The FDI angle:
- The conversion of abandoned or underutilised railway infrastructure has become one of the hottest trends in urban regeneration as cities look to monetise idle land.
- These sites are often on prime real estate within city centres, making them a sought after investment for developers.
- Landmark projects include the High Line in New York, Parco Romana in Milan, Perth City Link in Australia, Ford's Michigan Central in Detroit, and the €25.2bn Madrid Nuevo Norte project in Spain.
In North America’s most visited city, a public park fashioned from a dilapidated railway has become one of its top 10 tourist attractions. The High Line in New York is a 2.3-kilometre (km) greenway built on an elevated rail line that runs from the meatpacking district, through Chelsea and further up into west Manhattan.
Advertisement
Before the first stretch was opened in 2009, the track lay abandoned for almost three decades. Today, it is filled with more than 500 species of plants, art displays and a lot of people. The High Line now attracts eight million visitors per year.
It is fitting that a city known for reinvention has transformed a piece of rusting infrastructure into a cherished public space. However, before being redeveloped, it was very nearly torn down. “When the idea first came up [in the 1990s], New York was under mayor Rudolph Giuliani’s administration and he wanted nothing to do with the High Line,” says Asima Jansveld, chief program and engagement officer for the High Line.
“His last action in office was to sign a demolition order for the track.” The project was saved by intense lobbying by a group of determined locals. Without them, the city would have missed a redevelopment opportunity that has sparked billions of dollars in private investment and revitalised Manhattan’s once-neglected lower west side.
A whistle-stop tour
The High Line was not the world’s first repurposing of abandoned rail assets. In Paris, the Promenade Plantée park has sat atop a decommissioned railway since 1994, while Musée d’Orsay has been housed in a former train station along the Seine since the 1980s. Much of London’s Olympic Park, meanwhile, was built on derelict land purchased from state-owned London and Continental Railways (LCR).
But New York’s project brought a new level of visibility to the untapped potential of rail regeneration. It has inspired at least 12 similar initiatives across the US, an elevated walkway called the ‘Goods Line’ in Sydney, and a copycat project in the London borough of Camden which received council approval in January. The trend also extends to obsolete land sitting within operating rail corridors, with multi-billion dollar examples underway in Madrid, Perth and Milan.
Advertisement
The rise of train infrastructure as a hotspot for urban renewal is underpinned by the changing geography of industry. In the 20th century, railways were often built to serve freight trains transporting goods for local factories, which were then within cities. As industrial zones moved into the suburbs and beyond, tracks have closed, stations have been shuttered and large swathes of land surrounding what were once bustling terminals have been left dormant.
In Italy alone, there are more than 30 million square metres of land — around half the size of Manhattan — owned by rail group Ferrovie dello Stato Italiane (FS) which is no longer needed for railway operations. Much of these are former railyards, once used to unload, repair and store carriages. “These railyards are connected to a world that, in big cities in … the West, doesn’t exist anymore,” says Giancarlo Tancredi, Milan’s deputy mayor for urban regeneration.
“The industrial world has changed and factories are no longer in urban centres, and so they are no longer needed.”
Indeed, some of the strongest momentum in recovering rail space is in Italy’s business capital. Since 2017, the local government and FS Sistemi Urbani, the state-owned group’s division charged with realising value from its unused land, have teamed up to redevelop seven vacant railyards within or close to the city centre.
Four of them have already been sold to private investors, most recently Scalo di Porta Romana which is being turned into an urban park that will house residential, office and retail space, plus the Olympic Village for the winter games in 2026. In May, FS Sistemi Urbani launched the competition to sell two more railyards, including Farini which is a 600,000 square metre site in the city centre, right next door to Milan’s current regeneration masterpiece, the Porta Nuova district.
“Farini is very important because it is the last area in Milan’s centre that can be regenerated,” says Umberto Lebruto, the CEO of FS Sistemi Urbani. “It is attracting a lot of attention from Italian, but also foreign operators, developers and funds,” he adds.
The winning bidder for the Farini site — which will be redeveloped to include an urban forest, residential buildings and a new campus for one of the country’s leading fine art institutes, Brera Academy — will be chosen by November.
Reclaiming cities
These empty plots — in Italy and elsewhere — are catching the attention of developers because they are often on prime real estate. Rural-to-urban migration means cities have grown around rail hubs, and they now sit in densely populated areas.
In London, for example, the people that own some of the most attractive redevelopment opportunities are probably the rail authorities
In London, for example, “the people that own some of the most attractive redevelopment opportunities are probably the rail authorities”, says Ross Blair, the UK head of global real estate firm Hines. A case in point is the land surrounding Kings Cross station owned by LCR. Over the past 20 years, this has been transformed from a dicey nightlife district into a thriving neighbourhood and innovation hub, attracting commercial tenants including Google and Meta.
