“Make no little plans; they have no magic to stir men’s blood and probably themselves will not be realized.”

~ Daniel Burnham

COVID has been a catalyst for countless macro-economic trends, a number of which may have significant consequences for the future of commercial real estate in America.  Among the trends super-charged by the pandemic are the decline of brick and mortar retail, the lack of fair and affordable housing, and the value of activated outdoor space.  (These trends are examined in greater detail in previous Leadership Insights shared by Katie Bucklew, Hilary Chapman, and Shawn Seaman respectively).

Enter now an ambitious developer with a plan to resurrect dead malls as vibrant, walkable, mixed-use communities and a mission to create inspired places.  To be clear, the path to a successful retail reboot is littered with barriers to entry:  development approvals, acquisition and construction financing, mixed-ownership (REAs), and private-public partnerships, to name a few.  However, under the right circumstances, each of these projects may represent a singular opportunity to reimagine retail, achieve equity in housing, and increase access to the natural environment on a transformational scale.  And in many cases, these malls are in very desirable locations and there may be good community support for this positive change.

Although they may now be approaching physical or market demand obsolescence, many of these retail assets function as regional hubs accessible via many spokes of transportation, are abutted or surrounded by residential development, and include sufficient land area for starting over from scratch or significantly reimagined.  Although many of these properties are commonly held by institutional real estate investors (i.e., REITs), anchor retailers may also own portions of the site, have favorable long term leases or other or consent rights.  Substantial public investment in infrastructure may also be required to accommodate the proposed development – so bond finance is often utilized

A successful mixed-use project is a lot like a forest, an ecosystem with many levels, each of which must communicate with and complement each other. In mixed-use projects retail customers may live directly above or adjacent to the stores they frequent, which tends to generate higher rents (and in turn, residential rents tend to be higher with built-in options for household goods and services). This symbiosis between components is important for the long-term health of the project, and must be carefully curated.  In its placemaking efforts, the strategic developer will also seek to capitalize on existing assets and to address shortfalls in the local community, whether they be civic (e.g., fires station, transit hub), recreational (e.g., greenspace, bike lane corridors), or health-based (e.g., a hospital or clinic), or perhaps all of the above.

The arrival of HQ2 and Virginia Tech’s Innovation Campus, and the influx of high-wage earners that will inevitably follow, could be a tipping point that marks the point of no return for housing prices in the region.  If so, retail redevelopment projects may be the best solution to deliver affordable housing stock in the quantities that will be required.  However, like the forest, a diverse array of systems will be needed for new growth to thrive.  Affordable housing cannot exist in a vacuum but instead requires thoughtful planning and integration of supportive services, such as vocational training, higher education, and childcare.  New affordable residents will also live somewhere in close proximity to employment centers, with easy access to public transit, that is nested within the fabric of the broader community.

The pandemic has also changed the way we interact with the environment.  Outdoor dining and woonerfs may be here to stay.  City planners are reexamining the connectivity and safety of pedestrian and bike lanes with Vision Zero principles, and how greenspace networks can enhance the built environment and protect vulnerable species.  Selfishly, I am rather enjoying this “new normal.”  The nine miles between Bethesda and K Street give me a chance to get out of my head and connect with the world outside – something I appreciate now more than ever.

As the road unwinds before me, I reflect on how the role of the developer has significantly changed in my forty years of real estate practice.  The successful developer must be much more than a great builder, they must understand the intricacies of tax increment financing, master local politics, and possess (or partner with) a myriad of skills and an enduring commitment to their vision.

Make no little plans.

Roger Winston
Partner, Ballard Spahr LLP
Mixed-Use, Condominium, and Multifamily Development Practice Group
Full Member
Member, ULI Washington Full Member Engagement Committee
Member, ULI Washington Corporate Partnership Committee

In ULI Washington’s new Leadership Insights column, ULI Washington will regularly feature member leader’s thoughts and insights as we adjust personally and professional to a “new normal.”