The International Council of Shopping Centers defines mixed-use properties as follows:
“A mixed-use development is a real estate project with planned integration or some combination of retail, office, residential, hotel, recreation, or other functions. It is pedestrian oriented and contains elements of a live-work-play environment. It maximizes space usage, has amenities and architectural expression, and tends to mitigate traffic and sprawl.”
While mixed-use developments are not new – Rockefeller Center in New York was completed in 1939 – they’ve experienced renewed popularity. Almost all multi-family buildings constructed today include some kind of retail, entertainment, or service component. And the trend is growing. So, what’s driving the trend?
The growing trend of mixed-use
Three of the main reasons mixed-use developments are thriving are:
Office space within a mixed-use property can command higher rents - 22 to 33% higher than rents at stand-alone office buildings
Demand for mixed-use property is growing among prospective tenants and residents, as target audiences among all generations seek vibrant, walkable communities
Mixed-use developments have a built-in customer base, making them attractive to owners and developers
But managing a mixed-use development requires a broad set of property management skills. Consider the complexities that can result from combining a hotel, private residences, parking, restaurants, offices and quite possibly even a theater, all in one property. So, there are several different approaches to the management structure of mixed-use developments:
A small mixed-use development is likely to have one manager responsible for the entire development.
A large mixed-use development with a single owner may have a general manager responsible for the entire development and separate managers with property-specific skills, experience, and knowledge for each use.
If a hotel is a component of the property, a separate management team is required for the hotel component, as hotel management is a unique discipline.
Management and operational issues that may differ among the property types, including:
Hours of operation
HVAC & utility operations
The real estate manager for each component of the mixed-use development must recognize and appreciate the unique needs of each property type. Each component should have a coordinated management plan that maximizes the benefits of the development, and minimizes potential conflicts. Effective mixed-use property managers:
Understand how commercial uses intersect with residential uses
Think holistically and grasp the big picture
Develop a business plan that meets the owner’s goals and objectives
Can adapt, be proactive, and anticipate problems and opportunities
Hold strong leadership, communication, negotiation, and relationship skills
Above all, it’s critical to attract the right mix of tenants and residents – the key to managing a profitable asset. Each property type must be able to succeed on its own in order for the mixed-use development to be successful.
Mixed-use developments are truly unique, as they present opportunities not typically found in other types of developments. With every opportunity, there are challenges. But, when the mixed-use property is thoughtfully planned and managed, the development can meet or exceed the expectations of owners and occupants.