The Move Toward Mixed-Use: Creating New Value for CRE

Why schlep all the way across town when you can shop and dine in the same building that you live or work in?

This is a question lingering more and more in the minds of the professionals—especially young professionals—residing in the U.S.’s fastest growing cities.

With continuously growing populations, and the world in the palm of our hands, convenience is truly proving to be king.

As these populations continue to grow, and the digital revolution brings the world to the palm of our hands, it’s becoming evidently clear that convenience is king.

Therein lies the appeal of urban mixed-use development.

Why mixed-use?

Mixed-use development can be defined as any urban real estate development that functionally integrates a mix of two or more asset types.

Within one mixed-use asset, tenants can work, shop, eat, exercise, and even live—again, a very convenient scenario.

That proliferation of options stands to attract tenants, sure, but also provides property owners with an increased sense of stability as the commercial real estate market inevitably fluctuates.

At a high level, it’s easy to see why these properties are gaining popularity amongst tenants, owners, property managers, and developers.

Below, however, we’ll look at four major reasons why mixed-use development is ushering in a new era of CRE.

1. It’s super convenient for residents.

As briefly mentioned above, mixed-use real estate caters to convenience.

That’s never truer than for residential tenants.

By combining tried-and-true anchor establishments like movie theaters, gyms, fitness studios, local eateries, bars, and retailers, mixed-use properties offer residents convenience across the full spectrum of “live, work, and play.“

These local amenities serve several residential needs, and foster to a greater sense of community in the process.

For example, residents can skip a trip to the shopping mall. After that, they can then see a movie, grab a quick bite to eat, and have a night out with friends all in one location—it’s convenient, it’s fun, and it’s local.

2. Additional amenities 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.

Likewise, employers are also more attracted to mixed-use properties in their search for space, as it offers a more robust set of amenities for employees.

It can serve as a draw of its own to have an office with great shops, bars, and activities in the near-vicinity, let alone the same building.

On top of that, employers can build a greater sense of camaraderie and a tighter culture in having employees that enjoy spending time in the office they work at.

By creating unconventional workspaces above restaurants, gyms, and shopping areas, the traditional barriers between work, life, and entertainment can be minimized—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.

3. A captive, “built-in” audience for retailers.

Retailers, for their part, have cautiously grown to enjoy mixed-use developments since they offer a captive, “built-in” audience of residents and commuters that have no choice but to pass by that retailer’s outpost everyday.

At a time where just about everyone has instant access to everything they need via Amazon and other apps on their phone, one of the most important traits of any retail shop is the immediacy of purchase it can offer shoppers.

Immediacy has never been more essential for brick-and-mortar establishments looking to remain competitive in the digital revolution.

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 built-in crowd they’re given and grow their word-of-mouth reputation locally, and hope it grows from there.

4. A safety net for owners and developers.

Finally, mixed-use property serves as a generally-wise investment for commercial real estate investors and developers.

By combining different asset classes within one site, the entire mixed-use development will be better equipped to weather an economic downturn, should one or multiple facets of the CRE market begin to suffer.

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 the retail portion isn’t succeeding, the owners can bring in a different type of retail, or replace it with a restaurant or bar. If restaurants aren’t flourishing, then they can bring in a fitness studio, and so on.

Hardly a Revolutionary Concept

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, and smaller cities across the U.S. continue to flourish.

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