Navigating the Mixed-Use Maze

Developers and owners work with commercial tenants to keep amenities in place for residents during the pandemic.

By Joe Bousquin

Kimco is working to keep the small operators at its mixed-use developments open, even expanding sidewalks and parking space for local restaurants, like in its like Mission Bell development in Tampa, Florida. Courtesy Kimco Realty

Going into 2020, mixed-use development was quickly becoming the go-to model for multifamily and single-family residential communities alike.

Residents increasingly sought neighborhoods with a diverse mix of retail, restaurants, and office space that allowed them to live, work, and play in an area defined by minutes of walking, not highway miles. And developers were happy to meet that demand with more residential projects that also included shops, restaurants, fitness clubs, and working spaces just steps from residents’ doors.

Take Seattle as an example.

“The Seattle market has been great for mixed use, particularly smaller infill projects,” says Dr. John A. Kilpatrick, managing director of real estate consultancy Greenfield Advisors. “We coined the term ‘Seattle Special’ to describe communities with basement parking, first and second floor office or retail, and apartments or condos above. The market is littered with those.”

But now, with some of the hardest-hit asset classes from the COVID-19 pandemic including retail, restaurants, and office space, it’s putting strain on some of the core tenets—and tenants—of the mixed-use model. While residential residents, on balance, have continued to pay rent, commercial lessees have struggled to keep up with payments as business has been curtailed.

“One clear challenge has been the pandemic’s impact on sectors that make up a large portion of the mixed-use landscape, like retail,” says John Cetra, co-founding principal of New York-based design firm CetraRuddy. “Many owners now have to face the reality that these tenants can’t pay rent.”