COVER STORY, AUGUST 2006
VALUE VIA VARIETY
Mixed-use developments make sense to residents, businesses and cities in the high-growth West.
Land costs rise and availability shrinks, prompting many cities to optimize density with mixed-use developments. As the form evolves, its definition changes. Many see residential as a key component. However, Kenneth J. Sullivan III, co-founder and partner at Centra Properties, a development company in Southern Nevada, says, “I think mixed-use is the inspiration of separate uses within a single environment. It could be anything from retail/commercial to residential/office /commercial. We’re going to see hotels mixed with retail and hotels mixed with office. As land prices escalate, the need for developers to be more creative in how they develop the properties has required mixed-use as an essential tool.”
The Crescent luxury apartments will be located in the heart of Beverly Hills.
Centra’s contribution to mixed-use is Town Square Las Vegas, a pedestrian-friendly complex of 1.9 million square feet on 117 acres at the intersection of Interstate 15, which links the Los Angeles metropolitan area to Las Vegas, and the I-215 Las Vegas loop highway. Slated to open in late October 2007, the development will feature 150 retail shops, 12 restaurants, 200,000 square feet of Class A office space and a boutique hotel (second phase). “On a daily basis, we see traffic counts of 300,000 to 400,000 cars. That’s ideal for a retail project,” Sullivan says. Centra and its development partner, Turnberry Associates, have already leased approximately 80 percent of the retail and restaurant space and one-third of the office space. “Businesses love the location, the easy access in and out, and the wide array of amenities for clientele and employees,” he says.
Mixed-use is not only an urban phenomenon, however. It is also an increasingly popular product type in the suburbs. “Las Vegas is finding itself restricted in developable land,” Sullivan says. “Most of the land in [our] county is owned by the Bureau of Land Management; only a small portion gets released every year for private use.”
Centra is working with KB Home to develop mixed-use in fast-developing suburban locations near the I-215 beltway. Stone Lake Village in Las Vegas’ neighboring city of Henderson, includes 1,400 medium- and high-density homes and condominiums situated around 20,000 square feet of retail space. Project Durango, a second partnership with KB Home, is a mixed-use, mid-rise residential complex combined with 700,000 square feet of office space and approximately 60,000 square feet of retail located in a newly developing area of the beltway in southwest Las Vegas.
A Pedestrian Purpose
In Colorado, mixed-use has become a mainstay. In downtown Denver, roughly 30 to 50 percent of new apartments and condominiums built since 1990 have included retail. The Genesis Group, a market research and analysis firm specializing in Colorado’s new housing industry, recently surveyed prospective buyers about their preferences in urban living. Vice President Mike Rinner says, “The number one criteria people look for after wanting their home to be a good investment and secure while they were away, is ‘walkability’ to dining and entertainment.”
The “walkability” factor is significant in suburban settings as well, Rinner says. In November 2006, a light rail that connects Colorado’s two biggest employment centers —the south I-25 business corridor and downtown Denver — will be complete. Rinner cites an example of two new condominium developments on either side of I-25 to illustrate the significance of walkability. “One has no adjacent retail or trails, and the walk to light rail is through parking lots for suburban office buildings. It has been selling very well for 2 years at about $210 per square foot and will be sold out this year. The other project has lofts over retail in a mixed-use environment very inviting to retail and is adjacent to walking trails through a new residential neighborhood. There are spectacular mountain views from the pedestrian bridge over I-25 to the light-rail station. Forty-five contracts were written for these lofts in the last 2 weeks of June at about $260 a square foot. I think this is evidence that a walkable environment makes a difference to buyers.”
In California, the downtowns of the state’s two major metropolitan centers of Los Angeles and San Francisco have proved inviting to mixed-use developers. Ted Slaught, a real estate broker with 25 years experience in commercial leasing and president of Hillcrest Development Partners, an affiliate of Charles Dunn Company, says, “Downtown Los Angeles is zoned commercial. As a result, virtually all of the housing that has been constructed and/or renovated downtown has commercial on the ground floor. Some buildings contain retail and restaurants, health clubs on the ground level — all the uses you’d find in freestanding commercial. There might be hospitality in the building, an office component and then condominiums on the floors above.”
At the same time, mixed-use is an element being used to revitalize the downtowns of older suburbs and significant but smaller cities as well. The Olson Company, which specializes in building urban infill communities, has constructed more than 100 developments in less than 20 years. Many are mixed-use and often integrate ground-floor retail with residential units, says David French, regional president for Metro Communities. A product type that has proved very successful for The Olson Company is the live/work unit, which combines a ground-floor office — often used for a small business like an art gallery or an accountancy practice — with a loft or townhome above. “Employment in the state has changed,” French says. “More and more people are working out of their homes. Live/work was developed to fit a specific need in the state.”
Like Rinner, The Olson Company understands the attraction that a walkable neighborhood holds for some homebuyers. The company uses “walk” in the name of all its communities, such as City Walk in Oakland, California, and 133 Promenade Walk in Long Beach, California, to emphasize that homeowners are close to services, shopping and entertainment.
Making Mixed-use Successful
While “walkability” is one significant factor in the success of mixed-use, there are others as well. Sullivan names “really great design” as important to Centra’s retail/commercial Town Square development. “We spent a lot of time looking at projects that did and did not work and talked to developers and architects,” he says. Rinner advises that the success of mixed-use projects depends on their execution. In a residential/retail mix, retail has to make sense and attract businesses. For example, “For Rent” signs on the ground floor of a residential building deter potential buyers. “An ‘engaging pedestrian environment’ is my mantra,” Rinner says.
The Olson Company has been successful in urban infill in general, and specifically in mixed-use, because the company has worked in partnership with cities and redevelopment agencies to revitalize urban centers. French says, “If you’re able to integrate retail space into the community you’ve accomplished two things cities are looking for — higher density and services nearby.”
“There is no blueprint, no perfect way to build these projects,” says Sullivan. “Every project is unique. The types of uses might be great in one place and fail in another. I think that developers have to be fluid in their thinking. It’s listening to your customer —Business 101 — and paying attention to what will work in that environment.”
Fox Plaza in Riverside, California
Developers: MetroPacific Properties and The Nicholson Company
Components: 500 condo and live/work lofts; 65,000 square feet of Class A retail and 120-unit high-end hotel
Groundbreaking: July 2007
Price Tag: $200 million
Project Architect: MVE & Partners
Angle: “The goal is to create a lifestyle center in Riverside’s downtown district. The project will bring upscale living and retail opportunities in an urban setting.”
— Siavash Barmand, principal at Tiburon, California-based MetroPacific Properties
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