Traditionally, people didn’t segregate their buildings based on their function.
Throughout history, it was natural to build homes next to markets, eateries, taverns, places of worship and various shops. Here in North America, the earliest cities and towns sprouted around a “Main Street” - a thoroughfare lined with ground-floor businesses and upper-floor dwellings. Only with the advent of zoning laws did we start to regulate where buildings of a specific function can be placed. Then, during the postwar inner-city decline, land use became more distinct and large swathes of residential homes and enormous retail plazas became the 20th-century zoning model.
A few decades ago, things changed. The younger generation embraced city living and everything it represented - diversity, authenticity, vibrant social life, walkability, and proximity to venues. On the heels of the urban revival, returned the millennia-old, mixed-use building model.
Mixed-use developments combine several profit-producing residential, commercial, institutional and/or industrial uses into one building. The uses vary but commonly include dwelling units, retail spaces, cultural, and entertainment venues, among others.
Types of mixed-use developments
1. Main Street
The “Main Street” model has survived the urban decline to return and energize urban communities in towns and cities alike across North America. However, in the modern version, mom-and-pop shops have been largely replaced with services, hospitality, and entertainment venues, while still containing dwelling units above or behind the storefronts. Have a peek at the Princeton Junction Transit Village in Princeton, NJ, for a contemporary example of the Main Street concept.
2. Shopping Mall/Department Store Conversion
As electronic commerce took America by storm, many brick-and-mortar retail businesses simply could not compete and went out of business. Vacated shopping malls and large department stores found a new purpose as mixed-use centers, featuring residential units and businesses better-suited to compete with e-commerce stores. Such redevelopments have surfaced across the continent, breathing new life into defunct, yet precious real estate; just take a look at what’s become of the old Sears building in Santa Monica.
3. Vertical Mixed-Use Developments
Falling into a broader category of mixed-use developments, a vertical mixed-use building may house any combination of businesses. Typically, however, public uses such as restaurants, coffee shops, government offices, and even transit facilities congregate on the lower floors, while private uses the likes of condo units or hotel rooms are located higher up. The Metropolis in Downtown LA is a prime example of this development model.
4. Horizontal Mixed-Use Developments
These combine various single-use buildings in a single, mixed-use lot. Such an arrangement allows for the combination of businesses and dwellings to evolve into a walkable community or even a neighborhood.
In urban areas, horizontal mixed-use developments often repurpose abandoned buildings. For instance, take Toronto’s Liberty Village - a 19th-century parcel of land enclosed by railway lines, initially used for institutional and industrial purposes. While its correctional facilities and factories shuttered during the 20th century, the ghost neighborhood got a new lease on life in the early 2000s. With a series of condo towers popping up, and a myriad of shops, restaurants, banks, and offices quickly filling up the old, empty factories, the area evolved into one of the most vibrant, desired neighborhoods in the city.
Benefits of mixed-use developments
Today, mixed-use developments present an attractive investment opportunity. If you’re contemplating buying or building a mixed-use building, consider the benefits below.
Mixed-use buildings appeal to a large segment of today’s consumers
Young professionals and seniors alike are drawn to mixed-use buildings. Both groups enjoy the comfort of having shops, restaurants, and various services at their doorstep. Environmentally conscious millennials revere the sustainability aspect of reduced vehicle reliance made possible by such buildings. Seniors prefer the more affordable rents, easier maintenance, and the proximity of amenities.
Commercial tenants rely on their community relationships to keep their businesses running, and favor locations where their consumers can have easy access to their products and services.
Commercial tenants are good tenants
Many real estate investors are wary of doing business with residential tenants. If you feel this way, mixed-use developments may be a breath of fresh air. Commercial tenants are good tenants, who need to attract their customers and are thus incentivized to keep the leased space clean and in good repair.
Further, commercial leases are subject to looser consumer protection laws than their residential counterparts. This flexibility can be advantageous for the proprietor; that said the relationship with commercial tenants is likely to be less adversarial, more professional and courteous.
Common in commercial real estate, net lease agreements, - single, double, or triple - allow the landlord to hand down property taxes, building insurance, and maintenance fees to their tenant in exchange for lower rent prices. In recent years, these types of leases have become a popular investment vehicle for investors seeking low-risk, steady income.
Overall, commercial leases can bring in more income. Commercial properties typically offer an annual return of 6-12% off the purchase price.
Don’t let the retail meltdown worry you
While more and more consumers embrace the online marketplace, brick-and-mortar shops aren’t going anywhere. Yes, one can buy a wide range of products online, but certain services, such as hair and beauty salons, movie theaters, clinics, restaurants, and coffee shops will always need a consumer’s physical presence. As the Santa Monica Sears redevelopment mentioned earlier illustrates, the decline of retail has sometimes been an opportunity for mixed-use developers.
How Design Everest Can Help
If you’re involved in, or planning a mixed-use development, our team of engineers can help with all aspects of civil, structural, and MEP design. We also offer architectural drafting, 3D modeling and rendering support, Title 24 and CalGreen calculations, and construction administration services. Contact us at (877) 892-0292 or email@example.com to discuss your project and receive a quote today.
*Note: The content published above was made in collaboration with members of Design Everest.
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