Unique Valuation Model Required for Mixed-Use Asset Success

Mixed-use properties are drawing considerable interest by investors in the multifamily and commercial spaces. Walkable communities and transit oriented development are creating new opportunities for not only developers but renters and business owners as well. Partners at Goulston & Storrs, one of the largest retail real estate law firms in the U.S., say mixed-use assets are on the rise in report by Forbes. New developments are springing up combining residential with retail, office, medical and other spaces in large urban areas. "Mega development" towers that blend luxury, conventional or affordable living spaces with local retail that includes high-end restaurants and theaters are dotting Los Angeles, New York, Washington, D.C., and other metropolises. Residents can live, shop and dine without leaving home with desirable ground-floor retail and office space anchoring high-rise apartments. Valuation practices are challenging real estate’s newest trend The Urban Land Institute and National Association of Realtors are devoting plenty of space to what’s becoming a widely popular investment option but say with it comes a lot of questions. Ideas vary on how to effectively execute a mixed-use development from finance to development to lease to operation. Unlike residential or commercial developments, mixed-use projects in high-density or suburban settings are sometimes difficult to finance and have a lot of check-boxes to determine whether they are profitable or will fail. One of the biggest challenges is that valuation practices haven’t always advanced with the asset strategy, says RealPage Senior Vice President Damien Georges. In a recent article published by PERE, Georges said a single valuation won’t capture the true worth of all the spaces under one roof. “In this new world of mixed uses and co-working, institutional owners must grapple with the problem of valuing different cash flow streams in different ways, based on how a propert...