Mixed Use Developments Go Vertical

Mixing office, retail, residential and entertainment space in one location is an idea on the rise, literally. For example, take the Time Warner Center in New York City. The 80-story, $1.7-billion building houses a 2.8-million-square-foot combination of condominiums, office space, a Mandarin Oriental hotel, CNN television studios, performance space, restaurants and retail space that includes a Whole Foods Market. It’s a stupendous urban version of mixed-use developments that have cropped up in suburbs across the U.S. since the early 90s.

These spaces often outperform standard suburban real estate in office and retail lease rates, residential rents, retail sales, hotel room occupancy rates and property values, both on-site and in surrounding areas (according to a study by Charles Lockwood, a real estate historian and author). All this multi-use bounty comes at a price, however, since building these 24/7 communities costs more. Design is more complex because retail needs are often at odds with residential needs. Restaurants have different logistical requirements than office space. It’s also difficult to find the right mix of high- and low-end retail tenants. Residents need groceries and dry cleaning far more often than luxury jewelry or clothing, making the right mix of tenants a top priority for developers. Nonetheless, in close-in urban areas or highly desirable waterfront or scenic locations, the extremely high cost of land often dictates dense, vertical mixed-use development.

The vertical trend is expected to dominate built-out suburban cities with set boundaries over the mid-term and beyond. Michael Beyard at the Urban Land Institute projects that vertical, multi-use expansion of aging strip malls that are on prime land will promote significant reinvestment and tax base expansion.

Another twist to the vertical trend is to build “live, work, play” communities around sports arenas. Take the 75-acre Victory Park project in Dallas, Texas, for example (www.victorypark.com ). Built around the American Airlines Center, home of the NBA Mavericks, Victory Park currently boasts the W Dallas Victory Hotel and Residences, The House (a 28-story condominium high-rise) and two apartment complexes, Cirque and The Vista. Developed by Hillwood and partly owned by Hicks Holding LLC, the multi-billion-dollar project includes large amounts of office, hotel, residential and retail space.

A number of vertical developments are cropping up around light rail line terminals such as a project in Carrollton, Texas near Dallas. The city approved a $38 million mixed-use development next to a commuter rail station that links Carrollton with Dallas. Commuters using rail are likely to look for housing, shopping and entertainment venues close to stations. Many communities are using funds from bonds and government subsidies to build new developments. Examples of recent developments include the $1 billion revitalization of Union Station in Denver, Colorado and a $2.3 billion ($1.5 billion from private investors and $800 million in municipal, county, state and federal funds) redevelopment of central Columbus, Ohio. However, changing property trends due to the Coronavirus may lead to different ratios of commercial/retail/office space in mixed-use developments. For example, more space may be given to residences. Also, greater work-from-home features are likely to be included.

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