Convenience a key to urban/suburban development.

The hottest trend in real estate development these days is a reversion to a 2,000-year-old European system: the re-evolution of cities and suburban areas as conglomerations of small towns.

"Traditional Neighborhood Developments" (TNDs) - defined residential communities built around a town center with parks, offices, shops, schools and entertainment, all within easy walking distance - are under development all over the country, and they represent the sorts of arrangements preferred by more and more businesses and residents.

Such is the main conclusion of "Markets to Watch," one of several articles contained in Emerging Trends in Real Estate 1998, authored by ERE Yarmouth and Real Estate Research Corporation (RERC), and published by Coopers & Lybrand L.L.P.

The typical modern TND, according to the report, features narrow, pedestrian- and bicycle-friendly streets. "Sidewalks predominate over driveways. Cul-de-sacs are verboten. The housing is higher-density than in typical suburban neighborhoods, but public spaces and amenities make up for less lawn space and fewer three-car garages," the report says.

"People are willing to pay more for TND homes, and developers are beginning to notice" the report continues. "They're building knock-offs of pioneering developments like Seaside in Florida and Kentlands in Maryland. Even Disney has built a TND, located near EPCOT outside Orlando."

The key to the success of TNDs, apparently, is an increasing desire for a residential setting that's definitely a town. City-dwellers want to escape the bustle and anonymity of a metropolis, while suburbanites wish that their shopping, socializing and entertainment options were more centralized. Above all, residents crave "proximity to work, proximity to the demands of life and to the things they want to do. They want convenience," according to the report.

It appears that cities will benefit more than suburban areas from the current demand for TNDs. Poor suburban planning, based on a "laissez-faire development system," has created a hodgepodge of subdivisions and retail strips, without the infrastructure to support evolving embedded commercial centers or further growth. Obsolete road systems are creating the very traffic snarls that suburbanites left the city to escape, but mass transportation solutions are often unfeasible.

Furthermore, the suburbs have just become too popular. Once regarded as an upscale alternative to city dwelling, they've generally lost their cachet, the report asserts; an urban address is often more socially desirable, certainly among baby-boomers and empty-nesters.

Large cities, on the other hand, generally have a well-planned infrastructure in place, and can take advantage of their unique settings to form desirable TNDs.

"You can't replicate Nob Hill [San Francisco], Lake Shore Drive [Chicago], or a Central Park [New York] view," the report observes.

Generally speaking, "24-hour cities" (New York, San Francisco, Boston), whose CBDs are diverse, surrounded by attractive residential areas, supported by public transportation, and up and running around the clock, are the best spots for investment and development. "Nine-to-five" cities (Philadelphia, Detroit, St. Louis), where the CBD is virtually deserted at the end of the workday, offer the fewest opportunities. Suburban agglomerations (Los Angeles, Atlanta, San Diego), in which there is no single CBD, offer many opportunities and many pitfalls. They're generally good for investment if they have a mix of upscale and affordable housing, ample recreation and entertainment, good public schools, a diversified tax base, and nearby shopping that's integrated into the community.

The report cites San Francisco, Seattle and Boston as the current top three markets out of the 18 largest urban areas in the United States, in terms of investment and development potential. Chicago, New York, Washington, D.C., San Diego, Los Angeles and Minneapolis also offer tremendous opportunities.