Mixed-use developments create a vibrant blend of residential, commercial, and public spaces. They offer occupants an opportunity to ‘live, work, and play’ in the same place.
For commercial real estate (CRE) developers, these projects promise income stability and enhanced profitability by catering to diverse needs within a single precinct.
Considering trends like sustainable building design, walkable cities, non-motorized transport, and the like, where should you, as a developer, put your focus when creating mixed-use spaces?
In this guide, we explore the drivers and benefits of mixed-use spaces, offering key strategies for creating profitable and sustainable urban environments.
Understanding Mixed-Use Spaces
What is a Mixed-Use Space?
A mixed-use development combines two or more different property types in one complex.
For example:
- A shopping mall with offices on the top floor.
- A multi-story residential apartment block with shops at street level.
- A mixed-use neighborhood that includes offices, residential, retail, and green spaces all in one.
A Brief History of Mixed-Use Developments
Throughout history, human settlements have naturally developed in mixed-use patterns. Industrialization necessitated zoning regulations to protect city residents from the adverse effects of industrial activities such as smoke, noise, and light pollution.
This led to zoning certain areas for ‘single family residential use’. Post-World War II, the rise of the motor car further transformed modern cities, leading planners to segregate urban functions, often with superhighways.
This shift encouraged residents to move further out into the suburbs, contributing to urban sprawl and exacerbating the separation of different land uses.
Mixed-use spaces, as we know them today, aim to counteract the negative effects of urban sprawl and single-use zoning.
This growing trend in urban planning has gained momentum over the past thirty years and continues to rise in popularity.
Typical Components of Mixed-Use Spaces
Residential Components
Types: Apartments, condominiums, townhouses.
Importance: Base population for the area; drives demand for other uses such as retail and public services.
Commercial Components
Types: Retail shops, restaurants, office spaces, entertainment venues.
Importance: Provides amenities and employment opportunities; key for attracting foot traffic.
Public Amenities
Types: Parks, community centers, recreational facilities, public plazas.
Importance: Enhances community engagement and social interactions; provides leisure and recreational opportunities for residents and visitors.
Types of Mixed-Use Developments
Vertical Mixed-Use Developments
Vertical mixed-use developments integrate various uses within a single multi-story building, optimizing urban space. Typically, the ground floor is dedicated to commercial or retail activities, the middle floors house office spaces, and the upper floors contain residential units, often featuring luxury penthouses at the top.
A prime example of this is the Comast Technology Center in Philadelphia. It’s a 342-meter-high towering structure - the tallest mixed-use development in the country - that combines office spaces, a hotel, and residential units, along with retail and dining options.
Vertical mixed-use developments maximize the use of space in city centers by combining shopping areas, offices, and luxury apartments on one footprint.
This approach assists with maintaining a population density that supports efficient land use and quality public transport.
Horizontal Mixed-Use Developments
Horizontal mixed-use developments span large parcels of land, featuring different building uses side by side.
For instance, a neighborhood might include residential apartments and townhouses, commercial shops, and public amenities like parks and community centers, all within a short walking distance. This layout encourages a pedestrian-friendly environment and fosters a tight-knit community feel.
Hudson’s Yard in New York City is an example of a successful horizontal mixed-use project that seamlessly blends residential, commercial, and public spaces.
Benefits of Mixed-Use Spaces
Mixed-use developments offer several benefits to urban planning including:
Efficient Land Use that Promotes Densification
Densification is beneficial to cities as it improves the economic viability of public transport and amenities, offers better accessibility for all residents, and fosters a sense of community which means safety and security.
Walkability, Convenience, and Accessibility
Enhanced walkability, facilitated by the proximity of amenities and improved pedestrian infrastructure, promotes a stronger neighborhood atmosphere.
A 2023 survey by the National Association of Realtors revealed that over half of respondents preferred a smaller yard if it meant easier walkability within their community.
Mixed-use developments often incorporate zones for non-motorized transport modes too such as bicycles and scooters.
Healthier, More Sustainable Cities
Mixed-use neighborhoods are healthier than their counterparts in many ways. Air quality is often better due to reduced dependence on carbon-emitting vehicles.
Less traffic means less congestion, noise, and pollution, giving more space back to the public, pedestrian realm. Public spaces include trees and greenery that promotes healthier lifestyles and opportunities for recreation.
Economic Advantage of Mixed-Use Spaces
Increased Foot Traffic
The proximity of housing close to commercial establishments means that residents provide a constant and stable customer base for these shops, restaurants, and other kinds of amenities.
Placing public amenities and commercial businesses near each other means that retailers can capture foot traffic from those who visit public and recreational areas.
