
Recent reports continue to indicate that multifamily is still the darling of commercial real estate.
That said, at this stage in the cycle, many investors are approaching opportunities for ground-up development, especially in core markets, with increased caution amid concerns of weakening growth.
Many multifamily investors continue to identify mixed-use projects with a prominent residential component alongside retail, office, and hospitality uses, as a way to capitalize on the high demand for rental housing while diversifying their investment portfolio and positioning developments for long-term success.
These projects present the potential for not just a stable investment, but offer exceptional opportunities for resilience, synergy, and growth when approached strategically.
So how can developers benefit from the continued high demand for multifamily housing while combatting long-term potential for high competition and slowing growth?
Through considering effective use of land, a careful selection of uses, and a varied approach to multifamily components, investors can strategically execute multifamily and mixed-use developments that can thrive through economic cycles.
1. Choose Your Location With Care
In addition to creating a live/work/play or walkable environment in ine with the lifestyles of potential residents, the appeal of mixed-use for developers has been that the projects can allow for highly effective use of land, which is especially critical when they're able to secure competitive infill locations.
Selecting these locations with a high barrier to entry greatly reduces the amount of competition for all components of a mixed-use project over the long term, and undertaking a comprehensive analysis of the submarket before choosing the land or selecting the uses for it further ensures that developers can make the most of the site.
For example, we’re currently underway on The Fig, a mixed-use project in the land-constrained USC/Exposition Park submarket of Downtown Los Angeles. Through securing the competitive site and approaching the development with a hyper-local perspective, we determined that hospitality, retail, office, and multifamily (including student and affordable units) uses would best serve the location and create a one-of-a-kind destination, which will deliver long-term value to investors.

2. Create Synergy Using an Ecosystem Approach
The ideal mixed-use community will act as an ecosystem, feeding and driving the demand of the other components.
For instance, the hospitality component of The Fig will not only serve those visiting the established, new, and upcoming tourist destinations of Exposition Park, but will give families of students living at the development a convenient place to stay. A variety of shopping and restaurant options will serve both residents and visitors.
When executed properly, the different components of mixed-use projects can create a sort of synergy. Through a strategic selection of uses and tenants for mixed-use projects, developers can protect against volatility and ensure that no one use will subsidize another for any significant length of time.
3. Diversify the Residential Component
Today’s mixed-use developments offer investors the benefit of portfolio diversification, not only through combining multifamily with different product types, but also through varying the residential component.
Developers should consider how the residential uses can be varied to brand a mixed-use location as diverse and multi-generational, positioning it for long-term success and high investor returns.
For example, The Fig will feature approximately 408 residential units for 931 student housing, market-rate, and affordable residents. By offering traditional multifamily alongside affordable and purpose-built student housing as it fits the market, all residential components of the development will fill a great need and contribute to a higher potential for a strong stream of demand even as market conditions vary over the long term.
In the case of The Fig, those in the market for traditional multifamily are willing to pay premium for excellent locations in tight markets, which the project’s Downtown LA location offers. USC is also the largest private employer in the city Los Angeles, further driving the demand for housing near the school.
At USC, there is a lack of housing directly near the campus and many students are renting single family homes several blocks away, so there is high demand by students for residences within walking distance to university campuses.
Capital sources and developers have increasingly been attracted to student housing as a lucrative and stable endeavor. With the exception of a small handful of university submarkets that have experienced an abundance of development in recent years, student housing does not face the same risk of oversupply that traditional multifamily does.
The immense need for affordable housing in the area renders that component a stable investment as well.
Even with multifamily continuing to demonstrate its strength as an investment in the short and long term, investors are approaching ground-up development with some hesitancy as costs rise and some submarkets face oversupply.
That said, there is still great potential for the sectors, especially when incorporated into mixed-use projects. Through careful selection and acquisition of land, and a comprehensive evaluation of the different uses and types of housing a submarket demands, developers still have a plethora of opportunity to create unique, unmatchable locales for people to live, work and play.