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5 Reasons Multi-Family Residential and Commercial Real Estate Tenants Love Mixed-Use Space
January 21 | 2016

Urbanization

It means different things to different people. With respect to multi-family residential and commercial real estate, however, the movement towards increasing urban density is a force of nature.

It’s a matter of civic and cultural necessity resulting from a myriad of factors. Falling urban crime rates in conjunction with a general broader embrace of all forms of diversity are 2 big catalysts. Also, there’s the attraction of many to leading low-carbon-footprint lifestyles. Add to that the general shift in tastes towards the local, the unique, and the artisanal and it’s clear — Urban is in!

One of the byproducts of the particular brand of the urbanization du jour is a surge of interest in Class B multi-family residential and commercial real estate. I shared my take on the cultural dynamic fueling this Class B upward momentum in a previous blog post: Why Class B Real Estate is Best In Class, but another major parallel trend is the growing demand for mixed-use spaces.

There are a number of reasons why urbanization trends are leading many multi-family residential and commercial real estate tenants to seek out mixed-use property in particular.

These are my top 5:

1- It’s the Green Thing to Do

We all care about the planet. We all care about our community. We get that if we choose to live close to where we work and play, then we’ll be doing our part in some small way by consuming less. A person doesn’t need to be an urban planner to appreciate the efficiency that greater density brings. Multifamily residents and commercial real estate tenants know that mixed-use complexes are a step in the right direction. Mixed-use allows tenants to feel like they are a part of those greener steps.

2- Walkability is a Badge of Honor

The ability to walk to get a decent bite to eat is one of the first things people say to their friends when they describe their apartment or their job in a downtown area. Better yet, when you can walk to get drinks with friends/coworkers, the first few rounds are practically free in the form of Uber fare savings. One of my favorite Class A mixed-use developments is San Jose’s Santana Row. It’s an island of hip and posh mixed-use multi-family residential and commercial real estate surrounded by a sea of, frankly, otherwise uninspired suburbia. Tenants pay a meaningful premium to live and/or have their business there. And this is in the Silicon Valley no less. The Valley is a place where even a modest ranch home can cost as much as a grand estate elsewhere.

3- Recurring Clientele

The flipside of an apartment or office space offering its respective tenants and employees a walkable lifestyle, is the customer loyalty that retail tenants get from their mixed-use neighbor-patrons. When I lived in a mixed-use building in the Sunset neighborhood of San Francisco, many nights’ take-out dinner choices were self-confined to a three block radius around my place. I probably spent 30% of my non-housing money in a dozen or so stores within that ¼ mile square. The mixed-use retail tenants were the beneficiaries of that recurring spending. Retail tenants love mixed-use because, unless they piss off the entire neighborhood, they’ll have a baseline of dependable income in perpetuity.

4- Compliance is a Piece of Cake

Peeling back the layers of the onion a little bit, an upside of mixed-use space is the ease of getting municipal approval for commercial tenant improvements. Mixed-use space is, by definition, zoned and engineered for flexibility. Chances are if an industrial, office or retail tenant wants to change things around a bit, the infrastructure and the building codes will be able to accommodate those changes (within reason and good taste of course).

5- Existing Amenities

Mixed-use spaces are most viable in existing urban environments. That means that there are often parks, schools, and libraries close by. Airports and freeways are in a reasonable proximity and so are shopping districts and nightlife. Mixed-use allows tenants be near the things that they love to do and shortens the errands that they have to run.

I’m long on the mixed-use because I’m long on greater urban density. For my money, betting against a continued urban renaissance (and mixed-use real estate via the transitive property) would be like betting against Biff Tannen armed with a copy of Gray’s Sports Almanac.

(WARNING: Back-to-the-Future-II-nerd-alert)

Charlie Muir, Lead Growth Hacker
Written by , Lead Growth Hacker

Charlie Muir is a UCSD alum and resident Growth Hacker at commercial real estate tech startup Digsy. He was formerly a growth specialist at LawnLove; a Summer 2014 Y Combinator company.

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