The Evolution of Mixed-use

by Hayden Spiess

Mixed-use properties have matured as communities, shoppers and end-users have realized the benefits they offer.

While many argue that mixed-use properties have been around since the dawn of shopping (think residential atop retail), purpose-built mixed-use properties have really been en vogue for the past 20 years. Combining retail with multifamily, hotel, office and other property types has been successful for developers, who often have to partner with each other based on sector expertise to get mixed-use projects done. Initially skeptical, municipalities have warmed to the concept as they see the hub of activity that mixed-use projects bring, in many cases serving as a community’s center of life. In some instances, they even house a town hall and city offices. New uses and tenants have entered as they realize the sector’s benefits.

“Mixed-use today has a much more diverse menu of users,” says Ralph Conti, principal with RaCo Real Estate, which has participated in the development of a number of mixed-use properties. “The traditional office space as we know it has taken a hit. Medical office, however, has not. Education is another use that is viable today, with remote campuses. We are seeing a lot more diversification in the mixed-use components. It’s not just residential over retail anymore.”

As mixed-use properties have proliferated in smaller areas and extended to infill markets, they have become more tailored to the needs of the community, as well.

“Mixed-use is evolving and becoming more specialized,” says Michael Gold, president of Peoria, Illinois-based Cullinan Properties, which has been developing mixed-use projects for more than 20 years. “Compared to 10 or 20 years ago, it is more focused on community, connection and convenience. Consumers, residents and office workers want everything on demand — from coffee to fitness to doctor’s appointments, they want it at their front door.”

Because mixed-use properties often contain public-facing elements, like parks, stages and amphitheaters, they are often utilized for events and product displays. Realizing that mixed-use centers can be community gathering centers, managers of these properties are monetizing common areas to bring in traffic.

“Today, there is more attention being paid to the experience side to how mixed-use centers are operated,” says Starr Cumming, retail director at Hines. “Landlords are having to get more creative with in-house produced events to drive traffic to centers. You can’t just rely on the fact that the residents, retailers or office tenants will be your only traffic. You’ve got to bring additional traffic, and you do that with experiential events.” 

Conscious Development

Mixed-use properties have become more conscious about the end user, and developers are concerned with future-proofing projects to be adaptable in the years ahead. Because many large-scale mixed-use projects are being developed on the sites of former regional malls, more attention is being paid to the long-term viability of the project. Communities don’t want to have to go through another redevelopment years down the road because one use leaves the site.

While is it difficult to predict the future, mixed-use developers are conscious of the fact that what they create needs to be adaptable to future needs. CASTO developed the mixed-use Winter Park Village in Winter Park, Florida, in 1998 on the site of Florida’s first regional mall. In 2022, the company set out to reinvent the project again, redeveloping the retail space and adding more office space. Free People, Kendra Scott, Tommy Bahama Marlin Bar, Ruth’s Chris and Arhaus Furniture were some of the new retailers joining. CASTO saw a renewed interest in the retail component post-COVID.

“People were ready to move around again and that has driven a demand for more bricks-and-mortar retail,” says Brett Hutchens, president of CASTO Southeast Realty Services. “We have some very strong tenants joining Winter Park Village who really weren’t interested in bricks-and-mortar several years ago.”

The center has 360,000 square feet of retail; 117,000 square feet of office space; and 68 loft apartments. CASTO developed a 204-unit multifamily project about five years ago adjacent to the center. JP Morgan now owns that project, though it serves as one of the residential communities of Winter Park Village. 

As part of the redevelopment, CASTO raised the streets in the project approximately 13 inches, making them curbless. That allowed for the creation of a new park that added many amenities for the community. A number of the project’s retailers took the opportunity to remodel or refresh their stores, including anchor Regal Cinemas. 

At Winter Park Village, the average visitor stays 2.5 hours on site. That is good news for the city of Winter Park, which is able to retain sales from its residents, as well as capture sales from nearby communities and visitors.

“Municipalities like mixed-use because the capture rates of sales tax from citizens go up; they are not losing sales to other areas,” says Hutchens.

CASTO is also underway with a mixed-use project in Lakewood Ranch, the fastest-growing master planned community in the country, located near Sarasota, Florida. There, CASTO developed a 77,000-square-foot medical office building. The company is also developing 170,000 square feet of retail at the project. Ruth’s Chris, Owen’s Fish Camp, Toasted Yolk and Bar Italia are among the restaurants at the center. Charlotte, North Carolina-based 131 Main purchased a pad to develop a restaurant. A 10,000-square-foot Chamberlain’s, a natural grocer, anchors the retail. 

