Ground-floor retail space, considered a must-have for many urban developments, is more challenging to lease in today's market, even as the multifamily spaces atop the retail are snapped up at record rates, causing brokers to get creative.

When Waterford Property Co. bought a slew of market-rate buildings in 2021 to convert them into moderate-income housing, two of the complexes it purchased in Pasadena, the Hudson and the Residences at Westgate, had ground-floor retail space.

The demand for that retail space “has been dramatically different than the demand we've seen on the apartment side,” Waterford Property Co. President John Drachman said at a Bisnow's Future of Pasadena event Tuesday.

“The retail in both those projects has been challenging,” Drachman said.

Pasadena, like other cities in the greater Los Angeles area, saw the trend of mixed-use residential with ground-floor retail space take off. City planners, seeking to promote pedestrian-friendly streetscapes, generally want retail on the ground floor of these projects, but commercial real estate developers and retail watchers largely maintain that the entire country has more retail space than it needs.

The same is true for Pasadena, some panelists said. A few of them hope that changing market trends will encourage the city to consider some nonretail uses for that ground-floor space — uses that might be equally pedestrian-friendly.

“We over-retailed the central district from a code perspective, right?” Adept Urban Vice President Robert Montano said.

A mixed-use project effectively requires ground-floor retail, Montano said, requiring pedestrian-oriented uses, which include restaurants and retail, but not office.

Montano said coworking could be an excellent use of ground-floor space in such buildings, as could street-level residential.

“There are plenty of other urban cities in America that have good ground-floor, nonretail square footage," Montano said.

Pasadena has a couple of examples too. Montano pointed to Madison Walk, an apartment development on Madison Avenue by The Olson Co., which has ground-floor residential.

“It's a really nice environment,” Montano said.

A block south on Union Street, the Andalucia and Granada Court apartments and for-sale townhomes developed by Mack Urban and Mill Creek Residential also feature front doors at street level.

Others highlighted that the retail landscape in many places is intertwined with that of the office.

“I think the lack of daytime population, because of the office space not being utilized here, because we're so close to Lake [Avenue], I think that's been a challenge,” Drachman said, speaking about the retail space at the street level of the Pasadena apartment complexes Waterford owns.

“I don't know when that comes back. I'm optimistic, but I think it's going to be a challenge to get more and more people back into the office,” he said. “That daytime population loss, I think, is having a dramatic impact on retail.”