Home Is Where the (Retail) Heart Is

From the very first outdoor markets centuries ago, to the iconic indoor malls that defined the retail landscape for much of the latter part of the 20th Century, commercial destinations have established clear boundaries between the retail function of the space and what were once naively considered to be “distractions”. Commercial development was about retail, almost to the complete exclusion of any other uses. It was not uncommon to see a few restaurants or cafes perhaps, or maybe a movie theater – but certainly not residential or hospitality. But, in recent years, things have changed. Today, as the power of mixed-use becomes increasingly evident, bringing residential and/or hotel components into a project is becoming more and more common, and the benefits of doing so have made themselves abundantly clear.

As developers, owners and operators – not to mention shoppers, guests and residents – have discovered, adding these new elements into the equation creates a more vibrant, invigorated and interconnected network of options, resources and experiences; a true mixed-use development. As savvy developers continue to break down arbitrary conceptual barriers and find new synergies between designed components, the retail “mall” is evolving into something entirely new: town- and lifestyle-center projects that are not just places to shop, but also to live, work and play.

The commercial, aesthetic and popular success of these developments has been so clearly evident, that the trend has had a defining and transformative impact on the industry. What was once virtually unheard of is now no longer a novelty, it is business-as-usual.

Despite some lingering concerns surrounding the current state of the national residential real estate market, this accelerating trend is clearly here to stay. But what is it that makes residential and hospitality exert such a profound influence over not only the ambiance and atmosphere, but also the bottom line of mixed-use projects?

On one level, the benefits of on-site residential or hospitality operate within the same baseline dynamics that drive all mixed-use design: an integrated mix of uses adds layers of depth and personality to a destination that are not just attractive, but defining. The effect of adding new uses to a project is not additive, but exponential, as the interplay of options and experiences inspires visitors to stay longer, do more and spend more. Mixed-use developments have been so successful precisely because of the innovative idea that people do not want a sterile retail behemoth; they are drawn to places that provide them with more choices and a more well-rounded experience, all in a pleasant, welcoming environment.

Whether it is freestanding residential or hospitality components or residential-above-retail options, bringing in actual living spaces to a lifestyle project not only adds to the designed density of the space, but strengthens the overall commercial profile. The built-in customer base, in close proximity to such a broad range of available retail, dining, service and entertainment amenities, creates a true “win-win” situation for both residents and developers alike. The financial benefits frequently extend to leasing as well, as residential or hospitality component can be a known factor; a preexisting customer base that can be very reassuring to a prospective retail tenant. A wider range of uses can also help minimize the impact of any potential financial downturn in one market segment, as one component can help compensate for a slowdown that may be impacting another portion of the project.

Although mixed-use projects with residential or hospitality uses do work in suburban locations, they tend to thrive in more urban environments. In this context, some limited service hotels are being almost entirely reinvented to function as a new type of product – a little edgier, more urban; perhaps catering to a slightly younger professional demographic. Similarly, residential components are designed to become part of a vibrant urban lifestyle; frequently offering a different type of loft or apartment product that becomes inextricably linked to a project, and in fact goes a long way toward establishing a memorable and defining sense of place. These dynamic projects tend to be more attractive to surrounding communities, and often find a more welcome public reception than the average retail strip center.

The impact of residential and hospitality uses is not limited to increased drawing power and a more robust bottom line. Every step in the process of the design and management of mixed-use centers, from site selection, to tenant mix, to day-to-day operations, needs to be evaluated through a new – or at least different – lens. Developers frequently respond to the increased complexity of these mixed-use projects by drawing on a broader range of expertise and experience, often using a different contractor for each component. Selling, leasing and managing separate residential or hospitality components is sometimes contracted out locally, but if the design calls for residential-above-retail, the interplay of residential and retail uses and the potential implications for the architectural character and the long-term success of the project are significant enough that responsible developers should be closely managing development in-house. Understandably, this dramatically narrows the field of developers who are willing and able to successfully take on and execute these kinds of projects .

While the inescapable design and functionality complexities and potential complications that can arise from mixed-use designs with prominent residential or hospitality components can seem daunting, the payoff can be significant. The reward for working alongside an experienced developer who can skillfully navigate through possible design difficulties, zoning issues, more complex management issues, or even apparent conflicts of interest between competing uses, is a finished product that reflects the best ideals of place-making design.

The bottom line is that residential and hospitality components allow a mixed-use development to become even more “mixed”. Just as adding additional legs to a stool or chair results in a more stable piece of furniture, these new uses can provide strong and enduring commercial benefits and lifestyle enhancements. In these designed environments, where residents and guests can walk to all of the amenities and visitors feel part of a larger mixed-use community, residential and hospitality options can actually serve as their own anchor. As long as architects and developers continue to create well-rounded projects where the concept, design and functionality of these new uses is seamlessly integrated into the larger development and demographic context of the project, this exciting trend seems certain to continue.

Hutchens is the president and chief executive officer of Sarasota, FL-based Casto Lifestyle Properties. The opinions expressed are the author’s own.