Not only is this kind of neighborhood desirable to residents for its convenience and accessibility, but businesses located in such areas benefit hugely too.
Businesses in mixed-use developments enjoy higher sales compared to standalone commercial spaces. For CRE investors this means a stable income over time, solid leasing rates, and a reduction in vacancy periods.
Tenant Synergy
Mixed-use developments promote social interaction across diverse groups of people, who may not ordinarily mix were it not for the buildings being near one another.
Integrating different businesses fosters collaboration and cross-promotion among tenants too. For example, a coffee shop could partner with a neighboring bookstore for joint promotions or events, boosting traffic for both.
Enhanced Environment
Mixed-use spaces are a nucleus for vibrant community engagement. Features like outdoor plazas, parks, and public art contribute to a sense of community and place. Across the world mixed-use spaces attract more than just residents, bringing tourists during the peak season times of the year.
These public spaces become a stage for social and cultural activities. Public spaces within these developments often host events, markets, and festivals that engage the community. For example, the 606 in Chicago – six ground level parks which run alongside the 2.7 mile Bloomingdale Trail on top of an old, elevated railway line.
It is twice the length of New York’s High Line which was also built on top of and only railway. The 606 has become a hub for recreational and cultural activities which foster social connection within the local community.
Successful Strategies for Mixed-Use Space Development
As a CRE developer interested in mixed-use spaces, you might be wondering how to ensure a successful development. Here are some considerations:
Flexible Design and Space Planning
Adaptability is essential in mixed-use spaces to allow for flexibility of use. Since uses are constantly changing, adaptable spaces can meet future needs and trends too. An example is multi-functional spaces that can transition from retail to office, or even residential, as market demands change.
Modular design construction that allows for easy expansion and reconfiguration also supports flexibility. Housing, for example, is likely to take the form of modular townhouses or apartment blocks. A skilled architect can bring the design expertise required to turn these concepts into dynamic spaces, rather than ‘cookie cutter’ blocks.
Prioritize Public Spaces
In mixed-use developments, public spaces could take the form of parks, plazas, and communal areas that serve as gathering places and recreational spots for residents and visitors. These spaces encourage social interaction through clever spatial design.
They could include outdoor seating areas, play zones, or event spaces. The activities in these spaces – which are sometimes an attraction all on their own – offer support to local businesses and entrepreneurs.
While housing and offices might be modular designs, mixed-use developments usually have a public focal point that breaks the design mold.
This could be in the form of a special building or public space which demarcates the hierarchy of use. New York’s Hudson Yards are a good example of this.
At the center of the mega-development is a large public square featuring a copper-clad accordion-like pavilion called ‘vessel’.
The dynamic design of the pavilion bears a stark contrast to the more rectilinear forms of the other types of buildings.
Focus on Sustainability
There is a growing demand for greener and more eco-friendly spaces among consumers and businesses. Mixed-use development offer economies of scale to those looking to incorporate sustainable building practices such as solar power, and energy- and water-efficient technologies.
Long-term cost savings serve to make the development more profitable. Energy-efficient buildings have lower operating costs which enhances tenant appeal. Not to mention potential tax incentives or grants for green buildings.
Reduced reliance on vehicles allows for a reduced carbon footprint. Mixed-use developments on the forefront of sustainability, can certify the buildings or precinct with a LEED (Leadership in Energy and Environmental Design) silver, gold, or platinum certification.
Incorporate Technology and Innovation
Smart technologies, infrastructure and building management systems help to ensure operational efficiency and reduced energy consumption. Digital connectivity ensures that businesses and residents can always be connected to the online world. These technologies can be applied at a precinct level to improve economies of scale.
Implement a Phased Approach
Implementing a phased development strategy is a smart way to manage risk and adapt to often changing market conditions. Many mixed-use developments are constructed in phases, to provide flexibility with funding but also to revise plans based on the initial performance of the first phase. A developer may start with commercial spaces with high foot traffic and follow with residential units in a later phase as demand increases.
Final Thoughts on Creating Profitable Mixed-Use Spaces
As a CRE developer embarking on a mixed-use development project, you have an opportunity to shape the future of our cities. From choosing to focus on green building design, vibrant public spaces, and interconnectivity, your next big project could be a catalyst for enhanced wellbeing and improved quality of life for urban dwellers.
This approach not only benefits communities but also provides stability and adaptability for your CRE investments, making it a win-win for all stakeholders involved.
Interesting Fact: The Best International Mixed-Use Development is all the way in Africa. Forbes International Tower in Egypt, by Magnom Properties, was awarded the title at the 2024 International Property Awards.
The carbon-neutral tower embraces a biophilic design ethos, and is a beacon of sustainability targeting a Platinum LEED Certification.
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