The emergence of this trend goes back to the late 1940s, when there was a large exodus from the cities out to the suburbs. Many residents sought a single-family home on a quarter-acre lot. “Everybody was told that that was the American dream,” says Ellman. “People were commuting to Silicon Valley from Modesto or to the Bay Area from Tracy. If you’ve ever been on those roads at commute hours, it’s a nightmare.”

In the late 1970s, people began to question the wisdom of the American dream and began to go against the tide that the financial institutions were promoting, Ellman adds. Slowly, the realization that cities can have a lot to offer residents began to dawn on the collective public, particularly as mixed-use developments near transit centers became popular.

The challenge to residential development around transit centers is to provide all of the amenities and meet all of the needs of potential tenants, such as good schools, childcare, healthcare, dry cleaning, etc. Another is dealing with noise issues and allowing enough space and privacy for tenants not to feel crowded or stressed by their environment. “All you have to do is in the planning stage, leave space for that development,” says Ellman. “Restaurants will compete with each other to get the space.”

Tony Pauker of ULI in San Diego says that there is demand for TOD from both a marketing and a municipality standpoint. “Cities are interested in promoting development and higher-density uses around transit, and depending on the area you’re talking about, there are market demands for those kinds of transit-oriented projects. I think if you look at the state, the greatest demand probably occurs in San Francisco, but there’s also a growing demand in L.A., and San Diego is starting to emerge more, particularly along the I-8 and I-5 corridors.”

San Diego sees demand for TOD around its light rail and trolley stations, but the greatest demand is in mature urban areas, Pauker adds. “There was a time when the suburbs were more popular, but now cities are experiencing a resurgence. Residents can live close to friends, retail, entertainment, jobs, etc.”

Pauker points out that the term “higher-density development” is relative to the particular area being discussed. “A TOD in San Francisco might be grounds for retail and four to five stories of residential above it. That might be a more intensive use than the three-story apartments next to it currently. On the flip side, in San Diego, ‘high-density’ might be a three-story townhouse. It doesn’t necessarily mean it’s always mixed use and always five-story or higher development. What that higher intensity is is a function of what’s already in the market.”

The demographic of target tenants for TOD also depends on the market, Pauker adds. “Gen X and GenY are a big component of it, but in certain markets, the issue on children tends to be a function of schools. If you’ve got good schools in an area of transit, you’ll get the families. If you don’t have good schools nearby, then you’ve got another hurdle to overcome.”

Brad Wiblin, VP of BRIDGE Housing and a ULI member in San Francisco, tells GlobeSt.com that the Bay Area tends to value transit sites more than Southern California does, but it does have appeal in areas where work and recreation are concerned. “People find incredible value in being able to jump on a trolley to go to a ballgame or to their job, and there’s lots of places where you wouldn’t need a car in San Diego. If you’re working downtown at a job, you’d probably do pretty well by giving up a car, but it goes against the grain for most Southern Californians.”

Wiblin also points out that TOD is not the easiest type of development to do, thanks to environmental remediation costs, land assemblage issues and dealing with the transit agencies themselves, who don’t always welcome development since it can disrupt their business. “But on the real plus side, there are pots of money available that are seeking these locations, whether it’s private capital or the state of California through Prop 1C program.”

Also, many cities, such as San Jose, have upzoned certain sites for TOD in preparation for the next real estate development cycle, which is a positive sign for developers.