Jeff Green & Jerry Hoffman/Multifamily Executive - With mixed-use opportunities on the rise, development professionals are capitalizing on the growing trend to cross-categorize the retail real estate and multifamily housing markets to create a sense of "place." This is especially visible in major urban markets like New York and Dallas, but we're now starting to see the trend trickle down to secondary and tertiary markets, as well.
For multifamily decision makers, understanding the essential elements of cross-market development is becoming increasingly important. That understanding includes a sophisticated appreciation for what it takes to cultivate a thriving community with a diverse and engaging mix of tenants, and an awareness of the importance of examining the interaction between real estate and local demographic/market forces.
Multifamily executives who understand the dynamics at play can apply these principles and strategies to their own projects to ensure their next development creates a memorable and enduring sense of place in the diverse mixed-use neighborhoods that continue to expand in markets throughout the U.S.
Trend Lines and Demographic Dynamics
From a retail industry perspective, having a strong on-site demand component is an attractive proposition. Retailers are increasingly recognizing just how valuable it can be to have a built-in consumer base. On the residential side of the equation, the growing popularity of quality mixed-use with a strong multifamily residential component is being driven by important demographic trends. This includes the simple desire of families and individuals to live near places where they can eat, shop, go to the movies or an evening concert, and generally enjoy a wide range of convenient amenities in a comfortable residential setting.
The mixed-use/multifamily trend seems to transcend geography, taking root not only in larger urban markets, but also in secondary markets and smaller cities and towns across the country. It's being driven by the evolving preferences of two extremely influential demographic groups: young professionals looking for dynamic and engaging spaces to live, work, and play, and empty-nesters drawn to the convenience and wide range of amenities that comes with apartment-style living in a mixed-use environment. It's worth noting that these groups encompass two demographics—millennials and baby boomers—that wield a staggering amount of spending power and social influence.
For multifamily executives and decision makers, the question then becomes: How can you create and/or benefit from this mutually beneficial dynamic, and what kinds of strategies, principles, and key considerations should be prioritized to identify and capitalize on promising mixed-use opportunities?
Principles and Priorities
Maintain "double vision." It's extremely important to program for both retail and multifamily uses at the same time. Retail can lead multifamily, but both elements have to be accounted for and accommodated with regard to design, development, and demand.
A classic mixed-use challenge is parking. Ideally, you want an abundance of convenient parking to meet the needs of retailers. One of the most popular parking solutions, the parking deck, doesn't always go over well with residents (or even retail, for that matter). Any project that leans too heavily to one side of the retail–residential scale will run into difficulties, and the fact remains that to benefit from mixed-use synergies, you first have to accommodate mixed-use priorities.
Consider geography. Don't try to force a square peg into a round hole. Consider geographic and market context carefully, making allowances for preferences and site characteristics. Residents in urban areas are typically more used to structured parking, for example, while people in more suburban markets tend to be far less enthusiastic about it.
In denser urban environments where space is at a premium, going vertical with residential above ground-floor retail can be an effective way to create density and enhance the dynamism and energy of the space. In a suburban context, or in secondary markets where more land is available, it may be more cost-effective and practical to add a multifamily component on the site of an existing parking lot or an adjacent property.
There's more than one successful mixed-use formula. The key is to understand the marketplace and maximize the resources available to you.
Stick to site-selection basics. When evaluating any potential mixed-use/multifamily opportunity, always remember to review the fundamental retail site-selection considerations that are key to any predevelopment evaluation. These include visibility, accessibility, ingress/egress, parking, and co-tenancy. Promising opportunities will check all of these boxes; failure to account for even one of these core principles could compromise or even cripple a project’s long-term viability.
Consider co-tenancy. Think critically about how the integration of uses plays a role in co-tenancy considerations. In many respects, the co-tenancy criteria that retail developers rely upon are directly translatable to co-tenancy thinking in mixed-use/multifamily projects. The reality is that many suburban “apartment homes” are not really true communities because they lack the amenities, services, and cohesive and defining sense of place that is present in all great mixed-use environments. Programming decisions and co-tenancy considerations should be made with an eye toward what enhances the value of the real estate, the businesses there, and the multifamily housing component.
Conduct professional market analyses. The right multifamily components in a retail/mixed-use context can help foster a sense of community, a mutually beneficial social and commercial energy, and a powerful and self-sustaining economic engine. But while retail and multifamily certainly work well together, their combination can also be compared to that of a potent chemical reaction: It takes precise measurements, extensive experience, and a keen understanding of the elements at play to ensure that the desired reaction takes place, instead of fizzling out or blowing up in your face.
It’s not magic, but it is art. It takes that artistry (along with a little bit of science) to evaluate these opportunities and successfully bring them to life. When possible, work with development professionals who understand how to create synergies instead of making awkward compromises, and who have an established track record of creating a powerful and lasting sense of place.
And, perhaps most important, conduct a comprehensive and integrated market analysis that's fully cognizant of the need to match your multifamily property with existing or anticipated retail. A successful market analysis doesn’t look at these things as separate; rather, it analyzes them together and provides guidance accordingly.