The Art of the Mixed-Use Deal

Over: “There’s a bit of art behind the science of creating the retail experience. It’s not always a rectangular piece of dirt.”

WASHINGTON, DC—There’s a mixed-bag of hurdles involved in getting mixed-use real estate right, from rightsizing the square footage to choosing the proper venue for the tenancy and the surrounding community. In this GlobeSt.com exclusive, Nick Over, vice president and director of development in RPAI’s Eastern division, shares some of his expertise in setting up for success. And while most of his comments reflect mixed-use applications, you’ll see applicability in standalone retail as well.  

When it comes to right-sizing the retail square footage, for instance, Over says much depends on the nature of the community. “Each project is unique in the marketplace,” he says. So specific questions must follow: How does the competition stack up? Is it more of a local or regional power-type site? Is it on a major highway or intersection? And then there’s the obvious . . . how much square footage do you have on which to build—and then optimize—FAR?

It might sound simplistic, but Over stresses that “you also have to understand the real estate. As a DC guy, I understand the Washington-Virginia-Maryland market.  You have to understand how the roads work and where potential customers are coming from.  It’s not always accurate to put a pin down and measure a three-mile ring.  Where are the barriers?” This last is an important nuance since, he says, barriers such as major roads may stop potential customers from coming . . . even if the destination is a mile or two away.

Newcomers to the sector would do well also to remember Over’s advice: “There’s a bit of art behind the science of creating the retail experience.  It’s not just a rectangular piece of dirt.”

Part of the art is knowing when to do retail at all.  “I’ve seen developers come in and go for their entitlements,” he says, “and, through the process, they may be required to have a retail component. But you’ll often see retail space that’s always vacant, or uses that aren’t ideal because the retail simply shouldn’t be there. So when you’re evaluating mixed-use, the first question is if the retail will work in the first place.” Candidly, he admits to having fallen victim to that entitlements trap as well.

We hear much these days about the retail “experience.” Interestingly, Over says there are two definitions—one for the developer and one for the consumer.

“When tenants talk about the retail experience, it’s about the retailer,” he says. “At Crown Farm in Gaithersburg, for instance, we have a tenant, Coastal Flats, which is part of the Great American restaurant chain. They’re unique and they drive a ton of traffic.”

For the developer, it’s about the retailer and more: It’s also about the physical space. “What’s the storefront look like? Do we have outdoor dining space and if so, what’s the sidewalk design? What’s the landscaping? That to me is what the retail experience, especially in an open air center, is all about.” 

Ultimately, what’s the right mix of retail/office/residential to enhance the overall experience for the residential or commercial tenant? That, says Over, “is a tough question, only because it depends on where we are in the market. Are we out farther away in the suburbs? Are we close to mass transit?”

He says he particularly “loves having a mix of office in my projects to help me drive weekday traffic.” This is especially true for cost-justifying the parking-structure expense. 

“Where we’re close to mass transit, we’ll typically have parking structures, so the cost is obviously high,” he explains. “But when you have office and retail with restaurants they cross-park perfectly. The peak restaurant hours occur when the office building is empty. And so the parking is usually full. It helps subsidize the cost of the structure.”

It is, he says, a great example of maximizing performance. It also underscores the art of the science.