In the San Francisco Bay area, it often takes commuters an hour and a half to go from the tolls on the east side of the bay across the Bay Bridge into the city – a commute of less than five miles. In the Washington area, a rush-hour trip from Alexandria, Va., across the 14th Street Bridge and into the city – less than 10 miles – sometimes takes an hour.

In response to growing gridlock, which robs commuters of time and adds pollution to the atmosphere, more localities want housing, retail, and office space near mass transportation. Such communities reduce congestion by putting commuters within walking distance of trains. They help local transit authorities by increasing ridership. And, with more people riding instead of driving, other car commuters and the environment benefit.

The reward for multifamily developers building transit-based housing is premium rent. But the price tag can be costly. To start with, land near stations is 5 percent to 10 percent more expensive and difficult to come by. Plus, the office, retail, and parking elements, all of which many localities mandate, can push up development costs. Finally, many multifamily developers don't have the experience or expertise to build these additional elements.

Follow the Stations

Avalon at Grosvenor Station is located in North Bethesda, Md., at the Grosvenor Metro Station. AvalonBay's 497-unit community gives residents easy access to Washington.Jennifer A. Johnston"There's one train of thought in business planning today: Follow the stations," says Brad Griggs, CIO for BRE Properties, a real estate investment trust (REIT) in San Francisco. "Wherever you see light rail put in, you see multifamily housing around those stations."

Avalon at Grosvenor Station is located in North Bethesda, Md., at the Grosvenor Metro Station. AvalonBay's 497-unit community gives residents easy access to Washington.Jennifer A. Johnston"There's one train of thought in business planning today: Follow the stations," says Brad Griggs, CIO for BRE Properties, a real estate investment trust (REIT) in San Francisco. "Wherever you see light rail put in, you see multifamily housing around those stations."

The goal: Obtain premium rents. This can be accomplished by building near transit. A walk of three blocks or less to the subway can mean an extra $50 to $90 per month in rent, according to Al Neely, executive vice president for Archstone-Smith, a REIT based in Englewood, Colo.

Convenience is the primary reason people pay more. They like being able to hop on the train to go to work, for a night out, or just to run errands. As cities grow bigger and more congested, the ability to get around without a car will become more important, says Leonard Wood, president of Wood Partners, a multifamily developer based in Atlanta.

With a limited number of infill locations around transit stops, a developer with one of these spots owns a prime location, only increasing in value. "You are creating high-barrier-to-entry markets," Griggs says. "It's hard for others to compete with you."

Plus, there is a marketing advantage. With riders constantly arriving at and leaving from stations, apartments near those sites get great visibility. "You have built-in advertisement," Griggs says. "There's really efficiency as far as marketing and advertising. Your cost of finding customers goes way down."

Securing Land

Availability of land is not the only hurdle for multifamily developers. Often, the transit authority owns the land adjacent to its stops, and acquiring this land can be a painstaking process. There must be a consensus among a number of departments before the agency will sell. "This can be a very prolonged process and cause your legal fees to escalate rather quickly," Griggs says.