightly transformed data so that we’re able to quantify things like pleasantness and quietness and walkability, and accessibility to different services.
And moving towards basically an index for location sustainability, we’ll be able to actually bring together the various things I was just talking about, like accessibility to core amenities and services and infrastructure, coupled with pleasantness so that it rolls up into something like a location sustainability and livability score, and wellness score, and so on.
So we’re basically collecting a lot of data about the built environment that people don’t have easy access to, we’re turning it into intelligence, so it’s not just information but intelligence that lies on top of those reams of data and making it accessible through frameworks like location sustainability and wellness and livability to people throughout the real estate value chain, homebuyers, tenants, real estate developers, brokers, and eventually for investors as well who care a lot about ESG reporting, maybe they need to understand the GHG – greenhouse gas emissions – implications of owning or not owning a specific asset and so you can take that same framework, which basically boils down to mobility.
Mobility has a clear relationship with emissions and pollution and congestion and so on, and converting that into emissions terms that make sense for an investor, for a home buyer, or for a developer it might mean exposing opportunities for people to live in vibrant lower-cost neighborhoods where transportation costs and time spent in traffic are much lower as a result of being proximate or semi-proximate to a bunch of amenities, so we use that intelligence, that core framework, and expose it to different audiences to help them accomplish different goals.
It fundamentally rests on the same kernel of intelligence, which is understanding the relationship between the built environment and mobility and the ramifications for cost and livability, and carbon emissions.
Who is Local Logic’s technology built for?
AK: I’ve taken a look at some of the Local Logic tech. It’s really interesting and pretty intriguing. Can you tell me a bit more about the different use cases? Who can use this? Homebuyers? Real estate developers? Investors? Tenants? Can you go more in-depth on maybe from the home buyer versus the real estate developer?
JS: So Local Logic is about six years old as a company, and many of the products that were built early on and that continue to be a beating heart of the company are on the homebuyer side and indirectly homebuyer because the customer and user are large brokerages – so think about the REmaxes and Centris and Realtor and so on of the world. Those sites host a lot of information about real estate that is being bought and sold, and homebuyers and
home sellers use the site and those platforms as a way to facilitate those transactions.
The information classically on those websites has been about, unsurprisingly, the four walls paradigm. It’s like how many bedrooms, how many square feet, what’s the price like, what’s the age of the dwelling, and things like that.
Of course, it’s not new that people who want to move to a location care deeply about what kind of neighborhood it is like. Am I going to be able to send my kids to school, or am I going to have to drive everywhere? Am I going to be able to go to restaurants? Is it a vibrant neighborhood or not? Is it too wild and too loud for my liking? Am I close to transit? Those things have always been concerns; it’s just that they were neglected, and so Local Logic built products that brought all of that intelligence to bear on those individual properties and, in some cases, also integrated directly into the search function of those brokerages.
So people buying homes, it was much easier for them to get information about the kind of neighborhoods that they could be moving to so that remains a core part of what Local Logic does.
We’re adding on top of that a location sustainability prism where we’re trying to help people understand not just the individual bits like how walkable and how quiet and how green a neighborhood is, but to actually fold them together into a bit more of a conceptual framework so that we can make higher-level claims about the overall wellness and overall livability and overall sustainability of a given place rather than leaving it to people to assemble the individual pieces of intelligence together into something like a wellness understanding.
So we’re building on top of the insights that we historically had – so that’s the homebuyer’s side.
The investor is a bit different. There are different kinds of investors like at the very high level, you have investors that hold thousands and thousands and thousands of properties. They can’t know those individual properties inside and out. They do monitor those properties financially; they’re increasingly starting to monitor some aspects of the environmental footprint of those properties.
If you’re familiar with things like a GRESB score, there are more and more property managers and asset managers that are using this to measure the environmental footprint of properties, but that framework is still very much in the four walls paradigm and so what we think we can bring to that conversation – and this is a bit more of an R&D piece than compared to some of our existing products – but what we think we can bring is using the location sustainability paradigm to help them understand the transportation-related or mobility-related emissions footprint of their different properties because it has a core impact on real estate as we talked about earlier around land use and transportation patterns.
The impact of a property is not just in the type of energy that’s used or the amount of energy that’s used or the concrete that’s used, it’s also about what transportations you make likely, and so we’re working on developing a paradigm, a set of tools that allow investors and asset managers and really large-scale developers that are tracking the emissions of their portfolio to help them understand the mobility-related emissions and to make decisions over time that allow them to improve the sustainability of the individual locations, and to move away from assets that fundamentally are unsustainable if they can’t improve them.
