Time to look to the future

### Introduction to Office Mixed-Use Projects

Office mixed-use projects integrate office spaces with complementary uses like retail, residential, hospitality, and entertainment within a single development or adjacent buildings. These "live-work-play" environments aim to create vibrant, walkable communities that address modern lifestyle demands, such as reduced commuting, amenity access, and community connection. Post-pandemic shifts, including hybrid work and e-commerce disruption, have accelerated their growth, with mixed-use accounting for nearly half of new U.S. commercial and multifamily development since 2010. In 2025, these projects are stabilizing the commercial real estate (CRE) market, particularly as office demand rebounds modestly and retail emerges as a resilient anchor.

Retail plays a pivotal role in these developments, often comprising 4-14% of total square footage (SF) but driving foot traffic, revenue diversification, and overall project viability. While residential typically dominates (70-83% of SF), office follows at 11-22%, with retail as a secondary yet high-impact component. Success hinges on synergies between office workers (daytime traffic) and residents/visitors (evening/weekend), but outcomes vary by location, design, and economic factors.

### The Role of Retail in Office Mixed-Use Projects

Retail in office mixed-use acts as the "engine" for activation, transforming sterile office towers into dynamic hubs. It generates 18-hour dwell time—extending beyond typical 9-5 office hours—by attracting workers for lunch/coffee, residents for dining/shopping, and visitors for entertainment. This synergy boosts office appeal: tenants like tech firms and startups prioritize retail proximity to recruit and retain talent in a hybrid era. For instance, office leasing in retail-rich districts has surged, with smaller occupiers (under 15,000 SF) flocking to "resimmercial" setups featuring casual eateries and shops.

In 2025 trends, retail's integration emphasizes experiential, open-air formats over traditional malls. Adaptive reuse of underutilized office or big-box spaces into mixed-use nodes is rising, with suburban "lifestyle centers" blending retail with co-working offices. Sustainability features, like LEED-certified designs, further enhance appeal, aligning with consumer preferences for eco-friendly, walkable amenities.

### Likelihood of Success: Metrics and Performance Data

Retail in office mixed-use shows strong success likelihood, outperforming standalone counterparts due to built-in demand and diversification. Key metrics from 2024-2025 data:

- **Occupancy Rates**: 90-95% in mixed-use vs. 80-85% for standalone retail, driven by 20-30% higher foot traffic and 30-40% longer dwell times.

- **Rent Growth and Premiums**: 10-20% higher rents, with national averages up 2.1% year-over-year in 2025; essential retail (e.g., grocery-anchored) vacancies are 1% below open-air centers.

- **Sales and Spending**: 5-10% annual sales growth (vs. 2-5% standalone), with consumers spending 15% more due to convenience.

- **Vacancy Trends**: U.S. retail vacancy hit a five-year low of 4.08% in 2024, the lowest among CRE sectors, with obsolete space at 1.4% of total inventory. In mixed-use, ground-floor retail thrives in pedestrian zones, achieving near-zero vacancies in vibrant areas.

- **Property Value Uplift**: Up to 25% increase in rents/values with optimal tenant mixes; national retail valuation reached $3.03 trillion in 2024.

- **Absorption and Demand**: Positive net absorption in high-growth Sun Belt markets, with deliveries constrained (below pre-pandemic averages), intensifying bidding for anchor spaces.

Overall success rate is high (80-90% occupancy sustained in prime projects), but bifurcated: prime, transit-adjacent sites succeed 20-30% better than isolated ones. Office-retail pairings yield 18-20% higher retention, with Manhattan office visits at 80-93% of 2019 levels fueling retail.

| Metric | Mixed-Use Retail | Standalone Retail | Source Insight |

|--------|------------------|-------------------|---------------|

| Occupancy | 90-95% | 80-85% | ASG Consulting |

| Foot Traffic Increase | +20-30% | Baseline | ASG Consulting |

| Rent Premium | +10-20% | Baseline | NAIOP/ICSC |

| Sales Growth (Annual) | 5-10% | 2-5% | ASG Consulting |

| National Vacancy (2024) | 4.08% | N/A | MCB Real Estate |

### Factors Influencing Retail Success

**Positive Drivers (High Likelihood Factors):**

- **Synergies with Office**: Daytime office traffic (e.g., 15.2 million monthly visits to Manhattan offices) boosts retail demand for quick-service spots; co-working integration adds flexible revenue.

