When planning a mixed-use site, it's imperative to choose a retail anchor that tenants and the community at large will actually like.
As multifamily development continues to pick up in resurgent downtowns and city centers across the country, identifying the right complementary retail tenants remains an important part of the development mix.
The first consideration should always be identifying the right candidates to suit the tone and tenor of both the neighborhood in general and the residence in particular. A fast-food brand is unlikely to be a good fit for your new luxury apartment building, for example.
The biggest and most important priority is finding retail concepts that people like: places they want to visit, products they want to purchase, and services they want to use. Staying in touch with which retail concepts are resonating with multifamily tenants will continue to be a key piece of the mixed-use puzzle.
Here's what the multifamily retail landscape looks like in 2018:
Coffee Is Still Hot
You can’t have a discussion about retail and multifamily without mentioning coffee shops. Saturation is always a concern when you have a segment this hot (no pun intended). As coffee consumption continues to increase, more coffee shops and concepts will open. Although Starbucks remains a top contender in the coffee niche, we’re seeing the millennial generation placing more of an emphasis on unique coffee concepts—and they're willing to pay more for it.
For example, coffee chains like Blue Bottle Coffee are beginning to disrupt the sector. They provide a trendy boutique feel but still have the advantage of being a chain, so people know what to expect no matter what location they visit. This proliferation and popularity of niche products and concepts shows no sign of slowing down. This is a trend that is evident across the retail spectrum, with plenty of local, regional, and national names to choose from.
Authenticity in Demand
We're witnessing a surge of interest in local, authentic, nonchain retail concepts—a trend especially evident in the restaurant sector. There are a mix of national chains wanting to get into the market—with mixed success—and local/homegrown food purveyors who are still the most desirable tenants downtown. Nationally, casual dining concepts are in demand, and those with an authentic feel or fresh approach are getting the most attention. Bakersfield, for example, a popular new restaurant concept inspired by authentic Mexican street fare, is expanding across the Midwest and the Ohio Valley.
At Your Service
Dining concepts and service retail, such as laundromats, convenience stores, and banks, remain among the strongest-performing categories for multifamily. In any city where urban development and redevelopment are picking up steam, population growth is driving a corresponding need for service retail. With continuing uncertainty about the relationship between online retailers and traditional brick-and-mortar brands, food and service retail will never go out of style.
Working It Out
Cycling, yoga studios, and a whole range of new and emerging exercise concepts continue to gain traction in mixed use. From kickboxing and Pilates to variations on CrossFit-style personal-training gyms, this is a space where innovation and creativity have really taken off. The convenience of being able to exercise in the same building as one lives continues to be a driving factor in the multifamily landscape, especially for urban dwellers.
Local and Regional Edge
Two things tend to give popular local and regional retailers somewhat of an edge when it comes to urban multifamily synergy. First, in the early stages of a turnaround like the one we're seeing in Detroit, brokers, developers, and civic leaders are recognizing the unique opportunity available to carefully curate the retail and mixed-use environment. They tend to be focused on interesting, innovative concepts.
There still isn’t a ton of available retail space in downtown Detroit, but as more space opens up, we’ll likely see more-familiar, national concepts finding ways to get a foot in the door—that is, if they can overcome the second issue behind local and regional retailers' prominence: size. National chains tend to be somewhat formulaic with respect to store size and layouts, which can be tricky in an urban context where older spaces aren’t all going to be the ideal cookie-cutter size. Some flexibility and experimentation will likely be needed.
Look at how long it's taken Target to refine and settle on a workable urban concept, for example. That will likely remain a challenge for more than a few national brands in the years ahead.
Quality and Experience
With growing demand for “something different,” retailers are finding creative new ways to differentiate themselves. Sometimes that’s a high-end concept, like a full-service dermatology office similar to The Carter Snell Skin Center in our property The Scott at Brush Park in Detroit, or a premium product, like the artfully crafted city bikes from Detroit Bikes in our nearby property The Albert Capitol Park. Other times, it’s a retail experience that's more service oriented, as with optician Warby Parker.
In sum, it’s all about finding a way to reposition yourself within a specific niche, like branding a beauty-products retailer as an apothecary and focusing on organic and all-natural health and wellness products and services.
Understanding which brands and multifamily-friendly retail concepts have traction, and which new ideas are coming down the pipeline in the months and years ahead, isn’t just a big part of developing successful apartment projects and thriving neighborhoods—it’s about creating dynamic, diverse, engaging urban environments. The places where people will want to live, work, play, and stay.
