You can't call it a master planned community. And it's not always on an infill site. So how do you classify the latest wave of projects in both cities and suburbs that meet the needs of hip urbanites, empty nesters, and family-oriented suburbanites alike? What else but "mixed use."

With its European heritage, mixed use has been a way of life in many countries for generations. However, the blending of live, work, and play boundaries is a relatively new concept in this country, where zoning has long kept them apart. As a result, builders and developers are confronting a new set of development challenges as well as opportunities as they try increasingly to adapt to localized residential, retail, commercial, and even industrial needs and requirements to maximize potential returns. For many, mixed-use developments are opening up new design ideas, neighborhood by neighborhood, to create villages where people might live in a more balanced way.

While many people simplify the term "mixed use" to mean residential and commercial together, Randal Jackson, president and chairman of The Planning Center, based in Costa Mesa, Calif., challenges the industry to be more open-minded when defining a project. With more than 34 years of experience working with builders and developers planning large-scale MPCs throughout the country, Jackson has experience blending the residential sector with industrial, office, and commercial components. "I think people are limiting it too much by defining mixed use as residential and commercial together," says Jackson. "It's really the concept of doing away with zoning and looking at the other aspects that need to be resolved to mix the use. You don't have compartmentalization of land like we used to in zoning plans."

Even a traditional MPC is a sophisticated zoning plan, Jackson contends. "When we get to mixed use, the blinders are off. You can do anything in a mixed-use project that you can imagine -- as long as you make sure the environmental, the operational, and the physical uses are compatible."

The Learning Curve

It's the way that builders and developers with a historically residential focus are learning to deal with these compatibility issues that are creating new business opportunities and unique business models. As they learn from mixing uses in suburban and urban projects, companies are re-tooling themselves.

"To grow as a company, we have to be willing to go outside the box," says Rick Horton, D.R. Horton division president. "We believe we should put 10 percent of our balance sheet outside the box in non-traditional neighborhoods. Five years ago, we were 100 percent inside the box with no desire to go outside."

Recognizing the need to explore new product opportunities, Standard Pacific Corp. created a research and development position. As vice president and general manager of Standard Pacific's Gallery Communities, Ralph Spargo coordinates the resources within divisions to expand the company's non-traditional products. "I think this mixed-use [development] is really the next wave," says Spargo. "Five years ago, no one at Standard Pacific would have considered looking at a project that included commercial and industrial. Today we are, and we're looking at different ways to develop those kinds of projects."

In the past three years, Bob Garrison, director of urban development for Miami-based Lennar, has experienced the shift. "When we go into cities for entitlements, we are constantly being asked to do mixed use," says Garrison. Although they are relatively new entries into this field, the company sees mixed use as a growing percentage of their business. "We want to deliver more each year."

Click here to read The Olson Cos. mixed use case study.

"What the cities want to see most is vertical mixed use," says Garrison, who is responsible for Lennar's Los Angeles and Orange County, Calif., regions. "It seems real sexy to them." The idealistic scenario includes commercial on the ground floor and residential above at each site. But these projects have a lot of intricacies to be addressed. Services like trash pick-up and deliveries to the retail users often present conflict, and the entire effort needs to be integrated. Different utility requirements and venting are also an issue. According to Garrison, these issues are problematic because not many people know how to deal with them. Plus, there's a real cost factor. "They look fantastic, but financially, it's a killer."

According to Garrison, home building roots don't necessarily provide the expertise necessary to tackle these projects. "We try to avoid the vertical mixed use, as of yet, and stay horizontal. In other words, we segregate the areas," says Garrison. "The real challenge is, to get the density, you wind up with higher buildings. We have a learning curve on our home building side to pick up some of that."

Blazing the Trail

What is resulting from this new philosophy is a flood of developments that are focusing on lifestyle: creating a community around which homes are generated. While the movement may have initially been generated by land constraints and been more prevalent in California, the excitement has migrated, in all shapes and sizes, to other parts of the country.

In some cases, regional land planning efforts have produced mixed-use developments that amount to new towns. "It's about humanity," says developer David E. Craig, president and CEO of McKinney, Texas-based Craig International. "Traditional developers tend to go toward suburban sprawl in this area. We wanted to create a strategically located, friendly, self-sustaining community. I believe a good percentage of the market wants it, but it wasn't being offered."

Craig Ranch, in McKinney, Texas, addresses that need. The 1,850-acre mixed-use project incorporates "all walks of life" where 30,000 people can live and 20,000 jobs will be located. While it includes residential living in every arena from detached affordable to high-end custom on estate lots, as well as townhomes, triplexes, and quadplexes, it doesn't stop there. Twelve parks, the state's first PGA-owned tour golf course, and a focus on youth entertainment have been incorporated with baseball fields, soccer fields, and water parks. The community's town center features an array of restaurants and shopping venues. A full-service hotel, 350,000-square-foot medical center, assisted living facility, schools, and churches are also planned for the area.

Capitalizing on regional planning efforts, Craig Ranch is anchored into an area where the counties' four largest cities -- Plano, McKinney, Frisco, and Allen -- will meet. "We are blessed for our location," says Craig. "You can't do a development of this magnitude without the participation of the municipalities." And the cities are cooperating. "The planning departments are realizing that what they have done over the last 30 to 40 years hasn't worked."

"There's a lot of land there where people can work," says Horton. "But, the first thing you need are rooftops -- and they're coming fast." As the community began its infrastructure, D.R. Horton bought the first 260 residential acres. Building a total of 1,473 units on this parcel, the company anticipated a five-year absorption. Instead, they're selling 50 units a month.

In an exclusive arrangement, D.R. Horton has negotiated a first-right-of-refusal agreement with Craig. Before any other builders can buy land, Craig offers it to D.R. Horton. "We intend to buy the land as he [Craig] needs to sell," says Horton. While it was difficult to create a pedestrian-friendly environment and keep the design natural, the biggest challenge was to incorporate all the components, keep 30 percent as open or recreational space, and then convince builders there was a market for it. "I've been involved in these types of projects from Minnesota to Florida," says Horton, "and I've never been a partner in anything like this. We see a lot of pie-in-the-sky ideas, but this is really happening."

"I kept hearing, if the wheel isn't broken, why fix it," says Craig. "I said, 'Try it and you'll see.' " Now Craig Ranch is the fastest-absorbing community in the state.

Pushing the Approvals
Randal Jackson, president of The Planning Center, in Costa Mesa, Calif., finds three elements are key to successful mixed-use projects:

1. Education -- People need to expand their ideas. Zoning locks uses out. Mixed use allows you to mix uses to include the things you need to achieve.

2. Road Tour -- The reality is, you have to get out there and show people that there are good examples of this happening. Take the politicians out to see the sites. Show them what is and isn't working.

3. A Document with Codes and Covenants -- Be sure that a private/public sector agreement travels with the land. Once there is an agreement between developers, builders, and the city, all parties need to make a commitment. "Often it doesn't mature for a while, so you need to be willing to see it through from both sides," says Jackson.

Learn more about markets featured in this article: Los Angeles, CA.