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Convenience is king in commercial real estate. From smart buildings that automatically adjust room temperature to same-day e-commerce delivery, consumers want everything on demand. While mixed-use properties aren’t new, combining two or more asset classes into one building or development has grown more popular in recent years.
“It’s about having easy access to the things that you need in your everyday life,” said Judy Guarino, Managing Director of Commercial Mortgage Lending at JPMorgan Chase. Everyday essentials can include everything from coffee and healthy breakfast options to gyms and medical clinics.
Here are some insights about mixed-use properties and how the office and retail asset classes impact multifamily properties.
There are many types of mixed-use developments, including retail districts, mixed-use hotels and live-work spaces. But before you invest in any mixed-use property, it’s important to understand the relationships between these asset classes.
Employment drives the relationship between office and multifamily asset classes.
“If you need office or industrial space, you're going to pick a market with the best population for your industry,” Guarino said. For example, Washington, D.C., is the epicenter of government and politics, while Hollywood and the film industry go hand in hand.
“When it comes to office, it’s ultimately about the people,” she said. “So the properties are often in the most densely populated areas where there’s multifamily housing.” These areas provide businesses at offices with a larger talent pool and a wider client and prospect base.
Proximity to retail is key for residential and office properties.
“In densely populated areas, the retail component with multifamily housing is important,” Guarino said. “Those services are needed—that’s why you have grocery stores, entertainment, drugstores and urgent cares.” Proximity to self-care services—everything from skincare, hair and nail treatments to yoga, rock climbing and cycling—has also become increasingly important in recent years.
Likewise, office workers often run errands on their breaks. It’s important to have nearby retail where workers can eat lunch and shop for everyday items.
Exactly how close these retailers are depends on how the development is built.
Mixed-use properties or developments are built either vertically or horizontally:
Aside from convenience, mixed-use properties offer commercial real estate owners and investors:
For years, commercial real estate revolved around city centers. First, the American Industrial Revolution attracted immigrants to cities where they established neighborhoods. As the economy shifted away from factory work, those properties were torn down or used differently.
Williamsburg in Brooklyn and Long Island City in Queens are prime examples. “Those neighborhoods were 100% factory,” Guarino said. “Now it's completely opposite. It's all high-end retail and multifamily rental properties.”
Central business districts may change as well. Instead of being solely office-focused, they could become central social districts where residents live, work and play. Mixed-use properties are key to developing those communities.
Developers are leveraging innovative solutions to transform offices and central business districts. Find out what the future of the office could look like.