Why mixed-use districts are on the rise

Areas of cities with a variety of restaurants, cafes, shops and offices have long been locations for companies looking to attract top talent.

But the benefits have taken on a new meaning amid the push to encourage employees back into the office.

“Companies are recognizing the value in high-quality offices and premier locations, not just for recruitment and retention advantages, but also to motivate return-to-office strategies,” says Jacob Rowden, U.S. Office Research Manager at JLL. “And more frequently, these places are emerging in peripheral regions of the urban core.”

Indeed, in the U.S., prime office corridors are migrating away from core central business districts (CBDs), according to JLL research. Peripheral, urban neighborhoods are becoming more dominant and now account for 54% of the most expensive U.S. streets. The report found that while the likes of California’s Sand Hill Road and Hudson Yards in New York still command the highest office rents, interest in mixed-used environments is rising as consumer habits evolve.

Activity levels in areas with a more diverse distribution of property types among commercial, residential and entertainment uses have recovered more quickly than commercially dominated cores.

In Europe, there’s a broader effort to deliver entire neighbourhoods and places that keep people stimulated beyond the working day. In the U.K., the £500 million ($634 million) redevelopment of the Smithfield district in Birmingham will create public and commercial space alongside 2,000 new homes. Crucially, a new street grid over what was once the site of a large wholesale market will be implemented.

Cities in Europe have been moving towards closer integrated development since the European Union’s signing in 2007 of the Leipzig Charter, which aimed to avoid cities separating functions into districts. The presence of multiple, self-sufficient submarkets, as found in the likes of Berlin, can help insulate against office vacancy. While European office vacancy was at 8.1% in the first quarter, Berlin’s rate was just 5.4%.

“The pandemic proved that a siloed approach to planning around commercial real estate can see disadvantages at different times in the cycle,” says Rowden. “More than ever, cities and developers are now seeking to create symbiotic ecosystems of vibrant real estate that create benefits across multiple uses.”