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Mixed-use development and financial feasibility: part I - economic and financial factors.(FEATURE)
INTRODUCTION
MIXED-USE DEVELOPMENTS ARE GROWING IN POPULARITY AS they reportedly can create additional value and outperform standard single-use real estate developments. The synergy and appeal of a quality mixed-use development can increase office and retail prices, rents and occupancy rates as well as accelerate absorption rates. Retail tenants may be willing to pay higher rents because of the increased customer traffic generated by the compatible and complementary uses. Residents and hotel guests are attracted by the convenient location of dining, retail and entertainment venues on the site. However, some locations are not well suited for mixed-used developments, and careful consideration must be given to the financial feasibility of each specific project. (1)
Financial feasibility of mixed-use development occurs when the return on the investment meets or exceeds the required return of the developer and/or the investor. Evaluating financial return on a mixed-use project is more complex than with a single-use development. While some economies of scale may be achieved, the complexity of multiple uses may raise development and operating costs. On the other hand, the synergy of complementary uses may increase cash flows. Financing development is complex and can be more costly than for single-use developments. Measurement tools for such financial success are expressed in different ways. Discounted cash flow analysis generating an internal rate of return is one important tool. Debt service cover and cash-on-cash are also considered useful tools. (2)
Some developers believe that a mixed-use project diversifies risk across the multiple uses. (3) Other developers believe that the added financial and physical complexity of a mixed-use development, in addition to longer development timelines, heightens the uncertainty associated with the project and thereby increases the level of risk.
Factors influencing the financial success of a mixed-use development can be grouped in the categories of economic and market, financial, physical and public issues. (4) This article will focus on economic and financial factors in the professional literature.
ECONOMIC AND MARKET FACTORS
The Local Economy
- MIXED SIGNALS IN LOCAL ECONOMY.(Business)
- Newspaper article from: The Cincinnati Post (Cincinnati, OH) April 30, 2004 700+ words
CINCINNATI -- The local business economy continued to heat up in April, as did the threat of higher prices and supply problems, according to a monthly survey of purchasing managers. All indicators pointed to further economic expansion -- including employment, production, new orders, and prices --
- CONNECTICUT'S MID-SIZED FIRMS REPORT IMPROVED BUSINESS; VIEW LOCAL ECONOMY AS...
- Press release article from: PR Newswire May 25, 1995 700+ words
...responses to questions on the local economy can be deemed guarded at...percent said the same about the local economy. When asked how the local economy compares to the nation...performance and conditions were mixed. On the positive side...
- World Cup gives boost to local economy but hoteliers fall short.
- Magazine article from: Los Angeles Business Journal Deady, Tim July 25, 1994 700+ words
...tournament paid off for the local economy, but fell short of expectations...the county. A segment of the local economy that had mixed results was the retail industry...tournament was good for the local economy and the long-term effects...
- Garden has given tremendous boost to the local economy.(Business)
- Newspaper article from: The Journal (Newcastle, England) January 18, 2005 700+ words
...given a tremendous boost to our local economy. Let me give you a few examples...holiday spend was kept within the local economy. Impressive statistics, I'm...large quite a good thing really?" mixed with subliminal messages like...
- Local economy is languishing but not plummeting, says Econowatch.
- Magazine article from: Los Angeles Business Journal Cole, Benjamin Mark August 26, 1991 700+ words
Local economy is languishing but not plummeting, says Econowatch Econowatch registered mixed signals last week, reflecting a regional economy that appears to remain somewhat flat, neither igniting out of the recession...
- DRIVING THE LOCAL ECONOMY AUTO DEALERS, BIG RETAILERS FILLING CITY...
- Newspaper article from: Daily News (Los Angeles, CA) February 21, 2000 700+ words
...Writer SANTA CLARITA - Automobile sales continued to fuel the local economy last year, as dealerships again ranked among the city's...Lincoln/Mercury Mervyn's of California National Ready Mixed Concrete Parkway Oldsmobile/Cadillac Qiagen - light manufacturing...
- Orlando, Fla., Sentinel Posts Small Circulation Gain as Local Economy Recovers.
- Newspaper article from: Knight Ridder/Tribune Business News May 4, 2004 700+ words
...results reported Monday by the Audit Bureau of Circulations were mixed for three of the five papers. The report measures weekday and...April 1 through Sept. 30. Two other large papers reported mixed results between weekday and Sunday sales. The St. Petersburg...
- Local economy looks good now and for the future.
- Newspaper article from: Mail Tribune (Medford, OR) January 9, 2007 700+ words
...over the next 12 months. However, the Portland economist said, data from which the committee draws its conclusions is more mixed than in recent years. "There is more uncertainty than usual when you look at 2007 because the data isn't all going one way...
