Surveys find strong sales, occupancy in town centers

Research shows mixed-use main streets often outperform conventional properties in their local markets. The strength of new urban town centers goes well beyond competitive retail sales — it also includes unexpectedly high demand for live/work housing and an increasing number of employers who want to locate in more urban settings. Many town centers are already outstripping conventional suburban real estate projects, according to real estate writer Charles Lockwood, who surveyed eight town centers — most new urban, a few hybrids — and reported in Urban Land that all produced higher revenues than single-use shopping centers in their respective regions. A similar conclusion was reached by Charles Bohl in his soon-to- be-published report, “The Return of the Town Center,” in the Wharton Real Estate Review. Bohl, who shared his findings with New Urban News, says that among the mix of uses in town centers, “the most consistent positive performance” was that of the residential component. “Demand for town center housing has been very strong in a wide variety of markets throughout the US and rental rates, sales and resales of properties have exceeded expectations.” Bohl cites the example of Mizner Park, in Boca Raton, FL. “Mizner Park’s apartments above shops and cafes have proven extremely popular, particularly those facing the bustling central plaza, and are now considered the most successful parts of the project,” Bohl observes. “In Miami Lakes, Haile Village Center, and Mashpee Commons, there are waiting lists for rental apartments above shops.” In assessing commercial performance, Bohl found evidence of strength in first-year retail sales of $60 million at CityPlace and $150 million at Easton Town Center, but as for town centers as a whole, he wrote, “It’s too early to judge.” Lockwood’s findings, on the other hand, focused predominantly on office and retail lease rates and turned up “exciting numbers” across the board. In fact, the figures for the town centers surveyed were often five, ten, or even 20 or more percentage points higher than those of competing properties (see table). Conspicuous examples: • Southlake Town Square, where both office and retail leases achieved occupancies above 95 percent while earning a 25-30 percent premium over the Dallas-Ft. Worth metroplex; • CityCenter Englewood, in the Denver metro area, where retail rentals averaged $18-20/sq. ft. compared with $8-14/sq. ft. elsewhere in the community; and • Easton Town Center, which posted retail sales of more than $400/sq. ft. compared with the national average of $220-230/sq. ft. for superregional shopping centers. “Everybody agrees,” Lockwood told New Urban News, “that a true town center is the right thing to do for various reasons — increased community, less driving — and now we see that it makes money, it’s also the profitable thing to do.” Lockwood cautions, however, that town centers cost more to build than conventional shopping centers, and his research does not quantify rate of return. Bohl documented other factors contributing to the investment appeal of town centers, among them, demographic trends that will continue to drive consumer demand for both residential and retail components; the salutary effect of town center development on adjacent portions of properties, a compensation for investor patience; and developers’ growing sophistication in orchestrating the complexities of town center planning. He also cited retail expert Bob Gibbs’ prediction that the near future will bring a new wave of town center construction in secondary markets with smaller populations and more middle-class demographics. But, Bohl adds that the key to the future of town centers lies with the towns themselves and their willingness to encourage town centers through favorable zoning and development policies, infrastructure improvements and investment in the civic components of town center plans. “The town center should be the place where civic institutions and high-quality civic spaces are located, transit connections are made, and the life of the community is celebrated,” he said. “This means that you should not be measuring success in terms of the number of jumbo rolls of toilet paper and packs of Pokemon cards sold. There is public use value in the creation of town centers that exceeds the narrow retail receipts measure. Recognizing this, communities should step up to the plate and support the creation of town centers.” Despite the dearth of market data on the potential for housing in town center projects, and strong skepticism among some real estate professionals, residential properties in town centers continue to exceed expectations in a wide variety of markets. Most surprising has been the strong demand for housing above retail and offices. Demand has been strong for lofts and live/work units in Orenco Station, apartments in Mizner Park, live/work units in Kentlands, and apartments above shops in Miami Lakes, Haile Village Center, and Mashpee Commons.