Mixed-use development may be on the rise, but it’s certainly nothing new. In fact, until the 1920s, most development in the U.S. was concentrated in urban areas where mixed-use property allowed Americans to live and work in walkable areas. It wasn’t until the rise of the automobile that trends started to change. The automobile allowed Americans to flee cities for the suburbs’ greener pastures, forcing urban investors to list their mixed use property for sale.
But just as clothing styles come and go, so do real estate trends. In recent years, the pendulum has shifted back to favor urban areas. As a result, mixed-use development has become increasingly popular yet again.
What is mixed-use development?
In short, mixed-use development refers to the layering of compatible land uses, public amenities and utilities together at various scales and intensities. Mixed-use properties allow people to live, work, play and shop in a concentrated area – usually all within walking distance.
Mixed-use development can take several forms. At the most basic level, it refers to the integration of various uses within a single mixed-use property (e.g., ground floor retail with housing above). It can also refer to horizontal mixed-use blocks, whereby individual buildings contain only a single use but are situated on a block with a range of land uses (e.g., an apartment building with a grocery store next door). Mixed-use development can also take place at a neighborhood scale, with various combinations of vertical and horizontal use missing in a 5- to 10-minute walking radius. In today’s day and age, mixed-use property comes in all different shapes and sizes.
What’s driving the mixed-use development trend?
Most people will attribute the growth of mixed-use development to the Millennial generation (roughly defined as those born between 1980 and 2000). Millennials, experts say, want to live in dense, urban areas. They want to ditch their cars and travel on foot or by public transit. In urban areas, mixed-use property is the most efficient way to maximize limited land areas: developers simply build multiple uses atop one another.
But it’s not just Millennials in search of mixed-use, walkable neighborhoods. We’re seeing it among Baby Boomers, as well.
Take Boston’s Seaport neighborhood as an example. Ten years ago, this waterfront neighborhood was largely parking lots. Today, expansive mixed-use development has taken root. Luxury condos co-exist with high-rise office towers home to some of the city’s most prominent employers: Vertex, General Electric, Goodwin Procter, and LogMeIn, to name a few. The transformation continues, with WS Development leading a 6.3 million square foot mixed-use development project that will span a staggering 23 acres, a project known as “Seaport Square”. The project will include 1.1 million square feet of retail.
Baby Boomers were some of the earliest buyers in Boston’s Seaport – which can be, at least in part, attributed to the high cost of living. Many Baby Boomers have traded in their suburban mega-mansions for luxury waterfront living in what has become Boston’s hottest mixed-use property for sale.
The benefits of mixed-use development
Demand for mixed-use property for sale has created a flurry of activity among policymakers and developers alike. Coast-to-coast, we’re seeing cities and towns rezone their commercial districts to allow for the integration of residential uses. There’s been an uptick in “transit-oriented development,” or TOD zoning, which typically allows for higher-density, mixed-use development along transit lines.
Meanwhile, we’re seeing more developers make the transition from traditional to mixed-use real estate projects – in part thanks to looser zoning regulations that now support the mixing of uses.
As mixed-use development has grown in popularity in the U.S., the benefits have become harder to ignore. There are several benefits to mixed-use development, including:
1. More Vibrant Communities
One of the reasons people are drawn to mixed-use projects is because of the amenities they tend to offer. In urban areas, the blending of uses creates an interesting sense of place: there are numerous places to shop, dine, work, live and gather.
While this happens more organically in built-out urban areas, we’re also seeing it happen in new mixed-use projects – particularly those in suburban locations. These new “lifestyle centers” bring a touch of city living to the suburbs. They intentionally integrate plazas, parks and sidewalks that foster interaction among community members and visitors – interaction that wouldn’t normally be possible in a traditionally, car-centric design model. Developers of these mixed-use “lifestyle centers” typically curate very specific retail and restaurant users to help create a vibrant destination that appeals to all walks of life.
In either case, urban or suburban, mixed-use development projects can serve as an anchor for a community—a lively space for everyone to enjoy. Increasingly, mixed-use property for sale attracts Millennial and Baby Boomer buyers in search of more vibrant, walkable neighborhoods that are chock full of amenities.
2. Improved Walkability
Related to the point above, mixed-use developments are inherently more walkable than traditional real estate projects. A survey by the National Association of Realtors (NAR) finds that as a whole, Americans prefer walkable communities now more than they ever have in the past. Roughly half of respondents indicated they’d prefer to live in communities with smaller houses and smaller backyards, but within easy walking distance to local restaurants, retail, offices and arts and cultural institutions. Most survey respondents placed “walkability” as a top priority when searching for a home. The rise of mixed-use property for sale is largely in response to increased demand for walkable neighborhoods.
3. Higher Tax Revenue
One of the biggest benefits of mixed-use development is the increase in property tax revenue. As communities become denser, they extract more value per acre of land than they’d realize with traditional, single-story or single-use development. For example, a recent study found that Fresno, CA could increase its tax base by 45 percent per acre if it encouraged mixed-use development.
Related, studies show that projects with mixed-use property for sale have inherently lower operating costs. The ongoing costs for municipalities – like police, fire and trash collection – are estimated to be 10 percent lower with mixed-use development due to shorter travel distances.
