Truly understanding the core of cross-market development is becoming increasingly significant to the success of mixed-use communities.
With mixed-use opportunities on a steady rise, real estate development professionals are now taking advantage of the growing trend to cross-categorize the retail real estate and multifamily housing markets to create a sense of “place”, without the hassle of a long commute. This is more visible in major urban markets like New York, Dallas, Chicago, Boston, and Los Angeles, but we’re now starting to see that same trend flow down to secondary and tertiary markets, as well.
For multifamily decision makers, understanding the pivotal elements of cross-market development is becoming progressively more important than ever before. That understanding includes a deep 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 are aware of 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 entire U.S.
Trend Lines and Demographic Dynamics
From a retail industry perspective, having a strong on-site demand component is an enticing proposition. Retailers are 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 firm multifamily residential component is being driven by influential 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 without having to travel a hefty distance.
The mixed-use/multifamily trend seems to exceed geography, being developed not only in larger urban markets, but also in secondary markets and smaller cities and towns across the U.S as well.
It’s mainly being driven by two extremely influential demographic groups: young professionals looking for energetic 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 two groups envelop two key demographics — millennials and baby boomers — that exert an incredible amount of spending power and social influence.
For multifamily real estate executives and decision makers, the question now becomes: How can one create and/or benefit from this mutually beneficial dynamic, and what kinds of marketing strategies, principles, and key considerations should be prioritized to identify and capitalize on promising mixed-use opportunities throughout the U.S?
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. In a perfect world, you want an abundance of convenient parking to meet the needs of retailers. One of the most suitable parking solutions, the parking deck, doesn’t always go over well with residents (or even retail, for that matter). Any project that relies 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 take into consideration mixed-use priorities.
Consider Geography
Consider geographic and market substance carefully, making allowances for preferences and site characteristics. For example, residents in urban areas are usually more used to structured parking, while people in more suburban markets tend to be far less charismatic about it.
In condensed 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 rational 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 crucial key here is to understand the marketplace and maximize the resources available to you as developer.
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 pre-development evaluation. These will include visibility, accessibility, ingress/egress, parking, and co-tenancy. Failure to account for even one of these essential principles could compromise or even hurt a project’s long-term viability.
Consider Co-tenancy
Think severely about how the integration of uses plays a role in co-tenancy considerations. 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 incredible 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 all together.
Conduct Market Analysis
The right multifamily components in a retail/mixed-use context can help stimulate a sense of community, a mutually beneficial social and commercial energy, and a powerful and self-sustaining economic engine. It takes precise measurements, extensive experience, and a avid understanding of the elements at play to ensure that the desired reaction takes place, instead of everything getting out of control.
When possible, work with development professionals who understand how to develop synergies instead of making awkward compromises, and who have an established track record of creating a powerful and lasting sense of “place”.
And finally, conduct a comprehensive and integrated market analysis that is fully aware of the need to match your multi family 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.
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