Mixed-Use Projects Are:
When things get tough, mix it up. If it weren’t so cheesy, that might be a good saying for respondents of last week’s Quick Poll, 81% of which stated their belief that mixed-use projects are “More Important Than Ever,” leaving only 19% who thought the projects were “Not as Practical in This Economy.” Carey Levy, president of Irvine, CA-based Passco Companies Development LLC, believes mixed-use projects will have a tough time, but in the long-run, when the squeamishness in the financing markets eases, such projects will regain favor in the development community because they serve a social purpose.
I do believe that mixed-use is a very viable development option, and I think it’s a much needed product type. Most of these projects are going to go into infill metropolitan areas, and most of this development is occurring in either in blighted areas, or it’s a redevelopment component, a teardown, or a repositioning of properties, so that’s a good thing. Mixed-use projects also give young professionals a lifestyle are seeking, they give them an option to live, and work and shop in the same environment. That’s what they want today.
However, I do see that there’s a stall in the process of development of mixed-use. Retail, for example, is overbuilt—in the last five years everybody’s built retail, retail, retail. Now you have a housing slowdown, and that trickles into the commercial economy, so retailers are saying there will be no expansion for a while. You’re seeing the anchors stopping or slowing down for a while, and some centers not being able to be built for a while.
These projects also take a lot more money than just a residential project alone. You’re taking condos or apartments, and you’re stacking them and building that with subterranean or wrap-around parking and some retail and may be some office. Such projects take longer and require more money and the lenders have backed away from taking that kind of risk. You’re seeing a stall across the board in product types, but those projects are more risky and longer term.
So, the lenders have backed away from these projects, which has caused the developers to back away. Mixed-use is going to be stalled for sometime, until the economy returns to normal, but I think it’s going to be a very favorable development component of building society.
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