Development Magazine Spring 2015

Walkability Means Mixed-use Development Opportunities

Lush landscaping, comfortable seating, attractive lighting and streetscape designs that separate sidewalks from the street, like these in Denver’s Cherry Creek North district, can improve walkability. Cherry Creek North Business Improvement District.

Growing demand for walkable places is opening the door to more mixed-use development.

CITIES LARGE AND SMALL across the U.S. are marketing their walkability as a sign of an energetic and attractive community. Dig deeper, and you find that walkable mixed-use communities are attracting empty nesters who want to rid themselves of the burdens of home maintenance and lawn care and spend less time running errands in cars — as well as millennials who are looking for authenticity, neighborhood identity and “buzz,” and who are avoiding or delaying car ownership. Both of these demographic groups value being able to live, work, shop and dine in walkable places. Paula Rees, principal at the Seattle-based design firm Foreseer, says that both demographic groups want “community, connection and an urbane village feel. Social media doesn’t do it.”

Municipalities now see redeveloped or new walkable districts as having the potential to enhance assessed value, create new and better jobs, maintain real estate value for existing property owners, use existing infrastructure, and impose lesser burdens on public school systems.

But “walkable” does not mean no cars. It doesn’t mean the failed 1960s pedestrian downtown malls. It means a balance between pedestrians, bicyclists, cars, trucks and buses. It means slower-paced streets, enhanced pedestrian safety, and transportation and parking demand management, with parking located underground or “wrapped” above ground.

Developers are responding not only to empty nesters and millennials, but also to retailers and businesses that want to be in these neighborhoods, and to employers who recognize that locating there can help them attract and retain employees. But developing these places poses challenges. Developers and investors entering this market may have to up their game.

Planning

Planning walkable areas is more complicated than planning conventional, single-use development. It can involve plan amendments and zoning changes. The plan may well need to include parks or other public spaces, smaller blocks and intersections, a grid of narrow streets, lots of trees, underground utilities, wide sidewalks, street parking for car-share vehicles, a pedestrian circulation plan and related wayfinding, fewer curb cuts and alley loading. Just as in a mall, the plan should place anchors strategically to create maximum foot traffic between them, drawing pedestrians to and past smaller stores.

People walking along the sidewalk want to look at first-class exteriors, not blank walls, brutalist architecture or car and truck entrances. According to Rees, “People are attracted to places with details like facade relief, sidewalk textures and unexpected spaces like … small plazas and pocket parks. We’re drawn to places that reward with sounds, smells, and great landscape and lighting design. We’re drawn to landmarks, relevant public art or found objects. Walking should be feasible among all uses and in all weathers. Consider the use of protective features like awnings, arcades, canopies, sunshades and air misters. You can’t just transfer ideas from other neighborhoods or cities, and you can’t just do this by the book — there is no book.”

Entitlement

Obtaining entitlements for these types of projects and areas can be easier than for conventional development, since more and more municipalities are now supporting walkable development. Environmental and planning advocacy organizations will be in your court. Property owners in nearby communities should recognize the amenities that a walkable mixed-use district can offer; such development can increase nearby property values without threatening the fabric of even single-family detached surrounding neighborhoods.

Building Design

Building design issues are complex. According to Tim Mount, a partner with Street-Works Studio in Port Chester, New York, “retail, entertainment and restaurants need clear, high space with few well-placed columns. Retailers need storefront and customized spaces to be able to express the individual brands.” Upper-floor uses have different loading needs, layouts and their own structural grid. The upper-floor uses may call for a different building skin than the glass that will wrap the first floor. Mechanicals can be different for each use. Mount warns that “since successful walkability is the driving issue, the developer has to optimize [the project plans] for first-floor retail and then work out the structural and mechanical solutions for putting different uses above.”

Financing and Management

Financing walkable mixed-use projects typically has been more difficult than financing single-use ones. Developers have often had to put financing together from multiple sources, and equity investors have limited their investments in these projects to the “patient capital” part of their portfolios. Yet financing is getting easier, particularly since it has been documented that buyers and tenants are willing to pay a substantial price premium for office space in a walkable urban place.

outdoor shopping area with a fountain

Santana Row in San Jose, California, features many of the characteristics of successful walkable mixed-use neighborhoods, including vibrant streetscapes, active shop windows, al fresco dining, and office and residential uses above ground-floor retail space.

