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Advantages and Disadvantages of Mixed-Use Development

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Advantages and Disadvantages of Mixed-Use Development

Written by Brent Pace for Gaebler Ventures

Whether you are leasing space in a mixed-use development or developing it, you should be aware of the general advantages and disadvantages of mixed-use development.

"Mixed-use" has become a buzz-word in the real estate industry today.

All of the sexiest new developments seem to be massive mixed-use forays in urban areas. In this article we will examine some of the advantages and disadvantages of a mixed-use development.

Advantages:

1. Live/Work/Play Dynamics. In this day and age, time is money. The more time you spend commuting in your car and traveling to run errands (like grocery shopping) the less time you have to enjoy your hard earned money. Mixed-use development helps ease this dynamic by creating an environment where employees can live, work, and play all in close proximity.

2. Hiring the rising generation. For many companies, hiring the rising generation of workers, often called "millenials" in academia, can be challenging. One big attraction for these workers is to create a work place that has the aura of being exciting and different. Mixed-use developments provide that aura, much more than working in an enormous office park does.

3. Transit oriented development. Most of today's mixed-use projects are downtown and frequently offer incentives to increase your use of transit. Commuter rail, light rail, and bus service are frequently planned around nodes that often include mixed-use developments. Being transit oriented can also help you attract millenials to your organization, as these folks are increasingly environmentally and socially conscious.

4. Front end / Back end. One intriguing possibility for many lessees is to create a location where you can have your back-end business functions and your front-end sales functions in the same location. If you are a small one-off retail organization, a mixed-use development can provide you with the opportunity to have your office staff in close proximity to your retail staff.

Disadvantages:

1. Economies of scale. While many mixed-use development are enormous, a number of them are small and seem to have a little of everything. As an owner, or as a larger tenant, it may be difficult to get the economies of scale you need in a smaller mixed-use development.

2. Difficulty of management. For many property managers, managing this kind of development can be a gargantuan task. Most property managers focus on office management or retail space management. Unless the development is enormous and justifies several property managers on one project, this can be a beast to manage. As a tenant, you will have to realize that your property manager may excel at dealing with office tenants, but not understand well how to manage retail tenants. Before leasing in a mixed-use location you may wish to investigate this further with your Landlord.

3. Shared parking. Here is the real rub for most mixed-use tenants. Imagine if you will that you lease in a mixed-use complex that features office space, general retail space, restaurants, a movie theater, an exercise gym , apartments, and condominiums. Unless the developer has been extremely liberal with parking, many of these folks will be forced to park in the same parking garage as each other. As a tenant, I highly recommend that you investigate the details of the parking situation. Many Landlords try to create what they call floating parking. In other words, the Landlord does not have enough stalls for everyone in the complex, but they are banking on the fact that people using different parts of the development at different times allows them to float some extra parking out there. Investigate this before leasing or you may find your employees parking several blocks away from your office.

Brent Pace is currently an MBA candidate at University of California at Berkeley. Originally from Salt Lake City, Brent's experience is in commercial real estate development and management. Brent will have tips for small business owners as they negotiate their real estate needs.