InterFace Panelists Predict More Variety, Less Food for Future Mixed-Use Projects

by Alex Patton

ATLANTA — Traditionally, mixed-use developments are multifamily-based with ground-floor retail or dining and a few floors of offices in between or adjacent. That combination still works, but changing demographics demand more variety from the popular model, according to panelists of InterFace Mixed-Use Southeast on Aug. 22 at the Westin Buckhead in Atlanta.

Projects like The Battery Atlanta and the upcoming Revel development in nearby Duluth are anchored by popular entertainment sites — SunTrust Park and Infinite Energy Center, respectively. Other upcoming developments in the Southeast like Kern’s Bakery in Knoxville, Tennessee, will feature student housing, while others like 12|12 Aventura in South Florida will feature seniors housing units.

Speakers at the show cautioned that while restaurants are necessary elements of a successful mixed-use project and often bring some added variety, food and beverage options nationwide are becoming oversaturated, especially in mixed-use settings.

Professionals involved with some of the most successful mixed-use developments in the Southeast spoke about prominent trends and the future of the product type at the conference. Overall the various speakers were bullish on the product type going forward as demand generators such as job and population growth are strong in the Southeast’s top markets.

“I see two main demographic factors that are going to shape the future of mixed-use. First, the United States is supposed to grow by 50 million people by 2040 that includes a very large cohort of millennials, who are going to decide the future,” said Angelo Carusi, principal of Atlanta-based architectural firm Cooper Carry. “The other trend is ‘tribalism.’ People are finding places that they identify with together as a group.”

Carusi was a speaker on the architectural and construction panel at the InterFace event, which took place at the Westin Buckhead on Thursday, Aug. 22. More than 200 professionals from various disciplines in the mixed-use industry attended the networking and information conference. Carusi noted that mixed-use developments combine the desire for convenience and “authenticity” among all age groups, especially young adults and seniors.

“It’s appealing to me as an empty nester to be in those environments, and my kids in college want the same lifestyle,” said Carusi. “The uniqueness is the big attraction.”

Successful developments like Atlanta’s Ponce City Market and Raleigh’s North Hills service retail, office and multifamily needs, and appeal to those seeking a hip urban lifestyle. It’s an effort to naturally attract customers of all demographics to the same location, but panelists noted that too much focus on the appearance of authenticity can sometimes have the reverse effect.

Diversity in structure

Hotels and healthcare services have become more prominent additions to mixed-use real estate, and in some developments, seniors and student housing are replacing the traditional multifamily base. Even larger developments, which Les Juneau, president of Juneau Construction, called “intense vertical mixed-use,” may include all of the above.

“Building vertically helps with the parking and land value issues that developers deal with, and it’s more convenient for the people who live, work and shop there,” said Juneau. “Every year, we are moving closer to what we call a ‘silver tsunami’ of baby boomers demand for healthcare has already picked up dramatically, and it’s getting ready to be through the roof. We’re also driven by access and convenience, and hospitals are going after market share. It’s becoming consumer-driven healthcare.”

Thomas Tift, executive vice president of Lincoln Harris, mentioned that some mixed-use developments, such as One Hundred Oaks Mall in Nashville that includes both retail tenants and Vanderbilt University Medical Center, will actually give waiting healthcare patients a buzzer, similar to a restaurant patron waiting for a table. Far from the grueling tradition of healthcare waiting rooms, patients can go shopping or grab a bite to eat while they wait to see their physician. Juneau went on to cite Northside Hospital as a recent healthcare facility built in Midtown Atlanta near St. Joseph’s Hospital and Piedmont Hospital, effectively competing with them for business.

“Midtown is basically a big mixed-use development, and they’ve gone right in the middle of it to capture market share. It’s been very successful,” Juneau continued. “The competition has gotten severe and it’s all driven by access and convenience.”

Heather Lamb, first vice president of CBRE, supported the effectiveness of the healthcare services in mixed-use developments, citing a 60,000-square-foot medical office in the 1.1 million-square-foot Avalon development in Alpharetta, Georgia. She mentioned that a similar medical office is planned for the upcoming Revel development, which is under construction by Avalon’s developer, North American Properties.

“Hospital systems are all over that location because they saw what happened at Avalon,” she said. “Patients want to be able to combine trips to a medical service with retail, especially patients with kids. They want to be able to take their kids to the pediatrician, then buy a pair of shoes and maybe grab some ice cream later.”

Offices are some of the most successful spaces in mixed-use environments, often occupying multiple floors. They provide a constant stream of customers for retail and dining, and some employees may even reside in adjacent multifamily housing. Coworking giant WeWork recently signed three office leases totaling 150,000 square feet in metro Atlanta, including locations within mixed-use developments in downtown Decatur and Old Fourth Ward.

“Mixed-use environments love the coworking model because they pack a ton of people into the small space,” said Lamb. “Retailers and restaurants love that because that density brings more bodies who are going to shop and dine in the same area.”

Lamb went on to discuss the open design structure of modern offices, many of which are specifically tailored to the coworking model. She mentioned the tendency to create different gathering areas for mobile laptop users to find a change of scenery in their work environment, including bustling cafes with food sales and live music in contrast to “quiet rooms” where music and phone calls are discouraged.

“Instead of going into an office space with 70 percent private office and 30 percent open space, the model is flipped and now you have 20 percent office space and 80 percent open space,” said Lamb. “This structure creates different places to work, which can improve productivity and creative flow. We all need a little variety in our everyday environment.”

Mixed-use dining on the decline

Dining establishments are among the most popular attractions of mixed-use developments, and that trend is predicted to continue in the future. Some speakers on the panel identified an emerging problem though: Restaurants need both a high density and a high frequency of traffic to meet their own financial needs. With so many restaurants packed close together in mixed-use developments, the competition is fierce and only the strongest survive.

“An immediate trend that we are seeing right now is steady movement toward restaurants, breweries and food halls,” said John Moores, associate director at architecture firm Wakefield Beasley. “You used to see about a 70-30 split between retail and restaurants but now we’re seeing that flipped. Restaurants are now consuming almost 70 percent of that space.”

Food halls, designed like a higher-end cousin of a mall food court, typically feature a collection of food vendors sharing a collective space and communal seating. It’s a growing trend, but Fred Castellucci, president of Castellucci Hospitality, said they will be short-lived without the support of multifamily and retail driving constant traffic.

“From a restaurant perspective over the last four years, traffic has been down nationwide,” said Castellucci during the mixed-use partners panel. “The only growth has been from price increases or delivery, and since Uber Eats and Postmates take 30 percent of the topline, there’s not a lot of dollars left for the restaurateur.”

Nick Garzia, director of retail leasing of Houston-based Hines, said that food and beverage can serve as an anchor but that a mixed-use development’s retail component needs to offer traditional and service-oriented retail as well.

“We want our projects to be more than just about food,” said Garzia during the show’s development panel. “There are lots of people leasing to restaurants these days, whether they be nationals or locals, full-service, fast casual or QSRs. At the end of the day, you have to have balance in your mix.”

Castellucci predicted that the future holds significant turnover in the restaurant business, especially in suburban areas that already have abundant dining establishments. Adding a food hall to an area that already has 30 restaurants, he said, is a recipe for failure.

“Food halls are designed to push all these tenants into a single footprint, and not all of them are going to make it,” he said. “Developers have to ask themselves if the place where they are building is the best market for a food hall. You need a lot of density and a lot of bodies, day and night.”

— Alex Patton


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