By Beth Mattson-Teig
Contributor, Shopping Centers Today
Chinese retailers offer shoppers a glimpse of what the retail future could look like, with fully automated, self-service stores. Such concepts as EasyGo and BingoBox operate somewhat like a huge vending machine: Shoppers patronize these “staffless” stores independently, using their smartphones to summon up and scan merchandise and then to pay for it upon exit. Alibaba, for one, is rolling out dozens of highly automated HEMA supermarkets.
U.S. retailers too are trying to figure out how they can leverage automation to improve the customer experience. “We haven’t seen as much of it in the U.S., but we are absolutely seeing a move towards more automation in the stores, with cashier-free automated kiosks, ordering kiosks and order-ahead apps,” said Melina Cordero, CBRE’s head of retail research for the Americas. Increasingly, retailers are seeking ways to improve the shopping experience and also to reduce labor costs while improving operational efficiency. “Convenience is number one for the U.S. consumer, so every retailer is thinking about how they can drive that and lower the friction points of getting people into the store,” Cordero said.
Amazon Go has spearheaded efforts in the U.S. using so-called “just walk out” technology, notes Donna Stevens, director of store-transformation solution management at tech company NCR Corp. The Amazon Go stores allow shoppers to skip the checkout lines by relying instead on sensors and product-tracking technology.
Walmart and Kroger are testing out mobile scanning that enables shoppers to scan and pay by smartphone. On the apparel side are Zara and Burberry, both of which are experimenting with self-service kiosks at select stores for online orders and returns. Meanwhile, Nordstrom and Sephora employ mobile POS systems like those at Apple stores, by which sales associates can do checkout for the shopper from anywhere on the sales floor.
“These retailers are pretty open-minded about how they are tackling the checkout problem and the queuing problem and [about] finding ways to make it easier for consumers,” said Stevens. Where retailers may struggle, she says, is in expanding these initiatives across their broader store network.
Among the downsides to this type of self-service technology are the risks of theft, fraud and losing a touch point with the customer at the point of sale. But on the upside, being able to automate the rote tasks in these transactions frees up the retailer to focus on direct customer service and assistance, Cordero notes.
Retailers also need to consider the value proposition that the technology is bringing, proponents say. “You have to have a real business case behind it,” said Stevens. “What’s the right balance of this disruptive technology, and where is the tipping point between introducing technology that is cool but also really provides efficiencies and savings?”
It is virtually certain that some retailers will be eager adopters of these systems, while others will take a wait-and-see approach, observers say. In either case the customer is, as always, the key element. “I think a lot of this is not how fast the technology will move, but how fast the customer is willing and able to move,” argued Ken Nisch, chairman of Southfield, Mich.–based JGA, which designs stores and shopping centers. Indeed, even among customers willing to embrace store automation, there are those who have credit problems or who lack the smartphone technology, he asserts.
The focus over the next year or two will be on experimentation to find out what works, according to Stevens. Retailers and tech providers will continue testing walk-out technology, and they will also be looking increasingly at identity-authentication systems, such as those that use fingerprint-recognition or age-verification technology, she says.
“Most of the retailers that we are talking to believe that there is a place for technology in their stores,” said Stevens. “They just want to make a smart decision about what that technology is, and how they [can] go about introducing it the right way.”
Retail is the vital hub for successful mixed-use development, experts say
With regard to commercial real estate, when does a trend become a stable asset class? The answer is not in any sudden visibility on the local landscape. Instead, it occurs when institutional investors discern value in a given development type. This is why a massive mixed-use development called Avalon, in Alpharetta, Ga., seems to have become the poster child of mixed-use projects.
This 1.1 million-square-foot development of Cincinnati-based North American Properties was sold to PGIM Real Estate, an investment arm of Newark, N.J.–based Prudential Financial, in 2016. Though the sum was undisclosed, North American Properties insiders did call it the largest single-asset transaction in the history of the Atlanta region. PGIM was a busy if not a pioneering buyer of modern, mixed-use developments. In 2015 the firm acquired Mercato, a mixed-use lifestyle center in Naples, Fla., for a reported $240 million. Both these projects sold at strong pricing levels, according to Danny Finkle, a senior managing director in the Miami office of HFF and a co-head of the firm’s national retail practice group.
“Successful mixed-use projects are highly synergistic,” said Finkle. “On a price-per-square-foot basis and on value at the time of sale, valuation and underwriting account for the short- and long-term benefits of the multiple uses within the property. For that reason, successful mixed-use projects tend to be in high demand from investors and trade at a strong price level.”
Mixed-use developments are unified communities generally built around retail and with added-on real estate types: office, multifamily, single-family residential, hotel or medical offices. Traditional urban high-rises are forms of mixed-use with ground-floor retail and multifamily or office space above. Transit-oriented developments are often mixed-use, but most of the newer projects are either ground-up (sometimes called “place-making” developments) or else redevelopments of existing structures, such as an old mall.
