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The Latest Thought Leadership for Mixed-Use Affordable Housing Development

4/4/2016

 
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​As a retail real estate specialist, I really don’t consider the typical urban multifamily building with ground-floor commercial as being “mixed-use.” I will discuss why in another post. However, the term has been widely accepted as part of the multifamily industry’s lexicon. So why fight it? What is more important is designing—and doing it well—the commercial space that is incorporated into mid-rise and high-rise multifamily structures.
 
I find that goal to be an interesting exercise in problem-solving, a process in which the horizontal dimension—the typical framework of retail real estate planning—must be coordinated with vertical development. And that is why I was happy to provide a small assist to a new publication issued by Design Trust for Public Space, a non-profit think tank. That guide is entitled Laying the Groundwork: Design Guidelines for Retail and Other Ground-Floor Uses in Mixed-Use Affordable Housing Developments. Granted—that title is a mouthful, but it describes the mission that organization adopted on behalf of the New York City Department of Housing Preservation & Development.
 
Even though commercial spaces in most housing projects are relatively minor elements, mixed-use development requires cognitive diversity, i.e., diverse real estate perspectives—if it is to be done well. It is not sufficient for an architect or developer to just be really good at programming housing. An 80/20 rule or phenomenon can operate to impact project success: 20% of the building space (i.e., the commercial component) can cause 80% of the operating problems or project risk, if the commercial space is un-leasable or obsolete.
 
Consider what would happen to your project loan underwriting if 10,000 sq. ft. of ground-floor retail space remained vacant for several years or was leased at rates substantially below projections. When the East Harlem Pathmark supermarket was originally developed, the construction lender was—understandably—risk averse regarding the leasing prospects of 5,500 sq. ft. of small-shop space attached to the 50,000-sq.-ft. store. There were suggestions that it should be eliminated. I had, however, conservatively projected rents for that space at $25 per sq. ft., and we found a way to finance it. That first-mover anchor project, on what was then a highly blighted corridor, eventually catalyzed the redevelopment of nearby parcels. Those sites were activated with retail and commercial projects commanding asking rents of $50 per sq. ft.—yes, and within nine months of the groundbreaking of the supermarket.
 
So, the housing developer’s perspective must be amicably married with an understanding of commercial space users—otherwise a lost opportunity can result. And even now in some of NYC’s most challenged inner-city districts, which are where many affordable apartment units have been built, commercial rents can approach and surpass $40 per square foot. Therefore, even a 10,000-sq.-ft. ground-floor component can represent millions of dollars in capitalized value to the owner.
 
In NYC, there has been a widespread assumption (for over two decades) that many inner-city neighborhoods have been underserved with quality retail amenities. That is why I joined, back in 1994, the management team of The Retail Initiative, Inc. (TRI), which was the first national commercial real estate investment fund to spearhead inner-city retail development. However, the configuration and scarcity of available parcels in NYC has limited the opportunity to develop inner-city marketplaces—exceptions being two TRI projects, the 134,000-sq.-ft New Horizons Shopping Center in the Crotona section of the Bronx and that 55,500-sq.-ft. Harlem Pathmark Project on East 125th Street. That is also apparently why mixed-use development has been pushed by the City as a means of addressing two important economic development objectives: the production of affordable housing and the expansion of quality retail outlets.
 
However, I have observed that some affordable housing developers approach retail warily: They don’t understand it, and they see the obligation to incorporate it as a liability—not an asset. The Design Trust’s new publication should mitigate some of that wariness with its attention to the design considerations of various mixed-use building systems. The guide includes sections on the design of facades and signage, exterior access and streetscapes, electrical systems and sample configurations for ground-floor retail tenants. As a member of Design Trust’s peer review committee for the publication, I was pleased to contribute insights regarding the proper programming of ground-floor spaces in order to meet the requirements of small format supermarkets and other commercial users. To obtain a copy of the publication, click here. (Image: an example of effective mixed-use design by MAP Architects) 

Local Food Systems and the Live-Shop-Heal Paradigm – Part Two

6/23/2015

 
In a previous article of this blog, GLBA discussed local food systems and how they fit within a live-shop-heal paradigm of urban development. My firm has recently completed a plan in New York for the ground-floor commercial component of a proposed mixed-use housing development. This mid-rise project applies the live-shop-heal concept in one of the densest neighborhoods in the United States. In doing so, the plan also illustrates how components of a local food system can bolster the sustainability profile of a multifamily housing project.

The proposed project would bring over 100 affordable housing units to the development of an existing city-owned parking lot in the Mott Haven section of the South Bronx. A complement to that vertical development program is the proposed ground-floor commercial component. That podium would consist of over 21,000 sq. ft. of commercial space—62% of which would be anchored by a small-format supermarket designed with a loading dock to address modern logistical requirements. The development of urban supermarkets is often a common component of the evolution of local food systems, particularly in food deserts such as those which exist in major cities such as New York and Chicago. The subject development would bring a 13,000 sq. ft. supermarket to a zip code with a population density of almost 37,000 people per square mile and nearly 7,600 public housing residents within a 0.30-mile radius of the site. In addition, since the site is across the street from a city-operated health center, the wellness link of the live-shop-heal paradigm is established without the need to incorporate a health care use into the development.

