Mike Kennedy leads Mixed Use panel discussion at Pacific Coast Builders Multifamily Conference in San Francisco, CAPosted on June 27, 2014
By Natalie Dolce (Event Coverage – SAN FRANCISCO) Developing a mixed-use property makes difficult sites feasible from a financial perspective. It makes it more attractive. That is according to David Pierce, SVP of development at Inland American, during a mixed-use panel at PCBC. He pointed out that retail, even if a minor component at the property can bring 30% of the income on the site making it worthwhile for a higher land cost.
The panel, titled Mixed-Use Means More Money, was moderated by Mike Kennedy, an SVP at Avison Young. When he asked panelists another benefit to having mixed uses at multifamily properties, Hal Fairbanks, VP of acquisition at HRI Properties, said that having a mix of uses can also help in community support for the project to actually get done. There are a lot of market intangibles, he said.
Tenants will pay more for unique properties, said Fairbanks. The mixed use helps us optimize the site.
John Orfield, principal at BOKA Powell, agreed, adding that mixed spaces may retain real estate property values longer. From a getting it approved standpoint, financing and equity and all that, he said, the long-term viability of a deal is that is it a better place to live. The residents are going to want to be there and help drive the retail, he explained. It is a great add for the retail to know you have the built in population.
But one of the things that Orfield’s firm struggles with is the role of the retail development within a project and figuring out what it is going to be. Setting up a retail environment that is conducive to the tenants you are targeting is key.
Pierce added that retail rightsizing is a big issue in Inland American developments. You really have to understand the market, he said. The biggest killer in a mixed-use deal is empty retail on the ground floor We are very careful in how we evaluate retail opportunities.
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