Despite the recession—or because of it—mixed-use sites get a new look (3/5)
Mar 5, 2009 3:20 PM, By Arthur Zaczkiewicz
As national retail chains pull back growth strategies amid same-store sales figures that are the worst in decades, mixed-use projects that had been in the works for years are suddenly being thrown into disarray. Retail, once the main ingredient in the mixed-use recipe, is becoming a garnish. The most creative builders are not bolting from the kitchen, however. In some cases, builders are concocting new mixed-use combinations. Developers and architects are tossing new uses—a pinch of health services here, a dash of education there—into the mixing bowl to create a new model that, if successful, could prove to strengthen the mixed-use movement for the better.
For developers, the challenge is to bring in the right tenants in a timely way to bolster occupancies. The titanic shifts in the economy are having clear effects on the retail development business. A pipeline that was bursting at the seams 18 months ago is now down to a trickle. But some mixed-use projects were so far along that it was too late to stop. Instead, architects and developers have had to go back to the drawing board and figure out how to salvage the projects. They have had to look to other types of tenants to help drive traffic and create the volume of all-day traffic vital to making mixed-use environments successful.
That’s proving not to be such a bad thing. Many so-called mixed-use projects that retail developers have built in recent years were not truly mixed-use, in the strictest sense of the term. The Urban Land Institute defines mixed-use as “projects that have three or more significant revenue-producing uses; significant functional and physical integration of the different uses; and conform to a coherent plan.” But some developers have pawned off residential towers with first-floor retail as mixed-use. In other cases, multi-phased projects where residential, retail and other uses are built next to each other in distinct zones have been termed mixed-use. It’s become clear that these projects are merely retail centers with ancillary uses tacked on. They are not actually integrated projects.
The success of the retailers at those projects is becoming the make-or-break factor. All uses are not created equal in these settings and the success of one is not dependent on the success of the others. True mixed-use centers, experts argue, are projects that have a life of their own and where the success or failure is shared because of the integrated nature of the projects.
The most successful mixed-use projects provide retail that serves residents and workers on site throughout the day while at the same time serving as a draw to a wider trade area. There should be a constant flow to and from the site for much of the day and not just during morning and evening rushes. Achieving this flow requires a true mix of uses that draws traffic at different times and for different reasons.
Key connections to mass transit don’t hurt either. And an integral piece to this all—developers are finding—is bringing in uses that are not conventionally considered one of the main commercial real estate food groups (office, industrial, retail, multifamily and hospitality).
In short, what developers and retailers are quickly learning in this climate is that the old strategies don’t work in this new economy. The key to success is deeper diversification while also being as creative as possible in terms of lease terms and financing and bringing in nontraditional tenants. Moreover, making sure the project is original and truly tied to the existing community is crucial.
Cookie-cutter mixed-use projects that appear to have dropped from the sky with no connections to the existing urban fabric are not succeeding. Ones that are more integrated are performing better.
For example, at Blackhawk/Halsted, a 225,000-square-foot mixed-use facility in Chicago’s Clybourn Corridor, Towne & Country Pediatrics recently moved into the site, joining Advocate Health Centers, Pine Dental, Associated Allergists and Northwestern Memorial Physicians Group.
For REI, the outdoor lifestyle retail anchor on the site, medical services at the facility create a steady stream of traffic, and business, says Michael Drew, cofounder of Chicago-based Structured Development LLC, adding his retail tenant is “doing exceptionally well” as a result. “Having Towne & Country in the mix is attractive to other tenants,” Drew says.
The British School, another tenant, has 600 students, and offers REI an additional pool of potential business. Drew says parents drop off their kids at school or for an appointment at the doctor, and then end up shopping at REI. “Between all of these, we have created a more synergistic mixed-use center,” Drew says.
There are other examples of the new mixed-use twist. Michelle Seifert, associate vice president of the Retail Services Group at Grubb & Ellis|Commercial Florida in Tampa says the firm is currently working on a mixed-use project where more than 50 percent of the project is targeted to medical and office uses.
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