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Mixed-use may answer the call for increased flexibility

Argent Related’s Brent Cross Town in north London: a mixed-use scheme
pitched at creating a 15-minute town when launched in October 2020.

Mixed-use property is the answer to the demand for flexibility, delegates heard at Real Asset Media’s Global Outlook 2021 – Key trends for real estate briefing, which was held online recently.

“Mixed-use is the future because these schemes can deliver the flexibility that tenants now demand,” said Andrew Angeli, head of European strategy and research, CBRE Global Investors. “It is a vibrant sector that also delivers really good risk-adjusted returns.”

Andrew Angeli, Head of European Strategy and Research, CBRE Global Investors

It is also an incentive to much-needed regeneration in urban areas. “There’s a clear preference in Europe for renovating existing stock, yet less than 1% is repurposed every year,” said Angeli. “It is essential to ramp it up.”

Mixed-use schemes are changing and evolving: they used to be retail-led, but now the spaces are being re-imagined in line with new requirements and trends.

“Flexibility is key, because the most compelling pieces of real estate don’t fit neatly into a box anymore,” said Alice Breheny, global head of research, Nuveen Real Estate. “Mixed-use used to be at a discount, but now it’s at a premium because it gives you an opportunity to tick all the boxes, from environment to community.”

Mixed-use fits burgeoning concept of 15-minute city

The renewed interest in mixed-use fits in with the concept of the 15-minute city, which originated in France and has been getting more traction during the last year of lockdowns.

People are more reluctant to commute and travel long distances for their various work and leisure activities and have taken a renewed interest in their local communities.

“The pandemic has led to similarities between America and Europe, with deserted city centres and a resurgence of interest in local neighbourhoods,” said Lee Menifee, head of Americas investment research, PGIM Real Estate. “But mixed-use and the 15-minute city pivot on infrastructure investments, which are high in Asia but not high enough in the US or Europe.”

Investments need careful planning and cooperation between the private and public sector. Local authorities want more commitment for social infrastructure and communities want better places to live.

“The 15-minute city enriches the community and it’s a real opportunity, but it needs a good planning framework, it shouldn’t be a quick mix of resi and accidental retail,” said Kim Politzer, director, head of research European real estate, Fidelity International. Real estate has to be at the heart of social value initiatives, but you can’t pivot portfolios overnight and you also need to have active public/private partnerships.”

Impact investing attracts more attention

It might take time, but the direction of travel is clear: there will be more impact investing and more attention paid to affordable housing. “Some institutions are still building up the skills to invest in these sectors,” she said. “But they will increasingly become part of mainstream portfolios.”

The pandemic has led to a shift in investors’ attitudes that could be permanent. “This is such a different crisis from the GFC,” said Menifee. “We’ve seen more commitment, more attention to inclusion and ESG themes. I expected interest in impact investing to decline, but instead it’s accelerated.”