It seems that with every announcement of a new office building, sports venue or residential tower, there is also news of a mixed-use component — some modest, like a residential tower with retail space or a grocery store and others that create self-contained mini-cities. Some feature senior and townhouse developments that include amenities and a neighborhood design meant to encourage a sense of community and mimic an urban, walkable environment.
On the other end of the spectrum, sports facilities — like the new Detroit Red Wings hockey arena and the Arlington, TX, Texas Live! development — are serving as the centerpieces for a host of residential and commercial developments, transforming entire neighborhoods. In the case of the Red Wings, the team’s owners, the Ilitch family, have led private investment of more than $1 billion to date in not only the $625 million, state-of-the-art arena, but in ancillary retail, office, multifamily and hotel space in the surrounding 50-block area called “District Detroit.”
Mixed-use developments are so on-trend that last summer, international architecture firm Gensler announced it had brought on two experts in mixed-use design and planning to help the company become more competitive when bidding on those types of projects.
Is there truly an uptick in mixed-use projects, or is all the hype just driven by the fact that some of these projects are so high-profile that they manage to get more than their fair share of media coverage?
A growing trend
“There is more of it, or at least there’s more of it described as mixed-use,” said Michael Breclaw, with FitzGerald Associates Architects in Chicago. There have always been mixed-use developments, starting with a shop owner who lived in or rented the space above his establishment, he said. Today, the term mixed-use is a “catch-all” for a variety of projects.
However, he added that more mixed-use developments are springing up in cities and in “established towns.” These towns, he said “are becoming cities in their own right” as their cores have become the source of services and infrastructure that attract residents who want a more urban experience. “In order to achieve that, you really have to bring a variety of uses together, and I think that people are recognizing that as both a value for where to live and for where to do work, and that drives mixed-use development,” he said.
In the category of mixed-use are vertical and more “spread out” developments, according to Breclaw. Vertical developments, where the various uses are “stacked” on top of each other, are typically used in areas with limited space, while larger sites allow those different components to be built next to each other — such as an apartment building with a grocery store next door.
Zoning and financial incentives
One reason for the rise in mixed-use is the fact that zoning regulations — which for many years kept residential and other uses in separate areas of municipalities — have loosened up, and many local governments now support “the mixing of uses” and recognize their increasing importance to residents, Breclaw said.
There is also a financial driver behind the increased occurrence of mixed-use components, he added. Businesses want to be part of these developments because, simply put, that’s where the customers are. Business owners have started to recognize the value of a built-in customer base, sports venues included. As stadiums and arenas begin to come back downtown, there’s a recognition that “50,000 people will want to have something to do” before and after the game other than hang out in the parking lot, he said.
For example, Breclaw said Wrigley Field in Chicago can’t offer much in the way of entertainment, dining or retail because of its small size, but “everything around it is being repurposed.”
In addition, lobby cafes in office buildings — even convenience stores or dry cleaners in residential buildings — benefit from being located in the middle of a large group of potential patrons. The various mixed uses offer a sort of backup plan for the investors as well. A variety of tenants bring a balance to the development’s portfolio, according to Mary-Claire Burick, president of the Rosslyn Business Improvement District (BID) in Arlington, VA. That diversity poses less risk for the investor than just a single-asset-type investment.
Commercial leases tend to have much longer lease terms, which bring stability to mixed-use developments, Burick said. But if there is a downturn in the commercial sector, then a residential component can bolster the entire development. Typically, she said, when one market is lagging, the other tends to perform better.
Offering a ‘sense of community’
Perhaps the strongest driver of mixed-use developments, though, is the emotional and social element.
“I think that’s a key reason why we’re seeing more mixed-use developments,” Burick said. “According to estimates, some 33% of the population desires to live in a walkable, mixed-use neighborhood, and that’s because … it really offers that sense of community to everyone who’s there.”
Joe Pella, group vice president and Georgia CRE market manager for Suntrust Bank, calls it the “live-work-play” factor. “People want a sense of community, whether in an urban core or suburbs. They want the ability to be part of it all the time or in driving distance so they can park the car and go spend the day walking around the shops and enjoying the atmosphere,” he said.
The challenge for businesses, Pella said, is to target that mixed-use space to the clientele they hope to attract. Outdoor spaces or plazas have a great potential to draw customers with special holiday events, food and wine festivals and farmers’ markets. SunTrust helped finance the conversion of an old Sears building in Atlanta into the now-thriving mixed-use Ponce City Market. One of the main attractions there is an old-fashioned amusement park on the roof with games and vendors, where visitors can even climb to the top of the Ponce City sign.
Growing popularity among all age groups
Even millennials, who find it difficult to buy in cities when it’s time to start their families, are choosing near-urban neighborhoods with their own mixed-use developments in order to capture that community feel. “Millennials have absolutely shown a desire to live in those walkable mixed-use communities, and they’re the drivers right now,” Burick said. Groups like the Rosslyn BID are exploring affordable housing options so that cash-strapped millennials don’t have to pack up and move elsewhere.
However, it’s not just millennials who want a walkable, urban experience. “We also have a lot of retirees and empty-nesters that have downsized their big homes … in other areas and are wanting to have that vibrant city feel that a place like Rosslyn offers,” Burick said.
In fact, a Harvard University Joint Center for Housing Studies October report found that retiring baby boomers are downsizing at such a high rate that they’re grabbing up the available housing in many urban areas and pricing millennials out of some markets altogether. For some boomers, a move to urban areas is more about a change of lifestyle to a more social environment, once the purview of a younger crowd.
“Everyone really wants that walkable, amenity-rich environment where there’s a feeling of community,” Burick said. A compact place like Rosslyn, which is also a transportation hub, makes that goal more achievable for everyone. “It’s really about that accessibility to the place and accessibility to the amenities that are within the place.”
Breclaw added, “It’s just a demographic change in the world.” Overall, the country is becoming more urban, he said, with more than 50% of people in the U.S. living in cities or urban areas. After all, Breclaw said, “a city, by definition, is a mixed-use project.”