CHICAGO—Even though investors have begun pouring money into commercial real estate sectors such as multifamily, industrial and senior housing, they remain cautious when it comes to most retail. However, urban infill retail has largely captured their imagination. And yesterday at the Urban Land Institute's Fall Meeting, a panel of experts wrestled with the difficulties presented when developing retail in dense urban cores.

John L. Bucksbaum, the former president and CEO of General Growth Companies, Inc., said he spent most of his career in the suburbs. “Suburban retail is still very, very strong. The good malls are only going to get better.” However, he added that he “grew up on the development side of the business,” and since new suburban developments have gotten less common, as the head of Bucksbaum Retail Properties LLC, he now focuses on urban infill retail.

Matthew Wakenight, the senior vice president, investments for Equity Residential Properties, said urban residential developers need to learn how to properly add in a retail component to their projects, even if it comprises a relatively small portion of the total cost. Although the benefits are very hard to measure, the life properly-designed retail brings to the street does create value, he believes, by making residents more loyal to an area. “If you're walking by vacant retail everyday, it doesn't help. People want to live there and say, 'that's my coffeeshop.'”

But any retail chosen for a residential project has to be chosen with care. Many retailers keep hours that disturb residents, and the all the needed deliveries can make things even worse. “I want the Whole Foods across the street,” Wakenight said, not next door.

“There can be complications,” Bucksbaum agreed, when trying to meld retail and residential. Unlike retail-specific buildings constructed in the relatively open spaces in the suburbs, urban buildings primarily designed to take advantage of the high yields in the residential sector sometimes can't provide retailers with everything they want. Bucksbaum added that he recently lost a retailer who wasn't happy with the layout in a 19-story tower. The firm was able to find them another space, however, and he believes developers might just have to work harder to find the right retailers. “They do complicate the situation, but generally, you can find solutions.”

Wakenight said he has found patience very valuable. In one of their buildings, a nail salon wanted to occupy one of the retail spaces, but after realizing the neighborhood already had too many salons, they turned them down and deliberately left the space vacant for months. But eventually, they secured a wine bar as a tenant, and changed the tone of the neighborhood for the better. “We stay focused on what we want the place to be.”