Deciding which uses make the most sense is one of the most challenging aspects of mixed-use development. Cullinan Properties spends time identifying the long-term viability of uses as part of the pre-development process.

“We are thinking about that differently today,” says Gold. “Even though it has evolved to a point, we understand that mixed-use might look a little different. The adage of live-work-play is still real, but I would also add ‘stay.’ By that, I mean not only stay with hospitality, but also stay on-site, as a consumer or a resident. We want consumers to get everything they need within the development.”

Cullinan has several projects under development, the largest of which is Rock Run Collection, a super-regional mixed-use development in Joliet, Illinois. The 310-acre development at the corner of Interstates 55 and 80 will have more than 1,000 residences; a new Hollywood Casino; 500,000 square feet of retail and entertainment; and an office and medical component. The Hollywood Casino is under construction, with delivery expected in 2025. A new interchange off I-55 will open this fall, leading directly to the project. Cullinan is under construction with the first phase of multifamily that will bring about 250 units to Rock Run Collection this fall. The company is also finalizing several retail leases that will allow it to break ground on Rock Run Crossings, the retail component of the project, in the near future.

“All development is a lengthy process; when you add mixed-use you have to balance the needs of the different constituencies, like the municipality, the surrounding residents, the residents of your project, the retailers and office tenants,” says Gold. “Everyone has their own needs in what they want to see and feel. Meeting the needs of those groups is a huge challenge in mixed-use planning and development versus a strictly retail development. We spend a lot of time developing alliances and partnerships with each group to make sure the project aligns with their vision, particularly what the community as a whole wants to see.”

Community Focused

Since mixed-use is designed to satisfy multiple needs, developers have become more focused on fulfilling the needs of the community. RaCo is working with Preston Hollow Community Capital and the city of Jacksonville, Florida, to develop River’s Edge, a new large-scale mixed-use project along the St. John’s River just south of downtown. The infill property is focused on health and wellness, inspired by its waterfront location as much as the medical community that surrounds it.

Infrastructure site work is underway on River’s Edge, with construction expected to begin mid-summer. The developers are in permitting for a 125-slip marina along the river. Toll Brothers will build luxury townhomes, and third-party developers will build the hospitality and a residential over retail mixed-use component. A large park system is also part of the project.

“A central component of the project is a central park that will have artwork, which is key to the mixed-use component in that it creates an activity center for events,” says Conti. “We are not just building a project; we are building a community.” 

Wellness and food and beverage will be two of the focal points for the retail offerings, says Conti. 

“We are near a lot of medical uses, so the wellness will complement that, and the food and beverage is needed to serve that area, as well as those traversing the waterfront and nearby residents,” he says.

With retail space at a premium, Conti and his team plan to be selective on food and beverage operators. He expects leasing to target local and regional chefs that have a following, as well as some national tenants who are expanding to the market. 

“We want to be very purpose-driven about our retail selections,” he says.

Hines, with partners Urban Street Development, Cresset Real Estate, Las Americas, Hudson Capital and Halmos Holdings, recently broke ground on FAT Village, a mixed-use infill development in the Flagler Village neighborhood of Fort Lauderdale, Florida. Named for its three inspirations — food, art and technology — FAT Village will contain new housing, retail, restaurants, office space and entertainment uses on its 5.6-acre site. Hines and its partners are drawing on the neighborhood’s creative spirit and artistic vibe as inspiration for the design. The first phase of the project will be delivered in 2027.

Hines operates a number of large-scale mixed-use properties — including Atlantic Station in Atlanta and Fenton in Cary, North Carolina — and sees communities, office workers and visitors as key to the properties’ success. Hines has seen results by drawing traffic — and tenants — through themed events at its mixed-use centers, many of which serve as activity hubs of their respective communities. The company has also seen increased returns through ancillary revenue driven by third-party experiential activations that pay a fee for use of the common area space. These include food and beverage manufacturers, cosmetics brands or cell phone providers, among many others.

“They not only drive revenue, but drive traffic to a property,” says Cumming. “These activations like outdoor spaces that are at the 50-yard line of a project. They want to be able to touch, talk and communicate with potential customers. A mixed-use environment provides these brands a great location to get in front of different types of customers, whether that is daytime office workers, area residents or local and regional shoppers.”

