In the late 1980s, the area south of Market Street in San Francisco was pocked with rundown warehouses and empty lots where garbage collected on street corners and transients camped. Perhaps improbably, MacFarlane Partners, an investment and development company, came in and drew up plans for a hip, vibrant neighborhood. They called it Bayside Village. Now that area is one of San Francisco’s most desirable neighborhoods — complete with a nearby baseball stadium, shops and restaurants — where a 460-square-foot studio rents for $1,670 a month.

The ugly duckling story of urban transformation is playing out across the country from workforce housing in California to mixed-use complexes in Florida and everywhere in between. In the wake of their success, investors and developers are changing their attitudes toward these types of projects.

“Urban has become the new core,” says Greg Vilkin, managing principal at MacFarlane Partners. “We tell people that what we’re