Western Real Estate Business

AUG 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

Issue link: https://westernrealestatebusiness.epubxp.com/i/1012778

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Page 34 of 42

32 • August 2018 • Western Real Estate Business www.REBusinessOnline.com The retail industry remains in flux as owners, developers and tenants adapt to ever-evolving con- sumer demands. One of these is the in- creasing demand for convenience, as evi- denced in part by the rapid rise and expan- sion of ecommerce. While the popularity of online shopping has undoubtedly created a challenge for many brick-and-mortar retailers, the growing desire for con- venience also presents an excellent opportunity to place retail into mixed- use communities alongside other product types like multifamily, office or hospitality. An ideal mixed-use development is one that can act as its own "commu- nity within a community," creating an ecosystem where the real estate product types both drive and feed the demand of the other components, in- cluding retail. Developers and owners can circum- vent some of the uncertainty and risks surrounding retail investments by strategically positioning retail space among multiple demand drivers within mixed-use projects, as well as selecting the right locations. Mixed-use projects are becoming in- creasingly attractive to retail investors and tenants alike. When the product type is placed among other uses in a single project, it can create a synergis- tic environment where the retail op- tions serve as amenities to residents and employees of multifamily and of- fice components. Those who live and work in mixed- use communities are much less likely to drive even a mile or two down the road, when grocers and other daily needs retailers, and/or a diverse mix of boutiques and restaurants, are just a few steps away. This, in turn, gives retailers at these locations a built-in and consistent consumer base. As an example, Ventus is develop- ing a 4.4-acre, $400 million mixed-use project called "The Fig" adjacent to the University of Southern California (USC) campus and Exposition Park in Los Angeles. The project will feature student housing, market-rate and af- fordable multifamily units, creative office space and a 298-key hotel, in ad- dition to retail. We anticipate attract- ing a diverse retail tenant mix that will offer peak convenience for both the residents of the community and hotel guests. Developers can create a thriving, synergistic community that drives optimized returns for investors by creating a mixed-use project with the right selection of complementary uses. Those looking to develop mixed- use destinations incorporating retail should not only carefully consider product types and how they relate to one another, but identify locations where submarket characteristics (and potentially a large-scale venue or in- stitution) will assist in driving de- mand. For instance, Exposition Park is undergoing a revitalization that will drive more tourism. There are several projects underway in the area, including the $1 billion Lucas Muse- um of Narrative Art, which just broke ground, and a $270 million renovation of the L.A. Coliseum. Residents and hotel guests will drive demand and feed the retail component of The Fig project, as will other tourists to the area and non-resident USC students as well. Another critical factor in selecting a site for this type of development is the potential for competition to enter the market. Savvy developers must eval- uate both existing and potential future competition (i.e. other developments). Targeting infill locations with high barriers to entry dramatically reduces the likelihood you'll have to share the market with new competitors, espe- cially in the short-term. The Fig site is a rare development for the submarket due to the area's built environment and high barriers to entry. This will greatly enhance its long-term value and cater to a myriad of potential retail tenants. While brick- and-mortar retail is certainly far from obsolete, stakeholders must continue to address shifts in demand and the economy as a whole when consider- ing how a diverse mix of uses can sus- tain demand over the long term. As competition from online retail- ers and other changes in consumer behaviors increase vacancies and in- terrupt cash flow, developers can pro- tect themselves and their investors through selecting sites that can sup- port both retail and alternative uses. Booty courtesy of VisionScape Imagery Ventus is developing a 4.4-acre, $400 million mixed-use project called "The Fig," located adjacent to the USC campus and Exposition Park in Los Angeles. courtesy of VisionScape Imagery The Fig will feature student housing, market-rate and affordable multifamily units, creative office space and a 298-key hotel, in addition to retail. RETAIL CAN THRIVE IN MIXED-USE COMMUNITIES DESPITE UNCERTAINTY By John David Booty, Executive Vice President, Ventus Group UPCOMING EVENTS InterFace Phoenix Retail Real Estate September 11 InterFace Phoenix Multifamily September 11 InterFace Phoenix Industrial September 12 InterFace Multifamily Texas September 26 InterFace Healthcare Real Estate September 27 InterFace Net Lease October 3 www.InterFaceConferenceGroup.com

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