New Yotk, NY, November 17, 2006--Mixed-use centers could profoundly alter the American landscape as the U.S. population continues to rise rapidly in the coming decades, panelists said at ICSC’s first ever conference devoted to this format.
The U.S. population, which this fall passed the 300 million mark, is destined to reach 400 million by 2045. Some 20 million acres of development will be needed to provide space for those additional people to live, work and shop if America’s post-World War II pattern of suburban expansion continues, said Ronald A. Ratner, president and CEO of Forest City Residential Group. In contrast, using the mixed-use approach to development would only consume five million acres, he said.
Ratner was addressing ICSC’s Conference on Mixed-Use Development, which has drawn nearly 1,100 developers, architects, finance executives and others to Hollywood, Florida.
“There is an incredible pent-up demand for this,” said Yaromir Steiner, CEO of Steiner + Associates, which has built multi-block mixed-use developments in Columbus, Ohio, Kansas City, MO., and elsewhere in the U.S.
Mixed-use development is as old as the history of urban settlement, Steiner noted. But urban development came to a halt in America during the Depression. The country’s subsequent 70-year pursuit of single-use, zoned development that is responsible for sprawl should be viewed as an aberration from a model that is thousands of years old, he said.
But for all of mankind’s experience with mixed-use development, the format remains anything but easy to plan and execute.
The “critical challenge” is to achieve cooperation between public officials and developers, Steiner said, without which the multi-block “town centers” for which he has become know are impossible.
There are scores of other complications, too, panelists noted, ranging from parking to liability issues.
Once condominiums built above retail are sold to their occupants, how can the operators of the retail component guarantee that they will be maintained in a manner that will ensure the development remains attractive to shoppers? Who pays if a condominium pipe burst floods a retailer at the height of the holiday shopping season?
Design is also complicated. Office workers arrive at 8 a.m. and want the best parking spots. Retailers need those spots for shoppers who start arriving at 10 a.m. Residents, for their part, want their parking areas closed off and secured altogether. Consequently, these very different parking requirements must all be catered to.
And residents might like the convenience of restaurants on the ground floor, but they certainly don’t like the cooking smells that come with them, noted Dougal M. Cases, managing director of ING Clarion, Washington, D.C., which has mixed-use centers in its portfolio.
A solution to the friction arising from the conflicting interests of homeowners and merchants is not to sell off the housing above at all, but to rent it instead, said Charles Berman, managing principal of MacFarlane Partners, a New Canaan, Conn.–based real estate investment management firm. “It’s always the condos that cause the problems,” he said.
If developers must sell off the housing and other, non-retail components of a development, it is essential they maintain control, said Jeffrey H. Newman, a lawyer from the Newark, N.J. firm of Sills Cummis Epstein & Gross. Ideally they should also maintain overall control of a project over their partners, too, he noted.
Bankers attending the conference also warned that the financial viability of each component of a mixed-use center must be analyzed separately and stand on its own. One should not subsidized the other, they said.
