Managing the Mixed-Use ‘Micro-City’

Lela Cirjakovic and Kristin Muelller

One of the many outcomes from the COVID-19 pandemic was the blurred lines formed between live, work and play expectations. This shift in consumer preferences created the need for commercial real estate experts to rethink functionality of all asset types, paving the way for the rise of the mixed-use development. But why mixed-use?

Typically offering a combination of retail, multi-housing, office and even a hotel component, a mixed-use asset works to meet the consumer’s need for convenience, productivity and entertainment. The ability to wake up in one’s home, get a cup of coffee downstairs, walk to work and engage in a nearby afternoon leisure drives the appeal of mixed-use communities to consumers of all ages who value time and experience above all else.

READ ALSO: Getting in the Heads of Mixed-Use Owners, Occupiers

In addition to meeting the needs of the consumer, mixed-use has also proved to be beneficial to the developer and investors. With some brick-and-mortar retail centers and office buildings seeing distress and struggling to meet occupancy goals, it has become clear that mixed-used properties offer more than a favorable mix of tenant and visitor amenities. They can also provide a stable revenue stream in an otherwise unpredictable rental market as multiple asset classes allow for diverse income streams. Transactions with multiple components enable blending lower- and higher-yielding property sectors for a competitive return.

Mixed-use asset pricing tends to outperform other single-asset classes and demonstrates faster stabilization and higher rental rates when brought to the market.  Additionally, mixed-use projects have shown a notable divergence in performance over the broader submarket, with accelerated lease-up and premium rental rates. The assets even have the ability to enhance the performance of the entire submarket as a whole.

According to a 2022 study from JLL, office assets, for example, in mixed-use environments generate a 24 percent rental premium and 10.2 percent higher occupancy rate than the submarket average.  In the mixed-use environment, multi-housing elements benefit from the immediate availability of amenities and as such, demand a 31 percent rental premium and 2.9 percent higher occupancy rate than the submarket average.

Multi-housing and retail specifically have a symbiotic relationship in their performance within mixed-use communities. For example, when looking at an underutilized shopping mall, a developer can repurpose the mall to include both a portion of the retail, as well as a multi-housing component. The multi-housing component performs well as malls are typically located in densely populated areas in need of additional housing. At the same time, the retail component also thrives as it is now closer to an immediate consumer base.

Activating and optimizing the mixed-use asset

The Plaza Coral Gables in Coral Gables¹, Florida, for example, is a prime example of how mixed-use developments are transforming unused or misused infill locations into a daily destination.

Managed by JLL Property Management, the seven-acre property consists of The Reserve at the Plaza, a 235-unit luxury apartment community; Galiano Residences, a 39-unit townhome community; two Class A office towers, totaling 455,008 square feet; 161,000 square feet of retail space connecting the office towers and the 242-key Loews Hotel through a two-level paseo; and a 2,200-space technology infused parking garage, providing ample parking and ease of access for all vertical elements of the project. Additionally, JLL Property Management is responsible for the activation of the project’s extensive shared common areas, including open green space, interactive amenities and an impressive public art collection. The newest addition to the Plaza’s art display is the KAWS’ “WAITING” sculpture on the main lawn. This marks the third and final sculpture within the WATING collection with its two counterparts in Detroit and Brooklyn.

The Plaza Coral Gables, which JLL manages on behalf of Agave Holdings LLC, represents a generational and transformational shift in the Coral Gables community, providing South Florida residents a one-of-a-kind work, live and play opportunity. Coalescing these project elements creates a true destination for South Floridians and an unparalleled office and living option for residents and companies who choose to make Coral Gables their home.

However, mixed-use developments are, by nature, very complex undertakings as they create what is essentially a self-contained micro-city with a variety of property types and tenancy. As these developments become larger in scale, more multifaceted in their amenity offerings and more experience-driven, understanding the unique nature of mixed-use projects and establishing a connection across all asset classes becomes critical to a successful management strategy.

Partnering with the right the property management firm that will most effectively break down the asset class barriers, oversee all critical operations (facility management, tenant relations, retail sales growth, development of project revenues, finance and budgeting, client service experience, communications and technology), provide consistency across all asset classes and meet the overall tenant and visitor experience is crucial for success in today’s market.

Connecting all the components

Additionally, in uniting the various property types, technology plays a vital role in the function of the community. “Wi-Fi and cellular connectivity are the backbone for building other experiences within the community,” according to Jason Lund, JLL Property Management’s lead of technology infrastructure.”  “They act as the two rails that the train of technology runs on and unite the entire experience.”

When connecting the different aspects of the community technologically with effective Wi-Fi and cellular signals, property managers allow members to explore the community with a computer in one hand and a phone in the other without a broken experience. Technology is also the basis for further amenitizing the community, especially in creating effective property apps.

In addition to the benefits offered to consumers, developers and investors, mixed-use properties prove to be a vital part of a larger ecosystem. For instance, city planners take notice of the employment opportunities as well as the tax benefits offered by mixed-use assets. In addition, the communities address top environmental concerns as consumers use less public and private transit due to the convenient walkability.

As high expectations for connectivity between one’s living, workplace, and leisure remain, it is clear that the presence of mixed-use properties will only continue to develop. The coming years present endless possibilities to further shape the consumer experience and increase the overall bottom line with mixed-use properties, and unified management of all components will be critical in this transformation.

Lela Cirjakovic is head of JLL Multifamily Property Management, and Kristin Mueller is head of JLL Retail Property Management.