4. Lower Infrastructure Costs
An analysis by Smart Growth America finds that, “on average, municipalities save about 38 percent on infrastructure costs like roads and sewers when serving compact development instead of large-lot subdivisions.”
5. Greater Exposure to Customers
Because mixed-use property for sale integrates a variety of uses, it also attracts more interest and foot traffic than a typical stand-alone project would. For instance, someone going to visit a restaurant or bar may not otherwise know – or have interest in – a local chocolatier, but when that chocolatier is co-located to the restaurant or bar in a mixed-use development project, that chocolatier can now capture the person’s attention. That person may decide to pop in and buy a dozen chocolates while waiting for their table to be ready next door. Conversely, shoppers can easily take a break by grabbing a bite to eat at the restaurant co-located next door.
In addition, mixed-use retail tenants generally benefit from the recurring spend of local residents who are more apt to visit mixed-use properties more frequently than they’d visit a single standalone store.
6. Less Development Risk
The integration of multiple uses provides some insulation for real estate investors compared to traditional, single-purpose development projects. Mixed-use property for sale allows an investor to diversify his portfolio. If the local commercial market tanks, he still generates return from residential uses. If the hotel industry softens, he can still rely on cash flow from adjacent uses. Mixed-use development allows investors to minimize the total impact of a poorly performing asset on their overall investment portfolio, including the ability to counterbalance an unexpected loss. In a down cycle, mixed-use developments are considered to be a relatively safe bet for investors.
7. Greener and More Sustainable
Mixed-use development is also attractive because of its positive impacts on the environment. The development of denser, more compact buildings conserves land. Undeveloped land, open space, and historic and natural resources can therefore be preserved.
Moreover, improved walkability also reduces the traffic and pollution created by residents that would need to drive to and from more traditional, single-use development projects. In urban areas, for instance, many residents can forego their cars altogether. When mixed-use development is concentrated around public transit, it becomes easier than ever to walk or bike from one place to another, using public transit as a means to travel between mixed-use projects.
8. Better Health
Research shows that over 50 percent of Americans would walk and bike more than driving if they had the opportunity to do so. Mixed-use development offers that opportunity. Dense, mixed-use development allows people to lead a more active lifestyle, which reduces the incidence of chronic obesity and related health conditions.
There are certainly other benefits to mixed-use development, many of which can’t be quantified – like the social value associated with creating community gathering spaces. But given the aforementioned benefits, it’s no surprise that we’re seeing an uptick in mixed-use development. The trend may have originated in urban areas, but as urban areas become increasingly expensive, we expect the trend to continue its foray into suburban markets moving forward.
Best yet, investors don’t need to take a full plunge into mixed-use development to get in on the action. There are a number of real estate investment trusts, or REITs, that specialize in mixed-use development. Investing in a publicly-traded REIT is a great way for an investor to diversify his portfolio across a mix of uses. Just as mixed-use properties offer a range of uses for the public, so too do they offer a range of investment opportunities for real estate investors.
How Reonomy can help you source properties for mixed-use development opportunities
Through Reonomy’s search offerings such as filtering by building size, asset class or location, Reonomy tells you everything you need to know about commercial properties of your choice – from property ownership information, to sales history, to when a property was last sold. Leveraging data to source off-market mixed-use development opportunities has never been easier.
What are you waiting for? Simply sign up for a free trial of Reonomy here, today!
How to search for multi-family properties with Reonomy
With over 47 million commercial properties listed on Reonomy and a multitude of effective search filters, it is easy to search for new business opportunities with Reonomy. For many investment sales brokers, the goal is to seek off-market hidden gems that could easily be transformed into mixed-use development opportunities. With Reonomy this goal can be achieved in half the time.
Outlined below are some search filters that could be applied to generate impactful results for you.
Searching by asset class
In this instance we are searching for multi-family listed properties as they are most relevant to mixed-use development opportunities. As you can see below, a simple national multifamily search brings up 1,096,887 results.
Reonomy offers an impressive choice of commercial property types, so in order to conduct an effective search it can work better if you to specify exactly what you are looking for. The subcategory option on the tool allows you to do just that by selecting asset types within a category, allowing you to become quite granular in your search. Below, we have unselected any assets listed as apartment buildings under multifamily as an example. This brings our search results down to 945,312.
- Searching by location
Despite the power of the tool and the extent of data available from a national perspective, this is a colossal amount of information and it makes sense that most individuals such as brokers only have an interest in specific areas. One of the tool’s most popular search filters is the search by location option because it allows the user to exclusively search for properties in their area of choice.
You can search by State, City, zip code, or county. For this example we have used the location of Boston, MA, still including our multifamily and no apartments criteria. Our search results have now been narrowed down to 32,100 properties.
- Search by year built
To isolate properties even further you can search for buildings that were only built in the last 40 years. This now provides me with 996 properties.
- Search by sales / debt information
Then we can limit by sale. Here we don’t want anything that has sold in the past 20 years. You can see even fewer results are shown, returning just 403 results versus the initial 1,096,887 results figure before search filters were applied.
Sign up for a free trial of Reonomy here, today!