Recouping and upgrading these central areas can help reduce urban sprawl and improve city life. “There is a fight for space still going on in almost all urban metropolitan areas in Europe, even in the mid-sized cities,” says Jos Tromp, head of continental Europe research at US commercial real estate group CBRE.
While the rise of hybrid work since the Covid-19 pandemic has pushed office vacancies to record levels in some cities, he says there are still shortages in most other sectors of real estate. “Across the board, we believe the pressure on urban areas will remain,” he explains.
The business case
For governments, these projects can generate large payoffs by stimulating surrounding investment. The High Line cost $276m in public and donor funds to construct, and has sparked more than $2bn in private investment in the area, according to the New York City Parks department. “There is a clear economic impact that the redevelopment of these spaces can create for adjacent property owners,” says Ms Jansveld. “The huge amount of value created by the redevelopment of the High Line was really captured by private developers that built alongside it.”
There is a clear economic impact that the redevelopment of these spaces can create for adjacent property owners
One project in Miami, inspired by the New York structure, is the Underline; a 10-mile stretch of land under an operating, elevated metrorail in Miami that is being transformed from vacant terrain into a green belt. The Miami-Dade county government forecasts that the $140m project — half of which it is paying for — will generate $9bn in economic benefits for the county over the next 25 years. That encompasses everything from tax revenues and pollution control to new jobs and real estate.
David Martin, CEO of the property developer Terra Group, says the Underline played a “major role” in choosing to locate its Grove Central mixed-use development (valued at $350m) adjacent to the project. “From a real estate investment standpoint, any time the public and private sectors work together to create new public spaces, the surrounding areas tend to become more desirable in the eyes of residents and businesses,” he says.
One of the world’s most ambitious rail renewal projects led by public–private collaboration is Madrid Nuevo Norte. The redevelopment of 2.3 million square metres of derelict land surrounding Chamartín station in the city’s north is among Europe’s biggest examples of urban regeneration.
Madrid Nuevo Norte is being developed by Spanish investors BBVA, Merlin Properties and Grupo San José in tandem with the city and regional governments. The price tag is a whopping €25.2bn, but it is tipped to generate €52bn in long-term economic impact for the region and grow the nation’s gross domestic product by 1.3%. The masterplan includes 10,500 new homes, a new business district to run alongside the adjoining Cuatro Torres Business Area, and a 14.5 hectare park to be built over 20 hectares of sunken railway tracks.
Regeneration as a virtuous cycle
Aside from spurring surrounding investment and economic development, projects that involve the sale of publicly owned railway land to private investors have an immediate benefit for the railway operators themselves.
Milan’s railyard projects are a “virtuous cycle”, says Mr Lebruto, because the proceeds are reinvested to improve rail services. In big cities in particular, Mr Blair sees growing pressure on public bodies owning disused rail spaces to realise value by teaming up with or selling to investors. “Train businesses have a shortage of immediate capital to spend on their operations, and land supply is now thin on the ground for builders, so there is a bit of a marriage there,” adds Nick Parr, head of urban regeneration at Knight Frank.
One of these most recent ‘marriages’ in the UK was the 2019 pact between national train operator Network Rail and The Arch Company, which is a joint venture between US asset manager Blackstone and British developer Telereal Trillium. The Arch Company paid £1.46bn for a 150-year lease over the bulk of Network Rail’s commercial estate. The proceeds were reinvested to improve the national rail service, while The Arch Company now manages 5200 properties across the country and claims to be Britain’s biggest landlord for small and medium-sized enterprises (SME).
Nearly half its portfolio consists of arches under the railway viaducts in London. In a city synonymous with expensive real estate, “they tend to be at the affordable end of the rental market”, says the firm’s CEO, Craig McWilliam. He adds that more than half its arches are priced at £15,000–£50,000 a year.
The firm has launched a £200m investment drive to renovate 1000 of the dilapidated arches that were part of the portfolio it acquired from Network Rail. “We are taking derelict spaces that are blighting an area and bringing them back into productive use — typically by SMEs which tend to employ people locally,” says Mr McWilliam. “There is a real positive, local benefit to what we are doing.”
There is a real positive, local benefit to what we are doing
Reviving the city
In Detroit, the local impact unfolding from its landmark rail regeneration project is innovation. In 2018, Ford acquired Michigan Central Station, which had been vacant for three decades. The automaker is restoring the landmark building, which was designed by the same architects behind New York’s Grand Central Station, to become the centrepiece of its 30-acre innovation campus known as Michigan Central.
