Cranford Crossing is a living lesson in how to build a mixed-use project. The 50 new luxury apartments are set right across from the train station in Cranford, N.J., a leafy suburb of New York City, so that commuters leaving the station must walk past the project’s 22,000 square feet of retail space to get to the municipal parking garage, located on the other side of the project.
The development illustrates several of the development priorities listed by real estate experts in a report released last November. The survey, titled Understanding the Concept and Drivers of Mixed-Use Development, polled more than 1,000 experts from the National Multi Housing Council, the Building Owners and Managers Association, the International Council of Shopping Centers, and the National Association of Industrial and Office Properties. The last pages of the report are pure gold: a concise list of mixed-use lessons learned by these experts over the last 10 years. Here they are:
Locate near mass transit. It’s not hard to find projects like Cranford Crossing that are putting this idea into practice. But not every successful mixed-use project is built next to a commuter rail station or over a subway.
The developers of Atlantic Station in Atlanta are just now finishing the latest phase, the ATL Lofts, in what will eventually become more than 3,000 units of housing, 6 million square feet of offices, and 1.5 million square feet of retail. The site was until recently cut off from mass transit by a tangle of highways. Joel Brockman called the place “a very large black hole of the city that was almost impossible to get to.” Brockman is a vice president for the Lane Co., a multifamily developer based in Atlanta.
To overcome this barrier, developers of Atlantic Station built a pedestrian bridge across the freeway with help from federal and local programs, linking Atlantic Station with a light-rail station on the other side. This bridge illustrates another lesson of the survey.
Get the public sector involved. Like Atlantic Station, Cranford Crossing also benefited from the goodwill of local officials, who paid more than half the cost to build a 310-space parking lot on the site, serving both residents and the train station.
Find an urban setting rather than a suburban setting. An urban setting doesn’t have to be in the inner city. Cranford Crossing is located in the suburbs, but the site has all the benefits of an urban setting, with a regular flow of pedestrians walking by. The project also will benefit from being the only new apartment complex in a suburban community that is largely committed to single-family homes and has no other available land zoned for multifamily.
Locate near big employers, colleges, or entertainment facilities. Locating in a city has benefits. Camden Property Trust is now planning to build 306 apartments one block away from what may be the most famous street corner in Los Angeles: Hollywood and Vine. The property at 1540 North Vine will rise 11 or 12 stories over a 67,000-square-foot Whole Foods grocery store. “The key to this deal is the location,” said Robert Bussone, vice president for Camden.
Think vertically. The high cost of land at these prime locations encourages many developers to squeeze more units of housing onto the site, making mixed-use projects progressively taller.
However, building up makes construction more complicated, Bussone said, as different uses stack on top of each other. Retailers like grocery stores prefer wide, open spaces, but the architectural supports needed to hold up an 11-story building necessarily cut into that space. Bussone prefers to start the conversation with his retail tenants as soon as possible.
Have deep pockets. Mixed-use projects often involve a lot of investment up front. The Walters Group, Inc., for example, will pay $25 million to $30 million to clean up two old landfills on the site of its planned Stafford Park development just off the New Jersey Turnpike in Stafford, N.J.
The finished project will cost more than $300 million to develop and will include more than 650,000 square feet of retail space, including a Target and a Costco, along with nearly 700 single-family homes and apartments.
Mixed-use is here to stay
Nearly all of the more than 1,000 respondents—93 percent—think that mixed-use projects will account for a growing share of development projects over the next five years. Most of these respondents are currently building or planning mixed-use projects at their own companies. Other findings:
• The biggest factor that supports the growth of mixed-use will be encouragement by local public agencies, according to the survey, followed by rising land prices, and the convenience of living near retail services.
• At the same time, assembling the right parcel of land and navigating antiquated local zoning rules are still the most difficult parts of planning a mixed-use project today.
• More than two-thirds of respondents think mixed-use projects carry more financial risk than other deals.
• Lenders are becoming more knowledgeable about mixed-use and are now more willing to finance entire mixed-use developments instead of just taking one piece, according to a large majority of the respondents that expressed an opinion.
• Lenders are still less eager to lend to mixed-use projects than conventional deals, and they charge higher interest rates while asking for more equity participation from borrowers, according to more than a third of respondents that expressed an opinion.
• Mixed-use projects take longer to build and cost more to construct than conventional deals, according to nearly two-thirds of the respondents.