Keldur: Reykjavík’s next great urban quarter moves forward

A development covering 115 hectares, Keldur is carefully planned to prioritise bus networks, cycling and pedestrians. When complete, it will help alleviate Reykjavik’s growing housing shortage.

Reykjavík’s housing and infrastructure crunch has pushed one of Iceland’s most ambitious urban projects firmly into the spotlight. The Keldur development, covering 115 hectares on the city’s eastern edge, is advancing from concept to concrete planning, with draft masterplan amendments and environmental assessments now open for public consultation.

For a city facing rapid population growth, strained transport infrastructure and the need to align urbanisation with climate goals, Keldur represents both a challenge and a once-in-a-generation opportunity.

For decades, the Keldur site — named after the renowned research centre nearby — has been earmarked for redevelopment. The land was transferred by the state as part of a landmark transportation agreement with six municipalities in the capital area, with proceeds from its eventual sale ring-fenced for major infrastructure investments. These include Reykjavík’s long-awaited Bus Rapid Transit system, Borgarlína, alongside upgrades to trunk roads and cycle paths.

Wedded to transport infrastructure

That linkage between real estate and infrastructure is deliberate. As Thorsteinn R Hermannsson, director of development for Transport for the Capital Area (TfCA) has explained, Keldur’s development is inseparable from the Borgarlína roll out. The City of Reykjavík and TfCA have a memorandum of understanding to collaborate in the development of Keldur.

The busway will run directly through the district, funded by revenues from Keldur’s plots – a cohesive loop of urban planning, infrastructure and funding that aims to prevent the piecemeal, car-dependent growth that has often characterised suburban Reykjavík.

An international design competition held in 2023 was won by Swedish architect FOJAB and consultant Ramboll. Their proposal envisions a dense but green district with space for up to 5,800 apartments, three primary schools, and business centres capable of hosting 7,500 jobs.

When complete, Keldur could house more than 12,000 residents: roughly the size of established neighbourhoods such as Hlíðar or Árbær. The aim is to create a balanced, socially sustainable district rather than a dormitory suburb: homes, schools, workplaces, shops and services are all integrated into the plan.

One notable adjustment in the latest draft has been a scaling back of density. At the same time, green space has been significantly expanded, with protected natural areas and open parkland threaded through the neighbourhoods.

The result is meant to combine the best of both worlds: sufficient density to support transit, retail and local services, but with access to nature and outdoor recreation that Icelanders prize.

Perhaps the most radical shift in Reykjavík planning terms is the prioritisation of sustainable transport from the outset. Too often, public transport, cycling and walking have been bolted on after the fact. In Keldur, they are the starting point.

Priority to pedestrians and buses

Borgarlína will have three stations serving the district. Estimated travel time to the old city centre is around 20-25 minutes, whether by bus or bicycle. The street network is being designed for safety and livability, with calm traffic, good cycling infrastructure and a hierarchy that gives priority to pedestrians and buses.

Parking is mainly addressed through up to eight multi-storey “mobility hubs” scattered through the district. These modern facilities, already proven in Nordic cities, concentrate parking in accessible hubs while freeing street fronts for shops, services and urban life. Ground floors will host retail, cafes and small businesses.

No one expects Keldur to rise overnight. Officials anticipate more than a decade before the district is fully established, with phased delivery of housing and schools. The first residential plots are not expected until 2028. Yet with Reykjavík’s population growth outstripping forecasts – 50,000 new residents since 2012, already nearing the 70,000 once projected for 2040 – the pressure to get moving is intense.

Partnerships are key

Partnerships with experienced developers will be key. As Hermannsson notes, TfCA is not itself a master developer of large neighbourhoods. Instead, its role is to prepare and sell the land while ensuring that infrastructure and public services are in place. Private partners with track records in mixed-use urban districts are being sought to deliver buildings and amenities in line with the masterplan.

Keldur is not an isolated project, but part of a broader rethinking of Reykjavík’s urban corridor. From the old harbour area through Laugardalur and eastward, planners envisage a spine of dense, mixed-use neighbourhoods linked by Borgarlína and designed to support carbon neutrality.

This places Keldur alongside Iceland’s other major development push: the K64 masterplan at Keflavík International Airport. There, on a vast 55 sq km tract, state-owned Kadeco is advancing a transatlantic hub blending logistics, industry, energy and hospitality. Together, K64 and Keldur embody a new planning philosophy in Iceland: large-scale, integrated, sustainability-led urban projects tied closely to transport.

For investors, the implications are significant. While K64 offers a global gateway for aviation, trade and industry, Keldur provides a testbed for modern Nordic-style urban living adapted to Icelandic conditions. Both are designed to channel private capital into projects that also meet national infrastructure and climate priorities.

Engaging with proposals

The draft masterplan amendment, development plan and environmental assessment for Keldur have been published on Reykjavík’s planning portal since July. Introductory videos and online materials are available to help the public engage with the proposals. This consultation process is unusual in scale, reflecting both the size of the project and its potential impact on the capital region’s growth.

By the end of 2025, a legally-binding masterplan is expected to be approved, setting the stage for partnerships with developers and eventual delivery of housing, schools and business hubs.

Reykjavík is under pressure to accommodate growth while maintaining its unique character and meeting Iceland’s ambitious climate targets. Keldur offers a model of how to do so: density with green space, housing with jobs, and development that directly funds the transit system it depends on.

If successful, it will relieve the city’s housing shortage and showcase a new way of building in Iceland: one that aligns economic, social and environmental goals. For the 12,000 future residents of Keldur, it could mean living in a district where daily life is shaped not by congestion and sprawl but by connection, sustainability and opportunity.