Mixed Use Success – Stick With What You Know!

Mixed use requires residential, retail, and office components to be individually successful. Empty retail dramatically affects residential rents/absorption, just as residential failure destroys retail value within a project. To create success in this environment, mixed use developers must be realistic about their expertise and capacity. Retail developers are “business-to-business” operators, while residential developers service customers’ homes 24/7, two extremely different cultures; which if redirected, destroys customer confidence leading to project failure or value limitations. This need for focus and specialization is what is driving the multiple joint ventures that are taking place among real estate companies throughout the country.

Historically, real estate developers have made investments outside their focus area all too often, and the evidence shows a lack of return on capital. Most of the developers either cap their future capacity by continuing to struggle through, or more appropriately take a loss to exit the new venture in order to get back to their core focus. As a developer and entreprenuer, I understand the desire to control my own destiny, and fall into the “if someone else can do it, than so can I,” trap, but I have also learned the dangers of acting on those thoughts.

Unsuccessful projects are a big black eye for all mixed use projects. Find a partner or provider for the product in which you don’t excel, make sure they have been through the development of a mixed use project before, and lock them in to help them complete your next mixed use project, and that will be a big step towards making your project successful!