Mixed-use development remains the buzzword of choice as more retail REITs look to add apartments, offices or hotels to new or existing shopping centers. During the National Association of Real Estate Investment Trusts conference this week, Pennsylvania REIT became the latest to push the mixed-use mantra, saying it would add residential components to its planned 500-acre Gainesville, Fla. complex and to its Echelon mall in Voorhees, N.J.
Simon Property Group, which has been talking about “asset intensification” for more than a year now, is going even further down the road toward mixed use: Its new goal, according to David Simon, company president and CEO, is to include residential, commercial or hotel components in most of its new developments, with the exception of outlet centers. (Meanwhile, company founder Melvin Simon, through side venture Melvin Simon & Associates, is joining forces with Starwood Hotels & Resorts Worldwide Inc. and the LeFrak Organization to build The Westin Jersey City as the latest addition to the 16-million-square-foot Newport development.)
REIT executives joining the mixed-use bandwagon say that the market conditions now are right to take on the added risk and complexity inherent to mixed-use deals. PREIT chairman and CEO Ronald Rubin, who told investors at the NAREIT forum that the company will ramp up its mixed-use pipeline, cited higher gasoline prices as one reason why PREIT feels that the merger of retail and residential development will prove profitable. Rubin believes people are foregoing extra car trips and looking to shop closer to home.
“With the price of gasoline, people want to live next to retail complexes. This is a format that we think has great possibility, ” Rubin has noted.
PREIT’s move back into residential comes just more than three years after it sold off its residential portfolio to focus exclusively on retail.
Chad Firsel, executive vice president with Baum Realty Group, Inc., a retail investment brokerage firm in Chicago, says mixed-use demand is based on something more fundamental: a yearning for urban living. “People like to feel as part of a community, they want to be around other people,” he says. “If you can create a mixed-use concept that has an entertainment component, such as outdoor cafes, theaters or bowling alleys, that is the hottest kind of a development that you can put out there right now. I don’t see it going anywhere but up.”
In the view of the executives at Simon Property Group, Inc., mixed-use complexes simply make sense from the retailers’ point of view. Simon has already opened one mixed-use center in Jacksonville, Fla. in a joint venture with Atlanta-based Ben Carter Properties, LLC, and has three additional projects under construction, including a 1.2 million square foot retail/residential/office complex called Coconut Point in Estero, Fla., The Domain in Austin, and The Village at SouthPark in Charlotte, N.C.
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