Episode Summary

  1. Development is complicated. The more things you try and do, the more ingredients you're adding into your metaphorical recipe. Things like integrating transportation, however, can pay big dividends for developers as this is a pattern that has persisted through time for successful developments.
  2. Mixed-use zoning is the thing right now. But how soon before we need to think about adopting zoning to meet with some of the biggest movers in the market to match our zoning with our citizen needs.
  3. Make street-side dining permanent. It activates the street. More table tops for restaurants to earn revenue.

Details revealed for $20b phase 1 of transformational Chicago project. (4 min read)

Mixed used zoning is so last decade. And a business model that would need the support of a new type zoning.

Nationwide push to make outdoor dining permanent. (3 min read)

Outside The Episode

Source: Gensler Architects. 

One rendering of the entertainment district with the One Central Project by Landmark Developers in Chicago, IL.

Source: Author. 

Above is an example of convert 4-5 parking spaces into more dinning room space for restaurants.

Transcript

Episode 36 - Patterns of Development

Big, Last, Push

This is patterns of development.

Hey everybody it's Kyle. Where, on this podcast, I want to build with you case studies, discover examples, refine ideas, that hopefully inspire you.

At the very least, there's something here, some useful nugget that you can share in conversations or use in your work as a developer, real estate agent, city employee, builder, or citizen.

If you don't have time for your own R&D, I'm trying to break down the patterns here to help you stay ahead of the curve.

This week, a BIG, development in Chicago, 20 Billion dollar big for the first phase.

Developers love their phases.

The development is called "One Central" and plans call for a concert venue, retail and restaurants near Soldier field in Chicago Illinois.

The full plans for the development are to be about 22 million square feet of buildings. This first phase clocks in at a cool 1.4 million.

The developer, Landmark, intends to include a transit center linking Metro, Amtrak and CTA trains along with new bus/tram stops along popular destinations along the coast.

This project has got it all. This phase does too.

A couple of things worth noting from the article in the Chicago Tribune by Lauren Zumbach:

Landmark president Bob Dunn said, "A convention center today is only competitive if I can walk out the front door and walk to things that define the city — restaurants, entertainment outlets, concert venues, et cetera,” he said. Location, location, location.

Also also...

This Landmark has announced a partnership with the Chicago urban league that includes nearly $500 million in community investment, including at $50 million fund to help minority owned and women owned businesses get capital they need to bid on contracts for the construction of the project.

This is Kyle again...what's interesting to me about this project is the intense investment into public infrastructure. When you say metro, Amtrak, and cta, that's a lot more stake holders at the table. And possible tension here revealing itself in the article apparently the governor's office isn't sure if the transit center is needed, the developer says they have a study that says it does. That's something important to figure out especially considering the amount of incentives that will need to be approved at both the city and state level.

I was thinking the other day that development is like trying to cook a meal for guests at your house.

If you want to keep things simple you get the freezer pizza out and put it in the over, set a timer, and you're good. Everything is pre made, pre cut, simple, straight forward. Don't burn it. The freezer pizza? That's your residential builders.

(Laugh) I don't mean that in a bad way. I just mean that it's as straight forward as the process will get. Banks love federally insured loans, builders get approved by the banks, zoning is easy because it's all green field stuff.

Every time in a development, you add an extra ingredient, change the recipe, change the menu, it gets exponentially more complicated. You go quickly from freezer pizza to, a nice Italian dinner, to a 5 star meal that is vacuumed sealed in smoke and that slowly melts to reveal an entirely different meal when you're done.

It's insane. The difficultly curve is exponential. So this is me, giving a figurative tip of my hat to landmark. Thanks for not making freezer pizza. Because!

Because adding the transit element to the project is what early Japanese department stores did with railroad companies. In fact they were one in the same. Own a mall and railroad. This flywheel of growth help build multiple incomes streams for the business. Anyway good pattern pull there by the team at Landmark.

Next up -- let's talk about how mixed use zoning is so last decade. An article in the Market Urbanism Report.

Nationwide (United States) office vacancies are holding around 16.5%. Even in the sunbelt gansters like Orlando or Tampa hover around that 16% mark. They sourced that from statista.

And no surprise. Covid.

Even conventional retail is following similar trend line.

So the big question, is mixed use zoning (the store fronts on the ground floor apartments upstairs) that we've come to know and love, outdated and not compatible with how real estate is trending?

The article by Scott Beyer wonders if we need to include warehouse space into acceptable ground use. I've talked about this on the show with last mile infrastructure. Real estate investment trusts that focus primarily on warehouse space for light industrial and ecommerce use are at all time highs. One of my favorites, STAG, which I'm an investor in, is at 52 week high, and kicks a 4% div.

Scott offers a potential solution of filling vacant commercial space to be used to help support some of that last mile infrastructure and storage. There's even businesses that are leaning into this sort of blend of warehouse meets grocery store. Costco of course comes to mind...that's a ware house that you walk through.

BUT DoorDash is launching its own version of convince stores to sell snacks and groceries. So you place your order and you can have it delivered to you or you can go to the location/store/warehouse yourself and pick up your bin of goods. This is interesting for a variety of reasons.

Less overhead and breakage for the stores (you're probably all familiar with the decriminalization of shoplifting under $950 in California and some of problems that's been causing for businesses. Goodness I sound like a republican. There's also the potential for automation in the future. Robots zipping around a warehouse in the back assembling shopping carts and a couple of people in the "front of the house" to borrow from restaurant lingo to manage foot traffic.

Is that the future of commerce in our cities? I don't know but zoning certainly isn't positioned to take advantage of it at the moment.

Last up, and I'm at time here but a gimme.

Restaurant owners nationwide push to make street-side dining permanent. An article in CNBC by Amelia Lucas. Of course restaurants want this. They get more seating and don't have to pay more in rent. Some people are complaining about it (you live in a city...people hanging out in your city is good for your city) and some people are complaining about the loss of parking spots which we know less parking spots are actually better for downtown businesses, density, and community.

Which leads us to this weeks patterns:

  1. Development is complicated. The more things you try and do, the more ingredients you're adding into your metaphorical recipe. Things like integrating transportation, however can pay big dividends for developers as this is a pattern that has persisted through time for successful developments.
  2. Mixed use zoning is the thing right now. But how soon before we need to think about adopting zoning to meet with some of the biggest movers in the market to match our zoning with our citizen needs.
  3. Make street-side dining permanent. It activates the street. More table tops for restaurants to earn revenue.

That's all for this week and I'll talk to y'all soon.