Four ways mixed use properties are ushering in a new era of CRE.
As urban populations continue to climb and the digital revolution brings the world into the palm of our hands, many city dwellers are finding that convenience is king. After all, why schlep all the way across town when you can shop and dine in the same building where you live or work?
Therein lies the appeal of mixed use development — defined as any urban real estate development that functionally integrates a mix of various asset classes.
It’s easy to see why such properties are gaining popularity among developers, property managers, and tenants attempting to adapt to a rapidly changing commercial landscape. Within one mixed use asset, tenants can work, shop, eat, and exercise — a proliferation of options that not only stands to attract tenants across multiple sectors, but provides property owners with increased sense of stability as the commercial real estate market inevitably fluctuates.
Convenience for Residential Tenants
Mixed use properties are becoming increasingly popular among residential tenants. By combining tried-and-true anchor establishments like movie theaters, gyms, and fitness studios with locally run eateries, bars, and retailers, mixed use developments have the potential to not only foster a sense of community, but to meet several needs at once — meaning residents and shoppers can skip a trip to the shopping mall.
A Boost for Employers
Employers are likewise more attracted to mixed use properties in their search for spaces that offer promising potential to encourage collaboration, build morale, and attract talent.
By creating unconventional workspaces above restaurants, gyms, and shopping areas, the traditional barriers between work, life, and entertainment are challenged — leaving employees less likely to rush out the door at the end of the day. Employees are instead offered the convenience of a midday workout or post-work happy hour while maintaining the option to return to their desk. Recognizing this, employers are empowered to leverage multi-function spaces as key tools for recruiting, retention, and increased output.
A Captive Audience for Retailers
Retailers, for their part, have cautiously grown to enjoy mixed-use developments in that they offer a captive, built-in audience of residents and commuters with no choice but to pass by their outpost each day. At a time in which most of the population has instant access to everything they need via an app on their phone, immediacy has never been more essential for brick-and-mortar establishments to remain competitive.
The constant flow of foot traffic in and out of a residential development can be especially rewarding for new businesses that might otherwise have to spend extensively on marketing efforts in order to draw a crowd. Instead, they can work the crowd they’re given and grow their word-of-mouth reputation from there.
A Safety Net for Owners and Developers
Finally, mixed use property can be a wise investment for commercial real estate investors and developers. By combining different asset classes within one site, the entire development is better equipped to weather a storm should one facet of the CRE market suffer a downturn.
Mixed use developments are also, by necessity, zoned for multiple uses, facilitating a sense of plug and play when it comes to finding new tenants. If retail isn’t working on the lower levels, owners can bring in a restaurant. If restaurants aren’t flourishing, a fitness studio could fill the gap.
The concept behind mixed use developments are hardly revolutionary. Countries like Japan and Australia have used this model for years, and the results have been overwhelmingly positive. Communities are forming within communities, people are spending less time in their cars, and neighbors are getting to know one another. Meanwhile, the investment value of these properties continues to grow.
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