In Atlanta, a plaza offering retail, cafés and entertainment will be the glue binding Colony Square’s other uses together
big part of what has driven Prudential’s decisions regarding large mixed-use projects such as Avalon is the retail element. “Depending on where the mixed-use is located, we see retail rent premiums 15 percent to 25 percent above what one would expect in a given trade area,” said Ryan McCullough, a real estate economist at CoStar Portfolio Strategy, a Boston-based affiliate of CoStar Group. “In Avalon, asking rents were above $45 a square foot, and that was way north of what we would expect to see in suburban Atlanta, where rents were closer to $25 to $30 a square foot.” Other segments of Avalon performed equally well. Multifamily rents were at about $1,700 to $1,800 per unit, whereas the typical Atlanta suburban apartment rent was closer to $1,200 per unit, according to McCullough.
When a mixed-use project is done properly, people want to live and work there because of the amenities, such as retail, says Suzanne Mulvee, director of research at CoStar Group. “When you add these other pieces, the retail performs better than average,” Mulvee said. “The components combine, so when a mixed-use project goes to market, investors think about strong multifamily, office and retail cap rates. But the real value is that you are applying strong cap rates against better cash flows.”
North American Properties got into mixed-use back in 2010, when, coming out of the recession, it acquired Atlantic Station, in midtown Atlanta. Through the repositioning of that property, North American Properties acquired a mixed-use skill set and an affinity for these types of projects. The firm’s current projects include the redevelopment of Colony Square, in Atlanta; Revel, a 110-acre ground-up development in Gwinnett County, Ga.; and Riverton, a 418-acre ground-up development in Sayreville, N.J., that North American Properties calls the largest mixed-use development in that state’s history. The firm, which continues to bet big on mixed-use, with some $3 billion in development and redevelopment projects this year, no longer builds straight retail.
“It all revolves around retail: The street-level energy and commerce is the backbone of Main Street U.S.A. and of any successful mixed-use development”
“People who have gotten mixed-use right have invariably been retail developers,” said Mark Toro, a North American Properties managing partner who is a co-founder of the firm’s Atlanta office. “Understanding the requirement of retailers, restaurateurs and the street-level experience is the absolute key. If you get the street right, everything else takes care of itself. It all revolves around retail: The street-level energy and commerce is the backbone of Main Street U.S.A. and of any successful mixed-use development.”
North American Properties is hardly alone among big institutional firms committed to mix-use development. Some shopping center REITs, too, see a future in such projects. New Hyde Park, N.Y.–based Kimco Realty Corp., which owns roughly 450 shopping centers, has been active over the past several years assessing the best possible uses for each of those assets. “Mixed-use opportunities, whether it be adding residential, office or hotel components, or just reconfiguring retail itself to adapt to what the customer is looking for is, to us, what increases the value of our real estate going forward,” said Kimco COO David Jamieson. “We are currently working on $1 billion of development and redevelopment and have $2 billion in [future] development.”
Kimco is working with a local multifamily developer, Alterra Property Group, at its Lincoln Square property, in Philadelphia, doing an adaptive reuse of Lincoln Square’s historic train station into what is to be Philadelphia’s first Sprouts Farmers Market. And the company’s redevelopment of the 325,000-square-foot Pentagon Centre, in Pentagon City, Va., will include two residential towers.
Kimco and Alterra Property Group are converting a historic train station in Lincoln Square, Philadelphia, into a Sprouts Farmers Market
“What’s unique about Kimco is that, because of the sheer number of sites we control, we have the opportunity to layer in these projects over the next 10 to 20 years, continually adding to the value of the portfolio,” said Jamieson. “We have the raw materials. Markets have matured around us, and that has given us the opportunity to work through our portfolio in a thoughtful way. You want to invest in what will sustain and endure. In the areas where we own real estate, the markets are clearly changing around us, and we have to change with it. You have to continue to reinvent yourself — adding residences or offices, adding entertainment, reconfiguring, or just bolstering curb appeal.”
In Jacksonville, Fla., retail REIT Regency Centers Corp. is scrutinizing its portfolio of roughly 425 properties, including some California shopping centers acquired in the Equity One deal of last year. One of the more successful properties is Market Common Clarendon, in Arlington, Va., a mix of retail and residential. There, Regency is redeveloping a former office site into mixed-use office and retail. The firm is also entitling a group of properties in California, from San Diego to San Francisco, for mixed-use.