Is location sustainability only relevant to cities?
AK: Is this something that only is valuable in city centers where a lot of things exist around a location or where are you really seeing like maybe this technology or just the general idea of location sustainability being valuable?
JS: That’s an excellent question. So the short answer is no, absolutely not. The framework of location sustainability is applicable no matter where land is being put to some human use. It could be in urban areas and suburban areas in rural areas, and that’s because the implications of accessibility, proximity to different things matter no matter where you are, because a mile traveled in a vehicle has the same kind of environmental impact virtually regardless of where you are, and that’s in terms of emissions, it’s in terms of time spent in the vehicle, it’s in terms of the amount of money that you’re spending on gas, so those things don’t change fundamentally
when you move from rural to urban.
Now, of course, a suburban location – let’s just pick an extreme like single-family detached residential-only community, the classic sort of suburb image that you see when you Google “suburb”, so large homes with big driveways and so on, compared to let’s say a denser mixed-use neighborhood. It doesn’t have to be fully downtown. Still, somewhere in a city where you have access to transit and some bike infrastructure, nothing perfect but something closer to the mixed-use dense hub that I described earlier, clearly, the latter will score much better on the location sustainability index than will the former. But as I said earlier, it’s not a binary thing.
It’s a graded scale, and there’s a way of moving up that scale and there are many options available to either the developers or the investors and even in some cases to the tenants to improve their score without moving. It’s not just that the only option available to the suburban people is to abandon this property and move to somewhere downtown.
There are a lot of options available to improve the location sustainability of either of these so for example, in the suburban setting, we know that if there’s a supermarket located in the neighborhood or a school that’s more proximate or if we build cycling infrastructure that connects to infrastructure in other neighborhoods, the likelihood of people reducing the amount of miles that they spend in a car and using other modes of transit
So there are ways that you can change the nature without actually moving or just abandoning certain kinds of developments to allow them to improve on the locational sustainability index. Obviously, if you were to add a transit station to a neighborhood like that, it would have a major impact – that’s not something a typical developer is going to have much control over – but the location sustainability framework is, in a sense, actor-agnostic. So cities can also use this to understand, to map the gaps and opportunities across a city from a location sustainability perspective to identify better where transit deserts might exist or food deserts or school deserts and so forth, so we’re hoping that that framework is usable from the individual household looking to move to the tenants to the property managers to the developers to the investors and the city governments and potentially other actors as well.
And then, the same framework can expose opportunities and gaps and help generally improve the location sustainability of all locations and identify potentially where there are some places that simply should not be invested in because the bank for the buck on the sustainability front will be to improve other parts of the city. So we potentially need to have hard conversations about whether certain assets are fundamentally just not worth it for us to turn into sustainable locations, and we should abandon them and move to other locations. I think all those discussions are possible. The framework is a graded framework that allows people to drill down and identify the different opportunities and gaps they might be able to fill.
Why will location sustainability help save the planet?
AK: I love this as an idea, using location sustainability as a framework to understand where to put investment, where transportation demand management CDM professionals should be thinking about their programs, where they should be putting them, and what they should be putting in those locations so this is our final question, and it’s my favorite one, and we ask everyone the same question, so why will this idea, this topic, why will location sustainability help save the planet?
JS: As I mentioned earlier, about 30 percent of emissions right now in the US come from transportation. The bulk of those come from personal vehicle transportation, and about 80 percent of those of the miles traveled in cars are for just the daily, weekly needs that we need to fulfill. People are moving back and forth and relying overwhelmingly on cars right now. The electrification of vehicles, a big topic we didn’t talk about, will not be a short-term solution. Fleet replacement rates dynamics mean that it’s going to be decades before we get to the point where electric vehicles dominate, and we know that electric cars are not emissions-free. Building them and relying on, you know, dirty grids and so on means that’s really not even a clean option today so, combustion engines will remain dominant on the roads.
Reducing the amount of miles traveled in cars has to be an enormous part of the solution. Location sustainability is about exposing to all the different decision-makers in real estate – investors, developers, homebuyers, tenants, employers, retailers – the mobility implications of locating in one place versus another and what you put into an asset when you’re there so that we can reduce the number of miles that people are in their cars for and are increasingly walking and biking instead.