A building with living units on the top floor and office space on the ground floor, for instance, would be considered mixed-use office and residential space, with the living units taking up the lion’s share of the building’s square footage.
Accenture Tower, a KBS owned property at 500 West Madison Street in Chicago is a 40-story example of exemplary mixed-use office and retail space, with Class A office space, retail/entertainment amenities and convenient access to transportation. As the Windy City’s first and largest full-service office location, the building sits atop Ogilvie Transportation Center in the rapidly gentrifying West Loop area of Chicago’s near West side.
Within a multi- or mixed-use structure, developers and planners can establish a theme where all tenants, residents and business owners, form a mutually beneficial community. The goal is to strategically balance a building’s overall functionality and utility for all while keeping pace with amenities that may emerge. By ensuring a high level of satisfaction among visitors, tenants, office and retail workers the location as an ecosystem flourishes. In some cases, such as with Accenture Tower, the retail and entertainment venues attracts tourists and residents in the nearby local community.
While Millennials have been credited in recent years for driving the growth of mixed-use commercial real estate, these developments appeal to any generation that wants to be in a live, work, play setting.
“When planning out programming for our multi-use properties, such as Accenture Tower, we put our heart and soul into creating environments that are built around consumer needs,” said Todd Siegel, CBRE’s senior vice president, who specializes in leasing retail space in high-rise class A office buildings, urban storefronts and mixed-use developments throughout Chicago and across America’s primary retail markets.
Mixed-used commercial real estate need not be fully self-contained within the same structure. Developers and city planning departments often develop a scenario where many elements co-exist in one master-planned community. It can take up a single building or span an entire city block or neighborhood. When carefully planned and executed well, mixed-use real estate can incorporate various types of functions that complement each other.
“We’re always mindful of the amenities offered that we have immediately within an asset versus those that may exist across the street or within a marketplace,” said Siegel. “What we may deploy in midtown Manhattan isn’t necessarily something that we would consider in suburban Minneapolis.”
Mixed-use commercial real estate is not only becoming one of the most popular product types in the U.S. commercial real estate sector — but it offers investors a myriad of advantages, including:
Conveniences Are Good for Business.
Instant gratification has become the norm in a world of transportation on demand, online shopping and food delivery, so office tenants, consumers and visitors expect convenience — all in relatively close proximity. Therefore, convenience is a key demand driver to a fast-paced lifestyle and, it’s the strategy behind the appeal of mixed-use projects — especially in major markets.
When sharing a building full of prospective customers, businesses flourish. And when in such close proximity to amenities, people are more likely to pick the brick-and-mortar options in which they walk by every day — rather than relying strictly on online marketplaces or venturing out beyond their immediate community.
According to the National Community and Transportation Preference Survey by the National Association of REALTORS®, 53 percent of Americans prefer walkable communities, where people can to get to a restaurant, coffee shop, grocery store, retail store or their office without having to leave their community or get into a car.
With a variety of uses, services and amenities integrated into a mixed-use property, it attracts foot traffic and generally more interest than a stand-alone project. Visiting a restaurant, place of business, or a retailer, may result in a person discovering one of many building tenants that they would not necessarily have known of. Moreover, mixed-use retail locations enjoy the spending of residents, in buildings with living units, as well as office tenants who are more likely to frequent their most convenient option than visit a single standalone store or venture online.
Located where winter temperatures can drop well below zero — Accenture Tower is a welcome destination for train riders who disembark right into the building to go to work and access the 80,000 square feet of retail space, with more than 45 stores and restaurants is a win for everyone.
A Risk Averse Choice.
When different asset types are combined into one site, economic downturn can prove less risky.
According the Urban Land Institute, mixed-use real estate developers and investors incur far less risk due to demand and diversity of space. While a property owner who rents a standalone retail store or building risks a decrease in revenue if they lose a tenant, an owner of a mixed-use property may benefit from diversification which typically results in a reduced impact to revenue.
Being amenity rich is another way in which mixed-use properties can retain tenants and reduce turnover, because people rarely seek where the grass is greener when they’re content with where they are.
“Finding the right mix of amenities is just one of the ways we minimize risk,” said CBRE’s Siegel. “Providing the amenities that people desire helps create a positive experience in the space. And in mixed-use office and retail space, that can ultimately lead to a happy employee and a happy workforce.”
To learn more about Accenture Tower, click here.