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COVID-19 Pandemic Accelerates Mixed-Use Development Trends

BY MICHAEL KAISER
DIRECTOR OF DESIGN, THE BECK GROUP
A MEMBER OF MULTIPLE AGC CHAPTERS

As the Coronavirus continues to spread, speculation abounds how mixed-use developments will prevail during and after this public health threat. One thing is clear: The virus is accelerating transformational trends in this real estate sector.

Office buildings, shopping malls and centers, hotels, restaurants and other mixed-use developments were already in flux because of market forces, new retail trends and an abundance of innovative technology.

Those changes have noticeably picked up since the pandemic’s arrival. Until we understand the full extent of the virus’s impact on our society, the pandemic-driven accelerant of market trends offers valuable insights into the future of mixed-use.

What follows is how the pandemic is creating a “new normal” for mixed-use development, including creative solutions and a rethinking of mixes to best respond to emerging trends and COVID-19.

FEWER WORKERS IN OFFICE BUILDINGS

The work-from-home (WFH) concept is a recent phenomenon, as technological advances enable office workers to conduct business from their homes and elsewhere. But the pandemic has single-handedly boosted WFH to an unprecedented level resulting from government-ordered restrictions on companies, schools and basic daily life.

With fewer people expected to inhabit office buildings due to social distancing and a greater acceptance of WFH, office designs may shift to focus on collaboration spaces for internal and client meetings and less on employee work stations. WFH also lessens the need for parking facilities, paving the way for innovative ways to utilize this space best. However, fewer workers coming to the office translates to less foot traffic-driving retail, food and beverage around it.

WINNERS & LOSERS IN THE RETAIL SECTOR

Like remote working, online shopping was on an upward trajectory before the pandemic. With the virus forcing the closure or curtailing operations for many retail businesses this past year, e-commerce activity exploded.

Many retailers who transformed their business into a brick-and-click model quickly adapted to the lockdown. One personal example was buying art supplies at a store like Michael’s for stay-at-home events like “family paint night.” This approach allows customers to purchase items online and use curbside pickup to collect their merchandise safely. Other examples are the Apple Store and Best Buy, with robust online multichannel strategies that let customers place orders for delivery or store pickup.

Restaurants have been hard hit as guests fear catching the virus while eating or dining in poorly ventilated spaces. Rather than shut their doors, some restaurants built patios and other outside areas to minimize the virus’s impact. Some also installed air-cleaning technology designed to kill viruses and other contaminants. Others transitioned to curbside delivery, even going so far as to send home recipes and the ingredients to make your own cocktails.

And the pandemic delivered a one-two punch to some malls that lost major anchor store tenants to bankruptcy caused by persistent virus fears and the growing popularity of online shopping.

Malls and retailers offering consumers rewarding experiences over simple convenience will flourish in a post-pandemic world. This allows consumers to see products in person and experience customer service benefits while hanging out in trendy places. Customers can also order products online and decide whether they want them shipped or arrange a curbside pickup, giving them something else to do at the mall like grabbing a meal or catching a movie.

There also has been an increasing trend of transforming ailing malls into other commercial uses, such as hospitals, outpatient care clinics, schools, and churches.

One example is The Beck Group’s work in transforming the half-century-old Phipps Plaza, Atlanta’s first fully enclosed, multi-level mall, into a thriving mixed-use development. Phipps Plaza reflects the forward-thinking of the mall’s owner, Simon Properties, in recognizing years ago that people want malls to be more than a shopping destination, based on declining foot traffic.

Responding to this trend, Simon Properties is transforming Phipps Plaza into a new model for malls. Upon completion, Phipps will boast a Nobu hotel and restaurant, a 13-story office building, a luxury athletic facility, and a co-working destination. This diverse mix of uses will link by an outdoor event venue and public green space.

TRANSFORMING THE HOSPITALITY INDUSTRY

Hotels have experienced steep declines in business due to the virus hurting business travel and tourism.

According to an American Hospital Hotel & Lodging survey this past fall, half of owners predicted their properties are in danger of foreclosure. Two-thirds of the respondents said they would only survive another six months (based on revenue projections and occupancy levels) without financial assistance.

