Before delving into the specifics of mixed-use development, it's crucial to understand the current context. This is a truly unique moment in the real estate cycle, where the industry faces an almost unprecedented mix of secular and cyclical shifts. Cyclical shifts such as higher interest rates, rising construction costs, and temporarily slowing demand are accompanied by secular shifts like the change in office space usage in a remote world and increased demand for more experiential spaces. The bar has been raised, thanks to technological advancements that will shape how people live, work, and invest in real estate.

Top Success Factors for Mixed-Use Developers

Right Anchor Strategy

In the past, the anchor was simply the tenant filling a large portion of a development's space. However, today, it means something more. Successful developers are defining anchors more expansively and setting a higher bar. It could be a major sporting or events venue as a central draw or a collection of great restaurants, specialty food shops, and food trucks creating a compelling food scene. By stepping back and thinking deeply about the area's unique value proposition, developers can set a differentiated "right to win" and connect it to the anchor strategy. For instance, in an arts ecosystem-focused right to win, anchors might include an important museum along with galleries, dance studios, and street musicians.

Some of the only large-scale projects attracting investment today are those approaching anchors strategically. This approach can continue to differentiate projects even after market conditions stabilize.

Thoughtful Programming

A successful anchor strategy needs to be complemented by intentional curation of events and experiences. Multifaceted programming makes mixed-use areas active and vibrant, drawing people around the clock. It could be art installations, live music, seasonal events, or pick-up flag football games. The public space should be viewed as another experiential tenant and a core part of the brand.

Real estate developers now need a new set of skills in the operations team, including experience and digital engagement. The experience team should constantly think about the customer, offer excellent add-on services like a wedding planner, and be involved in project planning from the start. Digital capabilities are also essential, such as an app for residents to arrange services or for visitors to learn about events.

Bringing Nature In

This trend started before the pandemic and is even more important now. People don't want to be completely disconnected from nature in urban areas. There are recent developments in midtown Manhattan with fantastic roof decks and green spaces where people can sit outside and enjoy the city view. Developers need to intentionally integrate nature or an outdoor experience into the development.

These spaces prove that a mixed-use development doesn't have to be near a nature preserve. It shows that by integrating nature, developers can enhance the living and working experience.

These success factors may add costs, but they pay off. In the last few years, we've seen a significant divergence in property performance. Outstanding experiences, especially digital ones, lead to higher NOI and enhanced renewal rates. This dynamic holds true for mixed-use districts as well.

Success is a virtuous cycle where people are drawn to an area, companies follow for talent, and businesses come for the activity. At the core is an attractive place where people want to be.