RECOMMENDING A SMART INVESTMENT FOR YOUR CLIENTS
By Gavin Susman
With such a large amount of inventory available, it can be a daunting process to sift through the choices so that you are equipped to make the best investment recommendation. Couple the profusion with variety and the process can be even more overwhelming. If you understand what makes for an optimal mixed-use project, it is a lot easier to narrow the options for your clients.
Mixed-use projects have a healthy mix of residential, commercial and retail components.
There is no magic formula that dictates the ideal split between the three, and each project is unique in nature. However, a great deal of the development’s composition will be determined by zoning requirements. Usually, in new site plan approvals, the city tries to accommodate the needs of the community and gives the approval based on those needs.
For instance, in a new community where there is no retail available, you may find the developer focusing on increasing the size of the retail space. By contrast, if the area is in dire need of an office building, then the developer will maximize that segment. The ideal scenario is one in which the developer successfully integrates all three components into the mixed-use project.
It is the neighborhood that will determine what type of residential units will be built. The larger areas are typically in the suburbs, rather than in the center of the cities. Therefore, the typical residential construction for a mixed-use project is condominiums, or some form of attached townhomes. To illustrate, City Park Aventura, our new mixed-use lifestyle community, will consist of a 150,000-square-foot office tower, 50,000 square feet of retail and 104 residential units broken down into 36 townhomes and 68 condos plus a 16-story, 198-room hotel. The residential units are intended to be unique in their design as the City of Aventura is not in need of new high-rise condos.
Once a mixed-use project is built, the demographic is dynamic. Although it is feasible and desirable to live and work in the same community, it is not the norm, at least to date. In fact, when the developer first evaluates the demographics for the commercial components, he or she does not rely on the residential owners to support the remaining parts of the project. While community residents will frequent the retail component, the retail shops are typically supported by outside patrons.
In some cases, however, amenities of one component of a mixed-use project can be used to sell another. For example, at City Park Aventura we are offering owners of our townhomes and condos the opportunity to use the fitness center and pool area at the hotel. This is an added bonus that we hope will attract homeowners. Developers also offer to promote living and working in the same community, discounts on commercial/retail leases for residents and discounts on pre-construction residential units for tenants and business owners.
In the depressed real estate market today, we are seeing the mixed-use concept being used as a life-saving tool. If the initial plan was to build the residential component of the project first, developers are now modifying those plans to focus on the commercial component and leaving the residential component for the end with the hope that by the time the residences will be built, the market will rebound and there will be more of a need for that component. The notion that “if you build it they will come” is no longer relevant in South Florida, so mixed-use tends to be the preferred approach among developers and lenders alike.
Gavin Susman is the COO of Sky Development Inc. He can be reached at 305.933.4646 ext. 103, or by e-mail at Gavin@skydevelopmentinc.com.
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