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Last month on my blog we covered three reasons for the mixed-use development boom sweeping across the commercial real estate scene. As we’ve found, mixed-use developments are nothing new, as villages, towns, and cities in history embody the very idea. For a time, due to the cultural changes that came with industrialization, they fell out of favor, but now multi-use developments are making a comeback. Today, we’re going to dive into the benefits and drawbacks of multi-use developments

First of all, mixed-use developments make effective use of land and resources in areas where both are limited. In addition, they create spaces that revitalize communities, but the benefits don’t stop there. These developments consolidate infrastructure instead of designing and building independent systems. Ways that this can happen can be seen through unified electric and water service, and a better use of space through parking garages over lots. Though it will take extra time and thought to create a design that will work, a well-planned development can lead to overall cost savings long term. From this consolidated infrastructure emerges consolidated operations. Consolidated operations means that these developments can be managed more efficiently, given that the property management company is experienced with mixed-use properties. 

Mixed-use developments protect both developers and investors alike from economic volatility by spreading risk across various uses. The developments create a diversified revenue stream, and together this creates better financial stability over time. 

Given all of the benefits, however, mixed-use developments are not without their disadvantages and challenges. The first challenges with which developers are faced are local statutes. Local zoning rules established years ago make it difficult to approve development plans. It is possible to change these statutes, but the process can take a long time and bring opposition from stakeholders.  Another challenge is infrastructure limitations. A municipality may need to improve roads, sewers, and electrical services in order for the development of the complex. Furthermore, municipalities might decide that these costs must be shared by the developer. Though mixed-use developments are becoming more popular and prove beneficial among investors, financing is still a concern. Compared to other projects, they are relatively difficult to finance. Fortunately, local tax incentives and rebates can help to offset some of the construction costs.