An overwhelming majority of developers, investors and others in the real estate industry think mixed-use projects will grow as a share of their overall portfolios over the next five years, according to results of a survey released Nov. 17. Survey respondents (93%) think their involvement in mixed-use developments will rise between now and 2011.
“It is clear from the respondents that mixed-use is a trend that’s here to stay,” says Amita Juneja, research director for the Building Owners and Managers Association International. The survey results suggest that developers, investors and others are “extremely optimistic” about mixed-use projects, Juneja says.
The mixed-use survey questioned about 1,000 members of BOMA, the International Council of Shopping Centers, the National Association of Industrial and Office Properties and the National Multi Housing Council. The survey was conducted July 11 through Aug. 3. Survey results were delivered at the 2006 Conference on Mixed-Use Development in Hollywood, Fla.
Nearly 80% — primarily developers and investors — of survey respondents say they’re currently involved in or are planning mixed-use projects. Mixed-use projects now constitute 33% of the total business of people questioned in the survey. That compares with 27% of the overall business for respondents in a 2004 NAIOP survey.
In order of importance, the top three factors that will drive the mixed-use trend over the next five years, according to the new survey, are encouragement by public agencies, such as economic development and planning and zoning departments; rising land prices; and the convenience of live/work/play options in a single location. Today, respondents think the main drivers are (in order) live/work/play convenience, rising land prices and encouragement by public agencies.
Developers, investors and others in the real estate industry think the key challenges of mixed-use ventures are assembling the land, maneuvering through the zoning process and managing the financial obstacles of sequenced rollouts of project components.
The main ingredients for financial success of a mixed-use project, according to the survey, are proximity to a major employer, university or entertainment functions, development as part of a master-planned site, and an urban location.
Respondents (70%) also say mixed-use projects are financially riskier than single-use projects. However, 47% of those questioned say lenders now are more willing to finance an entire mixed-use project, rather than piece by piece, and 63% say lenders now are more knowledgeable about mixed-use developments.
Between 25% and 30% of respondents say the availability of capital is tougher for mixed-use projects than single-use developments, the pricing of debt is higher and the amount of required equity is steeper. For a mixed-use project to succeed financially, participation from the public sector is critical, according to 59% of survey respondents.
Mark Obrinsky, vice president of research and chief economist for NMHC, says it’s apparent from the survey results that developers must have deep pockets to undertake mixed-use projects.
Also at the Conference on Mixed-Use Development — billed as the first industrywide gathering on the topic — a new working definition for mixed-use projects was unveiled by BOMA, ICSC, NAIOP and NHMC:
“A mixed-use development is a real estate project with planned integration of some combination of retail, office, residential, hotel, recreation or other functions. It is pedestrian-oriented and contains elements of a live-work-play environment. It maximizes space usage, has amenities and architectural expression and tends to mitigate traffic and sprawl.”
About 1,100 people registered to attend the conference, which was hosted by BOMA, ICSC, NAIOP, NHMC and the American Resort Development Association.