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Page 18 — Retail Properties Quarterly — August 2018 www.crej.com Mixed-Use C onventional wisdom (through the mid-1990s and beyond) was that retail fol- lowed rooftops. Leasing pro- fessionals wooed retailers with the benefits of homes built and those yet-to-be constructed near new or established malls, big boxes or strip centers. By contrast, today, retailers are adding roof- tops, originating with investors and developers who are building mixed-use environments that are helping to define “community with convenience”: places to live, play, shop and experience culture in a walkable neighborhood that feels both novel and like home at the same time. In Denver’s past, apartments above a grocery store bordered by 14th Avenue, Santa Fe and Speer Boulevard may have seemed unusu- al. But, in hindsight, it foretold Denver’s increasingly urbanized expectations for how people and retail interact. Two decades later, residents near Union Station find that luxe life above a grocery store is the ultimate urban convenience. As longtime Denver residents and developers, many of us have roots in urban street retail, grocery- anchored centers or other single- use real estate. But with rising land costs and rare city-limit par- cels, we’re dedicating increasing amounts of energy into mixed-use projects. It’s not about re-inventing the wheel, but, instead, evolving into good land-use stewards, pro- moting livable communities while securing value for retailers and other stakeholders. • Mixed-use: As old as civilization. The root concepts of mixed-use development are as old as (or even older than) devel- oped civilization. In Rome, citizens worked from their homes (or nearby) and paid for or traded for goods and services with their neighborly shopkeepers. Mov- ing forward through the mid- to late-1800s in New York City’s Lower East Side, the nation’s newest immi- grants fashioned garments from working environments referred to as factories. These factories often were small groups of people working from various tenement residences, delivering almost-com- pleted garments to finishers and, secondarily, to nearby clothiers. Soon after, sharp increases in industrialization brought about the rise of single-use zoning. Combined with the growing popularity of the automobile and the advent of mass transit, families migrated to the suburbs and workers commuted to the urban core. Now, many genera- tions later, wholesale demographic changes have moved the focus to the preferences of a large millen- nial population seeking social con- nections and an increase of empty nesters seeking urban-based ame- nities. Mixed-use developments feel like an answer to a challenge that’s still being defined by residents and developers, alike. • How dense are you? Today, being a developer and investor in the city of Denver is all about smart, thoughtful density. Urban parcels are scarce and costly, and demand is high. Single-floor street retail, which flourishes in some neighbor- hoods, is unrealistic in others, both from a financial and sociological perspective where we want to pair commerce with a sense of com- munity. Currently, there are only a few mixed-use developments in the urban core. Several more have been announced and we hope to see this smart density continue. But addi- tional overlays of affordable hous- ing units at reasonable area median income percentages is overdue. Development that includes afford- able housing adds a level of com- munity diversity that makes a city feel like a city and, speaking plainly, Denver needs more of it. With resi- dential rental rates doubling over a decade, our preschool teachers, pharmacy assistants, veterinary technicians and others have few places to live in the city they enjoy. Ideally, an assistant retail manager in a mixed-use development could afford to live within its boundaries. • How creative are you? Financing mixed-use developments used to be challenging. Investors were siloed by their specific expertise in resi- dential, industrial, office or retail, so strategic partnerships were criti- cal and boutique firms underwrote early projects. Mixed-use now represents a critical diversification for investors who think creatively about a built-in customer base for retailers and efficient, walkable, green-living opportunities that are imbued with a sense of commu- nity to boost residential occupancy. Nearby transit is an extra bonus. We see extremely successful, transit- oriented development in Denver’s near suburbs and, more recently, in the core. As Denver continues to grow and evolve, we need more mixed-use developments. Still, the financial outlook for urban mixed-use projects depends on identifying the right mix in mixed-use. Creating a balance among asset types is crucial to prevent rapid turnover in any one segment. Meanwhile, the challenge of different leasing cycles, demand generators and market fundamen- tals that are rarely in sync can dampen mixed-use ambitions. Lay- ering over the differences between ground-up projects versus redevel- opment adds potential environmen- tal issues as well as the need for thoughtful neighborhood outreach and feedback cycles. Additional issues emerge as hard upfront costs. By definition, mixed- use developments carry design complexities. Architecture must feel native to its urban, retail envi- ronment as well as to established, adjacent neighborhoods. Building envelopes and exterior elements like physical barriers, noise mitiga- tion, and traffic circulation and vol- ume require careful analyses and planning. Infrastructure is literally multilayered: the interior plumb- ing and electrical work required to meet the combined needs of A mandate for urban mixed-use development Jimmy Balafas Co-founder and managing partner, The Kentro Group Please see Balafas, Page 27

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