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Commercial Real Estate Executive

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Senior Real Estate Professional

Candidate is a senior real estate professional with 15 years of related experience in corporate and commercial real estate brokerage services as a tenant broker. Experience includes proposal and lease negotiations, advertising, strategic planning, market and financial analysis, lease / work-letter negotiations and coordinated ancillary services. Candidate has indicated a willingness and interest in moving career more into working more on the landlord side of brokerage or in property management.


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Senior Real Estate Executive

Candidate is a senior real estate executive with over 20 years of related industry experience. Experience includes business development, acquisitions, property management, financial reporting, leasing, construction, due diligence, portfolio management, and staff supervision.

For more information on one or more of these candidates, please contact John Rainone, Project Operations Manager, by e-mail.

Mixed-use: A fad or lasting trend?
By John Rainone, Project Operations Manager, MorganSullivan

Across the country, and in many parts of the world, mixed-use development is all the rage. This trend seems to have enough momentum to be influential for many decades to come. Some may even go so far as to pronounce the traditional office or mall development dead, with mixed-use projects their successors. That's probably hyperbole, but mixed-use certainly has advantages that make it the best choice in many areas, and that will give the trend long life.

A mixed-use project generally involves a blend of retail, residential, and office space-and sometimes includes hotels, civic centers, parks, theaters, police substations, hospitals, libraries or even city halls. These projects, from investors', tenants', and public officials' perspectives, offer plenty of upside, but the risks for developers are probably higher than traditional single-purpose projects. What's more, mixed-use projects are more complicated to plan, and require matching project characteristics carefully with the desires of tenants, residents, and patrons. An urban mixed-use project may well be very different from a suburban one, for example. In addition, financing is often more complicated than in single-use projects.

That said, there are several social and demographic trends that would seem to make mixed-use an increasingly popular strategy:

• Harried commuters want to spend less time in their cars; having many amenities in one location reduces the need for travel, which reduces traffic.
  
• Mixed-use is seen as providing enhanced quality of life for residents, office workers and shoppers.
  
• The "new urbanism" trend and an increasing aversion to suburban sprawl.
  
• A desire to make city/suburban life more vibrant.
  
• Aging population wanting to live closer to amenities.
  

According to a recent National Association of Industrial and Office Properties (NAIOP) web article, in the future, mixed-use development will also be spurred by office tenants demanding unique environments for their employees. But demand for office space overall will continue to erode, with more remote workers officing at home, and companies making productivity gains by outsourcing work to foreign countries. That means developers will have less demand for traditional office projects, and mixed-use projects may succeed where single-use office projects would fail.

According to the CoreNet 2010 report, "Enabling Work in a Networked World: Must-Have Intelligence on the Emerging Global Workplace," workers who traditionally spent most of their time in an office will be on their own more often in the future-a trend enabled by technology. The reports says that employees will spend a third of their time in a traditional office setting; a third of their time in a home office; and a third of their time in a "Third Place," which currently is exemplified by environments like Starbucks, FedEx Kinko's, and some large evangelical churches. Telecommuting and Wi-Fi Internet connections in public spaces enable the modern office employee to be mobile. This is further evidence of a continuing decline in demand for traditional office space, and the need to combine construction of new office space with other uses.

All these factors point to a mixed-use explosion. But not so fast. There are significant risks and challenges to consider:

• Mixed-use projects can cost from 20 percent to 50 percent more than single-use retail, and can take twice as long to complete, according to Retail Traffic magazine.
• Zoning laws meant to separate commercial and residential buildings now stand in the way of mixed-use developments.
• Fewer lenders are willing to finance mixed-use projects than traditional office or residential projects.
• Lenders are reluctant to complete loans on projects that don't have a centralized control authority, and each part of a mixed-use development has to be self-sufficient in its own right in lenders' eyes.

Mixed-use projects require more up-front planning, taking into consideration things like adequate separation and blending of uses, visibility for retailers, parking placement and type (whether to include a parking garage, for instance), pedestrian routes, and creating a unique sense of place that draws in people beyond the folks that live and work in the project. Some mixed-use developments try to create a town center in the midst of suburban sprawl, or to revitalize decrepit downtown areas. Adding walking paths, fountains and sculptures, playgrounds, bandstands, or many other amenities can create a unique atmosphere.

Coming up with the right formula to draw people to the development is like an art form, and this is critical to success. The danger is that if the project doesn't resonate with the local community, it may fail to keep tenants.

But many developers believe that the added time to plan and the additional investment are worthwhile because successful mixed-use projects have higher returns than traditional single-use developments. What's more, they create a diversified stream of income. If the office market slumps, for example, you still have residential and retail tenants to offset the slowdown.

There's little doubt that mixed-use is a compelling concept for many reasons. This is a trend that's certain to have legs for many years to come.

What do you think? What have your experiences been with mixed-use projects? Let us know...

John Rainone is Project Operations Manager for MorganSullivan, an executive search firm serving the real estate and construction industries.