Capmark Finance Inc. put together a key part of the financing for Midway Companies’ CityCentre, the conversion of a Houston mall to a walkable mixed-use destination. Brant Smith, a vice president at Capmark, recounted that Midway’s research, experience (even though the company had not developed a mixed-use project before) and grasp of the nuances of mixed-use development were persuasive in assembling the financing, which was done through LaSalle Bank Corporation (now part of Bank of America). As Jonathan Brinsden, chief operating officer at Midway, noted in a spring 2012 Development article, “CITYCENTRE: From Mall to Mixed-Use,” Amegy Bank, CitiBank Texas and Compass Bancshares Inc. also provided financing.

Some additional aspects of walkable development can help on the financial side. Streets are narrower, and the mix of uses provides synergy that can result in higher land values and higher rents. Time to groundbreaking may be shortened because there may be fewer delays due to NIMBY concerns. Older districts may offer existing hard infrastructure in the form of legacy buildings, sidewalks, streets and utilities, as well as soft infrastructure such as neighborhood identity, gathering places, well-known institutions and active public spaces. New Market Tax Credits may be available, and historic buildings should offer financing opportunities.

Public and quasi-public entities may be willing to pay for infrastructure, as was the case in Cherry Creek North, a 16-block walkable commercial district in Denver praised by Paula Rees. Property owners and businesses there created a business improvement district (BID) that has led the way in investing in infrastructure, public spaces, landscaping, signage, wayfinding, lighting, energy and water conservation and public safety.  Cherry Creek North is now benefitting from hotel and residential investment and has more shoppers each year than any other Denver center, district or mall.

Walkable development also has consequences for training as well as building operations and maintenance. Robin McBride-Zeigler, former regional chief operating officer for Federal Realty Investment Trust, and currently executive vice president/head of operations with Penzance, reports that the company offered special training for landlord and contractor employees at the new walkable Pike & Rose development in Montgomery County, Maryland. Maintenance of mechanical and electrical systems in mixed-use buildings is generally more expensive and more complex.

For Pike & Rose, Federal Realty looked for retailers willing to go the extra mile in training staff. The training effort at Pike & Rose went beyond building systems and extended to parking attendants, security personnel and plaza aides. The training focused, in particular, on the project’s standards for operating in a busy pedestrian environment that includes public spaces near storefronts and building entrances, on-street retail, and retail alongside outdoor and indoor musical and other events.

Summing Up

Mount explains that “the mall is transaction based, but walkable retail is relationship based.” Many empty-nester and millennial customers are looking for just that type of relationship-based retail experience. To create successful, walkable streetscapes, retailers and other first-floor business owners who see the potential in interesting, fenestrated facades and active shop windows are essential. Mount cites Santana Row in San Jose, California, where his firm was on the design team, as exemplifying many of these characteristics.

Getting walkability right is more important than designing an attractive building. The primary role of a building in a walkable district is not to be looked at and admired, but to shape inviting spaces for walking. The final judges of its success will be the restaurant patrons, shoppers, browsers and visitors who will come and, ideally, return again and again. Their criteria, when deciding whether to return, will be whether the streetscape is comfortable, fun and safe — and real. 

Walkable mixed-use development offers retail synergy, office development opportunities, density with less traffic congestion and appreciation in land values and rents. High demand and limited availability mean these places — whether in center cities, inner suburban downtowns or outer-ring suburbs — will be part of the future of commercial real estate development.

From the Archives: Business / Trends Articles from the Previous Issue

By the Numbers: US Labor Market Setting New Peaks 

With the U.S. labor market recently recapturing the 8.7 million jobs lost to the recession, now is a good time to examine which metropolitan areas are leading in job growth and which are lagging behind.

book cover

Getting and Keeping the Right Team Remains No. 1 

In today’s highly competitive and transforming marketplace, the recruitment, retention and recognition of contributions made by talented professionals remains the No. 1 priority for real estate companies nationwide. That is one of the key takeaways from the recently released “2014 NAIOP Commercial Real Estate Compensation Survey,” completed in partnership with CEL & Associates, Inc.