- **Location and Design**: Walkability (WalkScore 87-93) and transit access (TransitScore 59-79) correlate with 2-3x higher success; urban/suburban nodes like Bethesda or Charlotte's South End excel.

- **Demographics and Trends**: Millennial/Boomer urbanization, remote work, and value-oriented spending favor experiential retail (e.g., non-chain eateries). 2025's LWP environments diversify risk, enhancing NOI via multi-asset streams.

- **Policy Support**: Streamlined approvals and incentives (e.g., Opportunity Zones) in areas like Montgomery County boost viability.

**Challenges (Risk Factors Reducing Likelihood):**

- **Economic/Construction Pressures**: Rising costs favor multi-building over vertical stacks; labor shortages delay timelines.

- **Post-Pandemic Shifts**: Remote work reduces office foot traffic, impacting daytime retail; e-commerce erodes 10-15% of traditional sales.

- **Site-Specific Issues**: Isolated locations (e.g., near highways) lead to 5-10% higher vacancies, acting as "negative amenities." Conservative underwriting limits retail SF to 4-5% in office-anchored projects.

- **Market Bifurcation**: Non-prime sites face 18.9% overall office vacancy spillover, indirectly hurting retail.

Success probability: 75-85% in prime markets (e.g., Sun Belt), dropping to 50-60% in secondary/isolated areas. Diversification mitigates risks, with mixed-use yielding 5-10% higher ROI than single-use.

### Case Studies: Real-World Examples

1. **Yard 56 (East Baltimore, MD)**: A $200M brownfield redevelopment with 100,000 SF retail, 227 residential units, and 222,342 SF medical office. Retail anchors community placemaking, achieving 98%+ leasing via public-private incentives. Success: Transformed vacant land into a hub, with office-retail synergy driving 20% foot traffic uplift.

2. **The Interlock (Atlanta, GA)**: Mixed-use with 105,000 SF retail/entertainment (e.g., Puttshack), 150,000 SF office (tenants like Georgia Tech incubator), and hotel. Rents hit $47.93/SF (up 38.9% since 2020) amid 68% population growth. Success: Attracts talent via "clubhouse" vibe; retail boosts office retention by 15-20%.

3. **Pike & Rose (Montgomery County, MD)**: Office-retail node with ground-floor shops enlivening streets; vacancy near 2.3% county-wide. Success: Pedestrian focus yields authentic experiences, with retail sales 10% above averages; office integration via transit access.

4. **Bell Works (Holmdel, NJ)**: 2M SF adaptive reuse of Bell Labs into 98% leased mixed-use with retail (e.g., restaurants), office (Nvidia, Cisco), and co-working. Success: Retail activation reduced vacancies from 25%+ pre-redev; dwell time up 40%.

Failures like isolated suburban retail (e.g., near parking lots) highlight pitfalls, with 5-10% chronic vacancies.

### 2025 Outlook and Strategic Recommendations

In 2025, office mixed-use retail likelihood remains optimistic: office absorption at 12M SF, retail supply constrained, and mixed-use deliveries doubling pipelines in growth markets. Trends like MOB integration, co-working, and sustainability will elevate success to 85%+ in adaptive projects. Investors should prioritize Sun Belt/transit sites, experiential tenants, and flexible designs to counter uncertainties like trade policies.

For developers: Focus on 7-14% retail SF in residential-office mixes, leveraging data for tenant curation. Overall, these projects offer resilience, with retail's low-risk profile (4.9% availability) buffering office volatility.

In summary, retail in office mixed-use is not just viable—it's a high-success catalyst (80%+ probability in optimized setups), fostering sustainable, revenue-rich ecosystems amid CRE evolution.

Henry McClure  
785.383.9994
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