Big hotel chains are encountering difficulty securing bank financing due to uncertainty of the pandemic duration, compounding other market challenges such as fierce competition from community-based online platforms like Airbnb. 

However, the hospitality industry has been steadily adapting to the pandemic with inventive solutions, some of which will most likely remain long after the health crisis passes. For instance, smaller hotels have adopted an Airbnb-style model to withstand the effects of this and future disease-driven pauses. Hotels also minimize the pandemic’s impact by including using zero-touch technology, such as keyless entry and contactless bathroom fixtures and appliances, fewer service staff, off-site housekeeping, and improved sanitation and ventilation.

ENTERTAINMENT VENUES PLAYING WITH INNOVATIVE IDEAS

Movie theaters, concert halls and other event venues are among those buildings that either closed or severely restricted occupancy to reduce the country’s soaring rate of COVID-19 infections.

Many entertainment venues are straining to recover from the social-distancing rules limiting the number of patrons. Some of these venues remain closed because it is economically unfeasible to stay open under pandemic safety regulations.

Like other businesses, the pandemic forced entertainment businesses to find viable solutions to their predicament, such as expanding online operations to help recoup lost revenue from closed or limited occupancy buildings.

A case in point is major Hollywood movie studios releasing new movies on Netflix and other pay streaming services, a strategy designed to help limit the impact of showing flicks in sparsely attended movie theaters. But movie-theater owners are employing clever marketing tactics to alleviate the financial pain caused by the pandemic, such as allowing theaters to be rented for private showings to a limited number of patrons. A few even placed screens outdoors to draw movie-goers.

Top Golf remains a viable venue due to its open-air environment. The multi-tier, well-spaced hitting bays give families and friends a place to socialize responsibly while still enjoying food and drinks. Pre-COVID, The Beck Group worked on a new prototype that adds additional common area space in the venue’s heart, allowing people to socialize and watch a game or play other socially competitive games. At the same time, they wait for their bay to open. Post-COVID, these venues should continue to thrive. They can become more prominent anchors of development, especially as virtual golf bays increase in popularity while requiring less acreage to occupy.

FINDING THE RIGHT MIX OF USES

What makes mixed-use appealing is that it is a catch-all sector, but there is always one market driving a development as its anchor. The challenge now is to define the best mix of anchor and supporting uses given current and future market conditions.

As previously mentioned, office space as an anchor is a challenge because some aspects of the WFH movement will be permanent. Restaurants, bars and indoor entertainment are at an impasse until society achieves herd immunity through vaccinations or finds a cure for COVID. However, there is optimism that food and beverage will eventually recover because it’s anticipated people will flock back to them whenever restrictions lift.

The most significant opportunity in mixed-use is focusing on the ways people prefer to live, work and play – now and in the years ahead. With this as the lens, medium-density residential is arguably the best anchor in today’s mixed-use environment because it is incumbent on the designers and developers to increase the amenities that mixed-use offers.

Residential living can play this significant role because it blurs the lines of what it means to live, work and play in one place. For the consumer who works from home some or all of the time, they can expect to see homes with dedicated offices or flexible working spaces. Also, these spaces can be equipped with video conferencing and other technology, making WFH easier.

There was a significant increase in visitors to parks and other outdoor public spaces during the pandemic in response to restrictions on occupancy in indoor buildings. As a result, more cities and towns may emphasize converting underused areas into vibrant spaces for public gatherings. Examples include New York City’s spectacular mixed-use developments, such as Hudson Yards, the largest real estate project in U.S. history, and The High Line, a former railroad spur.

Similarly, residential as an anchor has the opportunity to offer scalable, outdoor green spaces and amenities that many people desire, such as gardens, park, and water features. We can also expect to see individual units equipped with plenty of terrace space and access to fresh air so that the benefit is available in and around their immediate home.

LOOKING AHEAD FOR MIXED-USE BUILDINGS

COVID-19’s impact has quickened the pace of unique and innovative mixed-use development trends, charting new and sometimes challenging territory in designing these spaces. But upon emerging from the darkness of the chaotic pandemic, recent developments in mixed-use should give consumers greater control in their choices, allowing them to experience live-work-play in a manner that complements their daily lives.

Mr. Kaiser is the Director of Design at The Beck Group, a Dallas-based integrated design-build firm and a member of multiple AGC chapters.

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