5 Exclusive Ways to Manage Mixed-Use Development Costs
Mixed-use development is becoming increasingly popular in commercial real estate. This property type combines commercial and industrial spaces, allowing developers to make the most of a single land site.
These projects create vibrant, walkable communities and generate higher incomes than single-use properties. According to JLL, mixed-use developments can earn nearly 24.7% more. Additionally, they offer built-in financial protection through diversification.
However, mixed-use projects are complex and costly. Building several properties within one project requires significant investment and careful planning. Despite these challenges, the benefits of mixed-use developments make them an attractive option for forward-thinking developers.
Terra Alma’s real estate development consultants in Atlanta suggest the following key steps to ensure the project meets investment goals and completes the construction process smoothly.
1. Using Technology for Automation
Leveraging advanced technologies is a highly effective way to boost efficiency and cut construction costs. Although technology can benefit all types of development, mixed-use projects gain the most due to their complexity and expense.
AI-powered management tools simplify and enhance project management. These tools provide deeper insights, enabling stakeholders to make proactive, informed decisions and optimize overall project performance.
2. Using Advanced Construction Materials
The rising cost of building materials has significantly increased construction expenses. Since 2020, about 82.5% of construction material prices have gone up by 19%, according to Construction Dive.
Although prices have stabilized, the higher costs are expected to remain. However, developers can still find ways to reduce these expenses. One effective strategy is to use prefabricated materials, such as precast concrete or modular components.
Prefabrication not only makes construction more efficient but also reduces waste. A report by McKinsey found that prefabrication can speed up construction by up to 50% and save 5% to 10% on total material costs.
For those sticking with traditional construction methods, purchasing materials in bulk and in advance can also help lower costs.
3. Combining The Right Uses
Mixed-use properties can range from a simple apartment building on the ground floor to a large complex featuring various commercial spaces. Selecting the right combination of uses is crucial for a property to succeed.
This mix should be tailored to the specific area, neighborhood, and demographic you aim to attract and the overall experience you want to create.
4. Considering Alternative Development Sites
In the early 2010s, local governments recognized the benefits of mixed-use properties and introduced flexible zoning policies and adaptive reuse ordinances to support their development. These policies allow developers to use alternative sites in densely populated urban areas where land is scarce.
Adaptive reuse sites are often more affordable than undeveloped land, with lower construction costs and shorter timelines due to existing infrastructure.
Developers can also explore other alternative sites to reduce the overall investment cost of mixed-use projects. Options include obsolete or abandoned buildings, such as indoor malls or warehouses, which cities may be interested in revitalizing, as well as underutilized public spaces.
These strategies help developers create vibrant, mixed-use communities while managing costs effectively.
5. Having a Professional Team
Developers often specialize in a single property type. Multifamily developers don't handle industrial projects, office developers avoid hotel projects, and healthcare developers steer clear of retail.
They stick to what they know because development is inherently risky. However, mixed-use development requires a departure from this approach. Developers must be comfortable working with multiple asset classes within a single project.
Consider a professional project consulting firm in Atlanta like Terra Alma to ensure the project’s success.
Our experts will guide developers to adopt proven practices, use the latest technologies, and assemble an experienced team. So, you can manage the costs and complexities, and turn your mixed-use projects into profits.
In Conclusion
Mixed-use development combines shops and offices in one project. This creates lively communities and can make you more money than single-use properties.
Though it's expensive and complex, developers can save money by using technology, new building materials, the right combination of uses, and alternative sites. Hiring a professional team, like Terra Alma, can help manage these projects smoothly and make them successful and profitable.