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Mixed-Use Gains Momentum

A decade ago, the number of mixed-use retail projects was relatively small and the format limited. Typical projects were either high-rise office buildings with a retail podium or regional malls with some combination of office, hotel or residential buildings sharing the same site.

A prime example of the former was Chicago's Water Tower Place, which put 40 floors of offices atop three floors of specialty retail in a high-profile building on North Michigan Avenue. The latter was exemplified by the Mall at Riverchase in Birmingham, Ala., where the mall court merged with the lobby for a high-rise hotel. Two residential towers sat nearby.

Today the number of mixed-use projects has grown significantly, and the permutations seem endless. Some, such as the San Francisco-based Emerald Fund's plans for three floors of apartments atop a new Albertson's supermarket in San Francisco's Western Addition, are quite small. Others have a larger scope. Santana Row in San Jose, Calif., being developed by Rockville, Md.-based Federal Realty Investment Trust, will combine 650,000 sq. ft. of residential, retail and hotel uses on a site once occupied by a neighborhood shopping center.

Still others are very ambitious indeed. Peabody Place, by Memphis-based Belz Enterprises, encompasses eight city blocks in downtown Memphis. And the 650-acre Fair Lakes in Fairfax, Va., being developed by The Peterson Cos. of Washington, D.C., includes some 7 million sq. ft. of retail, entertainment, office, hotel and residential uses.

In creating the new breed of mixed-use projects, developers are responding to a convergence of social and economic trends, including consumer demand for greater convenience, altered community planning policies that favor traditional city and neighborhood forms, and a shortage of developable land.

"What I'm seeing happen is a growing interest in the combination of people living, working and shopping in juxtaposition," says James Todd, president of The Peterson Cos. "We're getting away from the patterns of the past half century where everything was kept separate."

Fed up with traffic Perhaps the biggest factor in the change is a growing impatience with driving. "We see traffic congestion a problem in all urban areas," Todd says. "People don't want to spend their time tied up in traffic. If you can live, work and shop in the same place, it's a lot easier."

Certainly the movement toward mixing uses parallels the "urban village" and downtown renaissance movements. The majority of mixed-use projects appear to be patterned after traditional city and town centers or built within existing urban commercial areas.

The name of one Peterson project, Downtown Silver Spring, speaks for itself. Located in Silver Spring, Md., the 1 million sq. ft. project is an attempt to create a traditional city center - complete with offices, shops, restaurants, entertainment venues, hotels and public spaces - in a largely post-World War II suburb that never had one.

The number of such projects is large and growing, such as Pleasant Hill (Calif.) Downtown by San Diego-based Burnham Pacific Properties, Easton Town Center (Columbus, Ohio) by Columbus, Ohio-based Steiner + Associates, and Downtown Tacoma by San Diego's DDR OliverMcMillan.

Though the trend has existed for several years now, it has really begun to catch fire in the past two years thanks to the abrupt emergence of communications technology as a major economic force.

"Communication technology businesses are taking millions of sq. ft. of office space per year in cities all across the country," Todd explains. "And the overriding characteristic of these businesses is that the employees want to live near things, work near things because they're very busy."

He might add they also tend to be very young, often just out of college, and not ready to settle down. They love to go out - to movies, dinner, bars, clubs, concerts, whatever - and, judging from recent retail sales figures, they love to shop.

The role of mass transit The Washington, D.C., metropolitan area might be considered a kind of incubator for the mixed-use movement. In addition to Fair Lakes and Downtown Silver Spring, Peterson is developing the 1.1 million sq. ft. Fairfax Corner in Fairfax, Va. Federal Realty is completing Bethesda Row just outside the nation's capitol in Bethesda, Md., and The Village at Shirlington in Shirlington, Va. And New England Development of Newton, Mass., is building Friendship Place in Chevy Chase, Md.

There's also Reston Town Center in the planned community of Reston, Va. The project, owned and managed by Chicago-based Equity Office Trust, combines 540,000 sq. ft. of offices, a 514-room Hyatt Regency, a 13-screen cinema, 230,000 sq. ft. of retail and several hundred multifamily residences.

Several other developers also have mixed-use projects on the boards in the D.C. area. Significantly, most of the Washington-area projects are located at stations on the area's rapid transit system. Transit, says Todd, plays a critical role in the viability of a mixed-use project, as a matter of convenience and escape from traffic.

