Now Trending: Hotel and Multi-Family Residential on the (High) Rise
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At a time when the growing influence of millennials and the ongoing development, redevelopment and revitalization of urban communities continue to shape the commercial development landscape, the changes taking place in the hotel and multi-family sectors reflect many of those same demographic and development trends.
There are two noteworthy changes taking place concurrently that have a major impact on retailers. First, hotel and multi-family are crossing categories, rewriting some of the traditional rules and increasingly being developed immediately adjacent to each other. Second, the growing popularity of extended-stay hotels — and the corresponding changes underway within that category — have reinvigorated extended-stay and made a formerly drab format more appealing to travelers, especially millennials.
Coexistence and synergy
More and more clients are coming to me with questions about multi-family high-rise and hotel. Based on the feasibility studies that those clients have requested in cities like Boston, Chicago, Los Angeles and Atlanta, the concurrent development of new multi-family and (mostly) limited service hotel concepts is clearly on the rise.
On Lake Street in The Loop in Chicago, Bighorn Capital is working on a new high-rise project tower that will include 600 hotel rooms and 300 apartments. Nearby, architect and developer Thomas Roszak is planning a 33-story high-rise project with 265 apartments. The project is likely to invigorate a dark Loop corridor surrounded by transportation. In Atlanta, Simon Property Group is expanding the hotel and residential components around Phipps Plaza, a luxury retail regional mall in the city’s Buckhead neighborhood. An AC Hotel by Marriott is one of two major redevelopment initiatives in the works. Along with a luxury apartment complex being built nearby, the goal is to add density to enhance the existing retail environment and ultimately boost the overall value of the real estate. Buckhead is a natural fit for such a strategy, as the area already boasts abundant opportunities for extensive cross shopping with apparel, beauty, health, electronic and convenience retail, as well as a number of appealing restaurant options.
Photo: In the Buckhead area of Atlanta, a Hyatt Grand stands alongside the new Berkshire Terminus luxury apartments.
Simon is pursuing a similar strategy in a number of markets, and is looking at redeveloping as many as two-dozen properties in their portfolio to add or enhance a multi-family/hospitality component. Because greater density in the consumer demand component is such a critical factor for hotels, it is significant that the majority of these and similar efforts from other developers are taking place in cities where large populations of millennials continue to lead an urban resurgence.
Extended amenities
Whether the explosive popularity of grassroots hospitality concept Airbnb is the cause or the symptom, the inescapable conclusion is that consumer’s hospitality expectations have evolved. Today, growing numbers of guests are looking for more convenient, chic and amenity-rich hotel experiences — and a number of extended-stay hotel concepts are adapting or being introduced — to accommodate those emerging priorities.
Marriott Residence Inn and Element by Starwood Hotels & Resorts (which plans to open 20+ hotels in the U.S. and Canada over the next two years) are two notable examples. Hyatt House represents Hyatt’s attempt to move into the expanding extended stay space. Hyatt House tends to be more of a suburban concept, typified by properties such as the Hyatt House in Evanston, Illinois near Northwestern University. Suburban extended-stay properties are often located near office parks, airports and regional malls, with convenience the prime consideration. Assembly Row outlets in the Boston suburb of Medford within walking distance of many hotels, is a classic example. In urban neighborhoods, walkability and a vibrant selection of nearby retail, dining and entertainment options is a key factor.
It isn’t just the big national chains that are expanding the extended-stay concept. Independents like ROOST Apartment Hotel in Philadelphia and mid-sized brands like AKA (which has properties in a handful of U.S. cities and one location in London) are making their presence felt with innovative and successful new luxury extended-stay properties. The push for more amenities in the extended stay model is also helping to blur the lines somewhat between residential living and hotel concepts. Designer décor, expanded kitchen amenities, in-house gyms and workout facilities, and residential-style extras such as doormen and maintenance services. The result is something of a mash-up of luxury condominium-style living and a traditional service-oriented hospitality experience.
While the conceptual lines have been blurred somewhat, ultimately, hotels and high-rise residential represent two big pieces of a truly synergistic whole: an essential ingredient in a truly vibrant and commercially dynamic mixed-use urban environment. As hotels and multi-family developments continue to be featured more prominently in high-profile urban mixed-use environments, the impact on retail tenants is extremely positive. Larger numbers of consumers want to be in these vibrant urban communities — and as they spend more time and more money, the classic mixed-use formula of live, work and play may have to become live, work, play and stay.
Jerry Hoffman, president and CEO of Hoffman Strategy Group, brings 30 years of economic and market analysis that provides insights for all pieces of mixed-use projects. Core project specialties include urban retail corridors, infill, and suburban mixed-use as well as shopping center repurposing and redevelopment, entertainment district development, university-led development, and adaptive reuse of property. To learn more, visit Hoffmanstrategygroup.com or connect with Jerry at [email protected].