Broker Blog: What You Need to Know Before Investing in Mixed Use Property

Mixed-use developments sprouted across the country in the mid-2000s as developers sought ways to blend urban-style living with walkable communities. Since then, demand for mixed-use developments has attracted domestic and foreign investors as well as young home buyers. If you’re considering investing in mixed-use property, it’s safe to say that these developments are here to stay. Mixed-use developments provide multiple streams of income for investors by offering commercial and residential space, they’re often in close proximity to other community amenities which makes the building and location more desirable, and the variety of revenue lessens the overall risk for real estate investors. Investing in mixed-use development property is a great way to diversify your portfolio, but here are three things you should know before investing in mixed-use property.

Tenant Retention is Key

Both for residents and business owners. You must be able to create an environment where people live, shop, work, and spend time together. Thus, you have to have both residential and commercial tenants. Your investment must foster tenant interaction, not discourage it. Tenant retention means little to no vacancies and a higher return on investments (ROI). 

 

Consider Your Commercial Tenants

Residents who live in mixed-use developments are often drawn to the commercial tenants of the building. When considering potential commercial tenants, take into account the industry they work within. Is it a startup? Will it be a Cafe? Or a bar? Showing support for local businesses and spaces that promote resident interaction will foster a sense of community among residents and their commercial neighbors. Also, consider if the business’s operations align with residential living. For example, it might be best not to allow for a bar that plays loud, live music to set up shop below residential units – especially if you’re hoping for residential tenant retention. Businesses are also a great way to draw, or deter, potential new tenants for any vacancies. 

 

Mixed-Use Developments Aren’t “One Size Fits All”

A huge benefit of mixed-use development is the ease of optimizing profit. If you want a higher rental rate, then the state of your property’s businesses must reflect the state of the property for residents. The more you invest in refining the space and its amenities for a higher desired rental rate, the more profitable it could become. For example, you can set the residential price points to match the types of commercial tenants you favor. You could choose tenants that complement each other. For example, you could lease to a mortgage broker, real estate company, and insurance provider. They can pass along referrals and boost business which means rent is paid on time and fewer vacancies. Encouraging community events, such as fundraisers or farmer’s markets, will also actively engage residents and commercial tenants to form a sense of community and develop tenant loyalty. As you can see, there’re many ways to maximize your profits with mixed-use developments, and a myriad of opportunities when strategizing how to guarantee your ROI.

 

Blog By: Arnell Cordero   312-619-7412  | [email protected]

With over 20 years in the Chicago real estate industry, Arnell Cordero has been a Chicago resident since childhood, he knows the city and suburbs inside out. Initially, Arnell’s experience stemmed from running a family-owned property management business in the Logan Square and Bucktown neighborhoods.

Arnell places a strong emphasis on customer service, understanding that communication and responsiveness are as important to clients as his vast real estate knowledge. Whether you’re buying or leasing, selling, or investing, Arnell will make every effort to make your real estate needs as seamless and successful as possible!

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