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How Public Art Affects Real Estate Values

Posted On February 25, 2015

800px-Everett_-_Public_ArtBy choice or by law, commercial real estate developers are generous patrons of the arts.

Most public art created today is funded by CRE development. Some developers voluntarily budget for public art as part of their project costs, but most earmark funds because city ordinances require them to.

Does the developer see a return on investment in either case?

Developer Stephen Ross seems to be banking on it. The centerpiece of his ambitious Hudson Yards Redevelopment Project in Manhattan is a monumental sculpture by renowned artist Thomas Heatherwick. Featuring 16 skyscrapers, the Hudson Yards project is invariably described in superlative terms as the largest private development in New York history; the largest-ever mixed use development; and the biggest debut of office space since the completion of 1 World Trade Center. So it makes sense that Ross would put in one of the most expensive works of public art in the world “in hopes of establishing a must-see attraction” at the heart of his development, according to the Wall Street Journal. The developer himself envisions “a new icon for the city.”

Across several of its properties, Brookfield Office Properties — which develops, owns and manages office properties in the downtown cores of major cities in the U.S., Canada and Australia — is enriching the experience of tenants and communities through free public art in the accessible parts of its buildings, with works on display in Houston, New York, Denver and Los Angeles as well as international cities.

These are just two examples of voluntary support for public art. Most funding comes through “percent-for-art” ordinances that require developers to allocate a certain percentage, commonly 1 percent, of the total cost of large-scale development projects for public art installations accessible to the general public. Depending on the ordinance, developers may need to meet other provisions such as soliciting community input and prioritizing local artists.

The public art investment can pay off for developers in a number of ways. The artwork’s value can appreciate; additionally, there are “many immeasurable financial benefits” including increased leasing interest, more foot traffic and a revitalized local economy, according to Art Law Firm principal and founder Alexandra Darraby, a member of CREW San Francisco.

Well-conceived public art can also confer ongoing visibility, publicity and brand identification to a development, creating a “marketing bonanza,” according to the Urban Land Institute.

For all its benefits, public art comes with a host of legal considerations. It can be classified as stand-alone personal property or real property, and the legalities differ for each, Darraby writes for CREW Network. Usually, the artwork is personal property unless it is attached to the building or otherwise part of it in a “permanent and inseparable way.” Then, the artwork is usually deemed part of the realty.

Copyright is another important legal concern. The artist typically retains ownership of the copyright and the owner is granted a license for reproduction purposes, which can provide an ongoing source of income. The scope of the license and permitted uses by both sides is an important negotiation point, Darraby writes.

Maintenance and stewardship responsibilities also must be considered as they tend to be ongoing costs of ownership due to “city realities” like vandalism, pigeons and pollution, Darraby writes.

An art lawyer can obtain the appropriate licenses and address issues of public safety, access, insurance and copyright.

Since public art is so intertwined with commercial real estate development, some worry that it has become “window dressing for powerful real estate interests” and, as such, tends to be “safe” rather than daring or provocative, according to ArtsATL.com, which covers Atlanta’s art scene. This is a legitimate concern from an artistic standpoint. However, according to Darraby, public art patronage for the most part “enables liaisons with the creative community” and “enhances developers as good community citizens.”

Further Reading

Public Art: Eye of Beholder and Pocket of Developer by Alexandra Darraby for CREW Network’s “News You Can Use,” July 2014.

The Financial Case for Public Art by Dan Rosenfeld for CityLab, May 28, 2012.

How Art Economically Benefits Cities (with case studies) by Project for Public Spaces, Jan. 1, 2009.

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