“Successful retail still has to be driven by the attributes of premier location, such as population density and income levels, not just the fact that it is in a mixed-use development,” said Rafael Muñiz, senior vice president of mixed-use development in Regency’s Los Angeles office. “As a firm, we are very focused on being grocery-anchored, so our projects are going to have this feature. When you add residential, it is a big plus. You don’t have to have a full-size supermarket — you can go to a small grocer like Trader Joe’s, or a medium grocer like Sprouts. Other features on the retail level include a variety of restaurants and services, such as dry cleaners, pet stores or nail salons. Fitness uses, both full-service gyms and boutique offerings like cycle and yoga, have become very popular.”
Revel is a 110-acre, ground-up project in Georgia’s Gwinnett County
Although mixed-use has certainly gained the attention of developers and investors, the strategy is not necessarily easy to implement. These projects are more complicated than, say, a straightforward retail center, and with such complications always come risks. Among retail companies that want to redevelop existing shopping centers, in particular, almost everyone acknowledges that mixed-use development will not save every failing retail property.
“For high-quality centers, those that are driving traffic with good retail tenants, the goal is to create a place where people want to sleep, work and play — in effect, little communities,” according to Matt Kopsky, a REIT analyst at St. Louis–based Edward Jones. “It takes a good location, for starters,” Kopsky said. “For some of the ‘B’ and ‘C’ centers, whether it is a strip center or a mall, adding mixed-use is not going to be a solution that will save them. You have to provide capital for those big projects, and that would be difficult.”
“It is a big risk to take on a major project like mixed-use, and there is no guarantee for success”
If mixed-use is to work, it is necessary to have the demand to support it, observes Melina Cordero, CBRE’s head of retail research for the Americas. “If you have an ailing mall in a more rural area, or where the population has declined, building apartments or offices is not going to solve that problem. It really depends on the demographics of the location.”
Should a developer decide to add apartments to former retail space, that could take several years to build and to lease, and an economic downturn could ensue in the interim, observers say. Thus, there is a lease-up risk, which is occurring in certain residential markets at present, and added to this are construction risks and the challenges of raising capital, observers note. “It is a big risk to take on a major project like mixed-use, and there is no guarantee for success,” Kopsky said.
Counterintuitive as it might seem, some say, a ground-up development is often easier than the redevelopment of an existing shopping center. “The challenge for a ground-up is finding the opportunity and tying up the property,” said Muñiz. “When you have an existing property, the good news is that you don’t have to compete for the dirt. On the other hand, the challenge is that you have to deal with in-place tenants that might have long-term leases. Even at some of our best centers, we might not be able to get at redevelopment for 10 years or more, and in the meantime, you have to be sure you are making the right lease decisions as you plan for the future.”
In a lot of instances, existing tenancy and lenders are big hurdles, says Toro. “If you need a department store or other tenant to approve an addition or other uses, that can be a problem,” he said. “If you have debt on the property, [that] may also require approval of existing lenders. You would think everyone would be OK with changes, but if the property has a securitized loan, it’s very complicated to work through the approval process.”
The success of a mixed-use development depends on the synergy of all the pieces — retail, residential, office, entertainment — working together to empower the other asset classes, which is why rent levels are higher and there is a premium to these developments. Getting there, however, is the test, and that is what Cordero calls the chicken-or-egg problem. “You need the retail on the ground floor to attract and charge higher rents for the multifamily units above,” she said. “You can’t charge a premium on the rent if there is no retail on the ground floor. At the same time, retail is not going to want to come in if there is no one living there yet. So what happens? Developers offer rent discounts to get retail onto the ground floor early. What we are seeing are a lot of creative leases, whether it is temporary leases, percentage increases or landlords contributing to tenant improvements.”
“People who have gotten mixed-use right have invariably been retail developers”
Not every developer has expertise in all asset classes, so the way mixed-use is typically constructed and managed is through partnership. A Green Street Advisors study of mixed-use and strip center REITs reports that “mixed-use projects are difficult; partners may help, but some control is lost.” Indeed, says Mulvee, “most deals are through partnering. The projects are often led by retail developers and operators. They bring in the best experts for multifamily, office or hotel.” Kimco brought in a local residential developer as a partner on its Lincoln Square project in Philadelphia, and Bozzuto Development on its Pentagon Centre.
North American Properties has taken a different tack. It is developing in-house expertise in asset classes besides retail. “We do the retail, multifamily, loft office and even single-family developments,” said Toro. “What we have yet to do is development of class-A office buildings, but we are developing capabilities in leasing and management.”
As the Green Street study notes, “mall REITs have been active in mixed-use for years; shopping center REITs not so much. Only three strip center REITs are engaged in major mixed-use projects. It is unclear if future mixed-use projects of significant size will be undertaken by the [strip center] REITs.”
