Urban Infill Making a Comeback

The demand for housing near urban centers has resurged in recent memory

By Patrick Duffy

When Builder and Developer debuted 35 years ago in 1990, developing an infill project in a built-out, urbanized area was generally the domain of smaller, local construction companies or the occasional out-of-area expert. Larger builders, preferring the economies of scale and relative ease building on undeveloped Greenfield sites, focused more on the growing suburbs. It was also where most of the demand was.

Throughout the 1990s, however, commuting times grew ever longer as buyers were willing to “buy until you qualify,” generally opting for a single-family home with a yard. As the 20th century turned into the 21st, there was a renewed interest in infill opportunities – both by newly formed “urban” divisions of larger public companies as well as by privately owned builders specializing in urban and certain higher-density suburban opportunities.

That’s also where demand was building, especially for cities attracting the “creative class” of technologists, artists and hipsters that would help launch gentrification booms in multiple forgotten downtown areas. It was fun while it lasted, and soon even luxury high-rise condos and condo-hotel projects were seemingly cropping up everywhere. But when the music stopped in 2007, so did most new urban development. 

A decade into the new century, and with some larger builders having stepped back from their urban divisions, these departures left more infill market opportunities open to the specialists. Although the construction process itself was well within large builders’ capabilities, their focus on volumes and costs left less room for the lengthier process to build community support, apply for zone changes and shepherd approvals through an often-arduous process. This challenge was even more prevalent when building on smaller sites to provide housing for the “missing middle” of essential workers who staff our hospitals, schools, stores, fire stations and police precincts but made too much money to qualify for income-restricted affordable housing.

“If you can’t vary, you can’t adapt,” says Phil Kerr, chief executive of Irvine-based City Ventures, which currently has about 75 projects selling, under construction or being planned in coastal urban and high-demand suburban markets throughout California. Alluding to former California Governor and Oakland Mayor Jerry Brown’s quote that “dumb cows trump smart people,” Kerr agrees that building next to smart people is really hard due to complex web of built-in interests and physical limitations. 

If you can’t vary, you can’t adapt.”

“You’re not starting with a blank canvas,” Kerr said. “You almost always have to go through a zone change, a plan amendment or other entitlement process. It requires the complexity of the institutional knowledge experience of doing urban land development.”

Today, as we enter the first months of 2025, such knowledge may come in handy as downtown cores in major cities are reawakening with more days required by employers pivoting back to “Return to Office” mandates. Although employers including the federal government, J.P. Morgan Chase and Amazon are insisting on a full-time, five-day-per-week return, data for the fourth quarter of 2024 from Flex Index – which tracks over 100 million workers at over 13,000 companies – shows that the majority of employers are sticking with more flexible schedules.

Still, if the average time required in an office continues to edge up in a structured hybrid model of three days per week (accounting for 43% of employers), 32% of bosses insist on five days per week and 25% of them offer full flexibility, 75% to 100% of office workers need to live within a reasonable commute time. If this quickly pushes up demand for new homes in urban and closer-in suburbs after several years of remote work, are these communities ready?

“You have to figure out how to grow well but preserve the character of the town,” Kerr said, with incremental increases in density that are consistent with the surroundings. As for engaging the local residents and leaders, he suggests going slow. “It’s the art of listening and patience and engaging that community to adapt a project to it. You specialize towards the nuances of each site in each municipality.”

Notably, today’s infill projects can also feature solar-powered and ecologically responsible homes to capture younger buyers. With well-run urban areas and adjacent cities enjoying a rebound in interest, their relative stagnancy of the last few years might be ending. Concludes Kerr, “Cities and towns are either growing or dying.” 

Patrick S. Duffy is a Senior Real Estate Economist for U.S. News & World Report and a Principal with MetroIntelligence.