However, urban agriculture has been incorporated into this development concept. And although GLBA has previously proposed incorporating rooftop hydroponic greenhouses into multifamily development, the circumstances of this project dictated a different approach. Recognizing the retail challenges of the site location, that those constraints called into question the marketability of certain portions of the site, GLBA proposed using the least-leasable section of the ground-floor footprint as space for an in-door hydroponic farm. The facility would incorporate stacking systems to make efficient use of three-dimensional space in order to maximize the growing capacity of an approximately 4,500 sq. ft. storefront with 15-foot ceilings. (An example of the stacking design is presented in the photo below.) A glass demising wall separating the farm operation’s growing room from the adjacent residential entrance lobby will turn the vertical stacks of plants into an eye-catching design feature for residents and visitors entering the apartment complex. However, since urban farming is a business, distribution considerations are important. Therefore, the vegetables grown by the facility can be sold to the on-site supermarket as well as building tenants, area residents and local institutions including schools—thereby establishing a nutritional ecosystem and demonstration project for the emerging industry of hydroponic farming. With its location near a health care center, there are additional potential synergies since health care systems are increasingly adopting holistic approaches to wellness. A fine example in New York State is the health insurer EmblemHealth which sponsors a local fruit and vegetables program that provides discount coupons usable at farmers’ markets.

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As if the live-shop-grow trifecta here was not enough for one development program, its urban agricultural component also adds another element: learn. Our plan provides for an educational component that allows area students to activate their studies of biology, math and chemistry by observing scientific principles in action in the methodologies of hydroponic farming. An added factor in that STEM training is exposure to the workings of the LED lighting that is to be incorporated as an in-door lighting source for the crops. This educational component can also create market buzz that will help draw traffic to the retail location. GLBA’s client, a developer of affordable housing, is hoping to be designated to develop this model housing and economic development project. Regardless of the outcome, there are potent elements here which can be incorporated in both affordable and market-rate multifamily projects in urban markets with mixed-use zoning authorization. National chains such as Trader Joes, Walmart and Whole Foods have developed or are experimenting with small format stores which could be incorporated into the site plans and ground-floor levels of vertical mixed-use projects. And just as low- and moderate-income households will welcome access to fresh vegetables, the lifestyle choices of wealthier and millennial households increasingly embrace a preference for locally-grown, organic produce.

A subsequent post will discuss the sustainability linkages of local food systems in multifamily development.  –  Lamont Blackstone

Local Food Systems and the Live-Shop-Heal Paradigm – Part One

4/7/2015

 
On behalf of a municipal client, GLBA just completed recommendations for spearheading a local food system as part of a downtown redevelopment strategy for a small city. For over twenty years, GLBA’s principal has been involved in efforts to develop supermarket facilities in urban neighborhoods. Local food systems constitute a new iteration on that theme of exploiting a local market’s purchasing power for food-related merchandise and services.

So what is a local food system and how can it fit within a live-shop-heal paradigm? Like any system, a local food system is a network of component parts with interlocking linkages. The components consist of businesses or activities involved in the production, processing, distribution, marketing, retailing and recycling of produce and other food items within a localized geography. And the linkages relate to the synergies among those various components. It is to be contrasted with the pattern of agricultural production and distribution which has evolved as the dominant system in post-World War II America. A defining aspect of a local food system is the potential for a dramatic reduction in the percentage of retail food prices attributable to transportation, energy and storage costs. As such, there are potential savings that could be passed on to consumers or potential profits to be generated by businesses participating in the supply chain of a local food system.

Businesses and economic activities that are considered as components of a local food system include various forms of urban agricultural enterprises. These are community gardens, rooftop gardens on multifamily dwellings, hydroponic farms at grade or on building rooftops, and greenhouses utilizing aquaponic technology. In addition, farmers’ markets or public markets that serve as retailing outlets for locally-raised produce constitute another potential component. Restaurants and grocery stores that enter into supply agreements with urban farm enterprises serve as additional distribution links to local consumers.

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Hydroponic & Aquaponic Farms:

One of the most exciting developments in the evolution of local food systems is the hydroponic farm. As opposed to soil-based recreational endeavors such as community gardens, hydroponic farms are for-profit enterprises operated in greenhouses using a technology in which plants are grown in water. Since they are operated in temperature-controlled structures, they can operate throughout the year. Rooftop hydroponic farms are a variant of the hydroponic format and have been erected atop supermarkets, warehouses and multifamily buildings—ideally new construction designed to accommodate the incremental structural loads and vertical access requirements. As a modern agricultural and quasi-industrial real estate use, the market feasibility of the at-grade or rooftop farm is based on the intrinsic competitive advantage of hydroponic farming within an urban market. This is attributable to the price advantage that urban farms have since as much as 50% of the retail price of produce (such as lettuce) is determined by the costs of transporting and storing vegetables and fruits from distant locations. That logistical advantage—combined with the perceived taste superiority of organically-grown produce delivered fresh and free of pesticides and conventional fertilizers—has become the foundation of the business model of various hydroponic operators.

Aquaponic farms involve the marriage of hydroponics with aquaculture. Not only are vegetables raised, but through a symbiotic and closed-loop system, fish are farmed as well. Fish species such as tilapia, perch, trout, catfish and hybrid striped bass are raised in water tanks for eventual sale in the local market. The accumulated effluent from the fish in the tanks is siphoned off and provided as nutrients for the plants growing in the hydroponic operation. Aquaponic facilities can range in size from an indoor farm operated within a 4,500 sq. ft. space on the south side of Chicago (Green & Gills) to a 365-ft. x 30-ft. outdoor greenhouse operated on  ¼ of an acre in Oregon. As such, their footprints can be adapted to hard-to-lease space in older buildings or vacant infill parcels. Aquaponic operations would typically entail a greater level of investment in machinery and equipment than hydroponic facilities. Accordingly, incentives directed towards capital investment in machinery and equipment may prove effective in attracting such operations.   

In a future post, I will continue my discussion of the components of a local food system. – Lamont Blackstone

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