‘Good For Society And Real Estate’: Why One CRE Company Is Embracing Mixed-Use Development
What do people want from their buildings and communities?
At one time, that might have seemed like a straightforward question. But the pandemic changed the way many people want to live, work and play, and it is now up to savvy commercial real estate professionals to make sense of tenants’ evolving expectations.
“I've never in my career seen so much disruption. It's like nothing else,” Lipsey said. “But instead of resisting what's taking place, we're trying to understand what our customers need and how to meet their goals.”
Four years after the health crisis began, Lipsey said a clearer picture has emerged of what many people want: mixed-use developments away from traditional urban centers. In fact, he and his colleagues are so certain about the long-term viability of this trend that they formed a new company last year to meet this need.
Parkway is the result of a new partnership between two veteran CRE firms: Parkway Property Investments, a successor company of Parkway Properties Inc. and Parkway Inc., both of which were publicly traded REITs; and Midway Holdings, a Houston firm launched nearly 60 years ago. The combined company has more than 40M SF in properties under management in 13 regions throughout the Sun Belt.
The new Parkway employs more than 150 people and is focused on developments combining office, residential and other asset classes.
Lipsey, who joined the original Parkway in 2001, said the firm believes these developments are best suited for what he has described as the “re-suburbanization of America.” This trend has seen a movement away from central business districts for developments that meet all user needs while offering more breathing room.
“If you look at the performance of office, multifamily, hotel or retail in the context of a mixed-use environment versus a standalone environment with a single asset type, mixed-use environments outperform every time,” he said. “It's certainly something that we're hearing but the data also demonstrates that it's true.”
In October, Parkway acquired two developments in Houston that Lipsey said exemplify the sort of projects he expects to see more of in the future. Both are currently primarily office in nature, but Parkway sees the potential to introduce additional assets to attract corporate tenants and residents.
“You're seeing companies move to environments that are true live-work-play environments while they try to figure out how to use their space as a tool to attract and retain the best talent,” he said. “That was already happening in a pre-Covid world, but the pandemic really put it front of mind.”
Parkway’s two recent acquisitions represent what Lipsey described as the “two ends of the barbell” in terms of the properties the company is interested in adding to its portfolio.
On one end is CityWestPlace, a 39-acre campus with nearly 1.5M-plus SF of rentable office space that was fully renovated in 2020. Lipsey said CityWestPlace is performing “incredibly well” in an environment where many businesses seek Class-A space to entice employees back to the office.
At the other end of the barbell is Post Oak Central. Despite an “incredible location” and having the pedigree of being designed by Philip Johnson in the 1970s, the property is “functionally underutilized,” Lipsey said. But to Parkway, that is an opportunity, not an obstacle.
“Some of the greatest opportunities to create mixed-use live-work-play environments are office assets that need to be re-envisioned, and Post Oak Central is a perfect example of this,” said Lipsey, noting that the 17-acre campus contains an “enormous” green space.
“That space is the perfect location for retail, and potentially hotel and multifamily. If you add those things, then you have a really extraordinary suburban-type location that's been re-envisioned for what is called the New Urbanism, a term coined by the authors of the extraordinary book Suburban Nation.”
New Urbanism emphasizes thoughtful, integrated zoning and design, in contrast to the car-centric suburban sprawl of the past century that tended to isolate people’s homes from the places where they worked or shopped. It is the sort of approach that can be served well by multi-use development, and Lipsey noted that Parkway works hard to ensure it provides the right mix of live-work-play.
For that, the firm seeks out the opinions of people who might not have played a big role in building selection in the past but are the keys to solving the challenges their employers face today.
“Historically, the people that we've interfaced with the most would be someone like the chief financial officer of an organization because office space has been viewed as a cost center,” Lipsey said. “I think what's shifting in the user community is that HR professionals have a much louder voice in terms of how businesses are trying to manage their talent force, and we want to know what challenges they are facing.”
Lipsey said understanding and responding to those challenges will be key to creating places where people want to be 24/7.
“It’s almost like creating a new town center, a place where people come together,” he said. “We think that's good for society, and we think it's also good for real estate.”
This article was produced in collaboration between Parkway and Studio B. Bisnow news staff was not involved in the production of this content.
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