Mixed-use developments can be a winning proposition if the architectural design, building amenities, tenant/anchor strategies align and are culturally-relevant a reflect the heritage of the neighborhood. Instead of large-scale residential developments or stand-alone, mid to high rise, generally single-use project, we see a shift to smaller infill projects with access to public transportation and commercial opportunities. In many cases, these projects feature a mix of uses, such as retail and office, as well as residential and hospitality. The uptick in mixed-use development ties into efforts by cities across the U.S —such as Austin, Houston, Dallas, San Diego, Charlotte, Denver, Orlando, Tampa, Nashville and Silicon Valley — to revitalize their downtown areas and close-in suburbs.
Place-oriented developments create value by providing a mix of activities and experiences. These activities might be structured, for example watching a free concert, partaking in an exercise class, or visiting a farmers market. Or they may be unstructured. The key is effective programming and the success of this approach is evidenced by projects such as Santana Row and Miami Design District.
Mixed-use developments with office uses are not new in Houston. Hines built The Galleria in the early 1970s. It included three office buildings, later augmented by the Transco Tower, along with hotels and its indoor retail mall which has expanded four times. The Houston Center development in Downtown included a mix of the same three uses, with more emphasis on office space. Greenway Plaza featured multiple uses, though its retail component was relatively limited. However, these projects had all appeared by the early 1980s, and none truly offered a non-enclosed public or publicly-accessible space outside of mall or food court corridors.
Beginning in the mid-2000’s throughout the U.S, we saw a re-emergence of integrated mixed-use developments. However, a differentiating factor for these projects was a deliberate inclusion of attractive and programmed public or public-oriented outdoor space as the heart of these developments with an emphasis on creating “place” as a means to generate value for the other project components.
Santana Row, a 42-acre “village within a city” was developed as a luxury, mixed residential and shopping district between 2001-2002, for a cost of $450 million and is regarded as one of the most successful examples of a mixed-use development in the United States. The site includes 680,000 square feet of retail space, a 9-story hotel, 1,200 residential units, above and below-grade parking, a hotel, restaurant, cinema, parks, and plazas. The structures are three-story, wood-frame over two to four levels of concrete-frame. The client’s vision called for a variety of design styles to create a town center with an impression of growth over time. This theme is expressed in building elevations as well as landscape design. The restaurants and boutique retail stores on the main street are topped with the apartments, condominiums, lofts and the boutique hotel. The streets themselves have a “European” flavor. Anchored at both ends of the row are large Class A offices.
In Omaha, the West Farm Development is a new mixed-use community located on farmland once owned and operated by the historic Boys Town Village and the DeMarco family. This new development is strategically located in the major growth area of western Omaha between West Dodge Road and Pacific Street at the corner of 144th Street. West Farm — the northern part of the development — formerly owned by Boys Town will include a new mixed-use town center with shops and restaurants, a new office park, urban apartment living, and a major new gateway park and trail system. South Farm — the southern part of the development — formerly owned by the DeMarco family will include a new corporate campus for Applied Underwriters, a mixed-use village with a neighborhood retail center and residential village, and an exclusive large lot residential community, all connected by an open space network of rolling hills and trails. In total, the development will include over 1,360,000 square feet of office space, 500,000 square feet of retail, a 300-room hotel, 1500 apartments, 140 townhouses, and 440 single-family houses. One-third of the total land area will be devoted to parks, trails, and recreation areas.
The Miami retail market is healthy, expanding and not showing signs of a slowdown. At more than 2.8 million people with an average household income of nearly $70,000, demand for more retail continues throughout Miami-Dade County. Most of the new construction projects underway or recently delivered are in the form of mixed-use projects, both within Miami’s urban core and in well-established submarkets such as Coral Gables and the Design District. The Design District is known for its sleek modern architecture, upscale interior design stores, and art galleries. Luxury fashion and jewelry boutiques, cafes and celebrity-chef restaurants draw a well-heeled crowd. Public art dotting the area includes the Fly’s Eye Dome, a geodesic dome designed by inventor Buckminster Fuller. Three years after the first major piece of Dacra’s re-development of the Miami Design District opened, the high-end district debuted its final phase in December 2018. Paradise Plaza, the northern anchor of the Design District, is an open-air plaza is on the north side of Paseo Ponti, an art-lined walkway through the heart of the district that ends at Palm Court, which opened in late 2014. This development is not just about luxury It wants to be as much a cultural destination and a place to hang out as a place to shop for luxury products.