If strip center REITs decline to leap into the mixed-use playing field, well, that could be unfortunate. “The most successful mixed-use projects are retail-centric,” said Mulvee. “You have to get the retail right first.”
By Steve McLinden
Contributor, Shopping Centers Today
Self-serve dog-washing stations are reinforcing strong bonds between multifamily residents and their beloved canines.
There’s a construction boomlet under way in dog-washing facilities at U.S. and Canadian apartment and condominium communities.
Half of U.S. dog owners live in the 25 largest U.S. metro areas, where dog-focused amenities are common at apartment and condominium properties. More than half (55.2%) of respondents to this publication’s 2017 “Amenities Survey” said they had installed a dog-wash spa in a multifamily projects.
Dog ownership has risen 29% in the past decade, claims pet-food market researcher Packaged Facts. According to the American Veterinary Medical Association, singles and renters make up the fastest-growing group of new dog owners.
Dog-washing stations provide renters and condo owners with an on-site amenity that’s a lot more practical than bathing a pup in a ceramic or fiberglass tub intended for humans. “Most tubs in multifamily building units have a conventional kitchen sink drain that can easily clog with dog fur, leading to maintenance and hygiene issues,” said Gary Sherman, Founder/CEO, Evolution Dog Wash Company, Los Angeles, who has installed about 50 such systems in residential buildings in North America.
The cost of installing a dog wash station can run from $3,500 to $8,000 per tub with all equipment, said Dan Hembree, President, Hemcor Construction, Cary, N.C. Some multifamily communities offer it as a free amenity; others charge a one-time fee or a per-use or monthly fee.
We asked four experienced professionals about installing these amenities. Here’s what they recommended.
Select a convenient location. Our experts recommend locating the dog-wash stations close to elevators, with easy access to the exterior, if possible. The dog spa at the 41-story Quartz at City Place condominium tower in downtown Toronto is adjacent to a small outside dog park, which is accessible through a side entrance. “Residents can whisk their muddy dogs inside quickly and without tracking them through the main lobby area,” said Dominic De Freitas, ARIDO, IDC, NCIDQ, Vice President of Residential Development at interior design firm figure3, Toronto.
Size it right. Dog-washing spaces range in size from 100 sf to more than 1,000. The most basic house a utility sink and a few prefabricated stainless-steel tubs, said architect Brian Romanelli, Associate, Solomon Cordwell Buenz, Chicago. Larger, more sophisticated dog spas feature custom-designed systems with wall-mounted blow dryers and grooming tables. Rooms should be adequately sized to give dog owners easy access to all equipment, he said.
Connect the space to other pet amenities. At AMLI Residential’s new AMLI Arc luxury apartment tower in downtown Seattle—a city where pets far outnumber children—the “Canine Social Club” in the 12th-floor amenities space has a dog spa with two self-serve washing areas and a grooming station with a hydraulic lift. The space is adjacent to an indoor-outdoor pet lounge that’s connected to a semi-outdoor dog run with artificial turf. "We were able to create a large, playful space that benefits both the residents and their pet family members,” said Camilla Watson, Interior Designer, ZGF Architects, Seattle.
Where there are multiple tubs, position the water valves on opposite sides of the tubs, so that two dogs aren’t facing each other while bathing. “Helps avoid conflict,” said Hembree.
Provide a ramp for the dogs, especially larger species, to get into the tub. “It can be a strain to hoist and control a rambunctious pup who isn’t crazy about getting wet and soapy,” said Sherman.
Never ignore aesthetics. Developers want to avoid making dog-grooming spaces feel like utilitarian, back-of-house facilities, said De Freitas. “There’s more of a focus to create a spa-like environment, especially in purpose-built rental projects,” he said. At the Sinclair, a 35-story, 390-unit luxury apartment tower in Chicago’s Gold Coast neighborhood, the finishes in the dog spa are consistent with the project’s other amenity spaces. “Tile floors, wainscoted walls, custom decorative lighting, and natural-toned finishes were incorporated throughout the space” as requested by the developer (Fifield Companies), said Romanelli.
Pay close attention to maintenance, air quality, and noise. Select wall and floor finishes that are easy to clean and resistant to moisture, including slip-resistant floors with a dog-friendly coating, said Romanelli. “It’s also important to provide adequate ventilation to ensure that no strong odors leave the room.” Sound-absorbing ceiling tiles and other acoustical treatments can prevent boisterous barks from penetrating into adjacent spaces.
Make sure electrical outlets are designed to accommodate hair dryers—in some cases, a 220-volt receptacle may be needed. Install wall-mounted hair dryers within easy reach of human users. If necessary to avoid accessibility problems, have the manufacturer weld custom brackets underneath the grooming table, said Hembree.