The $1bn-plus project, which sits just 12km from the automaker’s global headquarters, will provide Ford and its partners with workplaces and testing facilities to prepare the industry for the electric vehicle era. In turn, it seeks to reverse the automaking city’s economic decline by transforming it into a mobility tech centre. Since the campus officially opened in April, it has welcomed more than 25 early-stage companies which are collectively backed by more than $500m in venture capital funding.
In other cities, regeneration projects are connecting communities where rail hubs have created both physical and socioeconomic rifts within cities. In Western Australia’s state capital, Perth, the main railway station and corridor had separated the bustling central business district from the inner-suburb of Northbridge for more than a century. By the early 2000s, Northbridge was experiencing high crime rates, urban decline and nightly curfews.
“Framed by busy roads, the [rail hub] has long been a barrier in the centre of the city,” says Dean Mudford, acting CEO of the government agency DevelopmentWA. The state’s biggest development project in decades, Perth City Link, has removed this barrier by sinking the rail lines and covering them with a new public square, residential, retail and office space, and a new university campus set to open in 2026. The government’s A$1.4bn ($950m) initial outlay has sparked more than A$3bn of private investment in the project from the likes of Hong Kong’s Far East Consortium and Australian firms.
Among the project’s benefits, Mr Mudford lists improved public safety, access and connectivity.
Meanwhile, in Miami, the Underline is improving safety in a county where pedestrian and cyclist fatalities per capita are almost twice the national average. “One of the core principles of the project is to have safe walking and biking alternatives,” says Meg Daly, founder of Friends of the Underline, the non-profit spearheading the development. “With this direct connection to transit via the metrorail, it is really one of the only opportunities in Miami to not need a car to get where you need to go.”
Invariably, a key principle when redeveloping these areas is creating more green space in cities. At the heart of the sprawling Madrid Nuevo Norte district is a 14.5-hectare park to be built on a series of viaducts that will cover the sunken tracks below. “Today, the railroads next to the station are an urban canyon that heats up tremendously in summer,” says Adriaan Geuze, co-founder of West 8, the Dutch landscape architecture firm leading work on the park. It has been designed from an ecological engineering perspective, in line with the mayor’s vision for Madrid Nuevo Norte to focus on sustainability.
The park’s layout aims to “benefit from the direction of the wind, which is cooler from the countryside and flows via the rail corridors, and to introduce shade as much as possible”, says Mr Geuze. This is expected to lower the park’s temperature during summer by four degrees Celsius. In Milan, another city scorched by hot summers, the requirement that at least 65% of all railyard redevelopments be allocated to green space aims to cool local areas by two degrees.
Fantastically complicated
Madrid Nuevo Norte is part of a burgeoning subset of regeneration projects being built on top of operating train infrastructure. These developments are “fantastically complicated and expensive” due to their interaction with public transport, says Mr Parr. “But it is definitely a growing trend, partly because we have a better understanding of our future needs for rail infrastructure and knowing we don’t need as much space as we used to.”
To realise the Madrid project, West 8 had to micro-engineer how to deliver a park on top of a concrete deck. “We’ve been working with engineers to understand where we can build up soil — which is very heavy — as that’s the only way to plant large trees,” says Mr Geuze.
In London, Hines ran into challenges developing Cannon Place, an office building above the busy central railway station of Cannon Street. “Very early on in our development programme we had to book slots with Network Rail saying: ‘In a year’s time, we need to move this piece of machinery above this railway line,’” recalls Mr Blair. “If your programme changed nearer the time and you needed to push things back, they couldn’t shut down a railway for a day for you to do something.”
A challenge for all projects involving decommissioned or idle rail assets is the long timelines needed for rezoning, government approvals and public consultations before the first shovel hits the ground. Construction of Madrid Nuevo Norte will begin next year, 23 years after the idea was first conceived. In redeveloping Milan’s vacant railyards, Mr Lebruto says one of the biggest obstacles is the administrative phase, with it taking up to 10 years to get planning permission. Another “huge risk” is the prospect of changes in governments during these periods, says Ms Jansveld, which could mean losing state support.
Despite the hurdles, redeveloping these spaces is increasingly popular among real estate investors because much of the low-hanging fruit in cities has been taken. “The property development market goes through cycles in recognising where there are opportunities,” says Mr Parr. “Ten years ago, it was all about retail parks, outlets and supermarkets redeveloping carparks. Now they are moving into more complicated developments, and as property prices are going up, these projects with high construction costs are now becoming viable.”
It means that derelict space that runs alongside your train commute could be worth a second look. With a bit of imagination, determination and patience, an eyesore whose value has been written off by local officials could just become one of the city’s top-10 tourist attractions.
This article first appeared in the August/September issue of fDi Intelligence