The retail component is especially important to mixed-use developments today. Retail tenants must serve the community, while also filling the needs of the project’s office workers and residents — which can number in the thousands in large-scale projects —as well as shoppers from the surrounding market and tourists. 

“Curating your merchandising mix for retail is like a chef curating a menu for a restaurant; the menu is ever-changing,” says Cumming. “We are always looking to keep our merchandising mix up-to-date so we have what our office worker, resident and shopper need. In recent years, we’ve added in more service-based tenants, more entertainment offerings and more food and beverage tenants.”

While developing new projects, Cumming says Hines is always focused on evaluating the retail tenant mix at its operating properties, like Atlantic Station, which contains about 538,000 square feet of retail, restaurant and entertainment space.  Developed in the early 2000s, the massive mixed-use property — which contains over 2 million square feet of office space and a number of multifamily buildings — continues to expand. AMLI is under construction with a new apartment project with retail on the bottom level. Hines will be handling the retail leasing for the new building, which will open in 2025. 

“We are continuing to densify and expand the 138 acres of Atlantic Station even more,” says Cumming.

Creating Strong Relationships

Mixed-use projects generally don’t get built by the decision of a single party. Because of the multiple-use nature, they are complex projects to create. That complexity usually initiates the involvement of several parties, often including other developers, as well as the municipality — who must permit the uses — and investors. 

“Mixed-use development is multi-faceted, but it really comes down to developing trust with the municipality and the tenant community,” says Gold. “They need to know that you have their best interests in mind for them to be successful, as well as your success.”

Over the years, municipalities have become more friendly to mixed-use developments because of the benefits these built-in communities bring.

“We have found a lot of receptivity from municipalities for mixed-use developments,” says Gold. “A lot of municipalities know that they need a supply of new homes. With mixed-use, we are able to build to the standard and quality that the community wants, as well as bringing in a sales tax income component with retail sales. When you put it in the perspective of a true partnership — making sure that the municipality can trust the developer — you can be successful. We are looking out for their best interest and ours.”

Similarly, smaller mixed-use projects can add amenities to areas that didn’t exist before. Conti at RaCo is working on a small mixed-use project with a hotel, retail and an ice rink to serve Franciscan University in Steubenville, Ohio. The university will develop and own the project, primarily because it knows the market and understands its students, staff and visitors will utilize the services the project will provide.

“In my view, no one should undertake a major mixed-use project without a purpose,” says Conti. “Doing an in-depth analysis to determine what is going to occupy a mixed-use project makes sense. In the case of River Walk, we are basing a lot of our uses and retail mix off the water and health-and-wellness with the park system we are building. We have a very unique location — there’s a uniqueness to having an urban infill project on the waterfront.”

Because of the receptivity, and success of many older mixed-use projects, mixed-use is seen as less risky and preferred by many municipalities, tenants and even lenders.

“From the consumer’s standpoint, mixed-use has become more attractive,” says Hutchens of CASTO. “From a lending standpoint, we find that the lenders like the diversity of uses within one site.”

That has translated into making mixed-use less of a “sell” for developers to their various stakeholders.

“Mixed-use has become less challenging to develop over the years,” says Hutchens. “It is a preferred development type. We see demand for office in our suburban projects because people don’t want to go downtown and get in an elevator to go to work. Employees don’t want to pay for parking and they want to be closer to amenities. Companies want to be closer to their clients; that works out great for tenants in the legal, financial and medical fields.”

The evolution of mixed-use means that the industry will be seeing newer, more innovative properties in the future. Many mall owners, such as Dallas-based Centennial Real Estate and Los Angeles-based Pacific Retail Capital Partners, are executing plans to convert a number of their regional mall holdings to mixed-use properties. Other owners, such as Simon, have had success adding mixed-use elements to malls — such as the company’s Phipps Plaza in Atlanta — so the centers are diversified beyond retail. 

“Mixed-use doesn’t mean what it used to mean,” says Gold. “We spend a lot of time, energy and resources making sure that we are staying ahead of the trends, capturing the market today but building for the future. We are excited about the trajectory of the mixed-use sector.”

Randall Shearin

This article originally appeared in the March 2024 issue of Shopping Center Business magazine.

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