Specify non-slip grooming mats on drying tables. “A good rubber mat allows the wet animal to stand comfortably without fear of slipping,” said Hembree.
Look into built-in storage. The dog spa at AMLI Arc has open bins for residents to store their supplies short-term and lockers for long-term storage, said Watson.
Build community. Pet owners gravitate toward other pet owners, and dog-washing stations can serve as social connectors in multifamily communities. “We’re seeing a big push to create a community-like environment within a building,” said De Freitas. “As these spaces continue to get larger, they’re inevitably going to become more social as well.” At a new apartment building De Freitas is designing in downtown Toronto, the glass-fronted dog-wash room will be clearly visible from the main lobby. “We want the lobby to feel active and conducive to community,” he said. “So many people in these buildings have dogs. We’re trying to celebrate that, instead of hiding it.”
Prepare for future enhancements. De Freitas predicts that professional dog-grooming services, such as nail trimming and shearing, will become more common as developers and property managers test new and more elaborate pooch-friendly services.
Newbies to Chicago’s suburbs are increasingly stowing cars and slipping into walking shoes.
No longer are McMansions, white picket fences and sprawling square footage topping suburban buyers’ most-wanted list. Instead, proximity to a suburb’s downtown and easy access to restaurants, schools and parks are priorities. For many, walkable suburbs reign supreme.
“Buyer demand has shifted from wanting to be situated in the suburbs, to homes in the urban core,” said Nathan Freeborn, real estate agent with realty website Redfin. “People are trying to get away from using their cars as much as they can.”
That was the goal for the Franken family — Mara, 37; David, 38; Matthew, 5; and Eva, 2 — who moved from Chicago to Glenview about a year ago.
“We wanted to find a home that was close enough to the downtown to enjoy walking like we did in the city,” Mara Franken said. By foot, the Frankens can easily reach a library, train, four parks, a grocery store and a few restaurants.
“It almost feels like we’re in the city, with the benefit of having a yard and neighbors and a garage,” Franken said, noting that they checked the walk score — a measure of how walkable an area is — of houses before touring.
The shift toward more walkable suburbs started over the past two decades, thanks to planning efforts concentrated on creating mini-downtowns to revive traditional suburban centers, said Kheir Al-Kodmany, a professor at the University of Illinois at Chicago’s College of Urban Planning and Public Affairs.
Suburbs throughout Illinois added restaurants, cafes, stores, movie theaters, parks and sidewalks.
For instance, Wheeling recently spent $110 million to create a 16.2-acre downtown, slated for completion in late 2018, which will include a 25,000-square-foot plaza and a 100,000-square-foot retail area that includes a movie theater, restaurants and more. And in downtown Glenview, a four-story mixed-use development featuring 138 luxury apartments wrapped up in 2014.
“These suburban downtown places offer alternatives to the city’s downtown, which is increasingly expensive, unaffordable, congested, noisy, crowded and polluted. As a result, the suburbs could offer the best of both worlds,” Al-Kodmany said. “Low-density, affordable, peaceful and comfortable living that is accessible to vibrant, busy social places.”
A 2017 study by the National Association of Realtors found that walkers span the generations. Sixty-two percent of millennials and 55 percent of those born before 1944 prefer walkable communities and brief commutes, even if it means living in an apartment or town home. And 53 percent of Americans would give up a home with a large yard in exchange for a home with a smaller yard that’s within walking distance of the community’s amenities, according to the study. That figure is up from 48 percent in 2015.
It’s part of a shift toward valuing time and experiences more than possessions, said John Burns, CEO of John Burns Real Estate consulting.
“We coined the term ‘surban’ for this trend, which is development that is bringing the best of urban to the suburbs,” Burns said.
The housing prices reflect the shift away from the larger suburban homes to the suburban downtown condos.
A larger home in the far-out suburbs that may have sold in 2003 for $700,000 could be seen on the market today for $100,000 less, while a home in a downtown suburban area developed just two years ago will have already gone up in price, according to Julie Dunne, a Barrington-based realty agent with Keller Williams Success Realty.
A 2016 study from realty site Redfin seems to support Dunne’s point. The study took into account more than 1 million home sales between January 2014 and April 2016 and found that homes with higher walk scores tend to have higher sales prices than comparable homes in less walkable areas. One walk score point can increase a home’s price by an average of $3,250. In Chicago, the study found an increase of one walk score point can bump a home’s price by $2,437.
Developers haven’t missed the trend, and suburbs throughout the Chicago area have transformed into construction zones.
Construction began last November at Park Place Glenview, a 26-residence development in downtown Glenview located in the 40,000-square-foot former village hall. It’s one block from an elementary school, and is within walking distance to Starbucks, Trader Joe’s, the Glenview Metra station, North Shore Country Club, a brewery and restaurants.
