December 14, 2016
WITH MIXED-USE, THE REWARDS ARE WORTH THE RISK
Via Bisnow – Chuck Sudo
A growing number of multifamily developments these days are part of mixed-use, as developers are building the communities of the future. But these projects have unique challenges.
Our mixed-use panel at BMAC Midwest—Citylift Parking CEO Scott Gable, Murphy Development Group president John Murphy, Higgins Development Partners CEO Jack Higgins, KTGY Architecture + Planning principal David Kennedy, McCaffery Interests managing director Clayton McCaffery and moderator, Focus Development CEO Tim Anderson—engaged in a spirited roundtable on the state of mixed-use development and what they’re doing to build communities that last.
Financing Can Be A Challenge.
McCaffery Interests managing director Clayton McCaffery says his firm’s financial team defines mixed-use as anything that isn’t a pure asset. If a development has two sources of revenue—examples: residential and retail; retail and parking—underwriting is difficult. Mixed-use developers trying to secure funding struggle to make lenders comfortable with how each aspect of a development contributes to its long-term success. If those objections can be addressed adequately, the lenders tend to get on board.
Identifying What Underserved Communities Need.
Murphy Development Group president John Murphy says identifying the best mixed-use opportunities requires determining complementary uses to underserved segments of the population that need a specific product type. For the redevelopment of the former Cook County Hospital campus, which Murphy Development is spearheading, John found there was significant demand and opportunity to provide medical research, residential, hospitality and office space to a population that was never offered it. The county hospital building, which John says is derelict, provides up to 1.9M SF of FAR to work with.
KTGY Architecture + Planning principal David Kennedy says there’s more value to a mixed-use project if it’s integrated from a design standpoint. That means paying attention to the less sexy details of a building like HVAC, plumbing, signage and refuse. These have to work for every tenant in a project. His firm is working with clients to design mixed-use concepts and amenities that are outside the box, but within the traditional modular model of retail below, residential above. That could mean incorporating a YMCA or a library into senior housing, or streamlining the amenities offered to residential tenants. Example: if a retail tenant in a mixed-use project is a gym, there’s little need for a fitness room in the apartment building above. David and John both urge developers not to underestimate the need for adequate greenspace in a mixed-use project. That’s truly an amenity, regardless of the asset user.
The Planning Metrics are Changing.
Higgins Development Partners CEO Jack Higgins says municipalities and lenders are still working with old metrics to mixed-use planning and funding, but disruptive trends like Uber and TOD and the fast pace of technological change are taking former modules like parking and wired communications out of the development equation. Jack says if municipalities recognize this and are flexible with their zoning, it can be to the benefit of mixed-use developers well into the future.
What Will Happen to Parking?
No older metric is more scrutinized than parking. A study of downtown Chicago parking garages found only 30% of them are being used at night. This is creating opportunities for CityLift Parking CEO Scott Gable. CityLift built an automated parking structure in part of the Bay Area filled with residential, office and retail/restaurants that had little on-street parking. The structure can hold 39 vehicles, which are ferried to their spots via an elevator shaft. It can be used for monthly users like office workers during the day, and at night becomes valet parking for nearby bars and restaurants. Scott says Citylift has been brought in on projects to rethink how garages can be repurposed, while still retaining parking as a component to a project.
John Murphy brought up a hotel his firm built on the campus of the Cleveland Clinic with 11,000 parking spaces. The client considered parking to be the top asset and wanted room to expand to 14,000 spaces in the next two years, but the changes in how people get from Point A to Point B means now the client isn’t sure it will need 5,000 spaces five years from now.
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