A steel and bamboo bridge serves as the heart of Dos Lagos, a 534-acre mixed-use development in Corona, Calif., constructed by Consolidated Contracting Services.

If one development trend is revolutionizing the real estate landscape, it is mixed-use. By combining residential, retail, office and entertainment, mixed-use projects get more bang for the buck by using less land to situate all the amenities in one location.

Although some experts consider this development a fad, the concept is here to stay, says Wayne Kalayjian, an engineer and director with LECG, a real estate and construction advisory practice based in Los Angeles. “Mixed-use development isn’t a passing trend of residential construction these days, particularly in urban areas,” Kalayjian notes.

“The ancillary benefit to mixed-use development is how it complements the current ‘work where we live’ movement, gaining traction in the planning and environmental communities,” he adds. “Under this concept, our homes, shops, offices and transportation centers are more integrated and in close proximity, which decreases commuting time and expense, conserves energy, heightens quality of life and enhances a feeling of community. And it’s particularly attractive in our suburbs, which are especially susceptible to urban sprawl.”

Withstanding Boom & Bust
Because mixed-use properties are multi-dimensional, in many cases, they act as a buffer when certain markets weaken. According to Kalayjian, mixed-use developments are healthy from an economic standpoint since they can better-withstand the “boom-and-bust tendencies” associated with individual market segments, such as residential. “In many ways, it has revolutionized how developers view their real estate investments. It’s all about revenue, portfolio diversification and risk-management. Not only is there more revenue from more streams, but it’s a more predictable and complementary form of cash flow and it’s more impervious to real estate market conditions.”

Kalayjian asserts that mixed-use development is “a far cry from the speculative approach to real estate investing.” Because the developer’s investment is dispersed across several market types, the project remains viable, thus cutting the developer’s risk.

From the Ground-Up
“It seems like [mixed-use] is the way that everybody is going right now,” says Angel Trespando, project manager with Consolidated Contracting Services Inc. of San Clemente, Calif. “For the most part, we are starting to see these projects in redevelopment areas where there was tilt-up industrial buildings.”

Abandoned industrial sites can be the perfect location for mixed-use communities because they provide large land acreage often needed for more-sprawling communities, while giving developers the chance to improve sites that are often environmentally unstable. As an example, California developer SE CORP. recently commissioned Consolidated Contracting to complete a 10-acre park as part of a 534-acre mixed-use community being built on an abandoned silica quarry.

The Corona, Calif., development – Dos Lagos – was kicked off with environmental testing and treatment of the site to prepare it for the park and heart of the community. Valued at $12 million for the company, Consolidated Contracting built the park to include two four-acre, heart-shaped lakes with a built-in biological filter, a central nine-foot-high waterfall and a steel and bamboo bridge connecting the lakes.

The entertainment features of many mixed-use projects have also become more elaborate. From top-end restaurants and amphitheaters for the performing arts to sprawling parks and eclectic venues such as spas and sports arenas, mixed-use projects are evolving into hubs for the public’s recreational needs.

“We are seeing a lot more movie houses or amphitheater projects and developments bringing in the cultures of the community,” he says. “This project is almost like a piece of art. We took something that was pretty ugly environmentally and turned it into an economically feasible area.”

Infused With Luxury
Although it is still considered a modern concept, some developers are kicking mixed-use up a notch or two. Today’s developments have evolved from the traditional condo-above-storefront layout to more complicated, luxurious and sprawling designs geared to affluent clients.

The latest niche concept in modern real estate is wellness lifestyle communities, says Creative Choice Group President Dilip Barot. Barot is leading the Palm Beach Gardens, Fla., Amrit Resort & Residences development, a luxury community combining 195 condos, beachfront villas, a 104-unit boutique hotel and an Aveda spa. The $300 million development, now in the design phase, will line the shores of Slinger Island.

“We believe that there is going to be a great demand right now for these properties,” Barot asserts. “More affluent people are getting interested in wellness and there are more people willing to live this lifestyle.”

Drivers and Barriers
In states where land prices have become a barrier to entry for some developments, mixed-use can be the ideal solution. Trespando says skyrocketing land prices in California, for example, have spurred such development. “Part of the reason for the trend is that land prices are so expensive out here,” he notes. “Orange County has 17 mid- to high-rise live/work projects in various stages right now. Our residential market has slowed down a bit, but by going [vertical] with the development, they can sell [units] at lower prices.”

Marty Kennedy, CEO of Kennedy Capital Group, an Atlanta-based real estate development firm, says rising land costs have led developers to add mixed-use projects to their portfolio to maximize the land’s end-value. However, few developers have experience in both commercial and residential development. As a result, many developers take on projects as part of a joint venture. At the start of the year, Kennedy had partnered on six real estate developments to mitigate risk.

Because mixed-use projects are among the largest in their regions, the approval process can be long and arduous. Zoning laws that separate commercial and residential buildings can hinder development. “The biggest problem is trying to get them approved,” Trespando states. “It’s easy to get residential units approved, but when you go in for a 500-acre community and the financing for all the different uses there, it’s a little more complicated.”

Despite barriers, these developments can add new jobs and increase the customer base for local shops and services. Multifamily developments brings new residents to suburban towns, creating a demand for restaurants, movies theaters, grocery stores and other entertainment venues, which ultimately contributes to the local tax base.