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Tool 1: Market-Driven Reuse Alternatives

Tool 1: Market-Driven Reuse Alternatives

Market-driven reuse refers to development of a property for some activity that is dependent on the private market for its success. It can be residential, commercial or industrial, but in all cases, it will succeed only if there is market demand for the particular use. In most distressed cities or neighborhoods, it is important to take advantage of any market opportunities that exist to create market-driven reuses. At the same time, it is important to recognize that many sites do not realistically lend themselves to market-driven development, because the market – whether for homes, apartments or storefronts – is not strong enough in that particular area. The goal is to find the balance between what the site and its surroundings are most suited for, what is economically feasible, and what will provide the greatest benefit to the neighborhood and the city.


Where the market  is strong enough to support market-driven development, it is generally desirable to move in that direction. Only by building the market, and getting people with choices into the area, is it likely to be possible to create sustainable vitality for an area, whether it is a residential neighborhood or commercial district. It is important to make sure that in an area that is rapidly appreciating, however, that market-driven development is balanced with the need to preserve affordability for the area’s present residents. That is often not a problem in distressed communities, but it remains something planners should be aware of.


Some market-driven development may require public subsidy. In many distressed cities, market prices in most neighborhoods are below replacement cost; that is, it costs more to build a new home or rehabilitate an abandoned property than one can sell it for once built or rehabbed. In those areas, it may be necessary to provide a public subsidy of some kind – whether a direct subsidy, tax abatement, or other assistance – to make the new housing or commercial space marketable. At the same time, the goal should always be to build greater market strength, so that over the following years the need for subsidies gradually diminishes, and ultimately disappears. 

Go to a checklist of questions and issues to look at for market-driven development


Target markets

If the site is suitable for a particular reuse – or more than one potential reuse – the central question then becomes, is there a market for the reuse? Markets come in all shapes and sizes: the people who make up the market for a single-family house in the suburbs may be very different from those who make up the market for a downtown loft. Understanding those differences, and pinpointing who might be the market for a particular reuse in a particular location is known as target marketing, the process of identifying the particular targets for the product. This is relevant to all consumer products, but particularly for housing. A number of companies provide data on how consumer markets segment in different ways such as age, income and lifestyle, which can be useful for figuring out to whom to target a particular housing product.

Go to a description of the Nielsen PRIZM market segmentation system


There are many valuable pieces worth reading on this subject:

Go to a report by the University of Wisconsin extension on market analysis for downtowns and business districts.
Go to a report by the University of Wisconsin extension on market analysis for downtown housing.
Go to an article by Robert Lang, James Hughes and Karen Danielsen on marketing central city housing. 
Go to an article by Laurie Volk and Todd Zimmerman about understanding urban residential markets.


Go to Tool 2: Affordable Housing