20 Apr It’s time to think mixed-use…
When you think about commercial real estate, it’s natural to then think about comparing and contrasting the prospects of different sectors. Looking ahead, three sectors identified as hotspots for 2022 and beyond are food-anchored retail parks, multi-let light industrial and urban logistics.
At first glance, common elements across all three are their good prospects and strong fundamental characteristics, with all requiring urban infill locations with good transport links which are easily accessible and close to the population. We at Mitiska REIM believe that these three sectors have much more in common and many more synergies that can be realised. When considering opportunities moving ahead, we think it’s time to now stop thinking just by sector and start capitalising on the opportunities for mixed-use developments that combine the best elements of retail parks, multi-let light industrial and urban logistics.
We call this approach ‘convenience real estate’, which takes advantage of the converging trends we see across all three sectors and the increasing demand for urban infill sites that offer accessible locations, affordable buildings, flexible design and sustainable solutions to a growing range of end-users (please see our earlier blog ‘The opportunity in Convenience Real Estate’).
More flexibility, increased value
Mixed-use convenience real estate projects offer the opportunity to create a number of synergies. Retail parks, urban logistics and multi-let light industrial are very complimentary and require a relatively simple and similar type of construction compared to other areas of commercial real estate, which lends easily to all three uses.
From an investment perspective, mixed-use developments create more flexibility in sourcing potential sites as well as portfolios. By having several options with regard to the combination of schemes that could be accommodated on a plot or within a portfolio of assets creates more choice, rather than being restricted to plots of a defined shape or size. Choosing plots just based on a single-use can narrow down the options available and not realise the full value that can be created from scarce urban infill locations. Combining different uses makes optimal use of a location and better serves the surrounding population with a destination to shop and work.
Mixed-use developments also create the opportunity to build upwards, further increasing the potential income per square metre. By their nature, urban logistics and multi-let light industrial units require ground floor sites. Combining a retail park within a mixed-use scheme can optimise land use by building vertically, creating ground floor retail units below upper levels that offer restaurants, leisure, fitness, medical practices and pharmacies, self-storage or office units and co-working spaces.
Sustainable solutions incorporated within each of these property types include future-proof design, the use of renewable energy, the creation of local jobs and local services, and the opportunity to retrofit and repurpose old formats.
Creating go-to destinations
For retail park developments, we at Mitiska REIM look for sites that are conveniently located close to residential or office areas and are easily accessible by car, public transport, bicycle or by foot. Food-anchored by a supermarket and offering cafe and restaurant options, these sites become daily go-to destinations within their neighbourhoods and surrounding areas.
This approach also has significant benefits for mixed-use schemes that combine urban logistics, multi-let light industrial units or office spaces. For employees who work in these units, they have all the daily convenience needs offered by the retail park onsite, making their workplace a more lively and attractive place to work. Good examples of this are Mitiska REIM’s Dansaert Park and Parc de l’Europe convenience real estate developments – please click here to watch the virtual property tour videos.
Local councils are also increasingly in favour of these mixed-use schemes as they create retail and business hubs within communities, rather than just faceless ‘big box’ developments that sit beside main roads, at the same time creating new local services and jobs.
Supporting retailers’ omnichannel strategies
The synergies between retail and urban logistics are now becoming a growth area and investment opportunity. A very interesting report from Savills last year found that European retailers’ omnichannel strategies will become increasingly important in reducing the overall number of returns, with more retailers expected to use their store portfolios for distribution of goods, taking some of the demand away from the logistics market as a result.
The report also cites an innovative case study from the US where department store Kohl’s has formed a partnership for consumers to return Amazon goods in Kohl’s stores, leading to a boost in in-store sales and over 2 million new visitors into Kohl’s stores over the past two years.
This is creating an additional opportunity for mixed-use schemes, whereby urban infill sites can be developed to incorporate a retail park open to consumers at the front, backing onto an urban logistics development, providing omnichannel retailers with a front-to-back retail and logistics operation and taking a step towards the so-called ‘hybrid store’.
In this context it was interesting to read the recent analysis by German industrial consultant Realogis showing that the retail sector has actually become one of the largest renters of warehouse and logistics properties, accounting for around 35% of take-up in 2021 on the top locations and a marked increase over last year’s number.
A win-win-win situation
Mixed-use developments or repurposing of existing assets towards mixed-use are a win not only for tenants and occupiers but for consumers and the local communities in which they are located. They are also a win for investors by fully realising the beneficial synergies through optimizing the use of scarce space on urban infill locations. To reap these benefits, we at Mitiska REIM have been actively integrating mixed-use opportunities into our investment strategy and have built a strong track record of successful mixed-use convenience real estate projects.