“People are excited to have the best of both worlds,” said Tom Drake, president of The Drake Group, builder and developer of Park Place Glenview.
Buyers want the schools and amenities that the suburbs provides, but they don’t want to give up anything the city has to offer either, Drake said.
Construction is also underway in Lake Forest’s downtown, where the luxury Kelmscott Park development is introducing a mix of 12 single-family homes, 42 condominiums and 111 apartments designed by architecture firm Booth Hansen. Kelmscott Park is within walking distance of the Lake Forest Metra station, grocery stores, restaurants, parks and boutique gyms. All the condo and apartment parking is underground because it’s supposed to feel like an in-town experience, said Tim Anderson, CEO and owner of Focus, the developer of Kelmscott Park.
Some realty agents say millennials and first-time suburban buyers are at the center of the downtown suburban living trend.
“The most common profile” says realty agent Freeborn, is this: “young families moving up from the city who are reticent to give up the walkability of urban life.”
Danielle Braff is a freelance writer.
Chicago has issued a $24 million building permit for a project that “co-locates” affordable housing above a new Chicago Public Library at 6800 N. Western Ave. at what is known as the Northtown branch.
Perkins+Will designed the four-story project. Powers & Sons Construction is the general contractor.
The initiative is a collaboration between Chicago Public Libraries, the Chicago Housing Authority and private developer Evergreen Real Estate Group, which is also developing a similar project in Irving Park.
The permit describes the project as a “mixed use building, concrete structure” with an occupied green roof on the second level. There is a surface parking lot west of the building, and “row and alley improvements”. The permit document says the exterior wall assembly on the third and fourth floors and the library ceiling will have a separate permit.
May 3, 2018 | Dan Rafter
Large portfolios worth more than $150 million gave the medical office market a boost in 2017. JLL reported that these major portfolios made up an impressive 60 percent of the medical office sales recorded throughout the country last year.
Overall, the $5.9 billion worth of portfolio sales in the medical office sector last year exceeded the total sales for all years before 2015, according to JLL’s research.
JLL cited the sale of Duke Realty’s healthcare division at $2.7 billion as the biggest medical office sale of 2017. This deal boasted record-breaking pricing levels for medical office, encouraging other owners of medical portfolios to hit the market, too.
The Duke sale along with the MBRE Healthcare recapitalization of $640 million, the Meadows & Ohly sale of $600 million and the Investors Real Estate Trust healthcare division sale of $368 million dominated transaction activity for the year. JLL reported that these big sales made up 41 percent of 2017’s medical office sales.
Overall, there were 19 portfolio sales in the medical office space during 2017. These sales had an average value of $312 million. Compare this to 2014 through 2016, when the sector saw an average of 12 portfolio sales each year with an average sales price of $214 million.
The trend of large portfolio sales grabbing headlines has continued into 2018. The PHT portfolio and Welltower’s sale of its Aurora Health Care medical systems each consisted of 1.4 million square feet. Two other big medical office portfolios are now on the market: the 950,000-square-foot Hammes portfolio and the 1.02 million-square-foot Elliott Bay healthcare portfolio.
Hoffman Estates village board members are moving towards approval of a massive concept plan that will redevelop the former AT&T campus into a self-contained “City Works” residential/business community.
Published reports indicate that community’s planning, building and zoning committee approved a proposed development agreement with Somerset on May 7, setting the stage for the full council approval on May 14.
There are still additional levels of approval before construction can start on the 150- acre site. Final approval of even the earliest office components is likely six months away, The Real Deal reports. However, councillors are impressed with Somerset’s proposal, applying lessons learned on a conversion of the two million-sq. ft. former Bell Labs building in Holmdel, NJ.
DataBid reports the plans call for self-contained metropolis (Metroburb) with new residential retail and hotel developments.
There will be 550 residential units at the telecom giant’s former home, which will also include a “town center” with 1.2 million sq. ft. of offices 80,000 sq. ft. of conferencing space 60,000 sq. ft. of ground floor retail and a neighboring 200-room hotel.
Preliminary plans show 375 apartments and 175 town homes primarily on the property’s eastern border which would bring “24/7 life to the site that is vital to its success,” DataBid reports.
The existing buildings would mostly continue to be used as offices with suites ranging from 1,000 to 100,000 sq. ft. but with the atrium in the main building used as a “pedestrian street” with retail shops and restaurants with 24-hour public access.
A later phase of the development would include constructing the hotel near the northwest corner of the main office building.
A rendering of the Meijer Bridge Street Market coming to Grand Rapids, an example of the type of physical retail that is thriving today.
