Economic news today seems to revolve around three things: fear of a deepening credit crunch ensuing from the sub-prime mortgage fiasco, fear of a U.S. recession, and fear of a U.S.-led global recession.  

Real estate projects are endangered in cities large and small. The U.S.—ground zero for irresponsible lending practices—is on the leading edge of this crisis. From the $4-billion Frank Gehry-designed Atlantic Yards project in Brooklyn, New York, to the 54-acre Heart of the City redevelopment in Burnsville, Minnesota, the credit crunch is sending redevelopment projects into crisis. But many projects remain unscathed.

So far, Europe and Canada haven’t seen U.S.-style foreclosure rates, but credit is becoming more expensive. If the U.S. really is a window onto Canada’s immediate future, what lessons can be learned? Can infrastructure or real estate projects be bullet-proofed in this increasingly turbulent year? Do the projects that are sinking have anything common with each other? Do the projects that are still enjoying smooth sailing have anything to teach us?

The answer to all these questions is yes. There’s no room in this column for a detailed analysis. This is a good thing, because I haven’t done one. Here, instead, are some general observations. [Note: These observations derive from the fact that my professional life—speaking, consulting, writing, and teaching—is entirely based on metropolitan and natural “re” activities worldwide (redevelopment, remediation, restoration, reuse, and so on). This perspective sometimes allows me to detect commonalities and trends that I wouldn’t see if my work were limited to one country, or just one sector, such as infrastructure, heritage, watersheds, brownfields, catastrophes, education or housing.]

1. Infill projects seem to be less vulnerable than sprawl, even when they are speculative;
2. Infrastructure projects seem to be less vulnerable than vertical residential and commercial projects;
3. Projects combining infrastructure renewal with renewal of brownfields, vacant or historic buildings, and nature seem to be less vulnerable than purely vertical plays (even when those vertical plays are mixed use). Transit-oriented development is actually becoming easier to finance in some areas, but that infrastructure also includes water, wastewater, power, telecommunications, and so on. A major weakness in any of those components can sabotage the entire project;
4. Redevelopment projects combining renewal of the built environment with socioeconomic renewal programs—education, commerce, culture, or community services—seem to be less vulnerable than those based solely on physical assets. Renewal projects that effectively engage all stakeholders—such as the Noisette Project in South Carolina—seem to be less vulnerable than those proposed and designed by a few narrow interests. Citizens are less likely to give up easily on projects in which they feel psychologically vested;
5. The more partners a project has, the more resilient it seems to be when challenges of any kind strike, including the credit crunch.

I haven't seen any slow-down on the infrastructure or natural resource side of restoration. If anything, they seem to be accelerating. The renovation of water infrastructure, for instance, is going great guns all around the world, and that kind of work is often paired very effectively with environmental restoration.

There are several reasons infrastructure activity hasn’t been significantly affected by the global credit crunch. Despite the rapid growth of P3s, infrastructure is less dependent on private finance than residential or commercial projects. Many of the housing projects that have been slowed or cancelled are speculative, whereas infrastructure work is usually catching up to demand, not anticipating it. The credit crunch might force a P3-based infrastructure project to alter its financing strategy, but cancelling it is seldom an option.

Granted, there is such a thing as speculative infrastructure (usually related to sprawl), but it’s only about ten per cent of the pie. Just ask the original private backers of the Dulles Greenway toll road in Virginia if it’s possible to lose money building infrastructure, even when sprawl is guaranteed.  

Sprawl projects are more at-risk than refill (urban renovation/restoration/remediation/ redevelopment) projects because many inner cities, like Los Angeles, are adding residents at a faster rate than their suburbs, reversing the 20^th century norm. Combine that trend with the smaller supply of urban centre real estate, and it becomes clear why “re” residential, commercial, and mixed-use projects are safer bets. That makes infrastructure renewal projects related to such regeneration easier to finance.

The projects suffering most are often in cities that haven’t inspired confidence in their future. If investors are confident a city is on the path to renewal, they’ll buy while it’s cheap. But if they think the area will languish a while longer before hitting its stride, money will flow elsewhere. As a result, U.S. cities like Stockton, California and Detroit, Michigan—still struggling to find their renewal feet before the credit crunch—are seeing the highest rates of foreclosures now.

Cities that didn’t hit their stride before the credit crunch have no momentum to protect them. Those that were already making good renewal progress aren’t taking the lenders’ imprudence lying down. Courts in Buffalo and Cleveland, for example, are ordering banks to maintain the properties they’re foreclosing on. They don’t want their inventory of restorable assets transformed into liabilities by leaking roofs, vandalism, or crack dealers. Cities that are focusing more on renewing their infrastructure of natural environment aren't feeling the pinch as badly. Programs that have multiple facets and phases are able to reshuffle them when one hits a hitch.

The techniques for rapid, resilient renewal revealed in this column over the past four issues of ReNew Canada make sense in good times and bad. When the economy is flush, the “rapid” side of the equation takes the fore. When things turn sour, the “resilient” qualities are what bridge the gap to the next economic upswing.