In the San Francisco Bay Area, local and regional transit systems are promoting development of so-called transit villages at primary transfer stations. Oakland-based Bay Area Regional Transit (BART) solicited developers for sites adjacent to several suburban stations for the express purpose of attracting mixed-use projects.

For BART the goal is to attract passengers in order to boost its revenue base and minimizing traffic on the region's congested roads and freeways. For the local communities in which projects will be located, reducing congestion is also a goal, but no less important is the economic shot in the arm such developments can provide.

Nowhere is the latter goal more evident than Fruitvale Transit Village in Oakland. Being developed by a joint venture of nonprofit organizations, government agencies and BART, the project will include housing for senior citizens (already completed), a public library, a public health clinic, offices for various social service agencies, and retail and restaurant spaces targeted to local residents and commuters.

Farther to the south and east, the neighboring towns of Dublin and Pleasanton see intensive development at the communities' shared BART station as a step toward pulling people out of their cars, especially at commute hours when local roads often experience half-hour to an hour traffic backups. BART recently signed a contract with Chicago-based Jones Lang LaSalle to develop an office building, hotel and apartment complex on 17 acres at the station.

The beauty of mixed-use, says architect Ernie Vasquez, a principal with project designers McLarand Vasquez & Partners of San Diego, is the way each use reinforces and buildsupon the others. In the case of Fruitvale Transit Village, the residential, public service and transit uses ensure patrons for the retail shops, cafes and restaurants, while the convenient retail services makes the site more attractive to other users.

Some combinations of uses enable interrelations that otherwise might not be considered. For example, New York-based Millennium Partners and San Francisco-based WDG Ventures have a mixed-use high-rise in construction in downtown San Francisco that will have a tri-level retail concourse at the base with a Four Seasons Hotel above that and luxury condominiums at the top.

The hotel's maid, food and concierge services will be available to condominium owners, enabling residents to have meals and merchandise delivered to their units, according to project literature. The hotel concierge will even be available to select and purchase items on behalf of residents and hotel guests. Thus each component bolsters the economic viability of the others.

Parking, zoning challenges Single-building mixed-use projects present more challenges than projects with single uses assigned to individual buildings, reports Paul Paszterko, a principal with Perkowitz + Ruth Architects in Long Beach, Calif.

For example, he says, "The typical configuration of limited surface parking, subterranean parking, ground-floor and second-floor retail with residential or office above has built-in conflicts among the requirements of the individual uses." While separating the uses into separate structures reduces the complexities significantly, this approach requires more land.

Mixed-use entails other complications as well. According to Paszterko, meeting the parking requirements of the individual uses is one of the more formidable tasks. He says both local jurisdictions and major tenants often insist on the same parking ratios they would require were the project solely dedicated to a single use - and getting the parties to give in can take a lot of negotiating.

Good transit access makes a sound argument for alleviating parking requirements. Including congregant care or senior housing rather than standard apartments or condominiums can also reduce parking needs, he notes. Another significant challenge for many projects is overcoming local zoning laws. Though many communities champion mixed-use development, others strongly resist it.

In Columbia, Mo., city planners and developers faced multiple community objections when they attempted to implement the city's Metro 2020 plan, which favors mixed-use development. According to an article in the Colum-bia Tribune, even though most proposals involved fairly small projects with a maximum of two uses (office and residential or retail and residential), many residents adamantly opposed the introduction of one use or the other into existing single-use districts. The developers had to fight hard to gain approval, the newspaper reports.

Key to any mixed-use development, Paszterko says, is creating consensus among local residents, merchants, neighboring property owners, government agencies and the developer. He cautions developers to expect a lengthy approval process, sometimes lasting several years.

To make things go as smoothly as possible, he recommends laying the political groundwork through community outreach efforts. In addition, he says, gaining the support of elected officials and creating clear lines of communication with government agencies can substantially shorten the entitlement process.

Like urban planning In many respects, Todd points out, the plan for a large mixed-use project is equivalent to an area-specific plan prepared by a local planning department.

His company's Fair Lakes development is effectively a complete urban district, on par with, say, Beacon Hill in Boston or Coconut Grove in Miami. Few people are likely to think of it as a single development but rather as another part of town.

