Mixed-use real estate projects are not a revolutionary concept. But the increasing commingling of traditional building uses, a shift in live-work-play preferences and overall attractive investment fundamentals have led to a post-pandemic boom of mixed-use mega projects. As the developments become larger in scale, more complex in their amenity offerings and more experience-grounded, the property management function has never been more critical (or tricky).
Why all the hype?
All types of investors—including private equity players and publicly traded REITs—are enthusiastically embracing mixed-use properties. To get these billion-dollar projects off the ground, developers often partner with additional LP investors, including high-net-worth individuals, institutional players, sovereign wealth funds and pension funds.
But even with financing in place, mixed-use development is a complex undertaking. From public-private partnerships to the design and engineering across multiple uses to the navigation of political and community landmines, the high-profile mixed-use development typically faces a long road as it seeks to deliver a greater good to the community. It’s usually worth addressing the challenges.
Even when compared to trophy properties and new construction, office tenants at mixed-use developments pay on average 24.7 percent more at a mixed-use property, according to JLL research. This makes perfect sense as the experiential workplace explodes in popularity. But it doesn’t stop at the office. Multifamily buildings can benefit from shorter lease-ups and rent premiums due to the immediate availability of jam-packed amenities. Workers, residents, travelers and the community are demanding an elevated setting for productivity, leisure and culture, and mixed-use development is a solid retort.
Once the development hurdles are overcome, protecting ROI and optimizing operating income are critical to reducing risk. The importance of the property manager’s role can’t be understated. But what is the best way to manage the interconnectivity of uses? Should one property manager have ultimate responsibility for the larger master plan, or should each use operate independently?
The smart, single-source solution
To make mixed-use developments feel authentic, there needs to be consistency in experience around every corner. But property managers are faced with the extraordinary challenge of managing what is essentially a self-contained micro-city.
The Plaza Coral Gables is a 2.1 million-square-foot mixed-use development in Miami. The property encompasses two office towers, 161,000 square feet of retail space, a 2,200-space parking garage, shared common areas, residential luxury units and low-rise townhomes. The Plaza Coral Gables is a prime example of the mega developments that are transforming unused or misused infill locations into a daily destination for thousands of people. It’s also an extraordinary undertaking from a management perspective, and owner Agave Holdings, LLC has put its trust in JLL as a single source management solution.
Property uses can clash without proper guidance and management. Having one property management firm break down the asset class barriers and oversee all critical operations from finance and budgeting to client service experience, communication, technology and public event programming will provide comfort and consistency. But to truly be successful in smoothing out the tenant experience across all property types, that manager must aim to please.
Hospitality is not just for hotels
The management of a mixed-use asset is not simply a discussion of ROI. In a greater sense, this is where the retail and the residential or commercial tenant are all alike. A talented property manager knows that ROI comes from impeccable tenant relations, which result in tenant retention. That is the critical ingredient in all of the interactions taking place in a successfully managed mixed-use development.
But what is the fastest path to success at a property of such scale? Cues from high-end hotels permeate the atmosphere of a prosperous mixed-use development. Presenting across the entire property a consistent staff with backgrounds steeped in hospitality is the best chance at elevating the customer experience. Even office buildings, which traditionally followed a less attentive customer service playbook, are shifting to the hospitality model.
All-in for the win
All investors and owners are in the business of ROI. But to achieve it, it’s a matter of boldly going all-in and putting together a mix of uses that creates buzz– that makes people want to work, shop and live there. If you can make these uses seamlessly co-exist, you will find residents who stay longer and retailers who thrive. And the details matter.
Well-managed mixed-use developments represent a win-win for both investors and cities, creating more housing, community connection, operating income, retail and tax revenue.