Connect LA Recap: Mixed-Use Environments Make Some Noise

By Dennis Kaiser

Connect Los Angeles brought together nearly 500 CRE leaders last week for an information-packed conference in DTLA. One of the most engaging discussions focused on the dynamic mixed-use environments where people work, live and play today.

Owners, investors and developers discussed how communities are being created in emerging neighborhoods, as well as what it takes to create residential, retail, and office atmospheres that are always abuzz.

Today, the cool new ‘breakout’ projects being developed face different challenges from even a few years ago. For starters, the land and construction costs have risen dramatically. Then, there’s a little thing called competition.

Essentially, the rising stars in the uber space of creating special spaces now have company. But for those who cut their teeth in going where others hadn’t and taking risks, the advice is clear- listen to those who use your space.

In fact, Rising Realty Partners’ Marc Gittleman says success has been achieved when they’ve “created something unique,” typically through “project differentiation that justifies the cost” of a project.

That often runs against the grain of convention and logic. Fifield Companies’ Steven Fifield says “cool places are emerging” in areas where it is “not difficult to develop.” He says the dearth of new projects in places such as Santa Monica are a result of restrictive development environments. He notes that of the 14 key LA submarkets, 10 of them are tough to assemble land for development. That’s why markets like DTLA are active and will continue to see more development of unique environments.

One of the innovators in finding and curating projects that pass muster with the Millennial generation is the Runyon Group’s Joseph Miller. And even he admits it is a “struggle to keep up with new, interesting and innovative” things. That’s one reason he says its smart to “focus on tenant quality” as a way to “drive rents,” when curating a distinctive tenant mix. “The success of tenants leads to increased rents,” he says.

But in an over-stimulated and dynamic market such as Los Angeles, that’s a tough order. One reason it is difficult to be heard above all the buzz, says Avison Young’s John Tronson, is “tenant fatigue.” That is common among Angelinos, so it is a good idea to create mixed-use projects with an array of disparate tenants, such as a vegan organic restaurant, upscale burger place and cross-fit training spot. When a project does so, it “appeals to a wide demographic” audience who seek variety and new experiences.

To achieve that perfect space requires grit and determination though. Gittleman says they relish complex deals, because it allows their expertise and skill set to come out. “We understand those kind of deals and can unlock the value. We look through a different lens.”

What many are seeing is a massive shift underway. People are gravitating to places that are engaging and relevant to them – but they may arrive in a different way than before. Parking companies felt this rather quickly when there were fewer cars filling lots as people began using ride hailing companies like Uber and Lyft. Bars and restaurants are also noticing increased revenues from alcohol sales.

Those who are attuned to those changes can adjust. Rising Realty took note of the reduced parking need and created an amenity around it for its tenants. They bought a fleet of electric scooters that’s now become so popular it is being requested as part of a lease.

At the same time, while mixing work with play, the concept of outdoor work spaces has kicked off and is the most common request tenants make today.

Greenberg Glusker’s Ken Fields says tenants are also pushing the envelope as they seek to create their work environments too. Some have even been negotiating “drone rights” into deals.

Another way multifamily developers must adjust is to accommodate the new online shopping habits of residents. It is common for orders to be placed during the day while someone is away at work. Fifield says that means residential properties need expanded delivery space, a package concierge and perhaps even a refrigerated storage area to accept that night’s dinner for a resident.

Technology has pushed into every nook and cranny of where people live, work and play. Owners can co-op space outside the building it may not even own. That might mean providing WiFi in a nearby park, as Rising Realty does at Pershing Square. Gittleman predicts those endeavors will open up communities even more and make them more valuable and attractive to people.