In Houston, the recent economic boom in the region has resulted in significant new office construction. The Energy Corridor District has shared in this new supply with its stand-alone, mid to high rise, generally single-use projects which lack a “place-oriented” component. Some of this may be due to the District’s traditional office tenant profile of upstream oil and gas companies, and this industry’s technical service providers, which are sometimes viewed as preferring more standard office properties or campus settings. This contrasts with some other high-profile office construction such as Hines’ CityCentre located which has made a deliberate effort in its design to engage with the adjacent public street and sidewalk. CityCentre is accreting new buildings onto its mixed-use core, and will also add more retail to accompany it, along with a recently completed new multifamily complex. The River Oaks District and Kirby Collection represent moderate-scale “boutique” office uses accompanied by 65,000 square feet of lavish shops and hip eateries and luxury residences.
Mixed-use provides a solution meant to reflect a generation in the future — will an office tenant base seek out more “place-oriented” developments? Will a broader range of industries choose to locate to these districts if such environments are available? Both vacant and redevelopment sites are available to implement that sort of development vision. Will new activity centers emerge that are based on the “place-oriented” concept? We think it’s a reasonable bet that “place-oriented” developments and districts will provide a larger share of the office workplace in the future in Houston.
Mixed-use projects remain a viable way of getting hotel deals done, and the market continues to expand in secondary markets. Real estate developers and investors continue to utilize hotels as valuable anchors within mixed-use development projects, but according to industry experts the nature of those developments—and the hotel brands included within mixed-use projects—are both geographically expanding outward and diversifying in scope over time. New projects are diversifying beyond the traditional luxury hotel paired with branded residential. Instead, these sites, utilize upscale select-service and lifestyle hotel brands, making the overall potential pipeline all the larger.
While executing any kind of new-construction project remains challenging, especially one with all the moving parts of a mixed-use development, the programmatic synergy between components such as a hotel and condos remains a strong motivator and risk mitigator in the eyes of investors and underwriters. From the hotel perspective, the mixed-use structure can greenlight a project that otherwise might have feasibility constraints, whether due to market factors or project costs. When part of a mixed-use project, a hotel can bring the power of its brand to the larger development, lending credibility, consistency and in many cases a dash of urban cool to the complex. It can also have a positive impact on profits, too.
Adjoining condos or apartments can often be priced with as high as a 20% premium due to the presence of a hotel. The hotel industry has seen this relationship frequently in the past, when a major luxury apartment tower has partnered with a brand such as Ritz-Carlton, Mandarin Oriental for a companion hotel.
Mandarin Oriental Residences, Boca Raton
Not all mixed-use projects need to be new construction. In many cases, existing structures can be converted to hotels within a mixed-use development, particularly with commercial space. It is an effective way of refreshing a potentially aging development or completing a complex that was planned in phases and never completely built-out.
Sources said strategies for mixed-use development are no longer just a luxury play — the upscale select- and focused-service brands, as well as lifestyle brands, also work in today’s mixed-use environment. In the near future, mixed-use projects will increasingly spread outward from the major urban markets until most secondary and tertiary markets have their own mixed-use conglomerates. It is a reflection of evolving consumer demand, and developers will aim to capitalize.
Andaz San Diego
Mixed-use fulfills the desire for a denser-populated areas. Users do not want to lose the suburban feel, but they want that consolidation. Society as a whole has a desire to work and play in the same location. A revitalized urbanis and our brains are certainly intrigued by the “power of place.”