Throughout the 2000’s, mixed use developments saw a tremendous growth rate. This trend continues even now, even amidst a global pandemic. In fact, there is some indication that the health crisis has encouraged mixed use development as many of us worry about returning to the office, commuting, and being in crowded spaces.
Mixed use developments can bring new life to otherwise unused space, they use land efficiently, and promote a sense of community. Residents enjoy the convenience they offer, and business owners enjoy the density of people who live and work in these spaces. Property managers, however, are faced with the extraordinary challenge of managing what is essentially a community of residents, tenants that may include shops and restaurants, office space, and maybe even a hotel. Each of these elements alone calls for a unique skill set.Combined, the confluence of property uses can clash without proper guidance and management.
Development projects may be classified as"mixed-use" if they provide more than one use or purpose within ashared building or development area. Mixed-use projects may include any combination of housing, office, retail, medical, recreational, commercial or industrial components.
These projects might vary in scale from a single building occupied by a retail shop on the ground floor with an upstairs apartment to a comprehensive "urban village" development with multiple buildings containing separate but compatible uses such as a retail center, office building and medical clinic located adjacent to a multi-family housing complex.
Along with infusing commercial and industrial development with residential living, mixed use development projects aim to offer a variety of benefits: improvements in home affordability, walkability between housing, workplaces and other amenities, and stronger neighborhoods. When done right, mixed use developments are designed to not only incorporate various types of real estate together, but complement them.
Benefits to Mixed-Use Development
Potential Challenges to Mixed-Use Development
Management of a mixed-use development can present an array of challenges, but also provides multiple opportunities. By definition, mixed-use development means providing more than one use or purpose within a shared building or development.
Preventing mixed-use developments from being the perfect residential set up are the following issues:
Parking is another common issue that arises for mixed-use facilities. . It is ideal to have separate parking for commercial use and residents. Retail employees and owners also need designated areas to park in order to keep the most convenient parking options available for clients and customers. This is especially important when there is limited parking available.
Noise transfer from commercial to residential areas seems like the tradeoff to convenience. It can be problematic especially if a residential unit is located close to a restaurant or a nighttime bar. Ditto for related irritants like cooking smells, cigarette smoke, and visible trash from the commercial component of the development.
There are two main paths to get involved with mixed use properties:development or direct investing. Development is the most widely available entry path to mixed-use ownership, partly because there is relatively little existing stock and because the assets are so desirable they tend to be traded less frequently than single-use assets.
There are also opportunities to purchase existing mixed use properties through direct investing. As you might imagine, due to the profit potential of a high-performing mixed use property these investment opportunities can be hard to come by. Additionally, mixed-use buildings are hard to design, hard to build and hard to operate. This results in a higher frequency of under performing assets than with single-use construction. The talented investor can find, even in today’s high-priced market, assets that are flawed but remediable, with strong near-term upside potential both in income and valuation if the performance gap can be closed.
While development and direct investing are two of the most common ways to get involved in mixed use developments, they are not the only ways. Investors can also research REITs or other trade vehicles to enjoy the benefits of mixed use properties. These opportunities may not come by very often, but when they do they can allow investors to reap the rewards of mixed use developments without purchasing physical properties. All in all, there are a number of ways to get started investing in mixed use properties. Take time to find the right avenue for your investing business before getting started.
With all of the above benefits it is no wonder mixed use developments are so attractive to business owners, tenants and real estate investors. Consult the above guide as you evaluate your real estate portfolio, as it may be time to add a mixed use development to your repertoire. After all, what greater benefit is there than boosting your career and the community at once?
Investors, particularly those with a long-term view, can generate compelling returns and predictable current income by investing in mixed-use assets. No longer esoteric and more accessible even to smaller investors through new and evolving investment channels, mixed-use provides an attractive additional real estate investment opportunity, particularly for the sophisticated investor interested in participating in the creation of vibrant urban places.
No matter the type of property you own, you can count on the experts at Evanco Realty Advisors for the very best in full-service commercial administration. We provide everything you need to minimize your ownership workload and maximize the return on investment for each of your commercial properties. We provide peace of mind to owners; implement excellent property management services that enhance value for landlords.
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