All aboard the KOP Express

Four squiggly lines in four different colors may mark the future of real estate in King of Prussia. Real estate experts say two big items are crucial for land value — proximity and access.

King of Prussia already has both, but those little lines jutting out from Norristown could give the access side a huge jolt. They are proposed train routes that would start at the Norristown Transit Center and work their way deep into the heart of what is a now concrete jungle highly dependent on vehicle transportation. Just one will be chosen.

The train line would run four to five miles and have eight to 10 stops with stations along the way. What is now estimated to be a more than $500 million rail project has reached a point where most pie-in-the-sky ideas like this often don't get. It has momentum.

"When you're talking about any public transportation project, it costs a lot of money and things that cost a lot of money take time to get all of the stars aligned," said Eric Goldstein, executive director of the King of Prussia Business Improvement District, which has been one of the champions of extending rail to King of Prussia. "It seems now all of the stars are aligning for this."

Reached by highway

King of Prussia, in Upper Merion, Montgomery County, has done just fine over the decades without rail. It has thrived as a retail destination with one of the country's largest malls and other outlets. It's the second-largest employment center in the region outside of Center City, with more than 55,000 workers, and there's currently hundreds of millions of dollars of commercial and residential development underway in just about every corner of the community.

But many contend King of Prussia's vehicle-dependent present and past is not its future.

A demographic and cultural shift that is driving Millennials and others to live in dense urban environments is also influencing suburban areas. People want to live in communities in which they can easily reach work, shopping and entertainment by walking, using mass transit or riding a bicycle rather than driving a car. So-called transit-oriented development, or projects anchored by train stations, is on the rise.

Suburban municipalities that are thriving and will continue to do so in the future are those that have a mix of uses connected by rail. In the Philadelphia suburbs, think Radnor, Conshohocken, Malvern.

"Every community in the country understands a strong public transportation system," said Jeff DeVuono, executive vice president at Brandywine Realty Trust, a Radnor company that owns several office buildings in King of Prussia and sits on the board of the improvement district. "I think it's very simple to understand. There's a value proposition there. People are hungry for a transportation system so long as it supplies frequent, consistent service."

Companies are also cognizant that to retain and recruit the best employees they have to be able to cast a wide net and reach younger people who live in urban areas or they must be located in town centers accessible by mass transit. In an effort to somewhat accommodate this in King of Prussia, two shuttles now bring employees to and from the Wayne and Norristown train stations to local businesses.

Landlords such as Brandywine and Liberty Property Trust count the shuttle as an amenity that can be offered to tenants and consider it a big plus when marketing the area to prospective companies.

"King of Prussia has been lucky it has been as successful as it has been without rail, but looking ahead 10 to 20 years from now how successful will it be without it?" Goldstein said.

The future of suburbia

The addition of rail and access to King of Prussia has the potential to totally reposition a classic suburban community. With that comes another value proposition and that's the long-term potential increase in values for commercial and residential real estate. One doesn't have to look far to see how a train can influence the desirability of a community. The Main Line, known for its expensive housing stock, prestigious public and private schools and tony shops and restaurants, was built along a railroad line.

Over the last two decades, Dick Voith, president of Econsult Solutions in Philadelphia, has analyzed the effect public transportation has on property values. In general, good rail transit and access to it can give housing prices a 5 percent to 15 percent boost. Variables that influence the degree of impact include how close a property is to a train station and how much parking is available.

An Econsult study from last year looked at how SEPTA's Regional Rail service affected area housing prices. It concluded the average property premium that Regional Rail has on properties in the counties of Bucks, Chester, Delaware and Montgomery is $7,900 based on an analysis of 754,000 houses. That translates into $6 billion of property value. Those communities within three miles of a train station and with abundant parking saw an even bigger premium of $31,000 and $37,300.

"An extension is a different kettle of fish," Voith said, noting that the King of Prussia line is not an entire rail route.

Because of that, its effect on residential real estate may be a little difficult to determine. The proposed lines aren't exactly within walking distance of many current residential properties — especially single-family homes — though some existing multifamily properties and others under construction would have better access. In addition, a new zoning district in the King of Prussia Business Park encourages mixed-use development that veers away from just office or industrial uses.

"As for commercial, the beneficiaries will be those areas that actually get service and that will be measured better," Voith said, adding that some investors may start to buy based on the extension's viability. "I think you will see some speculation. Developers are always looking for an edge. People hold land with the idea that there will be some significant value change and this is something that will change the value of a particular area."

It will definitely allow companies to draw from a bigger labor pool and those seeking work who rely on or prefer public transit to cast a wider net for employment. It will also provide better access to retail and recreational opportunities.

"I don't see any negatives associated with this," Voith said.

Benefits of public investment

Transportation projects, whether highway or rail, can spur economic development activity. Some recent, local highway projects have underscored that fact. For example, the completion of I-476, commonly called the Blue Route, helped breathe new life into Conshohocken and West Conshohocken. Developers like Oliver Tyrone Pulver Corp. acquired land in those two boroughs in anticipation of the highway eventually being constructed and is one of the biggest office landlords in that office submarket. It gets some of the highest rents in the region.

A rapid succession of development activity followed the improvements to Route 202 in King of Prussia, which were completed about a decade ago. Among the new projects were U.S. Liability's expansion, the construction or renovation of several office buildings, and Bentley Homes' decision to build $1 million-plus houses nearby.

The new Route 29 ramp off of the Pennsylvania Turnpike in Malvern has ignited a bevy of development activity in Great Valley between Routes 29 and 30.

"Did those road improvements have some effect on that?" said Bruce Hartlein, vice president of leasing and development at Liberty Property, which owns office properties in King of Prussia. "I have to think so. Generally, I think when you look at historically what has gone on, investment of public money is closely followed by private investment."

A rail extension to King of Prussia is anticipated to accelerate what is already a robust development environment and encourage property owners where the new overlay is in place to move ahead with redevelopment.

A long, arduous process

The death of what was going to be the "Schuylkill Valley Metro," a train line that would have run essentially parallel to Route 422 from Reading down to Norristown, actually rejuvenated a plan to extend SEPTA's Norristown line into King of Prussia. That along with unabated traffic congestion throughout the region, pent up demand from riders who would use the line along with a buy in from companies, landlords and politicians have inched the extension closer to reality.

But steep hurdles remain.

"Extensions are a luxury but the King of Prussia rail project has good roots," said Byron Comati, director of strategic planning at SEPTA, who along with his team has been shepherding the project along for the last two years.

Thirty different lines were initially considered and those were narrowed down to 16 and now there are four. SEPTA will begin analyzing which one is the best based on a series of issues including environmental impact and construction costs. Portions of the line could run on existing rail lines not in use and the remaining stretch could be elevated above existing roads such as Route 202.

Of the rough estimate in cost, Comati foresees half coming from federal funds. The remainder would come from either public-private partnerships or local and state matches. Part of the private funding would come in a variety of forms including advertisement and sponsorship revenue from some of the stations that would be constructed. For example, King of Prussia Mall owner Simon Property Group or one of the mall's department stores may want to pay millions for the naming rights to stations serving the mall.

A financing plan is likely to be recommended sometime next year.

Once a line is picked, likely in the next couple of years, a final environmental impact statement would be submitted and then engineering and design work would get underway. It is expected construction could begin as soon as 2020 with the new line operational by 2024.

"Once you have something like this in place, the characteristics of that part of Upper Merion Township changes," Comati said. "Once you get a rail line in there, you will get some businesses and land owners to start thinking differently."

Source: Philadelphia Business Journal