Realty News Report | 07.13.2016
NEW ORLEANS – Mixed-use communities today are to Millennials what golf courses were to baby boomers two decades ago, according to Mark Toro, Managing Partner of Cincinnati-based North American Properties who has created, or recreated, a number of phenomenally successful mixed use projects including Atlanta’s Atlantic Station, a mix of retail, residential and high-rise office buildings and Avalon a $600 million, 2.3-million-SF mixed-use development in Alpharetta, Georgia.
Speaking at the 50th annual National Association of Real Estate Editors real estate journalism conference in New Orleans last week, Toro added that developing mixed-use projects is complicated. “It takes a lot of brains, but once you figure it out, it’s great,” added Toro.
Jonathan Brinsden, chief executive officer of Houston-based Midway, a privately-owned, real estate development and investment firm with some 45 million SF of mixed-used destinations, office, industrial facilities, and master-planned residential communities, noted that at the most fundamental level, developers are trying to build a community destination.
Brinsden said Midway is actively involved in a number of mixed-use developments in Houston and other cities including CITYCENTRE in Memorial, a mixed-use urban development that currently encompasses five office buildings, three multifamily residential options, brownstones, two hotels, and restaurants and retail space.
“We’re creating a community,” said Brinsden. “We do more than 300 events a year at CITYCENTRE and the community is responsible for about 50 percent of the events. It takes on a life of its own. The community says the development is their place and they want to create their own events. Developers need to realize with mixed-use, you are not just in the property management business, and you’re running a Disney World 24 hours a day, seven days a week. The community thinks your product is their own and can be very protective.”
Brinsden and others on the NAREE panel noted that each of the components in a mixed-use project – multifamily, retail, office, residential– must be successful on its own. “One of challenges is that most office developers, hotel developers, condo developers and others consider some parts such as street level retail almost a burden,” Brinsden added. “But we usually start with retail first to create a vibrant street level so you have the making of true large mixed use community.”
At North American’s Avalon, Toro said each of the land uses — retail, office, residential, hotel — complements and draws energy from the others. He added that the success of a mixed-use development depends on all the elements working together. “Everybody has to get in boat and start rowing together,” Toro said.
Today’s mixed-use projects aren’t developed in a vacuum. Local input is important, said Brian Leary, president, commercial & mixed use, at Charlotte, N.C. based Crescent Communities, with assets exceeding $1 billion. Leary said his company’s mixed-use developments follow the sun and are located primarily in the southwest and southeast. “Everything we do has a mixed use component,” he added. “At Crescent, we have a formal process before we start and we listen to the community prior to establishing our vision. We let the community know what we will deliver; their suggestions help us with the final product. In every market, we try to stay true to that vision.”
With mixed-use development, the game is value creation for investors, too, said Brinsden. “How does each of the uses add value to the others, so the total is greater than sum of the parts,” he continued. “We also are very aware of creating brand integrity. You can’t have a Residence Inn in your project if you’re creating a luxury mixed use development.”
The mixed-use concept isn’t just for new projects. “Colleagues in the office sector are often talking about suburban office parks losing tenants to mixed-use developments, and asking whether suburban park owners can retroactively integrate retail to make their developments more attractive,” said Melina Cordero, CBRE head of retail research for Americas.
Signing tenants to mixed-use, particularly retail clients, has become an art and science, added Cordero.
“One of the biggest challenges in creating a mixed-use community and a brand, is offering a retail mix that is unique and different,” Cordero said. “You don’t want to put 10 national chains in your development, you want to sign up cool, new, local brands — something really different. Signing up new local tenants is not like leasing any more. It’s like a courtship. You want the best local operator and I personally get to know them and they got to know me. It’s like match making.”