With projects of this size, Todd remarks, flexibility is crucial because it can take 10 to 20 years to bring the entire development to fruition. During that time, so much is likely to have changed that some elements of the original plan will no longer make economic sense.

"You have to have from the public bodies enough flexibility to make changes, so that what was to be a hotel becomes an apartment building or an office building becomes a retail complex," he says. "In most cases what we need is a method to change uses under specific guidelines. What will not change, however, is the overall density. There is an agreed-upon building cap that we cannot alter."

Developers also must decide whether to handle the whole project on its own or collaborate with others. With massive projects such as Dallas-based EDS Corp.'s 150-acre Legacy Park in Plano, Texas, or Atlanta-based Jacoby Development's 144-acre Atlantic Steel project in Atlanta, partnering is all but mandatory. Few if any companies have the resources and expertise to carry off these kinds of developments on such a vast scale.

With smaller projects, on the other hand, the option for a single developer is greater. Todd reports that Peterson has worked both ways.

Creating an 'organic urban fabric' Over the next decade, the number of mixed-use projects is likely to balloon, according to most observers. Paszterko, who was born in Hungary and has traveled extensively throughout Europe, likens this "new" type of development to what has existed for centuries elsewhere.

"With my European background and education," he says, "in my opinion mixed-use is a synthetic description of a true, organic urban fabric as it is known all around the Old World. It exists here in the United States, too, but unfortunately, with some noted exceptions, it is the stuff of abandoned, deteriorating and neglected downtown areas."

The situation is changing for the better, however. Says Paszterko, "As the public and developers recognize the tremendous economic potential of these areas and urban development as the one viable alternative to urban sprawl ... agencies will have no choice but to enthusiastically embrace proposed mixed-use projects."

Todd wholeheartedly concurs with Paszterko's assessment. "As traffic becomes more congested and people find it harder getting place to place, more and more people are recognizing that mixed-use provides a welcome convenience," says Todd.

At the heart of it, he adds, mixed-use simply reasserts a traditional way of building cities. Todd makes the point effectively when he recounts the comments of a Sony executive at a recent conference on development trends:

"He looked at us and said, 'I grew up in a mixed-use development. It was called downtown.'"

The range of uses that can be combined is wider than many people realize. For example, the University of Pennsylvania included a 658-stall parking garage and 15,000 sq. ft. of retail in a building on its Philadelphia campus whose primary purpose is housing a fully automated 13,400-ton chiller and thermal storage plant.

But James Todd, president of The Peterson Cos., says he doubts most industrial and distribution uses can be combined effectively in true mixed-use fashion. He calls their need for large low-rise buildings and truck and freight access antithetical to most other uses.

The University of Pennsylvania project, however, brings up a significant mixed-use issue: Engineering and structural requirements can be substantially different for different uses, especially in single-building projects. To keep the temperature from dropping too low in other parts of the building, the chilling facility required far more effective insulation than normal. It also needed systems to block the vibrations and noise of the machinery.

Sometimes engineering demands can create sizable obstacles to development. When San Francisco-based Pacific Resources PCX Development wanted to convert a historic office building in downtown San Francisco into a retail complex and luxury hotel, it discovered that the two components had radically different structural requirements.

In a new building, this could have been solved fairly easily, but in an existing building, especiallyone with landmark status, finding a solution was more difficult, recalls David Mar, an engineer with Berkeley, Calif.-based Steven Tipping & Associates, Inc. who worked on the project. Too much tampering could have caused the landmarked building to collapse.

Though the multi-column support system of the 1907 building worked ideally for the hotel on floors five through eight, it made the lower floors unacceptable to contemporary retailers. Yet the developer needed the retail to assure financial success of the project, dubbed Pacific Place.

Pacific Resources signed a 75,000 sq. ft. lease with Old Navy before knowing whether a solution could be achived. "Old Navy made it clear the building would not work without a more open selling area, but nobody had any idea how to accomplish it," recalls Jeff Vance, managing director for Pacific Resources.

Ultimately, the Tipping team designed an innovative structural system that could be installed in the lower half of the existing building shell and allow removal of about 70% of the original columns. Vance says the solution, for which Tipping received the Building of the Year award from the National Association of Structural Engineers, added about $10 million to the project cost, bringing the total to $102 million.

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