Mixed-Use Development: What’s Driving This Trend?

Posted on April 22, 2020

If you wait long enough, everything comes back into style. Plaid, corduroy, mom jeans, and even (no, please no), the mullet. One trend that we can really get behind, though, is mixed-use development. At a time when the world is at our virtual fingertips thanks to technology, there is an increased drive to make our communities “smaller” – that is more accessible and more convenient. These strategic real estate investments represent opportunity not only for those in the commercial real estate (CRE) industry, but for communities as a whole. 

What’s driving the trend of mixed-use development?

A man walking on a sidewalk alongside a mixed-use development in Brickell, Miami, Florida

Mixed-Use Development Trends in 2020

First, let’s define the trend: a mixed-use development or community offers a blend of uses within a specific geographic area. It meets the needs of residents, businesses, workers, shoppers, students, and visitors. So, you might see a blend of apartments and condos, office space, retail shops, galleries, health centers, schools, and social spaces (e.g., parks, rec centers, gyms, concert venues, etc.).

Basically, a mixed-use community is a one-stop-shop: it allows people who live there to access the services and amenities they need with maximum convenience, and it also provides a destination for recreation, shopping, socializing, dining, and culture. It takes the concept of your old town General Store and expands it: get everything you need right there.

Back to the Future 

Before the advent of the vehicle, work and life had to be concentrated around a small geographic area. In the early 20th Century, Henry Ford did much more than revolutionize the fledgling auto industry; he helped transform how our communities were designed and built. 

Suburbs began to pop up because we could travel further for work and services – and come back home to mow our lawns. Single-use districts were connected by the Interstate Highway System, and the fabric of our country started to look like a patchwork of disconnected pieces.

There is a shift now back towards closer-knit communities. Driving factors include:

  • Dynamic changes in the world of work. Remote workers (those who work completely from home) account for 5.2% of the workforce – and this number is growing. Furthermore, 43% of us work from home occasionally. These workers don’t have to make the commute into the city, for example, and they want their community to offer all of the essentials for daily living. On the business side, mixed-use communities represent a wide, deep talent pool for companies in the digital and tech spaces. Close proximity to universities and training institutions, as well as forward-thinking governance, contributes to the wealth of workers. This creates a beneficial cycle: more businesses move in, more highly trained talent moves in…
  • Shifts in consumer behavior. There is decreased interest in buying mass-produced, generic goods from impersonal chains among many demographics. In mixed-use development there tends to be a focus on small, locally owned businesses that community members (particularly Millennials) want to support. At the same time, savvy corporations like Target work collaboratively with developers to fit their retail spaces to suit the space and community – rather than forcing the community to work around a big box store.
  • Meeting of the generational minds. Broadly speaking, Millennials and Zoomers are eschewing material accumulations and finding that buying a house is not their definition of the American Dream. They are more likely to pursue shared experiences and want the feel of living in a communal area. Likewise, Baby Boomers are downsizing their homes and moving back to city centers to enjoy more accessibility in terms of services and amenities. Mixed-use developments have mixed-age appeal.
  • Demand for apartments. In LA, specifically, we are facing a pressing housing shortage, particularly when it comes to affordable rental units. Developing in areas near transportation, work, and other services creates a mixed-use environment that is conducive to a higher quality lifestyle for community members. There are also incentives (e.g., density bonuses) for developers who reserve a portion of their units for low income renters.
  • Convenience and Walkability. Fewer and fewer of us want to fire up the car, make a stop for groceries here, a stop at another store which has better produce, a stop for home supplies, a drive across town to make a stop for new sneakers, and then… You really want takeout for the new farm-to-table place, so you drive back… Mixed-use developments offer convenience and walkability. Everything is within reach, and your driving-around-making-multiple-stops miles get drastically reduced. Sure, you can still drive into the city or the next community over. But you don’t have to.
  • The trend towards “cities within cities”. Here’s an overly-obvious observation: we can’t make more land. We can use available land more effectively and strategically. From One World Trade Center in NYC and Millennium Tower in Boston to DC’s District Wharf and Miami’s Brickell City Centre, we are seeing well-planned cities within cities taking shape. We are also seeing “city centers” pop up in more dense suburbs, creating a centralized community appeal.
  • The need for more strategic real estate investments. Research conducted by Lionstone revealed that mixed-use developments weather rough economic periods significantly better than single-use properties. Office space and residential properties, specifically, saw much higher occupancy rates, rents, and rent growth than comparable, single-use districts and properties. While real estate investing has long been a game of specialties, mixed-use trends are pushing the industry to approach opportunities in a different way.
  • Nostalgia. Perhaps there is even an element of nostalgia that is driving the trend towards mixed-use communities. Even if many of us have not lived in a community with everything we need (and a lot we want) within walking distance, it evokes a sense of a simpler time – of being in a real neighborhood.

The big news: mixed-use development trends in 2020 will continue to develop as these communities thrive. People want to live, work, and play in more centralized areas, and investors can feel increased confidence in their short- and long-term profitability. There are clear benefits to community members, developers, and investors.

>> Our mission is to positively shape the future as it relates to the spaces we live and work in, while maximizing opportunities and rewards for our investing partners and communities. When considering strategic real estate investments in mixed-use areas, consult CGI Strategies.

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