May 3, 2018 | Dan Rafter
The headlines are filled with major store closures. Sandwich chain Subway just announced it plans to close 500 of its U.S. locations this year, while GNC reported that it will shutter 200 of its vitamin and supplement shops.
Earlier this year, Toys R Us made news when it announced it was closing all 735 of its stores this year, ending its U.S. business. And department store chain Carson’s will close all its stores by late this summer, wrapping up more than 160 years of retail operations.
The news, then, appears to be bad for physical retailers. But that’s a bit misleading. Not all brick-and-mortar retailers are struggling. Many are actually thriving. And in many Midwest markets? Retail is showing solid, if not explosive, growth.
Those retailers that are doing well are embracing the omnichannel approach, focusing both on physical stores and bustling online presences. You might visit a physical location, view a limited number of products on display and then make your actual purchase on a Web site. The retailer doesn’t care where you buy its product, as long you buy it.
So, where in the Midwest is retail performing well? Grand Rapids, Michigan, is a good example. According to CBRE’s first quarter Grand Rapids retail report, the average retail vacancy rate during the quarter here stood at 6.9 percent, down from 7.2 percent in the fourth quarter of 2017.
The retail market in Grand Rapids saw positive absorption of 96,566 square feet, too.
CBRE said that Grand Rapids’ Central Urban Area is seeing an influx of new retail opportunities. The most notable of these is the Meijer Bridge Street Market, a 37,000-square-foot urban grocery store; the Warner Building project, which includes 10,000 square feet of retail; and the Diamond Place mixed-use development, which will include 22,000 square feet of retail.
Finally, there’s the Studio C project that will include a 47,200-square-foot movie theater and 14,500 square feet of additional retail.
Grand Rapids isn’t the only market in the Midwest and across the country that is seeing a bit of a retail rebound these days. The Urban Land Institute, in its 2018 forecast, said that an expected increase in consumer spending should provide a boost to the U.S. retail market in 2018 and 2019.
The institute predicted that retail vacancy rates across the country would hit an average of 9.8 percent in 2018 and 9.9 percent in 2019. Those rates are higher than, say, in Grand Rapids right now, but are actually lower than what experts with the Urban Land Institute predicted six months earlier.
The Urban Land Institute also predicted that retail rental rates should grow at 2 percent in 2019 and 1.8 percent in 2019. Those aren’t booming numbers, but they do show that retail rental rates should rise at least somewhat during the next two years.
In Honolulu, Anaha at Ward Village offers a first-of-its-kind amenity for Hawaii.By Leah Demirjian
Architecture, interior design, and planning firm Solomon Cordwell Buenz announces the completion of the second residential condominium tower in Honolulu's Ward Village. Dubbed Anaha—which translates to "reflection of light" in Hawaiian—the tower is a residential cornerstone of the Howard Hughes Corp.–developed, cosmopolitan Hawaiian complex.
The tower's most novel feature—a glass-bottomed, saltwater pool—extends 15 feet off the edge of the building's seventh floor. Supported by cantilevers, the 75-foot-long swimming pool is the first of its kind in Hawaii and offers sweeping views of the coast and downtown Honolulu. The pool was conceptualized by Surfacedesign, the project's landscape architects.
The 60-acre master planned community, which is located in the vibrant Kaka’ako district of Oahu, showcases how architectural place-making can transform a city's center into a bustling urban core. The 40-story, 857,000-square-foot Anaha tower creates 311 condominium homes with the hope of transforming a previously industrial and retail-focused district into a thriving mixed-use community.
The tower's undulating architecture—inspired by its coastal location—features a wave motif that lends the project a distinctly island-style feel. Its form is derived from a sequence of shifted, interlocking curved floor plates, and its floor-to-ceiling glass curtain walls provide unobstructed views of the ocean and mountains. Anaha's façade is designed with a green-blue glass cladding meant to mimic the colors and shapes found in the Pacific Ocean.
"The composition is reminiscent of the play between the crests and troughs of a calm ocean wave," said the architects in a press release. "And like a wave, the reflection of light off the façade will constantly alter as the viewpoint and environmental conditions change."
In addition to the floating infinity pool, the building offers a bevy of luxe amenities, including the largest green living wall in the United States, which contains a blend of 8,000 indigenous tropical plants, as well as a sand volleyball court, a dog run, and a movie theater.
ABOUT THE AUTHOR
Leah Demirjian is senior associate editor of design for Custom Home, Builder, and previously, ARCHITECT. She holds a bachelor's degree in writing. Before joining Hanley Wood Media, she worked with an architecture firm in Los Angeles.
Chris Coleman, VP of Development at Wingspan, periodically shares his thoughts and observations on property development news.