1. Bay Area Economics bae Bay Area Economics Plowing New Ground: Economics of Mixed-Use Projects in Greenfield Settings SACOG Monthly Planners Seminar Series April 27, 2005 Graphic courtesy Fletcher, Farr, Ayotte

2. Bay Area Economics bae Bay Area Economics Economic Issues  Mixed Use Is Contrary to Business As Usual  Need more examples of successful projects  The market still rewards single-use projects  Mixed Use Can Be More Complicated  Can take longer to develop  May be incompatible with existing zoning  Investors and lenders may consider mixed use more risky

3. Bay Area Economics bae Bay Area Economics Economic Realities  Vertical mixed use buildings can cost more than single-use buildings.  Horizontal mixed use projects represent a “first step” in a progression towards true mixed use  Mixed use requires a developer to have skill in developing multiple land uses.  Current Sacramento economics are such that structured parking is typically not feasible, limiting density.  Current economics can favor single-use, but mixed use projects must compete with single use projects for land.

4. Bay Area Economics bae Bay Area Economics Encouraging Signs  The market is starting to respond  “New urbanism has definitely been mainstreamed.” – Urban Land Institute, Emerging Trends in Real Estate, 2005  Elsewhere in the U.S., advocates are starting to find that mixed-use projects command lower cap rates than single-use projects.  Local developers see mixed-use as desirable  Elliott Homes: Villages of Zinfandel  Opus West: Promenade at Natomas  Summit Commercial: Parks at Southport

5. Bay Area Economics bae Bay Area Economics The Parks at Southport West Sacramento

6. Bay Area Economics bae Bay Area Economics The Parks at Southport West Sacramento graphic courtesy of Fletcher, Farr, Ayotte

7. Bay Area Economics bae Bay Area Economics The Parks at Southport West Sacramento graphic courtesy of Fletcher, Farr, Ayotte

8. Bay Area Economics bae Bay Area Economics Promenade at Natomas graphics courtesy of Opus West

9. Bay Area Economics bae Bay Area Economics What Brings the Market to Mixed-Use?  Competitive rates of return  Realization that mixed use adds value  Complementary uses mean higher rents  Supportive planning policies (i.e., ease of entitlement)  “Encouragement” from local government  Consumer Demand  Demographic shifts (e.g., aging of population resulting in empty-nester households)  2004 P.P.I.C. survey of Californians found 48 percent would prefer to live in a mixed-use neighborhood instead of a residential only neighborhood, if it meant they could walk to stores, schools and services  2004 study by Metro Atlanta Chamber of Commerce found that 1/3 of suburban Atlantans wanted to move to more dense, mixed-use neighborhoods)

10. Bay Area Economics bae Bay Area Economics What Do Users Want?  What Do Residents Want?  Sense of community  Convenience to everyday activities and services  Security and privacy  Willing to make trade-offs on home for community amenities  What Do Retailers Want?  Visibility and access  Environment that reinforces their “brand”  Synergistic co-tenants  What Do Office Tenants Want?  Accessibility to employees  Convenient support services  Location that fits their image

11. Bay Area Economics bae Bay Area Economics Key Project Ingredients  Realistic mix of uses  Must tailor each component to market support  Phasing and Flexibility  Phasing can assist with financing and also allows project to be built according to market demand  Understand how project fits with surrounding trade area  Target unmet niches  Complement; don’t compete with other development  Utilize existing community assets  Existing homes, parks, schools, shopping, employment centers build synergy and add value

12. Bay Area Economics bae Bay Area Economics Contact: Matt Kowta, M.C.P. Principal Bay Area Economics Sacramento Region Office 803 Second Street, Suite A Davis, CA 95616 Phone: 530-750-2195 phone Fax: 530-750-2194 fax E-mail: mkowta@bae1.com