Mixed-Use Developments

New construction trend invades South Central region

By Angelle Bergeron

Mixed-use developments may be a hot trend with staying power or flash in the pan, but either way, they are generating a lot of construction.

And the developments – broadly defined as a community that incorporates a variety of end-uses – can be viewed as the new urbanist philosophy of traditional neighborhood developments where all needs for life are within walking distance, or they can be just a new way to chock various revenue streams into a tighter space.

One thing is certain: mixed use is gaining popularity, whether that mixture is a combination of residential and commercial in a single building or a sprawling community that encompasses multiple buildings that are residential, retail, office, medical, recreation and public services.

“I can’t tell you whether it’s a fad or the wave of the future, but nobody was doing it five years ago,” says Richard Steinberg, executive vice president of Mall Properties Inc. a division of Janoff & Olshan Inc. of New York. “Suddenly, anybody in the business is certainly thinking about it when they start a project today. Each developer and each project has its own character. Mixed use is simply a grab bag we throw them all in.”

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Mall Properties is currently working to convert mall properties into mixed use in Hampton, Va.; Dayton, Ohio; and Milwaukee.

But mixed-use developments are not the antidote to the sluggish housing market nationwide, Steinberg says.

“I don’t think that the national housing trend has much to do with this particular product because there aren’t enough to warrant that,” he says. “For example, we just opened a mixed-use development in Dayton with 125 apartments. It’s nothing to do with demographic trends in Dayton, 125 people moving from here to there. It’s just a new product in town.”

Dodge Analytics, the arm of McGraw-Hill Construction that tracks industry trends, doesn’t readily have stats on what percentage of the market is being invested in mixed-use developments, says Ralph Gentile of Dodge Analytics in Lexington, Mass.

That is primarily because dollars spent have traditionally been tracked according to different types of projects – industrial, residential etc. – not projects with mixed components.

“We would have to break down the parts and add up the amounts for each part, and it would be a long, complicated process,” Gentile says.

Although the figures aren’t in (at least not in a clearly communicable form), mixed use is definitely a lucrative trend, as demonstrated by several multi-million dollar projects underway throughout the South Central region.

Winter Construction Inc. of Atlanta is constructing portions of the $300 million Bridge Street Towne Centre in Huntsville, Ala. The development, which has components scheduled to open this summer and fall, will include approximately 2 million sq ft of retail, restaurant, entertainment, office, hotel and residential space.

Developer O& S Holdings of Los Angeles owns more than 80 properties in the U.S., including the Louisiana Boardwalk in Bossier City, La., and the 1.1 million-sq-ft Bridge Street Town Centre in McKinney, Texas. Its Bridge Street in Huntsville is located in Cummings Research Park, says John Southerland, communications director for the Huntsville Chamber of Commerce.

Developers agree that location is everything when it comes to a successful mixed-use development.

“It’s very difficult to find this type of location with the demand and growth patterns where you can produce all of these components,” says Stephen Keller, president of Creekstone Cos. of Baton Rouge, La., which expects to begin construction this summer on Juban Crossing and Market Place in Denham Springs, La. “We started working on the project before Hurricane Katrina, but I do believe Katrina will accelerate the development because of the demand for housing, retail, office space, everything.”

Denham Springs is a bedroom community to Baton Rouge and experienced tremendous population growth in the aftermath of Katrina. 

“Everything that you would find in a new city, we’ll have some aspect of it,” Keller says of the 500-acre community. “You should be able to live, work, eat, stay in a hotel or go to a movie.”

Indeed, mixed-use developments are generally planned as destinations themselves, contained but situated near desirable economic centers or geographic locations.

The Wharf, an $800 million mixed-use development in Orange Beach, Ala., is attracting well-heeled baby boomers to an area that has been economically sluggish since Hurricane Ivan barreled ashore in 2004, says Beason Wilkes, vice president of production for the Southeast area for AIG Baker, a Birmingham shopping center and resort developer.

The 223-acre project is approved for 1 million sq ft of retail, 1,700 condominiums, four hotel sites, a half-mi-long marina and the largest outdoor amphitheater (10,000 seats) in the region, Wilkes says.

“We’re really becoming a magnet down here,” he adds. “When you pull into The Wharf, you know you are at a resort destination.”

AIG Baker is doing $1 billion in construction this year and has no plans to give up that market segment, Wilkes says.

“We’ve built in excess of 20 million sq ft nationwide since 1993 and we currently have about eight shopping centers in development around the country,” he adds. Wilkes says he views mixed-use as an extension of its existing business and one that satisfies a burgeoning market niche that caters to the 50 to 60 million retiring baby boomers.

However, mixed-use also poses unique challenges for builders and developers. “The biggest challenge is making all the parts work together. It’s a lot about making sure all the parts make a whole, and that whole is bigger than the sum of its parts,” Wilkes says. “It’s synergistic. I would not recommend anyone who is strictly into building projects and walking away from them to attempt this.” 

Mixing the use of a single building or a whole development poses permitting challenges for local municipalities “because we don’t fit their mold,” says Joe Uithoven, vice president of construction for Kerioth Construction of Jackson, Miss. Kerioth Corp. is the developer and Kerioth Construction is the general contractor for the Township at Colony Park, a $200-million-plus mixed-use development in Ridgeland, Miss.

“The codes vary,” Uithoven says. “Fire separation issues vary. Egress and entrance to buildings all vary. It makes a whole different equation for the architects and developer and presents life safety issues (such as separating living areas of a residential floor above a commercial ground floor) that are not presented otherwise.”

Zoning can also be an issue.

“When I built Town Center (a Baton Rouge retail development that is being expanded as mixed-use to include office and residential space), I followed Baton Rouge’s zoning ordinances,” Keller says. “In Livingston Parish, because we are creating our own community development district, we are creating our own guidelines.”

Communication is also critical in mixed-use construction, and contractors must be guided to avoid repetitive processes throughout a contract that may include separate, distinct components, Uithoven adds.

It also can be difficult to find subcontractors with the specialties and skill levels to work on large projects with different requirements for each portion, says Jeff Schletty, project manger for Choate Construction Co. of Atlanta, the general contractor for the $87 million Icon in the Gulch in Nashville, Tenn. 

“A subcontractor that specializes in retail work may not have some of the standards we are looking for in our larger work,” Schletty says. “That, and the difficulty of the schedule, is challenging. On a retail job, the owners always want to be moved in as quickly as they can.”

Coordinating the number of contractors and subcontractors can also be a logistical nightmare.

“We will hire a variety of contractors, as many as five or six different building contractors that will build various parts as well as contractors building sewer systems and water fire protection, gas lines, streets, and a storm drainage system,” Keller says. “The only thing we will coordinate, not install, will be the power company.”

Developers often say that mixed-use projects bring a host of economic development benefits, and as a result, take advantage of a variety of tax breaks, bond incentives and local participation for infrastructure development. All of Mall Properties’ mixed-use projects are financed with some municipal participation, Steinberg says.

“There are a number of devices used to get financial commitment toward improvement, and an enormous amount of that is going on,” he says. “It’s one of those things where the window is open, and it may get closed. From our standpoint, a community doesn’t put any money in. It blesses the development by tax improvement bonds that we can borrow against.” 

The infrastructure for Juban Crossing is being funded in a variety of ways, including its Community Development District status, private sources and Go-Zone legislation for the vertical construction components, Keller says.