All Mixed Up
I mentioned briefly in my last column that I’ve been a little puzzled by what seems to be an industry-wide reluctance to design and develop, and in many cases redevelop centers into, true mixed-use venues. It’s not that our industry doesn’t get excited about mixed-use spaces — they clearly do. But, something is getting lost between the glamorous articles and design concepts, and the real-world execution. There’s always been a lot of buzz about mixed-use developments, but when we look at how many fully realized, true mixed-use developments there are in the U.S., really only a few dozen, the numbers are surprisingly low — in my mind, at least.
To be clear, there are some really great mixed-use projects out there. Some developers and commercial real estate professionals have done an amazing job of harnessing the synergies of mixed uses in exciting and profitable ways. And the interesting thing is that many of them were not designed and built from the ground-up as mixed-use; they were redeveloped into mixed-use. Which leads me to question why that is.
Are developers being overly cautious in a tenuous economic environment? Is it harder to get funding for more ambitious mixed-use concepts? Does the inherent complexity of mixed-use make those projects not just more daunting, but also more difficult to execute successfully? I tend to think that the answer might be “D: None of the Above,” but ultimately (and perhaps inevitably) it all leads back to the money. A common refrain I hear from industry professionals is that they are worried that investors won’t “get it.” There is a sense that “whatever we do, let’s make it easy for the lenders to understand.” I get that impulse — nothing is going to happen without financial support, and everything from market research to leasing and design can become more difficult when dealing with a large mixed-use concept — but ideally, shouldn’t it be all about the consumer? Or, more importantly, all about the best use of the real estate?
Why don’t investors get it? I think perhaps the industry, in general, has historically viewed real estate in distinct segments: Retail, commercial (office and hotel) and residential. As a result, not only are we dealing with some mixed-use inertia, but also a very specialized development marketplace. The pool of professionals who are comfortable working in the “mixed-use” space is actually quite small. As a result, the complexities of mixed-use projects often require collaborative efforts between multiple parties, which can further complicate the situation.
To make matters worse, all too often I’ve seen what happens when a half-hearted attempt at “mixed-use” has been made: a dining or entertainment tenant tacked on to a span of inline retail. Mixed-use projects that are tentative or poorly executed don’t work. You need that all-important critical mass to generate the synergy and cross-traffic that can make mixed-use a powerful format. And, because mixed-use, more so than pure retail, resists that cookie cutter formula, every project is different. So, it’s important to identify what uses are supportable and complementary.
While they might be more complicated, I do think it’s important for the industry to make more of an effort to pursue mixed-use opportunities. Not just because mixed-use spaces are often the most engaging and dynamic places to live, work, shop and play, but because, when it’s done right, the rewards/returns can be significant. The ability to attract shoppers, promote cross-traffic and extend hours makes mixed-use a uniquely powerful retail engine.
I’ve talked in the past about how malls (even underperforming malls) almost always occupy prime pieces of regional real estate. Developers and owners need to consider the fact that, in many cases, they won’t really be unlocking the highest value of a site if a strategic mix of uses isn’t introduced. The single greatest asset of any project is the real estate, and in my opinion, the unwillingness or inability to maximize the value of that asset is a true shame. I see plenty of candidates out there for prime mixed-use redevelopment: projects where underperforming retail is compromising quality real estate. I think the whole industry has to become more integrated and more flexible, with less compartmentalizing and more recognition that mixing uses is likely to become more prevalent — and lucrative — in the future. We have to be willing to take chances. After all, very few spectacular projects came about by playing it safe.
What do you think? Please make a public comment below or feel free to e-mail me privately at [email protected].
Click here for past columns by Jeff Green.